Attachment 1

 

MEMORANDUM

 

 

To:       Robert W. Tucker Jr., County Executive

Kevin C. Castner, Superintendent

 

From:  HealthCare Executive Committee

 

RE:      2005-2006 Health Insurance Programs

 

Date:   April 14, 2005

 

Each year the HealthCare Executive Committee (HCEC) reviews our current medical and dental plans and makes recommendations on the plans for the following year.  This year the HCEC is proposing that we continue with our current vendors with plans and employee premiums as outlined in this report.  The HCEC has been working with Mr. Tom Mackay, benefits consultant with Palmer & Cay, to review our current plans, 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 2005-2006 medical plans are to:

·        continue to offer affordable options for employees

·        maintain the reserves at approximately 15% of total plan costs

·        maintain our competitive position for benefits

·        modify plan design slightly to reflect current employer-provided health care plan practices

 

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.  Offering three plans recognizes the realities of increasing medical insurance costs and gives employees an opportunity to choose between different plans and  premiums to best meet their needs.

 

Background:

FY 03-04 Plan Year

To provide employees options, better meet individual needs, and offer affordable health care choices, three plans with varying 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 introduced.  The three plans were:

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 plans.

 

FY 04/05 Plan Year

A new enrollment process was implemented in order to effectively communicate Albemarle County’s benefit options, increasing employee understanding and awareness of benefit programs as well as simplifying the open enrollment process   The Human Resources Department worked with Palmer & Cay to develop a system that was used to conduct benefit counseling sessions between each eligible employee and a certified benefit professional (enrollment counselor).  Employees were asked to verify their personal contact information, make benefit elections, and identify eligible dependents. 

The participation rate for eligible employees of 85% was considered successful. Many employees (722) made changes to either their address or phone number.  Additionally, there was movement of employees from the high plan to the other two options as follows:

Enrollment as of 9/30/04

Enrollment as of 10/01/04

High Plan - 2332

High Plan - 2093

Middle Plan - 147

Middle Plan - 341

Low Plan - 160

Low Plan - 214

 

In order to measure employee satisfaction with the electronic format, the Human Resources Benefits Team developed an Open Enrollment Employee Satisfaction Survey.  Although positive responses greatly outweighed the negative, areas of improvement were identified and are being addressed for this year’s upcoming open enrollment.  For example, many individuals did not feel the enrollment counselors were as knowledgeable as they needed to be about our benefit offerings.  In planning for this year’s open enrollment, the Human Resources Benefits Team will serve as enrollment counselors to those who request assistance. 

 

Claims

Monthly claims for 2004-2005 are in line with projections.  The following chart illustrates our claims and enrollment history.

 

Medical Claims History 1999-2005 (projected)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Estimated based on 5 months of actual claim data.

 

 

 

 

 

 

 

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 Costs

This year employers are generally experiencing double digit health care cost increases, with average increases in the 10%-12% range after employers have made benefit modifications. This predicted increase is less than in the past five years, despite the continued escalation of prescription drug costs.  Our medical claims for this year are projected to increase 11.8%, 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

$2,239,324

$615,280

2004-2005

$2,239,324

$3,441,165

$1,201,841

 

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 data which included the City of Charlottesville, Charlottesville Schools, and Palmer & Cay's municipal group average.

 

Premiums

 The benchmark data indicated that the premiums compare as follows:

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

·        Employee contribution requirements were very competitive for all coverage tiers

·        The total premiums of the plan on an equivalent (employer and employee cost) single and family rate outline Albemarle's single costs being significantly above the market but family costs below the market.

 

Plan Design

The plan design of the high POS plan is above the market for the following provisions:

§         Inpatient hospital copayment of $100 then 100% coverage

§         Prescription drug copayments of $8/$18/$33

 

This benchmark data includes many organizations in our adopted market and indicates that our health plan design and premium amounts are currently achieving our targeted benefits strategy, which is to be slightly above market.

 

Attachment A illustrates plan design and Attachment B illustrates all premium amounts.  The employee premiums were increased to keep pace with rising healthcare costs.  The premiums in the high and middle POS plans were increased at a slighter rate than the low plan to account for the benefit reductions in these plans.

 

FY 05/06 Plan Year

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.  Several plan design changes were incorporated in order to maintain comparability with other health plans and for cost savings, as follows (shown on Attachment A, which shows changes in red):

            Changes to all plans:

           

            Changes to High Plan:

 

            Changes to High and Middle Plans: Specialist visit co-pay to $30 (from $25)

 

Dental Plan

 

The Committee also reviewed the dental plan and is recommending that we self-insure the Dental Plan, as our claims experience has been very consistent. Savings are generated from lower retention costs under the self -insured plan, since state premium taxes and risk charges are eliminated. 

 

The savings are based on a self-insured monthly administrative fee of $3.50 per employee per month with guarantees at year 2 and 3 at $3.70 and $3.90, respectively.  Albemarle County would pay the administrative fee every month, plus the claims under the program.  There would be no insurance, so Albemarle County would be responsible for all claim payments.  Delta would make the claim payments exactly the same as if the plan was fully insured.  A 2% claim margin is included in the self -insured rate calculation to account for possible adverse claim experience.  Additionally, with the reserve fund, there is a mechanism to fund claims if they are higher than expected. 

 

The HCEC reviewed the following in making the recommendation

Advantages:

·        Savings of $74,000 annually or 7% based on lower retention costs

·        Ability to retain surplus in favorable claim years

Disadvantages:

·        If claims are unfavorable, the cost may be more than a fully insured plan

·        Albemarle retains the fiduciary liability in the event of a suit by a member

·        Delta Dental will not assign benefits to a non-participating provider, therefore employees may be required to pay non-participating dentists up front and then be reimbursed through Delta Dental.

 

Additionally, Human Resources staff is focused on providing better employee communication about dental coverage.  Delta Dental has recently added more local dentists to their network. Feedback from employees on the recent survey indicated some dissatisfaction with the dental plan, however the plan design and cost are in line with the market. Based on this, it is recommended that the savings from self insuring be reflected in the employee premiums.   

 

 

Summary of Recommendations

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.      Recommend Board contribution of $5,860 for the new plan-year starting October 1st,  This is the amount approved in both school and local government budgets.  

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

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

 

Dental Plan:

1.      Change the funding mechanism on the dental plan with Delta Dental of Virginia from fully-insured to self-funded

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

3.      Recommend budgeted increase of $20 per participant in Annual Board contribution from $180 to $200 for the new plan year starting October 1st.  This is the amount budgeted and approved in both school and local government budgets.

4.      Approve the employee premiums as shown in Attachment B

 

Attachments:  A – Proposed Medical Plan Design for 2005-2006

B – Proposed Employee Premiums for Medical and Dental Plans for 2005-2006

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       Richard Wiggans, Albemarle County