HomeMy WebLinkAboutAgenda - 09-03-1996 - IX-B w 1
Orange County
Board of Commissioners
Action Agenda Item Abstract
Meeting Date: September 3, 1996
Action Agenda
Item Nora
Subject: 1997 Employee Health Insurance
Department: Personnel Public Hearing Yes_ No-X
Attachment(s): Information Contact:
1 - 1997 Health Plan Options Elaine Holmes, Personnel Director
and Estimated Costs Extension 2550
2 - Health Insurance Rates for Options A and B
3 - Estimated FY 1996-97 Health Telephone Number:
Insurance Costs Hillsborough 732-8181
Chapel Hill 968-4501
Mebane 227-2031
Durham 688-7331
Purpose: To consider employee health insurance options effective January 1, 1996
for calendar year 1997.
Background: During the 1996-97 budget work sessions,the Board of Commissioners
asked that Personnel follow a process similar to that for 1996 in bringing
health insurance for 1997 to the Board for its consideration. Specific areas
the Board said it wished to consider in this review are:
• Revisiting the option of limiting employee choice in health plans to a
single provider and identifying the cost savings which would result
from this.
• The current health insurance waiver option and whether this should be
further modified in follow up to the 1996 discussion.
1996 Health Plan Changes
As a result of the 1996 health insurance review,the Board implemented
the following changes effective January 1, 1996:
• Joined the North Carolina Association of County Commissioners
(NCACC)Health Insurance Trust.
• Replaced the Blue Cross Traditional Plan with the Blue Cross
Preferred Provider Plan.
a 2
• Changed the subsidy provided for dependent coverage to a percentage
basis and established this at 40 percent.
• Reduced the health insurance waiver option from$67.50 to $50 each
month for current employees and$25 each month for employees hired
January 1, 1996 and after.
The net cost impact of the Board's changes coupled with the reduced rate
quoted by Blue Cross for 1996 was an estimated annual reduction in
health insurance cost of about$250,000.
Current Status
Currently Orange County offers three health plans:
Elan Employees Enrolled
Blue Cross Preferred Provider Plan 77
Blue Cross Personal Care Plan(HMO) 295
Healthsource(HMO) 144
The two Blue Cross plans are offered through the NCACC Health
Insurance Trust.
1997 Health Insurance Review
In reviewing health insurance for 1997, Personnel has obtained health
insurance rate quotes on renewal of the current plans and on entering into
an exclusive or sole provider contract for health insurance.
Personnel has focused on the County's current health insurance providers,
Blue Cross and Healthsource. The reason for narrowing this focus is
because of the County's experience with these plans,the well established,
existing local network of physicians participating in these plans and the
existing relationship between County employees and these participating
physicians.
Options Identified
The two options identified for consideration are:
• Option A-Renewal of the current health plans (Blue Cross
through the Health Insurance Trust and Healthsource)with no
change.
• Option B-Renewal of the Blue Cross plans with the Health
Insurance Trust as the sole provider and elimination of
Healthsource as a plan option.
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Attachment 1 compares costs for the two options. Attachment 2 shows the
rates(total, County cost and employee cost)under each option.
Attachment 3 shows the estimated costs for fiscal year 1996-97.
In summary:
• The NCACC Health Insurance Trust 1997 rate quote for renewal of the
current Blue Cross plans (Preferred Provider and Personal Care Plans)
provides for an approximate 5.8 percent increase from the current
rates. (Please note the Health Insurance Trust rates are contingent on
a minimum participation rate of 65 percent. The Trust reserves the
right to recalculate the rates effective January 1, 1997 ifparticipation
drops below 65 percent after open enrollment.)
• Healthsource's rate quote provides for an approximate six percent
decrease from the current rates.
• As to the sole provider option,the NCACC Health Insurance Trust
quote for entering into a sole provider contract(Blue Cross plans only
and elimination of Healthsource)provides for a.4 percent decrease
from the current Blue Cross rates.
The approved budget for fiscal year 1996-97 included funding for up to a
seven percent increase in health insurance effective January 1, 1997.
Taking account of the budgeted increase and the rate quotes from both
plans:
• Option A would result in a cost savings over the amount budgeted of
approximately $25,000 for 1996-97 (from January 1 through June 30).
Option B would result in an estimated cost savings in 1996-97 over the
amount budgeted of approximately $55,000.
• Option A would result in an increase in cost over the current plans for
fiscal year 1996-97 of about$23,000. Option B (sole provider option)
would result in an estimated$7,000 decrease in cost over the current
health insurance cost.
• In comparison to Option A, Option B saves an estimated$30,000 in
1996-97.
Impact of the Sole Provider Contract(Option B)
Option B provides for a sole provider or exclusive contract for the two
Blue Cross plans through the NCACC Health Insurance Trust. If the
County entered into a sole provider contract for the Blue Cross plans,this
would mean discontinuing the current Healthsource plan effective
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January 1, 1997. Under a sole provider contract,the County could
continue to offer more than one Blue Cross plan type through the Health
Insurance Trust as it does now.
Approximately 144 employees currently are enrolled in the Healthsource
plan. If the County changed to a sole provider contract for the Blue Cross
plans through the Trust,these employees would have to change to either
the Blue Cross Preferred Provider Plan or the Blue Cross Personal Care
Plan during open enrollment for 1997.
Both the Blue Cross Personal Care Plan and Healthsource are health
maintenance organizations (HMOs). The benefits offered by the two plans
are relatively similar. In terms of required co-payments, the Personal
Care Plan requires fewer co-payments.
As to physicians in the network,Healthsource offers a broader physician
network. Healthsource also includes Duke Hospital and Duke physicians
in its network. The Blue Cross Personal Care Plan does not include Duke
Hospital or physicians in its network.
Dependent Subsidy
Orange County provides a partial subsidy to offset the employee cost of
dependent coverage. This subsidy is calculated using the Blue Cross plans
as the base plan, determining 40 percent of each dependent coverage
category and then applying that same dollar amount to dependent coverage
under Healthsource. The health insurance cost estimates reflect
continuation of the 40 percent dependent subsidy.
Health Insurance Waiver Option
As part of the 1996 review,the Board decided to reduce the amount of the
health insurance waiver option. Previously this option had provided that
an employee could waive health insurance coverage and receive $67.50
each month in lieu of coverage, if he or she had health insurance coverage
through another provider. For 1996 the Board reduced the amount to $50
each month for current employees and to $25 each month for employees
hired January 1, 1996 and after.
During the 1996 Open Enrollment, six employees currently participating
in the waiver elected to drop it and no additional employees elected to
participate. Of the six employees electing to drop the waiver, four elected
individual coverage and two elected family coverage. The net cost impact
of the change in waiver participation was an increase in annual cost of
about$1800. This takes account of the cost savings from the reduction in
the waiver amount and the additional cost of the health coverage for the
six employees.
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Since January 1, 1996 one new employee has elected to participate in the
waiver and one participating has terminated. As of June 1996, 39
employees are participating in the waiver option.
Both Healthsource and Blue Cross have advised that this option has no
adverse impact on the County's rates so long as the County requires
evidence of health insurance coverage through another provider, as is done
presently.
If the County eliminated the waiver option and the 39 employees currently
participating elected health insurance, additional funds ranging from about
$74,000 to $135,000(using current rates)would be required depending on
coverage elected.
The effect of the waiver option is to reduce the County cost in the instance
where an employee has coverage elsewhere and declines coverage instead
of enrolling because there is no other alternative. If the Board elects to
discontinue the waiver, it is recommended that current employees
participating in the waiver be allowed to continue to do so under a
"grandfather" provision so that additional funds are not required.
Effective Date of Health Insurance Coverage
An additional matter considered in this health insurance review has been
the effective date of coverage for new employees and any potential for
cost savings here. Currently, coverage for a new employee and his or her
dependents is effective on the first date of employment. For example, if
an employee begins work August 12, health insurance coverage is
effective August 12.
An alternative is to change this policy to provide that coverage is effective
on the first day of the month following the date of employment. For
example, if an employee began work on August 12,health insurance
coverage would be effective September 1. If such a policy were
implemented,the estimated cost savings for FY 1996-97 is approximately
$3,550 and on a full year basis is about$7,100,based on current health
insurance rates. The cost savings results from elimination of the County
cost for employee coverage and dependent coverage for the time prior to
the first day of the month.
As a practical matter, many employees hired by the County are coming
from other jobs and have health insurance coverage which takes them
through the first days of employment so in this case the County's coverage
is duplicative. It also takes several days for a new employee to get
identification cards from the insurance provider,and to be picked up on the
provider's system so the employee can use the coverage.
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For an employee hired who does not have health insurance coverage,the
impact is County coverage would not begin until the first of the month
following employment(the actual time would range from one to 30 days).
Summary
In summary,there are two health insurance plan options identified for
1997. These are:
Option A- Renewal of the current health plans with no change.
Option B -Renewal of the current Blue Cross plans through the Health
Insurance Trust as a sole provider contract and elimination of
Healthsource as a plan option.
The net cost savings over the amount budgeted for health insurance for
fiscal year 1996-97 under Option A is about$25,000 and under Option B
is about$55,000. In comparison to Option A, Option B saves an
estimated$30,000 in 1996-97.
The impact of implementation of Option B is that about 144 employees
currently enrolled in Healthsource would have to change plans and
employee choice would be limited to the two Blue Cross plans.
Listed below are the recommendations as to Board action for health
insurance for 1997. Option A has been recommended because it causes
the least disruption to employees and maintains some leverage with
providers in negotiating contracts.
The net impact of the recommendations is an increase in health
insurance cost for 1996-97 over the current cost of approximately $19,000.
In comparison to the amount budgeted for 1996-97, it is a reduction from
the amount budgeted of about$29,000.
Recommendation:
The Manager recommends the Board:
1. Adopt Option A-renewal of the current health insurance plans.
2. Authorize staff to negotiate an updated agreement with the NCACC
Health Insurance Trust in keeping with the Board's decisions as to
health plans for 1997 and authorize the Board Chair to sign the final
agreement on behalf of the Board.
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3. Continue the dependent subsidy and health insurance waiver as set in
1996.
4. Change the effective date of health insurance coverage to the first day
of the month following the date of employment for new employees
effective January 1, 1997 and after.
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Attachment 1
1997 Health Plan Options and Estimated Costs
Option A B
Description Renewal of the Current Health Renewal With Blue Cross and
Plans With No Change Blue Shield As the Sole
Provider
Plans Offered BC/BS Preferred Provider Plan BC/BS Preferred Provider Plan
BC/BS Personal Care Plan BC/BS Personal Care Plan
Healthsource
Cost As Compared to
Amount Budgeted for
FY 1996-97*
-FY 96-97 (25,335) (55,191)
-Full Year (2,668) (62,384)
Cost As Compared to
Current Health Plans Cost
-FY 96-97 22,665 (7,191)
-Full Year 45, 332 (14,384)
Cost of Option B As
Compared to Option A
-FY 96-97 --- (29,856)
-Full Year --- (59,716)
* FY 1996-97 budget included a 7 percent increase or about$48,000 effective 1-1-97
f.pers\health\97opt.doc
August 11, 1996
Attachment2 9
Health Insurance Option A
Renewal of Current Plans*
Blue Cross/Blue Shield Total Cost Paid By County Paid By Employees
Personal Care Plan Monthly Rates Monthly Rates Monthly Rates
Old New Old New Old New
Employee Only $162.86 $172.30 $162.86 $172.30 $0.00 $0.00
Employee and Child(ren) $314.30 $332.52 $223.44 $236.39 $90.86 $96.13
Employee and Spouse $343.62 $363.54 $235.16 $248.80 $108.46 $114.74
Employee and Family $488.54 $516.88 $293.14 $310.13 $195.40 $206.75
Blue Cross/Blue Shield Total Cost Paid By County Paid By Employees
Preferred Provider Plan Monthly Rates Monthly Rates Monthly Rates
Old New Old New Old New
Employee Only $162.861 $172.30 $162.86 $172.30 $0.00 $0.00
Employee and Child(ren) $314.30 $332.52 $223.44 $236.39 $90.86 $96.13
Employee and Spouse $343.62 $363.54 $235.16 $248.80 $108.46 $114.74
Employee and Family $488.54 $516.88 $293.14 $310.13 $195.40 $206.75
Total Cost Paid By County Paid By Employees
HealthSource Monthly Rates Monthly Rates Monthly Rates
Old New Old New Old New
Employee Only $168.00 $158.00 $168.00 $158.00 $0.001 $0.00
Employee and Child(ren) $351.00 $328.00 $223.44 $236.39 $127.56 $91.61
Employee and Spouse $376.00 $352.00 $235.16 $248.80 $140.84 $103.20
Employee and Family $535.00 $500.00 $293.14 $310.13 $241.86 4WKI
Health Insurance Option B
Blue Cross As Sole Provider
Total Cost Paid By County Paid By Employees
Blue Cross/Blue Shield Monthly Rates Monthly Rates Monthly Rates
Personal Care Plan Old New Old New Old New
Employee Only $162.86 $162.20 $162.86 $162.20 $0.00 $0.00
Employee and Child(ren) $314.30 $313.04 $223.44 $222.54 $90.86 $90.50
Employee and Spouse $343.62 $342.24 $235.16 $234.22 $108.46 $108.02
'Employee and Family $488.54 $486.59 $293.14 $291.96 $195.40 $194.63
Blue Cross/Blue Shield Total Cost Paid By County Paid By Employees
Preferred Provider Plan Monthly Rates Monthly Rates Monthly Rates
Old New Old New Old New
Employee Only $162.86 $162.20 $162.86 $162.20 $0.00 $0.00
Employee and Child(ren) $314.30 $313.04 $223.44 $222.54 $90.86 $90.50
Employee and Spouse $343.62 $342.24 $235.16 $234.22 $108.46 $108.02
Employee and Family $488.54 $486.59 $293.14 $291.96 $195.40 $194.63
*Blue Cross rates are contingent on a minimum participation rate of 65 percent. The NCACC Health Insurance
Trust reserves the right to recalculate the rates if participation drops below 65 percent after open enrollment.
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