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Home My WebLink AboutIR 8473 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8473 '4PATArro To the Mayor and Members of the City Council March 4, 2003 tam Page 1 of 4 SUBJECT: GROUP HEALTH AND LIFE INSURANCE FUND UPDATE - FIRST QUARTER REPORT - FY2002-2003 PURPOSE: Reports on health benefits and on the Group Health and Life Insurance Fund (FE85) have been provided to the City Council on a quarterly basis, since the City 's health benefit program became self-insured on October 1, 2001. This Quarterly Report for the first quarter of Fiscal Year 2002-2003 provides an end-of-year review of Fund FE85 for FY2001-2002 and projections for FY2002-2003, an update on first quarter claims costs/expenses, the first quarter status of the Group Health and Life Insurance Fund (FE85), and a brief summary of issues/concerns with the health benefit plans. END-OF-YEAR REVIEW OF FUND FE85 FOR FY2001-2002 AND ANNUAL PROJECTIONS FOR FY2002-2003: Fund Balance as of September 30, 2001* $ 7,127,597 Revenue (10/01-09/02) $37,972,904 r Expenses: (10/01-09/02) Claims $34,116,022 Admin. Fees, Reinsurance, and Adjustments $ 3,679,153 Other program expenditures $ 516,242 Total Expenses: $38,311 ,417 Reserves as of September 2002 $ 6,789,084 Projected Addition to the Fund Balance during FY2002-2003 $ 3,507,773 Projected Fund Balance as of September 30, 2003 $10,296,857 *Preliminary Fund Balance, pending any final audit adjustments ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ^ INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8473 oxn-T W# To the Mayor and Members of the City Council March 4, 2003 Page 2 of 4 SUBJECT: GROUP HEALTH AND LIFE INSURANCE FUND UPDATE - FIRST QUARTER REPORT - FY2002-2003 UPDATE ON FIRST QUARTER CLAIMS COSTS/EXPENSES: The City's health benefit plans were restructured effective August 1, 2002, in order to be more consistent with other, comparable employers and to reduce costs through "risk sharing." At the same time, contribution rates were increased, The first three months of FY2002-2003 reflect the effects of those changes. October 2002 — December 2002 Total Claims Paid Claims Total Paid Funding Revenue Paid By From Fund Claims Plus Surplus received in UHC FE85 Admin. Fees (Deficit) FUND FE85 from Fund Fund FE85 r rl Total $10,819,839 $9,268,206 $7,871,004 $8,802,951 $2,016,888 Previous quarterly reports to the City Council were based on the accrual method of accounting, i.e., reporting monthly claims processed by U n ited Healthcare (UHC) for payment and projected revenue based on assumed contributions multiplied by participants by type of coverage under the UHC contract. However, it was determined that a clearer picture of claims ("Paid Claims from Fund FE85"), revenue ("Total Revenue received in Fund FE85") and fund impact would be provided by reporting on a cash basis, as reflected in the chart above, It is anticipated that the cash basis of reporting expenses and revenues will more closely reflect the actual status of the Group Health and Life Insurance Fund. In order to track some of the future liability to the Fund, claims paid by UHC in each month ("Claims Paid By UHC") will continue to be reported. Reporting this information will allow comparison of claims paid by UHC but not yet paid by the Fund. For the first quarter of FY2002- 2003, approximately $1.4 million of claims have been processed by UHC but not yet paid for out of the Fund. Based upon the 1st Quarter claims and revenue information, staff is optimistic that the new plans will have the desired result of reducing claims costs, However, several additional months of claims experience will be necessary to fully evaluate the impact of the new plans, especially in light of a medical cost inflationary trend of about 15%. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS , uW INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8473 To the Mayor and Members of the City Council March 4, 2003 Page 3 of 4 CIE; SUBJECT: GROUP HEALTH AND LIFE INSURANCE FUND UPDATE - FIRST QUARTER REPORT - FY2002-2003 FIRST QUARTER STATUS OF THE GROUP HEALTH AND LIFE INSURANCE FUND: The first quarter (or year-to-date) status of the Group Health and Life Insurance Fund is provided below: Fund Balance as of October 1, 2002* $ 6,789,084 Revenue (10/02-12/02) $10,819,840 Expenses (10/02-12/02)** $ 8,948,573 Fund Balance as of December 31, 2002 $ 8,660,351 Preliminary fund balance, pending any final audit adjustments "Includes all charges to the Fund, in addition to UHC claims/expenses costs (e.g., health benefit consultant charges; external EAP vendor charges; etc.) SUMMARY OF CONCERNS WITH THE HEALTH BENEFIT PLANS: Several issues and concerns are being evaluated by the Health Benefit Advisory Committee- (1) Medicare-eligible retirees and/or retirees with Medicare-eligible dependents have raised issues about the fairness of the contribution rates. Medicare-eligible retirees have the same contribution rate as non-Medicare-eligible retirees and, in addition, pay the monthly premium for Medicare Part B. Medicare is the primary payer for these retirees. This issue is complicated and is currently being reviewed by an Ad-Hoc Subcommittee of the Health Benefit Advisory Committee. In order to insure that all sides of the issue are heard, a Medicare-eligible retiree has been appointed to the Health Benefit Advisory Committee by the City Manager and is serving on this Ad-Hoc Committee. (2) Some employees/retirees have requested that the City either (1) allow the $1,000 or $500 deductible required on the Classic and the Performance Plans that was satisfied in the 2002 plan year to apply to an entire year (from August 2002 through July 2003): or (2) allow any expenses which apply to the deductible and which were established in the 4th quarter of the last calendar year be carried over to the 2003 plan year. Allowing the carryover" of such expenses into the new plan year will shift more risk back to the City. Staff is currently obtaining cost estimates on these requests and will discuss the issue with the Health Benefit Advisory Committee. (3) The City's Internal Audit Department is completing an audit of United Healthcare's (UHC) claims paying process and their performance on the contract guarantees. Once completed, the results will be shared with the Health Benefit Advisory Committee, as well as the City Council. In addition, Human Resources staff and the Health Benefit Advisory ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ............ * INFORMAL REPORT TO CITY COUNCIL MEMBERS N o. 8473 March 4, 2003 "OTC To the Mayor and Members of the City Council Page 4 of 4 SUBJECT: GROUP HEALTH AND LIFE INSURANCE FUND UPDATE - FIRST QUARTER REPORT - FY2002-2003 Committee are partnering with the City Auditor to select an external auditor who specializes in such audits. It is proposed that the external auditor perform an annual audit on UHC's claims-paying processes and on the performance guarantees in their contract with the City of Fort Worth. (4) NurseLine provides 24-hour/7-day a week access (via telephone) to registered nurses who can respond to questions about potential medical emergencies, disease management, and other medical situations about which members might have questions. The cost for NurseLine is approximately $80,000 per year, Only 4% of the workforce has used the NurseLine service. Staff and the Health Benefit Advisory Committee have evaluated the utilization of NurseLine and determined that it is not a cost effective method of encouraging members to proactively manage their health care. It is proposed that the City provide each employee and retiree with a self-referral medical guide in lieu of offering the NurseLine service. The purchase of self-referral medical guides will be cost neutral for this calendar year, if the NurseLine service is rO cancelled, and will provide a cost savings in future years. Staff and the Health Benefits Advisory Committee recommend canceling the NurseLine service and purchasing the self-referral medical guides in order to improve member and dependent medical self-care skills; improve communication and decision making between members, dependents and their healthcare providers; and, reduce unnecessary outpatient visits through the appropriate use of home treatment. This change - canceling NurseLine and purchasing the self-referral medical guides - is reflected in M&C C-19505, which recommends the renewal of the contract with United Healthcare. Staff recommends that a conservative approach be taken regarding any changes to the health benefit plan design or administrative procedures that could increase the costs of the plans, unless additional funding is authorized or until the experience under the new plans Gonfirms that sufficient reserves are available to fund such changes. It is staffs opinion that the experience to date does not clearly indicate future trends, especially with an annual medical cost inflationary rate of 15%. If you have any questions, please contact Linda Cobb, Human Resources Director(817-871-7783). ary W. acksot City Xannager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ,