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Home My WebLink AboutAgenda - 09-09-2004 - 9bORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: September 9, 2004 Action Age a~ Item No. - SUBJECT: Em to ee Health Insurance for 2005 DEPARTMENT: Personnel PUBLIC HEARING: (YIN) No ATTACHMENT(S): 1 -Draft 2005 Health Insurance Rates 2 -Estimated FY 2004-05 County Cost INFORMATION CONTACT: Elaine Holmes, Personnel Director Extension 2550 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To consider renewal of employee health insurance plans through the North Carolina Association of County Commissioners (NCACC) Health Insurance Trust effective January 1, 2005. BACKGROUND: In summary, the County has received renewal rate quotations for employee health insurance effective January 1, 2005. The renewal rates quoted are within the amount budgeted for health insurance for 2005. Additional information is provided below. Current Health Plans Currently Orange County offers three health insurance plans: ^ Blue Cross Blue Care Plan ^ Blue Cross Blue Options Plan ^ CIGNA Healthcare Both Blue Cross plans are contracted through the NCACC Health Insurance Trust. The Blue Cross Blue Care and Plan and CIGNA are health maintenance organizations (HMOs). The Blue Cross Blue Options Plan is a type of traditional health insurance plan. The chart below shows the number of employees enrolled in each plan. Health Plan Em to ees Enrolled Blue Cross Blue Care Plan 573 Blue Cross Blue Options Plan 42 Cigna Healthcare 129 2005 Health Insurance Rates The NCACC Health Insurance Trust and CIGNA have provided renewal rate quotations effective January 1, 2005 for the current health plans as follows: Plan Rate Change Blue Cross Blue Care Plan -2.1 Blue Cross Blue Options Plan -2.1 CIGNA Healthcare 37.72% The NCACC Trust advises that the reduction in rates for the Blue Cross Blue Care and Blue Options plans is due to the County's favorable claims experience over the past year as well as a decline in the projected trend for health insurance costs. CIGNA advises that its significant rate increase is due to increased cost for claims and large claims alone (over $50,000) that have totaled over $480,000 for the past year. Domestic Partners Both the NCACC Trust and CIGNA renewal quotes provide for coverage for domestic partners with no additional charge for this coverage. In accordance with the Board of Commissioners' decision at its November 2003 pay and benefits work session to offer domestic partner coverage effective with the January 1, 2005 health insurance renewal, staff will be providing as a separate agenda item at the September 21, 2004 Board meeting, the proposed implementing policy and personnel ordinance revisions for domestic partner coverage. Benefits Changes The NCACC Trust renewal provides for one change for the two Blue Cross plans. When purchasing prescriptions, employees will be required to receive generic equivalents of prescribed medications, when available. If the employee voluntarily chooses a more expensive brand-name medication, he/she will be responsible for paying the prescription co-payment plus the difference in cost between generic and brand name medication. However, if the participant's physician specifies that abrand-name medication is re uired, and indicates "fill as prescribed" on the prescription, the participant will not be responsible for paying the difference in cost. The CIGNA Healthcare renewal includes no changes from the benefits provided during the 2004 Plan year. Canadian Drug Purchase The Board had asked that staff provide a report and update on the option of purchasing drugs from Canada. Staff plans to provide this later this fall. It does not impact the current health insurance renewal. CIGNA Healthcare After evaluating the renewal quote from CIGNA, it appears that the effect of the large CIGNA rate increase is to price itself out of the reach of employees. Assuming the County continues its current subsidy levels, the impact of the CIGNA rate increase coupled with the NCACC Trust rate decrease is to impose a large premium increase on any employee enrolled in dependent coverage through CIGNA. For example, the table below shows what the old and new employee costs for dependent coverage would be if the County continued to offer CIGNA. Monthly Amount Paid By the Employee Coverage Type Old New Employee/Child(ren) $143.14 $407.45 Employee/Spouse $171.70 $459.98 Employee/Family $301.72 $704.71 At the same time, the CIGNA benefits are comparable or in some cases slightly less than the benefits offered by the Blue Cross Blue Care Plan and the provider network is largely the same. Given these factors and the rate increase, it is anticipated that those employees with dependent coverage will leave CIGNA to join one of the Blue Cross Plans. Of the 129 employees enrolled in CIGNA, about 77 have dependent coverage. The remaining 52 employees participating in CIGNA are enrolled in employee only coverage. Assuming the County continued its policy of paying the full cost of employee only coverage, this would require that the County pay a monthly cost of $478.44 for CIGNA as compared to the monthly cost of $390.40 for the Blue Options Plan or $347.99 for the Blue Care Plan. Sole Provider Coverage through the NCACC Health Insurance Trust As in past years, staff requested that the NCACC Health Insurance Trust provide a quote for sole provider coverage; that is, if the County discontinued the CIGNA plan and offered only the two Blue Cross plans. The Trust advises that this would be an additional 1.5 percent rate reduction or a cost savings for the County of about $74,000 in fiscal year 2004-05. County Contribution for Employee Health Insurance The County's contribution for employee health insurance has been: ^ The full cost for individual employee coverage and ^ 52 percent of the cost of dependent coverage based on the Blue Cross Blue Care Plan rate. The County then has applied the dollar amount of the dependent contribution calculated based on the Blue Cross Blue Care rate to the Blue Cross Blue Options and CIGNA plans. The County had increased the subsidy from 40 percent to 52 percent with the January 1, 2003 renewal to offset the impact on employees of the 25 percent health insurance cost increase in 2003. The 52 percent subsidy was maintained during the 2004 plan year. The Attachment 1 draft monthly health insurance plan rates are based on renewal of the current plans with the continuation of the current 52 percent dependent subsidy, based on the Blue Cross Blue Care Plan. Continuation of the subsidy at this level maintains a key "family friendly" policy offered by the County. This is a family friendly policy in that it makes health insurance coverage for dependents, whether spouse, domestic partner, children, or the entire family more affordable, and thus, accessible. It particularly benefits lower salaried employees for whom dependent health insurance coverage is a significant cost. Recommendation Given the CIGNA renewal quote and the result that the new CIGNA pricing makes the plan unaffordable for employees, staff recommends the County pursue the sole provider option with the NCACC Health Insurance Trust. The Attachment 1 rates reflect discontinuing CIGNA effective January 1, 2005 and adopting the sole provider option. Budget for Fiscal Year 2004-05 The County budget for fiscal year 2004-05 provides funding for up to a 12.0 percent health insurance increase effective January 1, 2005. In dollars, this is $268,177 budgeted for the projected increase. Based on the quoted renewal rates for 2005, the cost of the County contribution for individual coverage and dependent coverage are within the amount budgeted for health insurance for 2004-05. The budget savings yielded by the actual renewal rates quoted over the amount budgeted for fiscal year 2004-05 based on the recommendation that the County adopt the sole provider option are about $347,000. Next Steps With the Board's approval of the health insurance renewal and rates, staff will proceed to develop the employee open enrollment packets, distribute these to employees in early October, hold the open enrollment period October 11 through November 5 with the Benefits and Wellness Fair tentatively scheduled for Friday, October 22. Payroll deductions at the new rates will begin in the pay period beginning November 22 for coverage effective January 1, 2005. FINANCIAL IMPACT: As noted, the County budget for 2004-05 provides funding for up to a 12 percent health insurance cost increase or about $268,177. Attachment 2 shows the current costs for health insurance and the projected costs for the renewal of the current plans with no change and renewal with the Trust as the County's sole provider. Both options are within the amount budgeted. RECOMMENDATION(S): The Manager recommends that the Board: • Approve renewal of employee health insurance plans with the NCACC Health Insurance Trust as the County's sole provider. • Discontinue the CIGNA plan effective January 1, 2005. • Adopt the Attachment 1 health insurance rates for coverage effective January 1, 2005 including continuing the dependent subsidy at 52 percent. 5 Attachment 1 Draft 2005 Monthly Health Insurance Rates Blue Cross Blue Care Plan Total Cost Paid by the County Paid by the Employee Old New Old New Old New Employee Only $355.61 $342.77 $355.61 $342.77 $0.00 $0.00 Employee/Child(dren) $686.34 $661.55 $527.59 $508.54 $158.75 $153.01 Employee/Spouse $750.01 $722.92 $560.70 $540.45 $189.31 $182.47 Employee/Family $1,066.83 $1,028.30 $725.44 $699.25 $341.39 $329.05 Blue Cross Blue Options Plan Total Cost Paid by the County Paid by the Employee Old New Old New Old New Employee Only $398.58 $384.19 $398.58 $384.19 $0.00 $0.00 Employee/Child(dren) $769.20 $741.42 $527.59 $508.54 $241.61 $232.88 Employee/Spouse $840.92 $810.55 $560.70 $540.45 $280.22 $270.10 Employee/Family $1,195.67 $1,152.49 $725.44 $699.25 $470.23 $453.24 Note: Rates are based upon a dependent subsidy of 52 percent calculated on the Blue Care Plan with the same dollar amount then applied to the Blue Options and CIGNA Plans. Health Insurance Renewal Options Estimated Fiscal Year 2004-05 County Cost Individual Total FY Cost Increase Increase Employee Dependent Total FY Total FY Cost Compared to Amount Renewal Option Percent Coverage Coverage County Cost Increase Budgeted FY 04/05 Present - $ 3,018,151 $ 839,545 $ 3,857,696 -2.1 % Blue Option 1 -Blue Care and Plans Blue Options Plans with 37.72% CIGNA CIGNA $ 3,023,913 $ 829,219 $ 3,853,132 $ 4,564 $ 272,741 Option 2 -Blue Care and Blue Options Plan with NCACC Trust as Sole -3.6% Provider Dro CIGNA Blue Plans $ 2,957,308 $ 821,873 $ .3,779,181 $ 78,515 $ 346,692 1) Cost estimates reflect general fund costs only. Calculations based on the current dependent subsidy policy of 52 percent on the Blue Care Plan rate. 2) Health insurance cost increase budgeted for 2004-05 at 12% or about an additional $268,000 D v 3 m N healcost05.x1s8/27/2004