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Home My WebLink AboutIR 8423 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8423 Date: August 8, 2002 To the Mayor and Members of the City Council SUBJECT: HEALTH BENEFITS FUND UPDATE —THIRD QUARTER REPORT Purpose: Prior to October 1, 2001, the City of Fort Worth Health Insurance program for employees, retirees and dependents was fully insured, through Pacificare. Beginning October 1, 2001, the City Health Benefits program became self-insured The City Council requested staff to provide quarterly updates on the health benefits program. The first and second Quarterly Reports to the City Council concerning Health Benefits were issued February 26, 2002 and April 30, 2002, respectively. This Quarterly Report for the third quarter of Fiscal Year 2001-02 provides an update on claims costs, a review of the status of the health benefits fund (Fund 85), and an update on the recent plan changes. Claims Costs: A summary of the paid claims for the first six months of the fiscal year (October 2001 — June 2002) is shown below: Total Paid Expected Paid Total Paid Self-Funded Funding Claims Claims Claims Plus Equivalent Surplus Admin. Fees Premium (Deficit) OCT'01 $ 494,006 $ 2,360,200 $ 812,212 $ 3,262,120 $2,449,908 NOV'01 $ 2,184,562 $ 2,358,248 $ 2,503,154 $ 3,187,473 $ 684,319 DEC '01 $ 2,447,025 $ 2,349,021 $ 2,764,988 $ 3,171,512 $ 406,525 JAN '02 $ 2,941,554 $ 2,340,955 $ 3,258,507 $ 3,166,829 -$ 91,679 FEB '02 $ 2,892,862 $ 2,347,920 $ 3,146,335 $ 3,175,294 $ 28,959 MAR'02 $ 3,429,541 $ 2,355,825 $ 3,672,308 $ 3,195,443 -$476,864 APR '02 $ 3,552,692 $ 2,354,559 $ 3,666,131 $ 3,186,590 -$ 479,541 MAY '02 $ 3,479,313 $ 2,350,338 $ 3,665,432 $ 3,184,520 -$ 480,912 JUN '02 $ 2,729,628 $ 2,343,688 $ 3,032,066 $ 3,178,825 $ 146,759 Total $24,151,183 $21,160,754 $26,521,133 $28,708,606 $2,187,474 As you'll note, the monthly claims cost trend above the expected claims cost is continuing. For seven (7) of the nine (9) months of the fiscal year, total paid claims exceeded the expected paid claims level. For four (4) of those seven months, the costs were above the funding level and resulted in a funding deficit. June's claims were below the funding level, but still above the expected level. Status of the Health Benefits Fund: As of the end of the third quarter, the reserves accumulated through the plan year are approximately $2.2 million. It is anticipated that claims and expenses expenditures above the expected claims/expenses level and/or the funding level will continue through September 2002. Claims expenditures above the funding level will result in a total or partial depletion of the $2.2 million funding surplus. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8423 Date: August 8, 2002 To the Mayor and Members of the City Council Page 2 of 3 ' SUBJECT: HEALTH BENEFITS FUND UPDATE —THIRD QUARTER REPORT If no surplus from FY2001-02 exists at the end of the fiscal year, the fund balance at the end of the current fiscal year will be approximately$8 million. Update on the Plan Changes: Because of claims expenditures higher than the funding level, an evaluation of the City's health benefit in comparison with that of other employers was initiated. The result of that evaluation was that the City's plans were "riche" than the average plan, in terms of what the members pay as they access medical services and in terms of the City cost sharing policy for retiree health benefits. The City Council directed that the City's health benefit plans be restructured to be more consistent with that of other comparable employers and to reduce costs through "risk sharing." "Risk sharing" means that members pay more as they access medical services (through higher co-pays, co-insurance, deductibles and maximum out-of-pocket expenditures). During April and May, staff and the Health Benefit Advisory Committee discussed a variety of alternatives and selected a health benefit plan that would offer three options to members. The three options allow members to ry select the "plan" that works best for their particular circumstances. The plan with the lowest "risk sharing" by the members costs more on a monthly contribution rate basis. Staff and the Advisory Committee also developed contribution rates that are projected to provide adequate funding levels to insure that the three options are self-supporting, that members pay the full cost of the buy-up to the higher options, and that the funding level is adequate to provide for reserves in the Health Fund, The City Council approved the new health benefits plans and contribution rates June 4, 2002 (M&C G-13638). Since that time, staff has taken the steps necessary to insure implementation on August 1, 2002. The health benefit program offers three PPO's, each offering the same coverage for medical services but at different costs for the members. A special enrollment was conducted in June (June 5 -27, 2002) to allow all members (employees and retirees) to select one of the three levels of the new health benefit plans offered. Overall, 72% of the members elected the Classic (or"low") plan. Only 1% of the members (75 total—44 employees and 31 retirees) opted out of the health benefit plan altogether. The new contribution rates for employees were effective with the first paycheck in July. Retirees' new contribution rates were effective August 1. The new health benefit plans were effective August 1, 2002. In order to assist members in understanding how the new plans work, three meetings are scheduled in August to explain in detail the plans and assist members in learning how to use the "Summary Plan Description,"which is the detailed outline of the benefits. Additional communication is being effected with specific groups of members (e.g., retirees who only have Part B of Medicare), to explain issues relevant only to them. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 6423 , Date: August 8, 2002 To the Mayor and Members of the City Council .. Page 3 of 3 �+"$ SUBJECT: HEALTH BENEFITS FUND UPDATE —THIRD QUARTER REPORT Many concerns about the new health benefit plans have been raised, most of which center around the increased cost: • Some retirees have expressed the belief that the increased costs are unfair. Under the previous health benefit plans, some retirees (Medicare-eligible) were allowed to "buy up" to the higher plan at no additional cost to themselves. The new plan only provides one plan, the Classic Plan, at no cost to retirees with hire dates prior to October 5, 1988. • Some surviving spouses and Medicare-eligible retirees have raised questions about the fairness of their costs and want the City to increase its contribution towards the retiree/survivor and/or the retiree/survivor dependent cost. • Some employees have shared their concerns that the increases in the employee costs through contribution rates and out-of-pocket expenses are too high. • Some members have expressed concern that the member's cost for some preventive ,U procedures is too high, As an example, under the current low plan a member can receive a mammogram as part of the physician co-pay for the well-woman exam of $15. Under the new low plan, the member must satisfy the $1000 deductible before the plan would pay 80% of the cost. • Some members are concerned about the increased cost of prescription co-pays and the $100 prescription deductible on the Classic Plan (the new"low" plan). • "rhe City's cost sharing on retirees with hire dates on or after October 5, 1988, has been questioned. Such issues and concerns are to be expected with any change in health benefits. More than 60 meetings were held during open enrollment to explain the reasons for the changes and the new benefit plans. Communication efforts will continue, through meetings, newsletters and letters targeted to specific groups of members. Future Issues: The Health Benefit Advisory Committee will continue to meet quarterly to evaluate the plan performance and to consider issues with the health benefits program. Some upcoming issues include: • City of Fort Worth's Internal Audit Department's audit of United Healthcare (as provided in the City's contract with UHC) • Medical management strategies • Medicare-supplement plans • Appropriateness of exclusions within the plans Gary W. Jackson -✓ City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS