COUNTY OF KANE Employee Benefits Renewal Presentation 2014
Agenda • Medical Plan Performance • BCBS Medical Renewal • Medical Marketing Summary • Alternative Funding Review • ACA Update • Retiree Management Strategy
Medical Plan Performance
Medical Plan Performance $16,000,000 Medical Loss Ratio $14,000,000 the relationship of $12,000,000 claims paid by the carrier to premiums $10,000,000 paid by the County Premium $8,000,000 Claims $6,000,000 Current Year: $4,000,000 Claims: $13,051,907 $2,000,000 Premiums: $14,193,720 $0 2008 2009 2010 2011 2012 2013
Medical Plan Performance Healthcare Trend / Healthcare Inflation 20.0% 18.0% 16.0% 14.0% 12.0% Trend 10.0% Increase 8.0% 6.0% 4.0% 2.0% 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Medical Plan Performance Actualized Value of Trend Increases versus Actual Renewal Increases $1,600 Trend PEPM increase: 120.50% $1,400 $1,200 $1,000 $800 Trend Actual PEPM increase: 56.22% Actual $600 $400 $200 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
BCBS Medical Renewal
BCBS Renewal • Initial renewal: 13.8% plan increase • Includes 4.5% load due to ACA – BCBS’s Estimated Health Insurer Fee – $5.25 per member per month Reinsurance Fee • Negotiations yielded lowered increase of 5.6% to plan plus 3.6% to ACA, for an overall 9.2%
BCBS Renewal • ACA-imposed costs are not new – they have been included in renewal rates each year since 2011 • Increases include charges for: – Age 26 Dependents – Women’s Preventive Care Services – Elimination of Lifetime Maximums – Preventive Care/Wellness Visits
BCBS Renewal ACA Cost History 10.0% 9.2% 8.0% 3.6% 6.0% ACA Fees 4.0% 3.1% Increase 0.5% 2.5% 0.5% 2.0% 1.0% 1.1% 0.0% 2011 2012 2013 2014 -2.0%
BCBS Renewal Loss Ratio / Renewal History
Current PPO Plan Design In-Network Out-of-Network Deductible $600 single $1,200 single $1,800 family $3,600 family Out-of-Pocket $1,500 single $3,000 single $4,500 family $9,000 family Coinsurance 80% 60% Office Visit Co-pay $25/$45 60% Annual Wellness Visit 100% 60% Prescription Generic: $10 75% after Brand: $40 copayment Non Pref Brand: $60
Current HMO Plan Design In-Network Out-of-Pocket $1,500 single $3,000 family Office Visit Co-pay $25 primary $45 specialist Annual Wellness Visit 100% Inpatient Co-pay $250 ER Co-pay $250 Prescription Generic: $10 Brand: $25 Non Pref Brand: $40 The County offers HMO Blue Advantage and HMO Illinois; plan designs are the same, but HMOIL has a larger network and higher premium
Medical Plan Utilization PPO Plan Provisions Deductible Satisfaction: 2011 Calendar Year ($300 Single/$900 Family) 1,440 members enrolled 373 Satisfied (26%) 2012 Calendar Year ($500 Single/$1,500 Family) 1,360 members enrolled 484 Satisfied (35%) Out-of-Pocket Satisfaction: 2011 Calendar Year ($750 Single/$2,250 Family) 1,440 members enrolled 132 Satisfied (9%) 2012 Calendar Year ($1,000 Single/$3,000 Family) 1,360 members enrolled 111 Satisfied (8%) PPO Claims Cost (Copays, Deductible, Out-of-Pocket, etc) 2011 Calendar Year $6,941,553 $953,873 (13.7%) 2012 Calendar Year $7,382,472 $1,663,140 (22.5%)
Medical Plan Utilization PPO and HMO Plan Provisions 2013 Plan Year 2012 Plan Year Services/1,000 Cost/Service Services/1,000 Cost/Service PPO Emergency Room Admissions: 170 $1,146 187 $852 BCBS PPO Benchmark 209 $825 204 $793 HMO Emergency Room Admissions: 157 $790 200 $761 BCBS HMO Benchmark 196 $847 206 $824 PPO Inpatient Admissions: 64 $18,039 62 $14,749 BCBS PPO Benchmark 71 $13,505 73 $12,680 HMO Inpatient Admissions: 67 $11,650 74 $11,202 BCBS HMO Benchmark 69 $12,294 71 $12,093 PPO Outpatient Cases: 1,575 $768 1,598 $710 BCBS PPO Benchmark 1,660 $672 1,645 $640 HMO Outpatient Cases: 514 $1,308 576 $1,154 BCBS HMO Benchmark 616 $1,171 592 $1,159 Pharmacy Utilization PPO HMO PPO HMO Total Pharmacy Paid $1,449,429 $959,207 $1,489,688 $821,953 Generic Dispensing Rate 74% 79% 67% 77% BCBS Benchmark 76% 78% 71% 74% Paid per Prescription $78 $78 $77 $69 BCBS Benchmark $70 $79 $71 $77
Medical Marketing Summary
Medical Marketing • Current – Blue Cross Blue Shield of IL Annual Premium: $14,219,652 • Initial Renewal Annual Premium: $16,181,964 Change from Current: $1,962,312 / 13.8% • Negotiated Renewal Annual Premium: $15,527,878 Change from Current: $1,308,226 / 9.2%
Medical Marketing • Alternative – Humana Annual Premium: $16,364,334 Change from Current: $2,144,682 / 15.08% • Alternative – United Healthcare Annual Premium: $16,816,301 Change from Current: $2,596,649 / 18.26% • Aetna and Cigna declined to quote
Alternative Funding Strategy
Alternative Funding Strategy • Kane has successfully modernized plan design and implemented widely participated in wellness programs • These are two key considerations in a review of Funding Alternatives • Alternative Funding means “other financial methods to funding costs associated with providing medical benefits.
Alternative Funding Strategy • The prevailing Alternative Funding method is partial self-funding. • Self-funding has several advantages: – Total plan design flexibility – Avoid certain costly ACA provisions, including certain taxes (Insurer Fee) – Cashflow due to not “pre-funding” claims – Reap rewards of claim mitigation strategies • Of course, there is a price for all of this… risk. Good planning can mitigate this.
Alternative Funding Strategy To accomplish this most effectively while still endeavoring to maintain current provider discount levels – leaving open the option of participating in an HMO – we narrowed the options to: • Cost Plus for HMO • Administrative Services Only (ASO) for PPO
Alternative Funding Strategy Cost Plus HMO • Uses a stop-loss level of $205,000 • Mature Projection yields: – Expected spend of $6,880,438 – Maximum spend of $7,477,338 • Fully-Insured HMO renewal - $6,737,570
Alternative Funding Strategy ASO PPO • Uses a stop-loss level of $205,000 • Mature Projection yields: – Expected spend of $7,999,686 – Maximum spend of $9,098,842 • Fully-Insured PPO renewal - $8,790,307
Alternative Funding Strategy Total Expected Self-Funded Maximum Self-Funded Program Insured Renewal Exposure – Mature Exposure – Mature HMO $6,737,570 $6,880,438 $7,477,338 PPO $8,790,307 $7,999,686 $9,098,842 Total $15,527,877 $14,880,124 $16,576,180
Alternative Funding Strategy PPO HMO Fully-Insured ASO PPO Fully-Insured Cost Plus HMO Year Premium Paid* Claims* Claims + Fixed Costs Year Premium Paid* Claims* Claims + Fixed Costs 2012 $8,315,082 $7,328,009 $8,000,071 2012 $5,851,820 $3,482,683 $6,319,588 2011 $8,848,549 $6,854,501 $7,526,563 2011 $5,935,511 $3,506,238 $6,343,143 2010 $9,071,537 $7,237,785 $7,909,847 2010 $5,876,606 $3,201,585 $6,038,490 2009 $9,410,519 $7,659,683 $8,331,745 2009 $4,901,526 $3,151,355 $5,988,260 SUMMARY Self-Funded PPO/ Fully-Insured* Cost Plus HMO Year Premium Paid Claims* Claims + Fixed Costs Net Gain/(Loss) 2012 $14,166,902 $10,810,692 $14,319,659 ($152,757) 2011 $14,784,060 $10,360,739 $13,869,706 $914,354 2010 $14,948,143 $10,439,370 $13,948,337 $999,806 2009 $14,312,045 $10,811,037 $14,320,004 ($7,959) $1,753,444 *Premiums and claims are represented on a calendar-year basis. Large claimants have been capped based on a $205,000 proposed stop-loss level.
Alternative Funding Strategy Questions on Self-funding?
Affordable Care Act Update
Affordable Care Act Current Provisions Provision Effective Date Necessary Response Most individuals must be covered by a health January 2014 Individual Mandate insurance program as of January 1, 2014. Insurance Insurance Exchanges become a means for January 2014 Exchanges purchasing Health Insurance. A temporary fee will be assessed on a quarterly basis from 2014 to 2016. The fee will start as $63 per Transitional January 2014 Reinsurance Fee covered life per year, and reduce each year, to $24 in 2016. A permanent fee will be assessed as a percentage of premium, to help fund premium tax credits and cost- sharing subsidies for individuals who purchase Health Insurer Fee January 2014 coverage through an exchange. (“Premium Tax”) The Transitional Reinsurance Fee and Health Insurer Fee will total approximately 3-4.5% of premium.
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