HomeMy WebLinkAbout2011 08 08 Regular 601 Health InsuranceSYSNOPSIS:
CONSIDERATIONS:
Background
COMMISSION AGENDA
ITEM 601
August 8, 2011
Meeting
CONSENT
INFORMATIONAL
PUBLIC HEARING
REGULAR
X
MGR /DEPT
Authorization
REQUEST: The City Manager and Finance Department requests The City Commission consider the
Health Insurance Proposal for FY12.
This agenda item is needed for the Commission to consider the Health Insurance Proposal for FY 2012. The
management team is purposing two plans that introduce an increase in "cost sharing" between the City and its'
employees. The primary driver for this change in healthcare coverage is the consumption of healthcare by City
employees.
Healthcare has been a hot topic in politics and in the news for the past 10 years. The primary focus of healthcare
reform has been the rising cost and access to quality care. Recently the "Healthcare Reform Act" was pasted by
president Obama that drives sweeping reforms in the healthcare industry. The single largest problem that exist in
the healthcare system is not the price for any one medical procedure, but the utilization or over utilization of
healthcare in general.
The way a healthcare plan is designed can either promote or discourage utilization by individuals. For instance
a healthcare plan that pays 100% of all cost would not deter a person from going to the emergency room for a
simple stomachache that would eventually cost the healthcare plan thousands of dollars. On the other hand if the
healthcare plan shifts too much of the cost onto the person they may not seek medical attention that is
desperately needed and too could end up costing the plan thousands of dollars.
In past years the City of Winter Springs has offered a traditional health maintenance (HMO) plan that covered
all aspects of an employee's health needs at a very low cost to the employee. The plan charged the employee $15
to go to the doctor office and covered 100% of diagnostics such as: MRI, Cat Scan, PET Scan and Nuc.
Medicine. It appears that this plan design has contributed to an increase in healthcare utilization the City
employees over the past two years.
Tracking Healthcare Utilization
When employers offer healthcare benefits to its employees and these employees sign up for healthcare benefits
they are joining their coworkers and employer in a mutual agreement to pool their money and buy a "group
health plan" from an insurance carrier. In order to initially quote, insurance carrier reviews the entire group and
weights the associated "risks" that are inherent in that group of people. The healthcare premium, at first, will be
primarily based on the groups' age, gender, professional profile and possibly individual preexisting healthcare
needs.
Once the group is established, the annual renewals are based almost exclusively on the groups' consumption
patterns of healthcare. The insurance company will group all of the employees purchases of healthcare together
and calculate the "Cumulative Loss Ratio ". This is nothing more than the ratio between how much is paid to the
insurance carrier (premiums) and how much healthcare is consumed by the employees in a given period.
Typically, an insurance carrier likes to see the following distributions of the premiums collected by each "group
health plan ":
If the group plan consumed between 70% and 75% of the total premiums paid in to the carrier in medical
benefits they would likely be facing no increase in premiums from one year the next. However, if the
consumption rose to say 85 %, the group would be faced with a renewal of approximately 10% (75 % -85 %).
Florida league of Cities has a slightly modified approach to the premium breakdown above that helps mitigate
and control future rate increases. The healthcare providers have classified the entire Florida League of Cities
and its participants as a single "risk pool ". This makes the pool of participants in the healthcare benefits much
larger and allows the League to spread the risk over a larger group. Second, the League is a not for profit
agency allowing the slice of the pie for profit /reserves to much smaller or even zero (which is currently the
case). Both of these factors together allow the City of Winter Springs to spend more of the healthcare premiums
on health benefits for its employees before realizing an increase in premiums from one year to the next.
The Winter Springs group plan has seen a significant increase in its utilization over the past two years. In fact,
the 24 month cumulative loss ratio is running at 105 %. This mean that we are consuming 105% of the total
premiums paid into the Florida League of Cities. After an in -depth analysis of the consumption behaviors of the
Winter Springs Claims we have concluded that we are over - utilizing diagnostics such as: MRI, Cat Scan and
PET Scan.
Coverage Type
Current FY2011
Plan (38)
Proposed FY2012
Primary Plan (4)
Proposed FY202
Buy -Down Plan (6)
Employee
$459.95
$507.17
$415.06
Employee + Spouse
$1,102.70
$1,215.97
$995.08
Employee + Children
$1,102.70
$1,215.97
$995.08
Family
$1,204.40
$1,328.16
$1,086.85
In order to curb our over - utilization of certain types of procedures and diagnostic examinations the City is
introducing a "Cost Sharing" program to our employees. The cost sharing features in both plans that are being
purposed, will allow the employees access to quality medical care at the same time sharing the expense of that
care with the City.
Purposed Plan (4) is a traditional 80 %/20% cost sharing between employees and employer. This simple mean
that once the employee has met his /her deductable ($500) they will be responsible for 20% of the cost for certain
medical care up to a maximum of $3,000 (single coverage). This plan allows employees to still go to the family
doctor and only pay $20. However, if they would require a MRI they would be responsible for paying an
additional amount toward that care /service.
This year the City would like to also introduce a high - deductible health plan (HDHP)(plan 6) which is a health
insurance plan with lower premiums and higher deductibles than a traditional health plan. Being covered by an
HDHP also allows the City to introduce health savings account (HAS). HASs are a great way to offset the cost
of medical care with pre -tax contributions. High - deductible health plans are a form of catastrophic coverage.
Financial Highlights
The City has received the FY2012 Health Insurance quote from our current provider, UnitedHealthcare. The
renewal for the purposed Plan (4) represents a 10% increase in premiums over last year. The summary of the
quotes has been provided below:
As seen in the chart above the City would like the Commission to consider adding Plan (6) for FY12. Plan 6 will
have a 18% reduction in monthly premium cost over plan 4 (base plan). The primary difference between the
base Plan (4) and the voluntary "Buy- Down" Plan 6 is the higher deductible requirement.
It is the proposal that the subsidy for both plans be the same ($502.17 for employee only). The City currently
pays all but $5 of the entire cost of Employee coverage. Additionally, the City currently pays 28% of the
difference between the Dependent coverage premium and the Employee coverage premium. The chart below
demonstrates the recommended subsidy for both plans
Employee
Employee & Spouse
Employee & Dependent
Employee & Family
Plan 4 (Base)
$502.17
$634.92
$634.92
$663.40
Plan 6 (Buy -Down)
$502.17
$634.92
$634.92
$663.40
In order to curb our over - utilization of certain types of procedures and diagnostic examinations the City is
introducing a "Cost Sharing" program to our employees. The cost sharing features in both plans that are being
purposed, will allow the employees access to quality medical care at the same time sharing the expense of that
care with the City.
Purposed Plan (4) is a traditional 80 %/20% cost sharing between employees and employer. This simple mean
that once the employee has met his /her deductable ($500) they will be responsible for 20% of the cost for certain
medical care up to a maximum of $3,000 (single coverage). This plan allows employees to still go to the family
doctor and only pay $20. However, if they would require a MRI they would be responsible for paying an
additional amount toward that care /service.
This year the City would like to also introduce a high - deductible health plan (HDHP)(plan 6) which is a health
insurance plan with lower premiums and higher deductibles than a traditional health plan. Being covered by an
HDHP also allows the City to introduce health savings account (HAS). HASs are a great way to offset the cost
of medical care with pre -tax contributions. High - deductible health plans are a form of catastrophic coverage.
Financial Highlights
The City has received the FY2012 Health Insurance quote from our current provider, UnitedHealthcare. The
renewal for the purposed Plan (4) represents a 10% increase in premiums over last year. The summary of the
quotes has been provided below:
As seen in the chart above the City would like the Commission to consider adding Plan (6) for FY12. Plan 6 will
have a 18% reduction in monthly premium cost over plan 4 (base plan). The primary difference between the
base Plan (4) and the voluntary "Buy- Down" Plan 6 is the higher deductible requirement.
It is the proposal that the subsidy for both plans be the same ($502.17 for employee only). The City currently
pays all but $5 of the entire cost of Employee coverage. Additionally, the City currently pays 28% of the
difference between the Dependent coverage premium and the Employee coverage premium. The chart below
demonstrates the recommended subsidy for both plans
Coverage Type
Florida League of Cities
Florida League of Cities
Florida League of Cities
Employee
Plan 38
UHC Plan 4
Plan 6
Employee + Spouse
$1,210.97
$995.08
HSA
In Network Benefits
$1,210.97
$995.08
$215.89
Deductible (Individual / Family)
N/A
$500 / $1,000
$2,500 / $5,000
Coinsurance
100%
80% / 20%
80% / 20%
Out of Pocket Max (Individual /
Family)
$1,500 / $3,000
$3,000 / $6,000
$5,000 / $10,000
Copays Apply to Out of Pocket Max
No
No
No
Lifetime Max
Unlimited
Unlimited
Unlimited
Employee Assistance Program
Included
Included
Included
Office Visits
Primary Office Visit
$15 Copay
$20 Copay
Deductible + 20%
Special Office Visit
$15 Copay
$40 Copay
Deductible + 20%
Diagnostics
MRI, Cat Scan, PET Scan, Nuc. Med
100%
Deductible + 20%
Deductible + 20%
Hospital & Outpatient Facility
Inpatient Hospitalization
$250 Copay
Deductible + 20% (PF)*
Deductible + 20%
Outpatient Surgical Care
100%
Deductible + 20%
Deductible + 20%
Emergency Room
$75 Copay
$125 Copay
Deductible + 20%
Urgent Care
$35 Copay
$35 Copay
Deductible + 20%
Prescription Drugs
Formulary Generic Drugs
$15 Copay
$10 Copay
Deductible + 20%
Formulary Brand -Name Drugs
$30 Copay
$30 Copay
Deductible + 20%
Non - Formulary Brand -Name &
Generic Drugs
$45 Copay
$50 Copay
Deductible + 20%
Mail Order
2 1/2 Copays for 90 Days
2 1/2 Copays for 90 Days
N/A
Out of Network Benefits
Deductible (Individual / Family)
N/A
S1,000 / $2,000
$5,000 / $10,000
Coinsurance
N/A
70% / 30%
70% / 30%
Out of Pocket Max (Individual /
Family)
N/A
$6,000 / $12,000
$10,000 / $20,000
Coverage Type
Proposed FY2012
Primary Plan (4)
Proposed FY2012
Buy -Down Plan (6)
Monthly HSA
Contribution
For Plan 6 election
Employee
$507.17
$415.06
$92.11
Employee + Spouse
$1,210.97
$995.08
$215.89
Employee + Children
$1,210.97
$995.08
$215.89
Family
$1,328.16
$1,086.85
$241.31
Finally, as can be seen in the chart below the cost for plan 4 and plan 6 are different, in -fact plan 6 is lower in
all four categories. This is due primarily because of the higher employee deductible and the employee is willing
to take on more of the cost share. Therefore, for all employees that choose plan 6 there would be a purposed
directed contribution (difference between plan 4 and plan 6 premiums) that would be deposited directly in their
own HAS (Health Savings Account) to be used for future healthcare. This will assure that the cost to the City
for healthcare premiums is same for all employees.
Coverage Comparison
The following chart is a coverage comparison detailing plan 38 (current coverage) and both new purposed plans
FISCAL IMPACT:
Due to proactive management of our overall personnel compliment, if both plans and the new subsidies are
approved by the Commission the City's health care cost will increase annually by approximately $18,000
(currently budgeted for FY12). We estimate that this cost sharing approach will begin to reduce in the
cumulative loss ratio which is the single most important indicator of future health care rate increases.
COMMUNICATION EFFORTS:
This Agenda Item Has Been Electronically Forwarded To The Mayor And City Commission, City Manager, City
Attorney /Staff, And Is Available On The City's Website, LaserFiche, And The City's Server. Additionally, Portions Of
This Agenda Item Are Typed Verbatim On The Respective Meeting Agenda Which Has Also Been Electronically
Forwarded To The Individuals Noted Above, And Which Is Also Available On The City's Website, LaserFiche, And
The City's Server; Has Been Sent To Applicable City Staff, eAlert/eCitizen Recipients, Media/Press Representatives
Who Have Requested Agendas /Agenda Item Information, Homeowner's Associations/Representatives On File With The
City, And All Individuals Who Have Requested Such Information.
This Information Has Also Been Posted Outside City Hall, Posted Inside City Hall With Additional Copies Available
For The General Public, And Posted At Five (5) Different Locations Around The City. Furthermore, This Information
Is Also Available To Any Individual Requestors. City Staff Is Always Willing To Discuss This Agenda Item Or Any
Agenda Item With Any Interested Individuals.
RECOMMENDATION:
The City Manager recommends that the City Commission approve:
1) The Florida League of Cities' Florida Municipal Insurance Trust/ Untied Healthcare for FY12,
based on their submitted Plans.
2) City offer two plans 4 (base) and 6 (buy -down) and the recommended subsidies.
3) Authorize for the City Attorney and City Manager to prepare and execute all contracts and
documents necessary to facilitate the above recommendations.
ATTACHMENTS:
N/A