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Home My WebLink AboutMicrosoft PowerPoint - Joint Health Care Presentation_2012Mar20City of Virginia Beach and Virginia Beach Public Schools 2013 Health Care Strategy March 2012 Ken Jeffries Lindsay Berg Richmond Agenda •Update on Health Insurance Fund balance •Revised 2013 contribution structure •Projected 2013 cost increase •2013 revised contributions •2013 contributions with plan design changes 1 MERCER March 21, 2012 UPDATE ON HEALTH INSURANCE FUND BALANCE 2012 Health Fund Projection Health Fund Equity Balance - December 31, 2011 $25.9 Estimated 2012 Fund Balance Activity: IBNR (Claim Liability) & Other Accounts Payable$2.1 Operating Expenses $1.3 Health Plan Projected Deficit$11.3 Other Post Employment Benefit (GASB)$8.0 Projected Health Fund Equity Balance - December 31, 2012$3.2 •One month of estimated medical claims is $9.6M Note –Figures above are in millions 3 MERCER March 21, 2012 REVISED 2013 CONTRIBUTION STRUCTURE Revised 2013 Contribution Structure Assumptions •Medical and pharmacy combined claims trend of 8.0% through 2013 •$8.0 million of GASB cost to be included in rate setting per Virginia Beach •Wellness for Life incentive of $500 per employee per year •City/Schools pay 80% of aggregate plan cost •Financial projections based on claims data through December 2011 provided by Optima and January 2012 enrollment provided by Virginia Beach 5 MERCER March 21, 2012 Revised 2013 Contribution Structure Changes •Offering a POS plan in place of the HMO and PPO plans to all employees •Eliminating double employee and double family tiers –Current double family will be given subsidy for 1 year to help with the transition from the old tier structure •Standard City and School retiree contributions –Retiree contributions set at current School POS contribution •Standard City and School active employee contributions –Active employee-only contribution for schools set to match the city contribution •VA Beach employer contribution set as a percentage of actual cost by plan and tier –90% of active employee-only cost for POS plan –60% of aggregate active dependent cost 6 MERCER March 21, 2012 Revised 2013 Contribution Structure POS Plan Features HMO Plan Features Plan Features Point of Service (POS) Point of Service (POS) Optima NetworkOptima Network PHCS PPO NetworkPHCS PPO Network OutOut--ofof--NetworkNetwork Benefits apply when services are rendered Benefits apply when services are rendered Benefits apply when services are Benefits apply when services are Benefits apply when services are Benefits apply when services are by a PHCS PPO provider (outside the by a PHCS PPO provider (outside the rendered by a provider that is not an rendered by a provider that is not an rendered by an Optima Health Plan rendered by an Optima Health Plan Optima Health Plan network).Optima Health Plan network).Optima Health or PHCS provider.Optima Health or PHCS provider. provider.provider. Annual Deductible Annual Deductible --Any part of the calendar year deductible that is satisfied in thAny part of the calendar year deductible that is satisfied in the last three months of a calendar year can be carried forward toe last three months of a calendar year can be carried forward tothe the next plan year.next plan year. Annual Deductible Annual Deductible $100/individual$100/individual$400/individual$400/individual 22 NoneNone Per calendar YearPer calendar Year$1,200/family$1,200/family $200/family$200/family 22 Maximum Maximum $1,500/ individual$1,500/ individual$5,000/individual$5,000/individual$7,500/individual$7,500/individual 10103344 OutOut--ofof--PocketPocket$3,000/ family$3,000/ family 1010 $10,000/family maximum$10,000/family maximum$15,000/family$15,000/family 3344 Per calendar YearPer calendar Year Physician Office Physician Office After deductible,After deductible,$30 copay per visit, then covered at 100%$30 copay per visit, then covered at 100%After deductible, covered at 60%After deductible, covered at 60% ACAC Visit/Primary Care Visit/Primary Care $20 copay per visit, then covered at $20 copay per visit, then covered at Physician (PCP)Physician (PCP)100%100% 33 Specialist Office VisitSpecialist Office VisitAfter deductible, After deductible, $40 copay per visit, then $40 copay per visit, then $50 copay per visit, then covered at 100%$50 copay per visit, then covered at 100%After deductible, covered at 60%After deductible, covered at 60% ACAC covered at 100%covered at 100% Preventive Preventive --Includes services such as routine physicals, GYN exam, routine mIncludes services such as routine physicals, GYN exam, routine mammogram screenings, pap smears, PSA tests, colorectal cancer ammogram screenings, pap smears, PSA tests, colorectal cancer screening/test, routine immunizations, well child care, and visiscreening/test, routine immunizations, well child care, and vision and hearing screenings for children up to age 18.on and hearing screenings for children up to age 18. Preventive CarePreventive CareCovered at 100%Covered at 100%Covered at 100%Covered at 100%After deductible, covered at 60%After deductible, covered at 60% ACAC Maternity CareMaternity CareAfter deductible, After deductible, $40 copay for initial visit, then covered at $40 copay for initial visit, then covered at After deductible, covered at 60%After deductible, covered at 60% ACAC $40 copay for confirmation of pregnancy, $40 copay for confirmation of pregnancy, 70%70% PrePre--AuthorizationAuthorization 11 plus a $50 copay for remaining plus a $50 copay for remaining RequiredRequired outpatient OB services, then covered at outpatient OB services, then covered at 100%100%(Includes routine prenatal/ (Includes routine prenatal/ 99 postnatal care rendered by OB/GYN).postnatal care rendered by OB/GYN). 7 CoCo--payment is in addition to inpatient payment is in addition to inpatient MERCER March 21, 2012 hospital admission copay.hospital admission copay. PROJECTED 2013 COST INCREASE Projected 2013 Cost Increase Cumulative costs and funding Increase from Total Annual Cumulative Total Virginia Beach Expense Estimate (in millions)Current CostCostCost (80%) Funding Projected Status Quo 2013 Incurred Claims and Admin $124.4$124.419.0%$99.5 Estimated Claim Impact from HMO and PPO Elimination $0.5$124.919.5%$99.9 Additional Admin for Removing Double Employee Tiers < $0.1$124.919.6%$99.9 GASB $8.0$132.927.2%$106.3 •In 2013, total contributions need to increase by 19.0% to cover status quo claims and administrative expenses •The inclusion of additional expenses would require total contributions to increase by 27.2%: –Elimination of the PPO and HMO Plans –Removal of Double Employee Tiers –GASB expenses 9 MERCER March 21, 2012 2013 REVISED CONTRIBUTIONS 2013 Revised Contributions Revised contribution structure –Active HMO population migrating to POS without •Active POS contributions Wellness for Life incentive: 2012 HMO 2012 HMO 2013 POS School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 HMOfrom 2012 HMO (School)(City)(School & City) $%$% $86.53 Employee Only$8.33$25.00$78.20938%$61.53246% $156.70 Employe & Child$78.42$78.42$78.28100%$78.28100% $349.60 Employee & Children$289.75$289.75$59.8521%$59.8521% $319.31 Employee & Spouse$261.25$261.25$58.0622%$58.0622% $573.84 Family$500.75$500.75$73.0915%$73.0915% with •Active POS contributions Wellness for Life incentive: 2012 HMO 2012 HMO 2013 POS School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 HMOfrom 2012 HMO (School)(City)(School & City) $%$% $44.86 Employee Only$8.33$25.00$36.53438%$19.8679% $115.04 Employe & Child$78.42$78.42$36.6247%$36.6247% $307.93 Employee & Children$289.75$289.75$18.186%$18.186% $277.64 Employee & Spouse$261.25$261.25$16.396%$16.396% $532.17 Family$500.75$500.75$31.426%$31.426% Note: Rates shown on 12-month basis for comparative purposes. 11 MERCER March 21, 2012 2013 Revised Contributions Revised contribution structure –Active HDHP population without •Active HDHP contributions Wellness for Life incentive: 2012 HDHP 2012 HDHP 2013 HDHP School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 HDHPfrom 2012 HDHP (School)(City)(School & City) $%$% $68.59 Employee Only$0.00$5.00$68.59n/a$63.591272% $76.40 Employe & Child$0.00$7.00$76.40n/a$69.40991% $119.16 Employee & Children$72.92$72.92$46.2463%$46.2463% $99.67 Employee & Spouse$54.58$54.58$45.0983%$45.0983% $278.66 Family$223.00$223.00$55.6625%$55.6625% with •Active HDHP contributions Wellness for Life incentive: 2012 HDHP 2012 HDHP 2013 HDHP School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 HDHPfrom 2012 HDHP (School)(City)(School & City) $%$% $26.92 Employee Only$0.00$5.00$26.92n/a$21.92438% $34.74 Employe & Child$0.00$7.00$34.74n/a$27.74396% $77.50 Employee & Children$72.92$72.92$4.586%$4.586% $58.00 Employee & Spouse$54.58$54.58$3.426%$3.426% $236.99 Family$223.00$223.00$13.996%$13.996% Note: Rates shown on 12-month basis for comparative purposes. 12 MERCER March 21, 2012 2013 Revised Contributions Revised contribution structure –Retiree POS population without •Retiree POS contributions Wellness for Life incentive: 2012 POS 2012 POS 2013 POS School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 POSfrom 2012 POS (School)(City)(School & City) $%$% $86.53 Employee Only$39.50$39.50$47.03119%$47.03119% $171.34 Employe & Child$129.67$100.50$41.6732%$70.8470% $403.17 Employee & Children$361.50$320.67$41.6712%$82.5026% $413.59 Employee & Spouse$371.92$320.00$41.6711%$93.5929% $627.25 Family$585.58$585.58$41.677%$41.677% with •Retiree POS contributions Wellness for Life incentive: 2012 POS 2012 POS 2013 POS School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 POSfrom 2012 POS (School)(City)(School & City) $%$% $44.86 Employee Only$39.50$39.50$5.3614%$5.3614% $129.67 Employe & Child$129.67$100.50$0.000%$29.1729% $361.50 Employee & Children$361.50$320.67$0.000%$40.8313% $371.92 Employee & Spouse$371.92$320.00$0.000%$51.9216% $585.58 Family$585.58$585.58$0.000%$0.000% Note: Rates shown on 12-month basis for comparative purposes. 13 MERCER March 21, 2012 2013 Revised Contributions Revised contribution structure –Retiree HDHP population without •Retiree HDHP contributions Wellness for Life incentive: 2012 HDHP 2012 HDHP 2013 HDHP School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 HDHPfrom 2012 HDHP (School)(City)(School & City) $%$% $68.59 Employee Only$0.00$5.00$68.59n/a$63.591272% $81.30 Employe & Child$0.00$7.00$81.30n/a$74.301061% $133.75 Employee & Children$72.92$72.92$60.8383%$60.8383% $120.31 Employee & Spouse$54.58$54.58$65.73120%$65.73120% $305.61 Family$223.00$223.00$82.6137%$82.6137% with •Retiree HDHP contributions Wellness for Life incentive: 2012 HDHP 2012 HDHP 2013 HDHP School EE Increase City EE Increase TierContribution Contribution Contribution from 2012 HDHPfrom 2012 HDHP (School)(City)(School & City) $%$% $26.92 Employee Only$0.00$5.00$26.92n/a$21.92438% $39.63 Employe & Child$0.00$7.00$39.63n/a$32.63466% $92.08 Employee & Children$72.92$72.92$19.1626%$19.1626% $78.64 Employee & Spouse$54.58$54.58$24.0644%$24.0644% $263.94 Family$223.00$223.00$40.9418%$40.9418% Note: Rates shown on 12-month basis for comparative purposes. 14 MERCER March 21, 2012 2013 Revised Contributions Impact to Double Employees and Double Families •Employees currently enrolled in Double Employee and Double Family tier are assumed to enroll in two separate tiers for the lowest family-unit cost depending on family size •To help with large increases, Double Families will receive $500 per employee annual credit with 1 child; $750 per employee credit with 2 children; $1,000 per employee credit with 3 children Impact to School Employees' 10-month Pay Checks 2012 HMO 2013* Combined Combined Combined Net Current TierEnrollmentContributionPOS Contribution Additional Credit Pay Check (10-month basis)(10-month basis)(10-month basis)Increase Double Employee171$20.00$107.66$0.00$87.66 Double Family (1 child)78$60.90$191.88($100.00)$30.98 Double Family (2 child)219$60.90$276.10($150.00)$65.20 Double Family (3+ children)113$60.90$423.36($200.00)$162.46 *2013 rates include Wellness for Live incentive Impact to City Employees' 12-month Pay Checks 2012 HMO 2013* Combined Combined Combined Net Current TierEnrollmentContributionPOS ContributionAdditional Credit Pay Check (12-month basis)(12-month basis)(12-month basis)Increase Double Employee79$50.00$89.72$0.00$39.72 Double Family (1 child)96$50.75$159.90($83.33)$25.82 Double Family (2 child)141$50.75$230.08($125.00)$54.33 Double Family (3+ children)52$50.75$352.80($166.67)$135.38 *2013 rates include Wellness for Live incentive 15 MERCER March 21, 2012 2013 Revised Contributions Status QuoDouble Employee and Double Family Tiers •Under revised employer subsidy strategy, the flexibility to elect two tiers appropriate for their family size is beneficial for Double Employees and most Double Families •Previous methodology set Double Employee and Double Family contributions by applying twice the per-employee subsidy ($5,400) to Employee + Spouse and Family tier costs •Applying previous methodology with the revised employer subsidy of 90% employee cost and 60% dependent cost, a Double Employee contribution would be $104.59 and Double Family employee contribution would be $271.85 •Only Double Families with 3 or more children would benefit from a Double Family tier compared to each employed spouse enrolling in Employee Only and Employee + Children separately 16 MERCER March 21, 2012 2013 Revised Contributions Comparison to Chesapeake and Norfolk •With the exception of Chesapeake Public Schools, revised 2013 contributions are in-line with benchmark municipalities Rate Comparison - Va Beach, Chesapeake and Norfolk City of Virginia Beach/ City of Virginia Beach/ City of Norfolk/ Virginia Beach City Public Virginia Beach City Public City of ChesapeakeChesapeake Public Schools Norfolk Public Schools SchoolsSchools Optima Advantage Plus POS Current Optima HMOProposed Optima POSOptima HMO HighHMO Anthem HealthKeepers Monthly Rate Monthly Rate Monthly RateMonthly RateMonthly Rate (if HRA* completed) (with Health Credit) $53.48 $25.00 $44.86 $57.00 $10.00 Employee Only $485.12 $500.75 $532.17 $547.00 $273.75 Family *City of Norfolk/Norfolk Public Schools provides a reduced premium if employee completes a Health Risk Assessment. 17 MERCER March 21, 2012 2013 CONTRIBUTIONS WITH PLAN DESIGN CHANGES 2013 Contributions with Plan Design Changes Market Median Plan Design Changes •To help further reduce plan cost increases, plan design changes can be considered •Currently, Virginia Beach deductibles are $100 for individual and $200 for family •Market median deductibles for employers nation-wide are $500 for individual and $750 for family •By moving toward a market median plan design, Virginia Beach would save approximately $2.5 million 19 MERCER March 21, 2012 2013 Contributions with Plan Design Changes Market Median Plan Design Changes Current 2013 ModelMarket Median In-network Deductible (Individual/Family) $100/$200$500/$750 Coinsurance 100%100% OOP Maximum (Individual/Family) $1,500/$3,000$2,000/$4,000 Office Visit Copay - Preventive$0$0 - PCP $20$20 - Specialist$40$40 50% coinsurance to $2,000 50% coinsurance to $2,000 maximum after deductiblemaximum after deductible Infertility Treatment $100 copay, then 90% after $100 copay, then 90% after Emergency Room deductible deductible $250 copay, then covered 100% $250 copay, then covered 100% after deductible after deductible Inpatient Hospital $100 copay, then covered 100% $100 copay, then covered 100% after deductible after deductible Outpatient Surgery Out-of-network Deductible (Individual/Family) $400/$1,200$1,000/$2,000 60% 60% Coinsurance OOP Maximum (Individual/Family) $7,500/$15,000$10,000/$20,000 Rx Copays - Retail - Preferred $10 copay - Standard $25 copay 25% coinsurance - Premium Min $35, Max $50 50% coinsurance - Premium Plus Min $50, Max $100 POS Relative Value1.0000.979 Estimated Claims Cost Impact($2,520,000) 20 MERCER March 21, 2012 2013 Contributions with Plan Design Changes Cumulative costs and funding for Market Median plan design Increase from Total Annual Cumulative Total Virginia Beach Expense Estimate (in millions)Current CostCostCost (80%) Funding Projected Status Quo 2013 Incurred Claims and Admin $124.4$124.419.0%$99.5 Estimated Claim Impact from Plan Design Change ($2.5)$121.916.6%$97.5 Additional Admin for Removing Double Employee Tiers < $0.1$122.016.7%$97.6 GASB $8.0$130.024.3%$104.0 •In 2013, total contributions need to increase by 19.0% to cover status quo claims and administrative expenses •Making plan changes toward market-median plan design would save an estimated $2.5 million in claims cost, lowering necessary increase from 19.0% to 16.6% •The inclusion of additional expenses would require total contributions to increase by 24.3%: –Removal of Double Employee Tiers –GASB expenses 21 MERCER March 21, 2012 Important notice with respect to projections contained in this document All projections are based on the information and data available at a point in time and the projections are not a guarantee of results which might be achieved. The projections are subject to unforeseen and random events and so must be interpreted as having a potentially wide range of variability from the estimates. The information contained in this document and in any attachments is not intended by Mercer to be used, and it cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or imposed by any legislative body on the taxpayer or plan sponsor. MERCER 3/21/2012