Kentucky retirement systems quick access insurance rider program.
The Kentucky Retirement Systems (KRS) strives to maintain a high standard of service to its members, former state employees. The challenge facing the retirement system is to provide the desired level of service within the confines of legislative restrictions on both staff size and budget. In 1995, the retirement system faced the task of assisting its retired members in selecting insurance coverage under Kentucky's complex health care reform provisions. The system looked to technology to solve the problem of conveying complex information to its members.
A Complex New System
In 1994, the Kentucky General Assembly enacted sweeping changes to the state's health care laws. One provision created a health purchasing alliance made up of various public and private employers and groups. The intent was to consolidate medical insurance purchasing power into a single organization in the hopes of generating more competitive bids for medical insurance. The retirees covered by KRS were included in the alliance.
The alliance developed new standard plans that the 35 participating insurance carriers are required to offer. These standard plans establish specific coverage levels and are designed to simplify price comparison. Alliance members can choose from five levels of coverage, from "economy" to "enhanced," that differ in what is covered and the copayments or deductibles. Members can use optional riders, such as for dental, vision, or mental health coverage, to customize the policy to their specific needs.
The basic information concerning the standard plans and riders was mailed to KRS retirees; however, the optional insurance riders proved more problematic. While composite rates were used for the standard plans - one rate regardless of the member's age or geographic location composite rates were not used for riders. The alliance offered 14 riders associated with the five levels of coverage, six age groups, four plan types (i.e., single, couple, single parent, or family), and seven geographic regions. This totalled 40,000 separate rates; a printed set of rider rates for the entire state would fill 600 pages.
Not only was it impossible to print and distribute copies to retirees within the enrollment deadline, but retirees could not be expected to sort through 600 pages of rider rates to determine their total premium. Nor was it feasible for KRS counselors to shuffle through 600 pages to give rates over the telephone without placing retirees on hold for intolerable periods of time. A more efficient system was needed.
Technology Tackles the Problem
KRS' deputy commissioner of operations called on data processing staff to consider the problem. It seemed that the best way to handle the data would be some sort of online program where counselors could look up rates on their computer terminals while the retiree was on the phone, eliminating the need to print complete copies of the rider rates. A mailer would give affected retirees a telephone number to call for rider rates, and KRS could personally assist members through the confusion of the new insurance system.
A KRS programmer recommended developing a single database of all the rates with an inquiry program that could narrow the search and finally produce only those rates that applied to the specific individual. The programmer further recommended that the program calculate the total rate based on the information provided by the retiree.
The first step was to acquire the data, which turned out to be one of the more difficult tasks. The alliance maintained the data in five separate files that were linked to each other. Further, placement of the decimal point for the data was not consistent: ending zeros were suppressed so that a rate of $1.00 showed as "1." while a rate of $2.22 showed as "2.22". The programmer compiled the five data files into one, made the data consistent, and translated the database into a format that could be accessed by a COBOL program.
With the data in a usable format, the programmer designed an inquiry program that takes users through a series of steps to eliminate irrelevant data until only the data applicable to the particular case are shown on-screen. For example, each insurance carrier operates in its own region, which is made up of several counties. Since the rider rates are partly determined by region, one of the first elements to input is the retiree's home county. Although most counselors were already familiar with the codes, a county code list is available on a help screen. Upon entering the county code, the counselor is shown a listing of the available insurance companies in that county [ILLUSTRATION FOR EXHIBIT 1 OMITTED]. This allows counselors to verify that retirees are considering a carrier that is available in their home county.
Once the carrier list is generated, the counselor asks the retiree for a few key pieces of information:
* name of the company he or she is considering;
* the plan - single, couple, parent plus, or family;
* the level of coverage - budget, economy, standard low, standard high, or enhanced; and
* the member's date of birth.
The first three items establish the base premium. As with the county codes, plan and level of coverage codes are available on the help screen. This allows even an inexperienced counselor or staff member from another area to look up the codes quickly.
Once this information is entered, the program searches through the data to list the riders offered by the selected company. The rider rates based on the member's plan (e.g., family status) and age are displayed [ILLUSTRATION FOR EXHIBIT 2 OMITTED]. The program shows only those riders available to the individual. Thus, the counselor can quickly inform the retiree whether a specific rider is available.
The counselor marks the riders that the retiree wants to consider purchasing. The program adds the cost of the selected riders to the retiree's base premium and displays the total premium. If a retiree has at least four years of service, KRS pays a portion of the premium that represents the standard level of coverage offered by one of the participating carriers whose premiums do not vary according to where the retiree lives. The more service a retiree has, the higher the percentage covered by the retirement system. If the retiree selects a higher level of coverage or a more costly carrier, the retiree bears the additional cost. For retirees from hazardous positions (e.g., police officers, firefighters) the retirement system also covers a portion for the retiree's spouse and any dependents. Most retirees know what percentage the retirement system pays, although the counselor can use the computer to determine the retiree's service credit. As shown in Exhibit 2, the amounts covered by KRS for hazardous and nonhazardous retirees is displayed at the bottom of the screen.
Exhibit 3 SAVINGS ACHIEVED Savings in postage cost $39,000 Savings in printing cost 27,720 Less: Staff salary and fringe benefits -3,500 Less: Increased telephone charges -2,400 Net savings $60,820
By pressing a command key, the counselor returns to the initial screen and can recalculate the total premium with riders for another company. Even if the retiree wants to explore every possibility, the entire process takes only a few minutes.
The program was placed on line and made available to all retirement system staff on a common menu. Because of its simple design, even employees unfamiliar with the insurance program could be trained quickly on how to use the program to determine accurate total premium amounts.
Money Saved, Service Improved
There are two ways quantify the results - measuring the cost effectiveness and measuring the service provided.
Cost Effectiveness. Based on the programmer's salary and the approximately 150 hours spent on the project, the cost of developing the program was $3,500. During the one-month enrollment period, the bill for the retirement system's toll-free number increased $2,400. Realistically, many of the retirees would have called even if printed rider rates had been provided. For the sake of conservatism, however, the entire $2,400 is considered a direct cost.
Savings achieved by the program are based on the cost of printing and distributing the rider information directly to retirees and staff. Fifty KRS employees would have needed copies of the rider rates (600 pages). Labels for the 12,000 retirees could have been produced by region, so only the rider rates for individual regions would have needed to be mailed, approximately 160 pages. The total printing would have amounted to 1,950,000 pages; at $.02 per page, printing would totalled $39,000. Postage on the 160 pages per retiree would have averaged $2.31 at bulk rates. As detailed in Exhibit 3, the net savings for the first year totalled $60,820. This total does not include the fact that the state printer could not have produced the printed copies in time for distribution without overtime, which would have inflated the cost. Further, bulk rate mailings would have been slow in reaching the retirees; more expensive first-class postage may have been needed.
Since its debut, the program has been used to determine total premiums for new retirees and for subsequent open-enrollment periods. Gender is now also a factor in pricing riders, which doubled the data from 40,000 rates to 80,000 rates, which would have further complicated written information. The KRS program simply added a place on the screen to enter the retiree's gender.
A further cost saving resulted for state government. The retirement system shared the program with other state agencies, including the department of personnel. This assisted the state in assuring that proper amounts were deducted from the payroll checks of the 38,000 state employees.
Service Provided. With the quick access program, KRS counselors are able to provide an accurate total premium to retirees in approximately one minute. With a few additional minutes, the retiree can compare various carriers' premiums and coverage options. The retiree does not have to try to read and grasp new and extremely complex materials, especially when much of it is irrelevant to the retiree's specific situation. Further, the counselor can determine if the retiree is selecting an eligible insurance company, coverage, and riders. The counselor can assist the retiree in reviewing his or her options with regard to companies and riders available in the county. This results in fewer applications being incorrect, a definite improvement because an incorrect application automatically places the retiree in the "default" insurance plan.
Health care reform implementation was confusing and disconcerting to many retirees, especially those who had had the same insurance coverage for a number of years. By utilizing the telephones, the retirement staff were able to add a human touch to the implementation and give one-on-one assistance to retirees. The program reduced voluminous data to simple and relevant information that was useful to both retirees and retirement system staff. Using the telephone to provide the information ensured that the health care reform deadlines were met. By combining the speed of the computer with personal contact, the retirement system greatly reduced the confusion resulting from the implementation of health care reform. The approach allowed counselors to tailor the information to the individual retiree. It would have taken many hours of clerical time to accomplish the same task by creating customized rider listings and inserting them into envelopes sorted by county of residence.
Although the vast majority of retirees complete their applications correctly and select appropriate coverage, the program allows counseling staff to help those who need assistance. Counselors can catch errors before incorrect applications are submitted and learn of situations requiring special attention, such as retirees who were becoming Medicare-eligible during or immediately following the enrollment period.
Because of the volume of calls received, many calls had to be returned after regular hours and on weekends. Although retirees had difficulties getting through, staff feel that the vast majority of those who needed personal assistance received it.
MARK L. ROBERTS is principal assistant for Kentucky Retirement Systems, which consists of the Kentucky Employees Retirement System, the County Employees Retirement System, and the State Police Retirement System.
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|Author:||Roberts, Mark L.|
|Publication:||Government Finance Review|
|Date:||Oct 1, 1997|
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