HomeMy WebLinkAbout022409 Heathcare PlanCity of Virginia Beach and
Virginia Beach City Public Schools
2010Health Care Planning
February 24, 2009
Purposes for Today’s Update
Share work to date
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Plan design options for 2010 including High
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Deductible Health Plan (HDHP) with a Health Savings
Account (HSA) as directed by Council
Strategies on Premium Rates and Employer
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Contribution
Solicit Council direction in order to:
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Finalize plan design
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Prepare recommendations on rates and contribution
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Health Savings Account (HSA)
Available since January 1, 2004; part of Medicare reform law
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A savings/spending account held in trust, like an IRA, balance
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rolls over from year to year
Portability of Funds:
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Belong to the individual, not the employer, move with the individual
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Can be transferred by individual to another HSA administrator
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Triple tax-favored, if conditions are met:
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Contributions are tax-free (subject to limits)
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Earnings are tax-free
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Distributions for qualified medical expenses are tax-free
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Flexibility of design:
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Employer may sponsor and/or contribute or do neither
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Individuals may contribute
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Total (employer and individual) contribution limits are $3,000
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individual / $5,950 family (for 2009)
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Health Savings Account (HSA)
(cont’d)
Limitations:
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Individual cannot be:
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Covered by other non-HDHP coverage
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Covered by Medicare (but they can be eligible)
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Eligible to be claimed as a dependent on another’s tax return
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Covered under another employer or spouse coverage or have
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funds contributed to an Health Reimbursement Account (HRA) or
Flexible Spending Account (FSA) unless they are limited use
Monthly administration fee
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Required Plan Coverage:
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To contribute, individual must be covered by a “high-
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deductible health plan” (HDHP)
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High Deductible Health Plan with
Health Savings Account
Plan Criteria –HDHP must meet certain plan design criteria to
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offer an HSA. Each year, the IRS publishes HDHP with HSA
limits based on cost-of-living adjustment factors; limits for 2009
are as follows:
SingleFamily
Maximum HSA contribution (Combined $3,000$5,950
Employer & Employee)
HDHP minimum annual deductible$1,150$2,300
HDHP maximum out-of-pocket limit$5,800$11,600
Indexed annual amounts to be released by June annually
Proposed HSA Employer Contribution –$500 annually (national
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average $501 annually)
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High Deductible Health Plan with
Health Savings Account
(cont’d)
? Rationale for Offering Health Savings Account:
? Triple Tax Advantages
? Portability
? Accumulation and growth of unused funds to meet enrollee future
needs –Balance rolls over from year to year
? Rationale for Offering High Deductible Health Plan with HSA:
? Increased awareness of the real cost of health care services
? Increased involvement in personal health care decisions including
treatment options
? Over time, with increased enrollment, could reduce the total claims
cost and GASB 45 liability
To date, research shows a low percentage of health care plan enrollees chose a HDHP/HSA
when other plans are offered. HDHPs are complex and require extensive education efforts.
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2009 Health Plan Offerings
Current Plan Offerings (with January 2009 enrollment
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data)
City Schools
HMO
5,4668,065
Premier PPO
2362
Basic PPO
78188
Point of Service (POS) –
382575
Retiree Only
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2010 Health Plan Offerings
? Proposed Plan Design Offering for 2010 (Staff Recommendation)
HMO Plan
(current plan with no changes proposed) –Greatest Level of
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Coverage for Employees at 100% Relative Value
PPO Plan
(reduced coverage from current PPO plan) –Moderate Level
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of Coverage at 90% Relative Value
HDHP w/HSA
(changes to Basic PPO plan to comply with IRS
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requirements) –Lowest Level of Coverage at 80% Relative Value
POS
–Retiree Only (incorporate proposed changes to PPO plan as the
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out of area coverage level) –110% Relative Value to HMO plan
The “Relative Value” is indicating a value of coverage between plans.
The HMO is shown as the benchmark at 100%; therefore the PPO Plan is equal to
90% in terms of value in coverage as a comparison to the HMO plan.
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2010 Health Plan Offerings
(cont’d)
Considered Alternate Plan Design Offering for 2010
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Offer two plan designs (in addition to retiree only plan) –eliminate PPO
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HMO Plan
(current plan with no changes proposed)
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HDHP w/HSA
(changes to Basic PPO plan to comply with IRS
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requirements; however change co-insurance for in-network from 70% to
80% and out-of-network from 50% to 60% -changing relative value to .84%)
POS
(Retiree Only) (incorporate proposed change to PPO plan as the out of
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area coverage level)
Offering two plans simplifies the benefit offerings for employees, but
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reduces choice
Recommend in future year(s) after implementation, and experience
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with, HDHP
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2010 Proposed Plan Design Changes
HMO
–No changes
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PPO
(modify current Premier PPO)
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Increase in-network deductible from $0/$0 to $400/$800
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Adjust in-network out-of-pocket max from $5K/$10K to $4K/$8K
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Eliminate co-pay and institute co-insurance
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Provide in-network preventive care at 100% before deductible
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HDHP
(modify current Basic PPO)
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Required increase in deductible to IRS minimum for in-network coverage from
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$1,000/$2,000 to $1,150/$2,300
Increase out-of-pocket max to IRS maximum from $5,000/$10,000 to
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$5,800/$11,600
Cover preventive at 100% before deductible and remove annual maximum
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Pharmacy covered after deductible per IRS requirements, but may allow
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“preventive” drugs to be covered at current copay/coinsurance amounts before
deductible.
POS
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Out-of-Area Network coverage would be changed as indicated above for PPO
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Premium Rate Setting/Contribution
Strategy
Projected 2009 Medical Cost Trend 7% (Trend experience in 2008
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4%, 2007 -2.5%)
Establish annual rates and premiums based upon the relative value
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among tiers –Further reduces implicit subsidy
Experience indicates that, on the average:
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Employee + Child coverage is 1.45 times the cost of Employee Only coverage
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Family coverage is 3.20 times the cost of Employee Only coverage
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Adjustments need to be made for new plan years.
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Establish annual rates and premiums based upon the relative value
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among plans –Further reduces implicit subsidy
HMO has highest coverage,10% higher than the PPO, 20% higher than
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the HDHP.
Value of the HSA employer contribution for the HDHP should also be
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considered when establishing rates
Contribution Strategy –Propose eliminating “set amount” and cover
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premiums at 90% for employee and 50% for dependent(s)
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Next Steps
Direction on 2010 plan design and contribution strategy
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Employee communication/education regarding
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HDHP/HSA (beginning March 2009)
Final plan design and rates provided to Council (June
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2009)
Open Enrollment (October/November 2009)
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Plan Effective (January 2010)
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Other Activities
Claims Audit –Complete July 2009
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GASB 45 Retiree Health Liability Valuation –Complete
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February, 2009, forward to City auditor for review of
assumptions
Dependent Audit –Issuance of dependent certification
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request to be completed by March 2009 (Schools) and
June 2009 (City). Issuance of documentation request to
be completed by May 2009 (Schools) and August 2009
(City). Dependent Audit will continue as an on-going
effort to ensure proper enrollment on plans.
RFP for Health Care –Self and Fully Insured Options –
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Complete for effective date of January 1, 2011.
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