Overview of City of Charlottesville Medical Insurance Program

Transcription

1 Overview of City of Charlottesville Medical Insurance Program I. Current Design and Administration a. The City of Charlottesville operates its own self-funded health plan as opposed to purchasing a fully-insured plan from an insurance carrier. Using the self-funded approach, the City assumes the health plan liability and risk in exchange for more significant control over the plan s administration and funding levels. The financial risk is limited through the purchase of a stop-loss policy. The stop-loss policy protects the City against higher-than-expected claims. If either one individual claim (specific stop loss policy) or total claims (aggregate stop loss policy) exceed the aggregate limit (determined by the City), the stop-loss insurance carrier reimburses the City. Please see Attachment A for more information of fully versus self-insured programs b. The City selects, through competitive negotiations, a carrier to administer claims and provide a provider network. Coventry (Aetna) currently administers the City s plan as well as provides the stop-loss policy. We pay Coventry (Aetna) an administration fee and a premium for the stop-loss policy. Currently the City offers a high option POS, a middle option POS, and a low option HMO. For plan design details, see Attachment B. c. The administration contract and stop-loss policy with Coventry (Aetna) will expire June 30, The RFP process is taking place now. II. Projected Plan Expenses for FY17 a. Claims: $11,832,115 (this includes a 3% margin and is $11,445,257 with no margin) b. Administration and Stop Loss: $1,172,736 (this projects an increase from current fees) c. ACA fees: $30, d. Total FY17 projected expense with a 3% margin is $13,035, or $12,648,670 without a margin. Please see Attachments C and D for projection breakdown of expenses Medical Claims 70% Year to Date Total Expenses by Type Rx Claims 21% Stop Loss 5% Admin. 4% III. Options to reduce projected plan expenses for FY17 Adverse claims experience is the main driver in the projected cost increase. There are, however, ways to reduce the projected $1.4-$1.8M (recommended 15%) increase to expenses,

2 a. Negotiation of fees with carriers during the RFP process (to be completed by mid-february) b. Remove the 3% risk margin. The expected increase would be 12% instead of 15%. c. Move from three medical plans to two plans, eliminating the current high option co-pay only POS. The two plan options would have increased employee cost sharing through deductibles, higher co-pays, and co-insurance. d. Introduce a spousal surcharge if the employee s spouse has access to affordable health care at his or her employer. (UVA and Albemarle no longer insure spouses who have access to affordable health care and City Schools implemented a surcharge) e. Continue to actively encourage employees to participate in the City s Wellness Program initiatives. With the exception of removing the 3% risk margin and the benefits of increased participation in the Wellness Program, the results will be an increase in costs for medical insurance for employees. IV. Other Municipalities We contacted other self-funded municipalities and the following responded: a. Albemarle County anticipates a 10-14% cost increase for their next plan year and are considering the introduction of a high deductible health plan option b. City Schools anticipates a 16-17% increase for 7/1/16 and will be evaluating plan design c. Lynchburg recognized a 12% increase effective January 1, 2016 d. Portsmouth implemented plan design changes to reduce their 2016 increase e. Norfolk recognized a 7% 2016 increase and made significant plan design changes to include a high deductible health plan V. Plan Data Current plan premiums and enrollment (*includes library and under age 65 retirees) Plan Full Annual Premium For Employee Only Annual City Contribution for Medical plan only Annual Employee Contribution for employee only coverage Enrollment (as of 1/11/16) High POS1 7, , Middle POS2 6, , Low HMO 5, , Premium Increase History FY11 No change to premiums FY12 12% FY % FY14 No change to premiums FY15 No change to premiums FY16 3%

3 Attachment A I. Characteristics of Fully Insured Plans II. Characteristics of Self-Funded Plans III. Insurer accepts full risk. IV. Employer accepts the full risk; however, risks can be mitigated through the purchase of employer stop-loss coverage. V. Insurer determines reserve levels. VI. Employer determines reserve levels with guidance from its employer stop-loss provider. VII. Insurer manages reserve capital. VIII. Employer manages the reserve capital; employer stop-loss coverage can be purchased to mitigate catastrophic specific or aggregate exposures. IX. Insurer retains excess reserve and capital at year s end. X. Employer retains excess reserves. XI. Insurer manages and oversees all the service vendors. XII. Employer manages and oversees all service vendors, thereby exercising more control over the type and quality of care as well as the cost of care provided by the service vendors.

4

5 CITY OF CHARLOTTESVILLE MMA Projection (paid claims 10/14-9/15) - 7/2016 Plan Year City of Charlottesville Attachment C MMA Medical/Rx Projection (w/ margin) 10/2015 MMA PROJECTION: Includes 3% claims margin Average Subscribers (assumes 2 months claim lag) (8/14-7/15) Current Subscribers (9/15) Paid Claims (10/14-9/15) Remove Total Amount of Claims over $150,000 Specific Stop Loss (7 claims) Net Paid Claims Adjustments Months of trend Trend (10% med/rx) Adjustment for 7/1/14 Plan Change (Rx OOP maximum) Enrollment adjustment Claims Margin Projected Claims (3% margin) Add Back in $150,000 of 7 Large Claims + $75,000 Aggregating Specific Deductible Projected Claims (3% margin) $150,000 Specific Stop Loss w/ $75,000 aggregating ded (7/15 $46.03, 7/16 est $52.93; 15% increase) 125% Aggregate Stop Loss (7/15 $3.15, 7/16 est $3.47; 10% increase) Administration (7/15 $34.00, 7/16 est $35.02; 3% increase) Comparative effectiveness research tax: est $2.24 for PMPPY 2016 (assume 1949 members) ACA Reinsurance fee: $27 per PMPCY 2016 (assume 1949 members) Total Projected Expense

6 City of Charlottesville Attachment D MMA Medical/Rx Projection (w/out margin) 10/2015 MMA PROJECTION: Does not include 3% claims margin 7/1/16 Plan Year Projection Average Subscribers (assumes 2 months claim lag) (8/14-7/15) 1057 Current Subscribers (9/15) 1069 Paid Claims (10/14-9/15) Remove Total Amount of Claims over $150,000 Specific Stop Loss (7 claims) $10,287,689 ($1,598,915) Net Paid Claims $8,688,774 Adjustments Months of trend 21 Trend (10% med/rx) Adjustment for 7/1/14 Plan Change (Rx OOP maximum) Enrollment adjustment Claims Margin Projected Claims (0% margin) $10,395,257 Add Back in $150,000 of 6 Large Claims, $75,000 of ESRD Claim, + $75,000 Aggregating Specific Deductible $1,050,000 Projected Claims (0% margin) $11,445,257 $150,000 Specific Stop Loss w/ $75,000 aggregating ded (7/15 $46.03, 7/16 est $52.93; 15% increase) $678, % Aggregate Stop Loss (7/15 $3.15, 7/16 est $3.47; 10% increase) $44,513 Administration (7/15 $34.00, 7/16 est $35.02; 3% increase) $449,237 Comparative effectiveness research tax: est $2.24 for PMPPY 2016 (assume 1949 members) $4,366 ACA Reinsurance fee: $27 per PMPCY 2016 (assume 1949 members) $26,312 Total Projected Expense $12,648,670