HomeMy WebLinkAboutAgenda - 03-18-2025; 8-b - Recommendations for Rate Renewal of Employee Health and Dental Insurance and Continued Participation in the North Carolina Health Insurance Pool 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: March 18, 2025
Action Agenda
Item No. 8-b
SUBJECT: Recommendations for Rate Renewal of Employee Health and Dental Insurance
and Continued Participation in the North Carolina Health Insurance Pool
DEPARTMENT: Human Resources
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1: Projected Health and Dental Brenda Bartholomew, Human Resources
Insurance Rates for FY Director, (919) 245-2552
2025-26
PURPOSE: To approve the Manager's recommendations of employee health and dental
insurance premium equivalent rates for plan year, July 1, 2025, through June 30, 2026, and to
approve the County's continued participation in the North Carolina Health Insurance Pool.
BACKGROUND: The County provides health and dental benefit plans for employees and their
families, as well as health benefit plans for pre-65 retirees. The Board of Commissioners has the
responsibility to approve the health and dental insurance rates each fiscal year. This approval is
made in advance of the annual budget so staff can hold an open enrollment period prior to the
beginning of the fiscal year—July 1. Open enrollment is scheduled for the period of April 28, 2025,
through May 9, 2025.
Health Insurance
In FY 2019, the Board of County Commissioners approved Orange County's participation in the
North Carolina Health Insurance Pool (NCHIP). Based on stable claims experience, from FY 2019
through FY 2022, the County maintained no increases in premium equivalent rates for health
insurance and dental coverage for employees and pre-65 retirees
In subsequent years, the Board approved 5% increases in premium equivalent rates for health
insurance coverage each year through FY 2025, with no employee contribution rate increase for
either active employees or pre-65 retirees. During these years, the Health Insurance plan
experienced increases in the frequency and severity of large claimants, overall increases to gross
claims and growth in plan enrollment. These factors have collectively contributed to the need to
draw down reserves within the North Carolina Health Insurance Pool and have created the need
to increase premium equivalent rates to both cover claims and build reserves.
Funding for the health plan is based on estimated premium equivalent rates that are calculated to
pay for incurred claims, administrative and reinsurance costs, and expected liability of claims
incurred but not reported (IBNR). The plan also carries a reserve balance which helps to ensure
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liquidity and the County's ability to pay claims if the total cost of claims exceeds the total funding
generated by the premium equivalents.
A reserve policy or the fund ratio target should range between 1.5 and 3.0 over IBNR to ensure
the ability to pay for future claims based on current claims experience. This means that the
County's reserve target should be between $1.3 million and $2.7 million based currently on the
January 2025 IBNR liability of$898,348.
The County's current fund ratio is 0.5 through January 2025. A reserve amount of two times the
expected IBNR liability is recommended as a target to build a strong reserve position. Based on
January 2025 IBNR liability, this equates to building reserves to $1,796,696.
JAN 2025 IBNR FUNDS NEEDED Reserve Target
$898,348 $490,481 0.5
$898,348 $898,348 1.0 1X
$898,348 $1,347,522 1.5 1.5X
$898,348 $1,796,696 2.0 2X
$898,348 $2,695,044 3.0 3X
Overview of Renewal Drivers for FY2025-26
The overall plan continues to show increases in medical and pharmacy claims as well as growth
in plan enrollment.
Gross Claims Comparison
Gross claims are defined as the total costs of claims incurred before any reinsurance or risk
sharing is applied and directly correlate with the need to increase premium equivalent rates. The
table below shows the costs of gross claims, both for medical and pharmacy services, over the
last five (5) fiscal years.
FY Med Claims Rx Claims Total Claims %Change Med Claims Rx Claims
2020 $7,132,341 $3,490,917 $10,623,258
2021 $10,717,277 $3,311,343 $14,028,620 32.06% 50.26% -5.14%
2022 $8,673,153 $3,760,867 $12,434,020 -11.37% -19.07% 13.58%
2023 $10,275,362 $4,661,882 $14,937,244 20.13% 18.47% 23.96%
2024
$9,804,063 $5,773,466 $15,577,529 4.29% -4.59% 23.84%
Some notable factors contributing to increased claims costs are:
• Significant change in medical claims from 2021 to 2022 suggests a rebound from
employees delaying medical services during COVID. In subsequent years, claims indicate
that usage is beginning to stabilize.
• Pharmacy claims are increasing at faster rates than medical claims. A contributing factor
is the increasing costs and usage of GLP-1 medications prescribed for type 2 diabetes and
weight loss. Approximately 80% of the increase in pharmacy claim costs is attributable to
these medications. Although the medications are costly at this time, employees have
access to services that show positive impact to their health.
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Enrollment Comparison
Total enrollments have increased 2.7% compared to January 1, 2024, enrollments. Further,
overall enrollment in employee only plans, which are 100% County funded, has increased the
most (18%) since 2022 contributing to increases in the County's funding liability.
EE+Children EE+Spouse EE only EE Family TOTAL %change #change
1/1/2022 226 68 657 63 1,014
1/1/2023 208 69 723 63 1,063 4.8% 49
1/1/2024 216 61 755 72 1,104 3.9% 41
1/1/2025 215 71 778 70 1,134 2.7% 30
Rate Renewal Recommendation
An actuarial analysis conducted by the North Carolina Health Insurance Pool recommends an
increase of six percent (6%) to adequately meet projected funding needs necessary to cover
projected total plan costs for FY 2025-26 and to increase reserve levels to the targeted two times
the expected IBNR liability.
Further, the Manager recommends that the employee contribution remains at current rates. This
means that the County will absorb an additional 0.5% of the premium increase, increasing the
total rate increase to 6.5%. This equates to an increase of $937,420 to fund the County share of
health insurance plans for employees and pre-retirees.
FY 2025-26 Health Insurance Rate Renewal
Fiscal Year Rates Monthly Cost Annual Cost Employee Employer
Contribution Contribution
Current Rates with
2025 Employer Increase $1,320,858 $15,850,290 $1,428,421 $14,421,850
Only (Renewal)
Current Rates with
2026 Employer Increase $1,398,976 $16,787,710 $1,428,421 $15,359,270
Only (Renewal)
Net Increase $78,118 $937,420 $0 $937,420
NCHIP Participation
The Manager recommends continuing membership with NCHIP. Gross claims have increased
significantly and many of these claims have been subsidized by the North Carolina Health
Insurance Pool risk sharing. The risk sharing within NCHIP has been very beneficial to the
County's ability to mitigate high renewal rates based on the impact of large claim increases and
repeating high claimants. Reinsurance costs would be considerably higher outside of NCHIP due
to the County's recent years' claims experience.
Dental Insurance
The County provides dental coverage for active employees. A four percent (4%) rate increase is
recommended for FY2025-26 which equates to an increase of $28,395 to cover claims and
administrative fees.
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monthly annually
Plan Levels enrollment FY2026 EE ER TOTAL EE ER TOTAL EE ER
Employee Only 633 $34.86 $0.00 $34.86 $22,067 $0 $22,067 $264,803 $0 $264,803
Employee+Child(ren) 151 $94.11 $47.74 $46.37 $14,211 $7,209 $7,002 $170,527 $86,505 $84,022
Employee+Spouse 98 $83.66 $39.32 $44.34 $8,198 $3,853 $4,345 $98,381 $46,240 $52,141
Employee+Family 123 $121.99 $70.20 $51.79 $15,005 $8,635 $6,370 $180,060 $103,615 $76,445
ALIGNMENT WITH STRATEGIC PLAN: This item supports:
• GOAL 2: HEALTHY COMMUNITY
OBJECTIVE 5. Invest in, support, train, and retain our community safety, health, and
emergency services employees and direct care workforce.
FINANCIAL IMPACT: The FY 2025-26 Health and Dental Fund budget request is anticipated to
increase by $965,815.
RECOMMENDATION(S): The Manager recommends that the Board approve:
1) An increase to the Health Insurance Premium Equivalents for both active and pre-65
retirees of 6.0%, effective July 1, 2025;
2) An additional increase of 0.5% for the County to absorb full responsibility for the premium
increase, which raises the total rate increase by 6.5% or approximately $937,420 for
FY2025-26;
3) An increase of 4% to the Dental Insurance Premium Equivalents effective July 1, 2025, to
be fully paid by the County, a total rate increase of 4% or approximately $28,395 for FY
2025-26; and
4) Continuation as a member in the North Carolina Health Insurance Pool (NCHIP).
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Attachment 1: FY 2025-26 Projected Health and Dental Insurance Rates
Table 1: Comparison of Health Insurance Funding from FY 2024-25 to FY 2025-26
2024/2025 2025/2026
Enrollment Premium TOTALCOST EMPLOYEE EMPLOYER Premium TOTALCOST EMPLOYEE EMPLOYER
Traditional Plan Levels
Equivalent Equivalent
Em ployee Only 656 $933.73 $7,350,323 $0 $7,350,323 $994.42 $7,828,094 $0 $7,828,094
Employee+Child(ren) 184 $1,466.99 $3,239,114 $507,619 $2,731,495 $1,547.40 $3,416,661 $507,619 $2,909,042
Employee+Spouse 54 $1,888.91 $1,224,014 $265,162 $958,852 $1,985.09 $1,286,339 $265,162 $1,021,177
Employee+Family 45 $2,655.26 $1,433,840 $396,814 $1,037,027 $2,780.09 $1,501,247 $396,814 $1,104,434
939 $13,247,291 $1,169,594 $12,077,696 $14,032,341 $1,169,594 $12,862,746
2024/2025 2025/2026
Enrollment Premium TOTALCOST EMPLOYEE EMPLOYER TOTAL TOTALCOST EMPLOYEE EMPLOYER
High-Deductible Plan Levels
Equivalent
Employee Only 122 $787.78 $1,153,310 $0 $1,153,310 $838.99 $1,228,275 $0 $1,228,275
Employee+Child(ren) 31 $1,233.06 $458,698 $56,477 $402,221 $1,303.34 $484,843 $56,477 $428,366
Employee+Spouse 17 $1,585.36 $323,413 $55,447 $267,966 $1,670.74 $340,831 $55,447 $285,384
Employee+Family 25 $2,225.26 $667,578 $146,922 $520,656 $2,338.07 $701,421 $146,922 $554,499
195 $2,603,000 $258,846 $2,344,153 $2,755,369 $258,846 $2,496,523
COMBINED PLANS 1134 $15,850,290 $1,428,441 $14,421,850 $16,787,710 $1,428,441 $15,359,270
INCREASE $937,420
Table 2: FY 2025-26 Employee and Employer Health Insurance Rates
Total Monthly Employee County Monthly Employee Semi-
County Semi-Monthly
Traditional Plan Levels Monthly Payroll
Premium Monthly Cost Cost Contribution
Deduction
Employee Only $994.42 $0.00 $994.42 $0.00 $497.21
Employee+Child(ren) $1,547.40 $229.90 $1,317.50 $114.95 $658.75
Employee+Spouse $1,985.09 $409.20 $1,575.89 $204.60 $787.95
Employee+Family $2,780.09 $734.84 $2,045.25 $367.42 $1,022.62
Total Monthly Employee County Monthly Employee Semi- County Semi-Monthly
High-Deductible Plan Levels Premium Monthly Cost Cost Monthly Payroll Contribution(includes
Deduction HSA funding)
Employee Only $838.99 $0.00 $838.99 $0.00 $537.49
Employee+Child(ren) $1,303.34 $151.82 $1,151.52 $75.91 $693.76
Employee+Spouse $1,670.74 $271.80 $1,398.94 $135.90 $817.47
Employee+Family $2,338.07 $489.74 $1,848.33 $244.87 $1,042.16
Table 3: FY 2025-26 Employee and Employer Dental Insurance Contributions
Employee Semi-
Dental Plan Levels Total Monthly Employee County Monthly Monthly Payroll County Semi-
Premium Monthly Cost Cost Monthly Contribution
Deduction
Employee Only $34.86 $0.00 $34.86 $0.00 $17.43
Employee+Child(ren) $94.11 $47.74 $46.37 $23.87 $23.18
Employee+Spouse $83.66 $39.32 $44.34 $19.66 $22.17
Employee+Family $121.99 $70.20 $51.79 $35.10 $25.90