San Francisco Health Service System Health Service Board

Transcription

1 San Francisco Health Service System Health Service Board HSS Rate & Benefits Committee Meeting Vision Plan Renewal Presentation April 11, 2013 Prepared by Aon Hewitt Health and Benefits

2 Contents Executive Summary History Current Vision Rates Current Vision Experience Proposed Vision Rates Recommendation Plan Design Benchmarking Appendix 2011 VSP Renewal presentation Aon Hewitt independent renewal analysis

3 Executive Summary The Health Service System (HSS) offers one vision plan to participant members through VSP. This plan is fully insured and is offered to active, early retiree, and retiree membership. This report summarizes the current vision experience, proposed vision rates, and the recommended rate actions for plan year This report also presents plan design benchmarking data (provided by VSP) that compares the HSS vision plan to the vision plans of similar entities. 2

4 History and Current Rates The last VSP vision plan renewal was July This renewal was a 6% rate increase guaranteed for 36 months through June January 13, 2011 HS Board Presentation The 2011 VSP renewal included a Vision Buy-Up plan offer. Due to the PeopleSoft conversion, the Buy-Up plan was never implemented. In addition, VSP lowered their administrative fees from 10% to 8%. During the transition to the Calendar plan year, an agreement was reached between HSS and VSP to move the renewal date up 6 months from July 1, 2014 to January 1, See appendix for more details on the 2011 VSP renewal. 3

5 VSP Vision Plan Utilization Month Number Covered Monthly Premium Administrative Fee Net Premium Paid Claims Paid Loss Ratio Mar-12 61,054 $375,003 $30,000 $345,003 $330,328 96% Apr-12 61,173 $375,869 $30,070 $345,799 $382, % May-12 61,135 $375,781 $30,062 $345,719 $336,793 97% Jun-12 61,070 $375,936 $30,075 $345,861 $358, % Jul-12 61,155 $376,220 $30,098 $346,122 $400, % Aug-12 61,061 $377,123 $30,170 $346,953 $391, % Sep-12 61,288 $379,311 $30,345 $348,966 $388, % Oct-12 61,917 $380,148 $30,412 $349,736 $369, % Nov-12 61,292 $380,327 $30,426 $349,901 $313,284 90% Dec-12 61,252 $379,783 $30,383 $349,400 $341,148 98% Jan-13 61,355 $380,423 $30,434 $349,989 $375, % Feb-13 61,536 $380,703 $30,456 $350,247 $321,165 92% Total 735,288 $4,536,627 $362,930 $4,173,697 $4,309, % Observations: The paid loss ratio over the past 12 months is 103%. The plan is running at a loss implying an increase in funding is necessary Please note that there appears to be an improving loss ratio since November The loss ratio of the three month rolling average as of February 2013 is 99% which is much better than the 113% loss ratio for the three month rolling average as of September

6 VSP Plan Year 2014 Renewal Rates VSP prepared two renewal options and is requesting the renewal be effective on 1/1/2014 instead of 7/1/2014 when the current agreement terminates. The two options are a two-year renewal with a rate increase of 5.5% or three-year renewal with a rate increase of 7.0%. For both options, 2% of the increase is due to the PPACA-mandated Health Insurer Tax. Two-Year Option - VSP vision plan 2014 rates guaranteed through 12/31/15: EE: $ 3.99 EE +1: $ 8.00 EE +2: $11.32 Three-Year Option - VSP vision plan 2014 rates guaranteed through 12/31/16: EE: $ 4.04 EE +1: $ 8.11 EE +2: $

7 VSP Plan Year 2014 Renewal Options Aon Hewitt s financial assessment of the two-year option versus the three-year option supports the two year option: HSS would pay the same amount over the three-year period starting 1/1/2014 in either of the following two situations: 1) The three-year option at a rate increase of 7%, or 2) The two-year option at a rate increase of 5.5%. The 2016 renewal with the two-year option would have to be 4.27% in order to break-even financially with the three-year option. 2 Year vs. 3 Year Renewal Comparison Annual Premium $5,100,000 $5,000,000 $4,900,000 $4,800,000 $4,700,000 $4,600,000 $4,500,000 $4,400,000 $4,300, Year 5.5% (2 Year Increase) 7.0% (3 Year Increase) 4.27% (New Contract star3ng 1/1/2016) 6

8 VSP Plan Year 2014 Renewal Options Aon Hewitt s financial assessment of the two-year option versus the three-year option supports the two year option: Total Amount Paid ( ) 3 Year Contract 2 Year Contract with 5.5% increase in Year Contract with 4.27% increase in Year Contract with 3.0% increase in 2016 $14.52 $14.56 $14.60 $14.64 $14.68 $14.72 $14.76 Total Amount Paid (Amounts in Millions) HSS will pay approximately $14.67M with either the proposed 3-year rate or the proposed 2-year rate if the rate increase in 2016 is 4.27%. A higher increase in 2016 will result in higher costs than if the proposed 3-year rate. Likewise, a lower increase in 2016 will result in lower costs than the proposed 3-year rate. Aon Hewitt predicts that a 2016 rate increase of less that 4.27% is more likely. 7

9 Recommendation Aon Hewitt recommends that the HS Board accept the following: VSP Fully Insured Rates guaranteed for two years through December 31, 2015 HSS anticipates being able to offer a Buy-Up plan starting in Therefore, given that the annual rate increases for the two options are comparable to each other (the two-year option calculates to a 1.7% annual increase and the three-year option calculates to a 1.6% annual increase when the Health Insurer Tax is removed from the increase), Aon Hewitt believes it is prudent to accept the two-year option Aon Hewitt independently assessed the renewal for this plan. The VSP renewal proposals are in-line with the independent Aon Hewitt underwriting assessment (see appendix) 8

10 Benefit Plan Benchmarking

11 Current VSP Vision Plan Design The current VSP vision plan has the following plan design: 1 routine vision exam is covered every 12 months 1 pair of lenses is covered every 24 months 1 pair of frames is covered every 24 months This is known as a 12/24/24 plan Other plan design highlights: $10 Exam Copay $25 Prescription Glasses Copay $150 in-network Retail Frame Allowance $150 in-network Elective Contact Lens Allowance $5 Copay - Acute Eyecare VDT Plan available to select unions: Computer VisionCare (12/24/24) - $75 in-network Retail Frame Allowance 10

12 Benchmarking Aon Hewitt requested that VSP provide benefit design benchmarking data on other similar clients for which VSP is a provider. The following information will compare the vision plan that HSS offers to the plans that the following entities provide to their employees: Alameda County Marin County Monterey County San Mateo County Santa Clara County Santa Cruz County Solano County Sonoma County The City of San Jose The State of California The University of California California State University 11

13 Benchmarking Plan Design Comparison Plan Options offered by Benchmark entities VSP PLAN DESIGNS Exam / Lens / Frame Frequency # of entities with plan % of total plans offered Plan C 12 / 12 / % Plan B 12 / 12 / % Plan A 12 / 24 / % Observations: HSS plan design is 12/24/24 (exam every 12 months, lenses every 24 months and frames every 24 months) HSS offers the same plan design as 20% of the aforementioned entities The remaining 80% of the entities have plan designs that allow a more frequent lens and frame allowance than the current HSS plan 12

14 Benchmarking Copay Comparison Copay Comparison Copay # of entities with % of total plans design offered Total ($10 - $20) 6 40% Split ($5/10, 10/10, 10/0, 15/25, 10/25, 25/25) 8 53% $0 1 7% Observations: HSS plan structure charges a $10 exam copay and a $25 prescription glasses copay ($10/$25) 53% of the entities charge a similar split copay for exams and materials The other 47% entities either have no copay (1 plan) or a flat copay structure 13

15 Benchmarking Frame/Contact Lens Allowance # of entities with design % of total plans offered In-Network Elective Contact Lens Allowance # of entities with design % of total plans offered $150 Allowance (HSS Current Offering) 1 7% Above $150 Standard ($155 - $400) 2 13% Below $150 Standard ($105 - $145) 12 80% Observations: HSS offers a $150 allowance for both in-network retail frames and innetwork elective contact lenses HSS in-network retail frame allowance is more competitive than 87% of the other participating entities HSS in-network elective contact lens allowance is more competitive than 80% of the other participating entities. One other entity offers a $150 in-network contact lens allowance 14

16 Benchmarking Base/Premier Option Comparison Base/Premier Option # of entities with design % of total plans offered Offered 3 25% Not Offered 9 75% Observations: As was previously mentioned, the HS Board voted to approve offering both a Base and a Premier plan starting in July However, due to a programming issue, the Premier plan cannot be implemented at this time 25% of the participating groups currently offer both the Base and Premier plans 15

17 Conclusion The VSP vision plan for HSS members is generally consistent with the comparison entities in this benchmarking survey with the exception of the frequency for lenses and frames. 16

18 Appendix

19 Verification of Underwriting Calculation of Two Year Rate Action Experience Period: March 2012 through February 2013 Rating Period: January 2014 through December 2015 Claims 1 $4,309,778 Membership 2 735,288 Claims per member 3 $5.86 Trend 4 3.0% Trended Claims 5 $6.04 Margin 6 0% Projected Claims PMPM 7 $6.04 Administrative Expense 8 8% Projected Claims + Administrative Expense 9 $6.56 Current Premium PMPM 10 $6.19 Increase over Current % Calculation of Three Year Rate Action Experience Period: March 2012 through February 2013 Rating Period: January 2014 through December 2015 Claims 1 $4,309,778 Membership 2 735,288 Claims per member 3 $5.86 Trend 4 4.1% Trended Claims 5 $6.10 Margin 6 0% Projected Claims PMPM 7 $6.10 Administrative Expense 8 8% Projected Claims + Administrative Expense 9 $6.63 Current Premium PMPM 10 $6.19 Increase over Current % Notes: 1. Sum of all claims paid during the experience period (March 2012 through February 2013) 2. Sum of monthly enrollment amounts during the experience period 3. Average claims per enrollee per month. (1)/(2) 4. Estimated trend 5. Current claims trended forward. (3)*(4) 6. Margin to account for moderately adverse experience 7. Projected claims including margin. (5)*(1+(6)) 8. Retention Rate 9. Projected claims including retention. (7)/(1-(8)) 10. Estimate of current premium paid per enrollee 11. Required increase. (9)/(10)-1 18

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