HomeMy WebLinkAbout031108 Health CareHealth Care Program Planning
City of Virginia Beach / School Board of the City of Virginia Beach
City Council / School Board Briefing
March 11, 2008
Direction and Input
City Council and School Board
?
City Manager and Superintendent of Schools
?
Employee Benefits Review Task Force
?
Mercer
?
City Employee Health Care Committee
?
VBCPS Employee Health Care Committee
?
Benefits Executive Committee
?
Farrell Hanzaker, Chief Financial Officer –VBCPS
?
Susie Walston, Chief of Staff –City of Virginia Beach
?
Dave Hansen, Chief of Finance and Technology –City of Virginia Beach
?
John Mirra, Assistant Superintendent of Human Resources –VBPCS
?
Fagan Stackhouse, Director of Human Resources –City of Virginia Beach
?
Patti Phillips, Director of Finance –City of Virginia Beach
?
Sammy Cohen, Director of Business Services -VBCPS
?
Catheryn Whitesell, Director of Management Services –City of Virginia Beach
?
2
Goals
Continue to:
Offer affordable, quality healthcareas part of a competitive
?
total compensation package
Control costs
?
Manage healthcare trend
?
Reduce GASB 45 liability
?
Maintain a healthy workforce
?
Achieve best pricesfor goods and services
?
Focus on health risksthat are significant cost drivers
?
Promote a culture of change and accountability: Managers,
?
Employees, Partners
Promote health awareness/education
?
3
Prior Plan Changes
2006
Implemented coinsurance on pharmacy
?
Increased copay on high cost diagnostic imaging
?
2007
Implemented coinsurance on emergency roomvisits
?
Increased retiree premiums(Schools)
?
Created Health Reimbursement Arrangement
?
2008
Set City/Schools employer contributionat $5,400
?
Reduced preventive carecopay to $0
?
Lowered dependent ageto 23 (City) and 24 (Schools)
?
Increased retiree premiums with less than 25 yearsof service
?
to pay full cost (City and Schools)
4
Future Plan Opportunities
Plan Design
?
Promote cost awareness in plan selection and choice of provider
?
services
Provide health savings accounts
?
Review dependent and retiree eligibility
?
Contributions
?
Evaluate employer contribution funding
?
Evaluate employee/retiree premium structure
?
Medical Management
?
Provide incentives for healthy behaviors
?
Manage health risks and medical cost drivers
?
GASB Funding
?
Develop formal funding policy
?
Continue to reduce liability
?
5
3-Year Strategy
2009 Recommendations
City/Schools Contribution -$5,400
?
Rate Setting
?
•by June 2008
•Begin to adjust employee rates to reflect true costs
(remove implicit subsidy)
Increase health education and awareness
?
Plan Changes:
?
Funded ($M)
Annual
GASB LiabilityGASB ARC
2009 Recommendations($M )
Deductible on all plans
(HMO plan - $100 Individual/$200 Family)
$1.2$1.9$0.2
Align City retiree rates to that of School retirees$0.5$4.4$0.5
Elminate $0 premium on HMO for employees ($10 mo)$2.0$0.0$0.0
No referral required on HMO$0.0$0.0$0.0
Savings (Reduction to Cost)$3.7$6.3$0.7
6
3-Year Strategy
2010 Recommendations
City / Schools Contribution -$5,400
?
Create High Deductible Health Plan (HDHP) with Health Savings
?
Account (HSA)
Enhance disease management and lifestyle management
?
programs
Increase generic drug usage
?
Eliminate double employee/family tiers
?
7
3-Year Strategy
2010 & 2011 Considerations
Implement co-insurance
?
Increase service years for access to retiree plans
?
Restrict plan choice(s) for new hires
?
Restrict plan eligibility and choice(s) for future retirees
?
Adjust all retiree plans and tiers to reflect costs
?
Provide incentive for completion of Health Risk Assessment
?
Impose disincentive for health risk behaviors
?
8
GASB 45 Liability
New Valuation –lower liability
?
“Funded”$157 million (down from $200.6 million)
?
“Funded”Annual Required Contribution (ARC) $19.5 million (down
?
from 28.7 million)
Funds have been reserved for ARC on June 30, 2008
?
$8.9 million (City $5 million / Schools $3.9 million)
?
Confirm funding policy by June 2008
?
Determine funding vehicle/trust fund by June 2008
?
Options: VACO/VML pooled trust or separate City/Schools trust
?
Requires establishment of Finance Board
?
9
Audits
City and Schools auditors developing 2007 Claims Audit
?
process
Provide amnesty period to be followed by Dependent
?
Eligibilityaudit
10
RFP Fully Insured
Optima’s estimate to convert self insured to fully insured
?
Additional $7 Million -7% increase
?
Negative impact on GASB liability
?
Cost to conduct RFP -$40,000 to $50,000
?
Mercer’s review of Optima’s estimate confirms that a fully insured
?
health plan will result in increased cost to Virginia Beach (and
consequently an increase to our GASB liability)
Recommend against conducting an RFP
?
11
Health Care
Self Insurance Fund
Fund Balance
?
$17 Million at calendar year end -
adjusted for Incurred But Not
?
Reported (IBNR) claims and pharmacy rebates
Flat trend in 2007 created fund balance –
prior six years were within
?
-2% to 3% of original projections
CumulativeElimination of
BalanceDeficits
YearYear
2001($3,000,000)2001$0
2002($2,000,000)2002$0
2003($1,000,000)2003$0
2004$02004$0
2005($3,000,000)2005$0
2006$3,000,0002006$3,000,000
2007$14,000,0002007$14,000,000
Total$8,000,000Total$17,000,000
12
Health Care
Self Insurance Fund
--continued
Establish Reserve
?
Maintain reserve equal to one month’s claims
($8 million based upon 2007
?
claims costs)
Fund Management
?
Establish methodology for monitoring fund quarterly
?
Annual considerations:
?
-Use for GASB funding
-Use to reduce increases to projected City/Schools contributions
-Use to reduce increases to projected employee increases
-Consider using to establish Health Savings Accounts
13
Conclusion
Incremental changes over time to temper financial impact on
?
City/Schools and employees
Increase education and awareness
?
Request City Council and School Board support
?
14