MEMORANDUM

 

 

To:       Robert W. Tucker Jr., County Executive

Kevin C. Castner, Superintendent

 

From:  HealthCare Executive Committee

 

RE:      2004-2005 Health Insurance Programs

 

Date:   March 11, 2004

 

Each year the HealthCare Executive Committee reviews our current medical and dental plans and makes recommendations on the plans for the following year.  This year the Committee is proposing that we continue with our current vendors with plans and employee premiums as outlined in this report.  The HealthCare Executive Committee (HCEC) has been working with Mr. Tom Mackay, our benefits consultant with Palmer & Cay, to review our current plans, our claims experience, and claim projections in order to make recommendations on the medical and dental plans for next year and the respective funding of those plans.

 

The goals of the HCEC in developing our recommendations for the 2004-2005 medical plan are to:

 

·         maintain our current benefit design

·         continue to offer affordable options

·         build up the reserves to approximately 15% of total plan costs

·         encourage movement of members from the high plan to the other options as our high option plan has a rich plan design and may not be offered by insurers in the future, and

·         maintain our competitive position for benefits 

 

In view of the continued escalation in the cost of health care throughout the country, the HCEC is proposing to continue the three different medical plans based on the budgeted Board contribution.  Offering three plans recognizes the realities of the changes in medical insurance costs and gives employees an opportunity to choose between different plans and different premiums.  An employee may choose to select a plan that will best meet their needs.

 

 

Background:

 

FY02-03 Plan Year (October through September)

 We experienced significant increases in medical claims for our self-insured plan in the 2001-2002 year and the 2002-2003 year.   In January 2003, the Boards approved a mid-year increase in employee premiums to ensure the medical plan for 2002-2003 was fully funded.  This increase was necessitated due to actual claims running higher than projected and a possibility of depleting the medical reserves.  This mid-year adjustment and a decrease in high claims in the final months of the plan year, resulted in adequate medical reserves at the end of the plan year.

 

 

FY 03-04 Current Plan Year

To provide employees options, better meet individual needs, and offer affordable health care choices, three plans with differences in deductibles, co-pays, and premiums were offered this plan year.  To accommodate the needs of our workforce and have premiums more accurately reflect claims, a new coverage level of employee plus children was also introduced.  The three plans are:

 

1)      High Option- benefit design did not change yet premiums were increased

2)      Middle option- changed benefit design to higher coinsurance, yet maintained employee premiums close to the current level

3)   Low Option-changed benefit design to higher coinsurance and copays  

      but reduced employee premiums compared to the current levels

 

The majority of employees (94%) opted to pay higher premiums and remain with the high plan. Staff attributes this partially to the enrollment process, which required no action to change from the current plan to the high plan, but required employees to complete a form to select the middle or low plan.

 

Claims

Monthly claims for 2003-2004 are in line with projections.  However, higher claims for several months can quickly change long term projections.  Due to the potential volatility of claims, staff monitors the claims experience on a monthly basis.  The following chart illustrates our claims and enrollment history.

 

 

Medical Claims History 1999-2005 (projected)

 

Text Box:  

Text Box: Average Enrollment

 

Costs

Costs in medical care, as well as prescriptions, continue to rise faster than other costs. Most employers across the county are experiencing 15% to 25% increases with some having increases over 40%.   Albemarle County’s medical plan has experienced increases between 5.4% and 28.5% over the past six years.  These increases reflect the rising cost of medical services, reinsurance and increases in enrollment.  Our medical claims for this year are projected to increase 16%, which is consistent with current medical trends.

 

 

Reserves

As our medical plan is self-insured, the County is responsible for all claims and our projections are based on the best historical and trend analysis information at the time.  If claims exceed our revenue collections the difference is paid from our reserves.  Likewise, if revenue exceeds claims the difference is added back to our reserves. 

 

Medical reserves serve two purposes.  First, to cover any difference between claims paid, but not covered by the revenues (employee premiums collected & Board contributions). Second, to cover Incurred-But-Not-Paid claims in the event the County stopped offering a medical plan.  To meet these two purposes, a reserve of 15% of total claims is recommended.    We have had adequate reserves at the end of each plan-year except for 2001-2002.            

                       

 

Medical Reserve Account as of October 1st

 

Start of year

End of year

Change

1998-1999

$1,818,539

$1,989,561

$171,022

1999-2000

$1,989,561

$1,981,152

($8,409)

2000-2001

$1,981,152

$2,361,453

$380,301

2001-2002

$2,361,453

$1,222,455

($1,138,998)

2002-2003

$1,222,455

$1,624,044

$401,589

2003-2004

$1,624,044

$2,271,098( projected)

$647,054

 

 

Competitiveness

Offering a competitive medical plan that balances the benefit design against the cost to fund the program is a major consideration each year.  The current medical benefit design is competitive. The Health Care Executive Committee reviewed benchmark public and private data, which illustrates that our plan design remains competitive in terms of office copay, and slightly above market in prescription drug copays and coinsurance.

 

Premiums

 The benchmark data indicated that the premiums compare as follows:

·         Employee cost for individual coverage under any of our three options is low

·         Family cost is high for the high option plan, in line for middle option, and low for the low option

 

Benchmark Data

 

Individual Premium

·         2003 Henry J Kaiser Family Foundation data shows:

o        Average employee premium of $43 per month for all organizations with over 200 employees nationally

o        Average employee premium of $39 per month for all organizations with in the southern region

·         2002 Mercer National Survey (data trended 13.5% to update to 2003) shows:

o        Average employee premium of $70 per month for all organizations with 1000-4999 employees nationally

o        Average employee premium of $47 per month for governments nationally

o        Average employee premium of $74 per month for all organizations in the southern region

 

 

Albemarle Health Plan Benchmarks versus 2003 Kaiser and 2002 Mercer Surveys

 

 

 

Family Premium

·         2003 Henry J Kaiser Family Foundation data shows:

o        Average family premium of $187 per month for all organizations with over 200 employees nationally

o        Average family premium of $244 per month for all organizations with in the southern region

·         2002 Mercer National Survey (data trended 13.5% to update to 2003) shows:

o        Average family premium of $252 per month for all organizations with 1000-4999 employees nationally

o        Average family premium of $243 per month for governments nationally

o        Average family premium of $295 per month for all organizations in the southern region

 

 

 

The benchmark data, while not compared with our adopted market, indicate that our health plan design and premium amounts are currently achieving our targeted benefits strategy, to be slightly above market.

 

Additionally, as our high option plan is rich in terms of no cost sharing for many services, the HCEC recognizes that this plan may not be offered by insurers in the future.  In anticipation of this, the rates for the low and middle plan will not be increased in an effort to drive some movement of other employees into these other options.  While the cost to Albemarle County is the same for all plans, the majority of employees have elected to continue in the high option plan.  The monthly Board contribution and premiums have increased.

 

Attachment #B illustrates all premium amounts.   The following illustrates the increase in premiums to employees in the High Plan:

 

 

Coverage level

Current Premium

 

Projected Premium

 

Employee Dollar Increase

 

Board

Employee

Board

Employee

 

Employee

$384.00

  $32.00

$436.00

  $34.00

  $2.00

Employee+Child

$384.00

  $69.00

$436.00

  $73.00

  $4.00

Employee+Children

$384.00

$223.00

$436.00

$237.00

$14.00

Employee+Spouse

$384.00

$223.00

$436.00

$237.00

$14.00

Employee+Family

$384.00

$298.00

$436.00

$317.00

$19.00

 

 

 

Recommendations:

 

The HCEC considered a number of options in offering a medical plan(s) that balances the needs of employees with the fiscal realities of funding the plan(s), in light of the continuing escalation in costs for medical care.  The Committee also reviewed the dental plan.

 

Medical Plan:

 

1.      Continue to offer three different plans through Southern Health Services Inc:

a.      All three plans are Point-Of-Service Plans with the same benefit coverage

b.      There are differences in cost sharing (co-pays, co-insurance, out-of-pocket maximums, deductibles) and employee premium requirements

c.      The benefit summary is shown at Attachment A

2.      Reduce the budgeted increase in Board contribution from $5,345 to $5,232 for the new plan-year starting October 1st

3.      Recognizing that in the future health care market, the high plan may not be offered by insurers and set premiums to encourage movement into the middle and low plan, yet maintain affordable options

4.      Set full-time employee premiums at the rates shown in Attachment B

5.      Retain a self-insured medical plan with Specific-Claim-Stop-Loss insurance to limit our liability against any single large claim

6.      Staff monitor claims experience and provide a status report at the end of the current plan year (September 30, 2004).  Staff will provide interim reports if warranted 

 

Dental Plan:

 

1.      Continue the contract with Delta Dental of Virginia as a fully insured plan

2.      Delta Denial’s rate increase is capped at 7.5%, as negotiated two year’s ago in the RFP process

3.      Continue to offer the Basic and High Options with no change in benefit design

4.      Retain the budgeted increase of $20 per participant in Annual Board contribution from $160.00 to $180.00 for the new plan year starting October 1st

5.      Approve the employee premiums as shown Attachment B 

 

 

 

 

Attachments:   A – Proposed Medical Plan Design for 2004-2005

B – Proposed Employee Premiums for Medical and Dental Plans for 2004-2005

 Return to executive summary

 

 

HealthCare Executive Committee:

 

Roxanne White, Albemarle County                      Steele Howen, Albemarle Schools

Melvin Breeden, Albemarle County                      Jackson Zimmermann, Albemarle Schools

Kimberly Suyes, Albemarle County & Schools     Joe Johnson, CATEC

Bill Brent, Albemarle County Service Authority      Tom Robinson, Regional Jail

Lorna Gerome, Albemarle County & Schools