Scarsdale Union Free Schools Health Insurance Reserve Analysis - PowerPoint PPT Presentation

Scarsdale Union Free Schools Health Insurance Reserve Analysis Prepared by: KBM Management, Inc. March 2019

1 General Municipal Law § 6-n Insurance reserve fund. 1. a. "Municipal corporation," as used in this section, shall mean a municipal corporation, as defined in section two of this chapter, school district, except a school district in a city with a population of one hundred twenty-five thousand or more, board of cooperative educational services, fire district, a district corporation and a special improvement district governed by a separate board of commissioners. 2. (a) The governing board of any municipal corporation may establish a reserve fund to be known as the insurance reserve fund. Upon the creation of the fund, the municipality may make expenditures from the fund for any loss, claim, action or judgment for which the municipal corporation is authorized or required to purchase or maintain insurance … provided, further that the Scarsdale Union Free School District and the Vernon Verona Sherrill central school district may establish insurance reserve funds in compliance with this section and article seventy-four of the education law. KBM Management, Inc.- March 2019 Scarsdale Union Free Schools

2 Article 47 of the Insurance Laws 4701. Legislative Findings. (a) Cooperative health risk-sharing agreements allow public entities to: share, in whole or part, the costs of self-funding employee health benefit plans; provide municipal corporations, school districts and other public employers with an alternative approach to stabilize health claim costs; lower per unit administration costs; and enhance negotiating power with health providers by spreading such costs among a larger pool of risks. (b) Appropriate safeguards are necessary to help keep self-funded municipal cooperative health benefits plans from exposing municipalities and their taxpayers to unpredictable and potentially catastrophic liabilities. Minimum standards regarding benefits and participation can better assure that self-funded municipal cooperative health benefit plans will continue to act responsibly and provide coverage for high-cost conditions and high-cost individuals. KBM Management, Inc.- March 2019 Scarsdale Union Free Schools

3 § 4706: Reserve and Surplus Requirements (1) a reserve for payment of claims and expenses thereon reported but not yet paid, and claims and expenses thereon incurred but not yet reported which shall not be less than an amount equal to twenty- five percent of expected incurred claims and expenses thereon for the current plan year, (3) a claim stabilization reserve; (5) a surplus account, established and maintained for the sole purpose of satisfying unexpected obligations of the municipal cooperative health benefit plan in the event of termination or abandonment of the plan, which shall not be less than: (B) seven percent of the annualized earned premium equivalents during the current fiscal year of the municipal cooperative health benefit plan which consists of four or fewer participating municipal corporations or covers fewer than two thousand employees and retirees. KBM Management, Inc.- March 2019 Scarsdale Union Free Schools

4 Budget Projection Health Insurance Budget - By Category of Health Costs 2018-19 2019-20 (Projected) (Projected) Overall Health Insurance Budget (Claims and Other Costs) Projected Claims $ 15,852,134 $ 15,398,354 UMR Admin. Health & Flex Plan $ 407,130 $ 419,344 KBM - consulting fees $ 30,500 $ 32,000 Trustmark - Stop Loss Insurance $ 627,264 $ 702,536 Collection of Premiums $ (780,000) $ (780,000) Collection of Spouse coverage $ (94,328) $ (95,000) Other $ 50,000 $ 50,000 Medicare Part D Direct Premium $ 1,580,000 $ 1,600,500 Total Health Ins. Budget (Claims & Other Costs) $ 17,672,700 $ 17,327,734 District Health Insurance Costs (Claims & Other Costs) $ 16,372,700 $ 17,327,734 Premium Equivalent (Does not Include Premium Conrtribution) $ 18,547,028 $ 18,202,734 KBM Management, Inc.- March 2019 Scarsdale Union Free Schools

KBM Management, Inc.- March 2019 -10% 10% 15% 20% 25% 30% -5% 0% 5% 1990/91 Annual Health Insurance Cost Change 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 Percent Change 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 Scarsdale Union Free Schools 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 5

6 Reserve Recommendation 2018/19 2019/20 4706 (1) - Accrual (IBNR) Calculation Projected Projected 25% of Projected Claims and Expenses $4,636,757 $4,550,684 4706 (3) - Claim Stabilization Reserve 24%* of Projected Premium $4,451,287 $4,368,656 15%* of Projected Premium $2,782,054 $2,730,410 4706 (5) - Surplus Account 7% of Annualized Projected Premium Equivalents $1,298,292 $1,274,191 Maximum Recommended Reserve $10,386,336 $10,193,531 Minimum Recommended Reserve $8,717,103 $8,555,285 * Based on Historic Changes in Costs KBM Management, Inc.- March 2019 Scarsdale Union Free Schools

February 2019 Claim Watch Historic Distribution of Claims Through February Monthly Paid Claims Comparison $3,000,000 $14,000,000 $2,750,000 $2,812,506 $2,500,000 $12,000,000 $2,250,000 $10,000,000 $2,529,588 $2,000,000 $2,922,054 $3,041,615 $2,860,106 $5,235,266 $1,750,000 $8,000,000 $1,500,000 $6,000,000 $4,449,311 $4,067,353 $1,250,000 $3,766,203 $4,071,442 $2,747,913 $4,000,000 $1,000,000 $1,519,560 $750,000 $2,009,515 $1,973,301 $1,974,990 $2,000,000 $2,870,769 $500,000 $2,214,704 $1,404,502 $1,624,055 $1,139,669 $0 $250,000 2014/15 2015/16 2016/17 2017/18 2018/19 $0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Inpatient Outpatient Maj Med Drug 2016/17 2017/18 2018/19 2018/19 Monthly Projection Year To Date Paid Claims Comparison Actual Paid Claims vs. Projected Paid Claims Through February $18,000,000 YTD 2017/18 YTD 2018/19 % Variance YTD Projected Claims = $10,782,368 $15,000,000 YTD Paid Claims = $10,713,163 Inpatient $2,870,769 $2,214,704 -22.9% Outpatient $2,747,913 $1,519,560 -44.7% $12,000,000 Medical $5,235,226 $4,449,311 -15.0% $9,000,000 Drug $2,812,506 $2,529,588 -10.1% Voids -$64,335 $0 N/A $6,000,000 Total $13,602,078 $10,713,163 -21.2% $3,000,000 Avg Cost/EE $1,604.96 $1,257.71 -21.6% $0 Avg # EE 1,059 1,065 0.5% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Prepared by KBM Management, Inc. – March 2019 Scarsdale UFSD Health Benefits Plan