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HomeMy WebLinkAboutAgenda 03-05-2026; 6-a - Approval of Employee Health and Dental Insurance Renewal and Continued Participation in the North Carolina Health Insurance Pool 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: March 5, 2026 Action Agenda Item No. 6-a SUBJECT: Approval of Employee Health and Dental Insurance Renewal and Continued Participation in the North Carolina Health Insurance Pool DEPARTMENT: Human Resources ATTACHMENT(S): INFORMATION CONTACT: Attachment 1: Renewal Projection for Brenda Bartholomew, Human Resources Health Insurance Rates for Director, (919) 245-2552 FY 2026-27 PURPOSE: To approve employee health and dental insurance premium equivalent rates for the plan year July 1, 2026, through June 30, 2027, and to approve continued participation in the North Carolina Health Insurance Pool (NCHIP). 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 27, 2026, through May 10, 2026. Health Insurance In FY 2019, the Board of County Commissioners approved Orange County's participation in the North Carolina Health Insurance Pool. 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 and a 6% increase in FY 2026. The County has absorbed the cost of these increases and has not increased the employee contribution to the health plan for active employees or pre-65 retirees since 2015. 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 the County's ability to pay any claims that exceed the budgeted amount in any given year. Best practice recommends maintaining reserves between 1.5 and 3.0 times IBNR. Based on the December 2025 IBNR liability of $922,644, the recommended reserve range is between $1.4 2 million and $2.8 million. A target of approximately two (2) times the IBNR, or $1.85 million, is recommended to stabilize the fund. The County's current fund ratio is —1.3% as of December 2025 indicating that reserves are below the target. Increasing premium equivalent rates to cover actual claims incurred will provide the opportunity to help build reserves in the future. Financial Review The following table details the County's claims experience from FY20 through FY25. FY20 FY21 FY22 FY23 FY24 FY25 Jul 19-Jun 20 Jul 20-Jun 21 Jul 21-Jun 22 Jul 22-Jun 23 Jul 23-Jun 24 Jul 24-Jun 25 YoY Change Med$ $6,895,698 $8,857,216 $10,946,908 $8,883,956 $9,921,942 $10,689,943 8% Rx$ $3,611,785 $3,362,195 $3,666,862 $4,257,610 $5,138,699 $7,173,975 40% Total$ $10,507,483 $12,219,410 $14,613,770 $13,141,565 $15,060,642 $17,863,919 19% Average Employees Covered 1078 1050 1024 1064 1111 1127 Avg Per Claimant Per Year $9,743 $11,635 $14,278 $12,349 $13,558 $15,846 Banded Layer$>40K $1,740,760 $2,701,986 $27,772,535 $2,547,489 $3,140,986 $4,150,593 Banded Layer Claimants>40K 45 57 53 73 74 88 Stop Loss Reimbursements $647,818 $549,098 $2,165,540 $483,352 $611,414 $767,884 Stop Loss Claimants 2 1 4 1 8 2 1 2 11' #of Claimants over$10K 221 262 266 296 357 414 #of Claimants over$20K 111 130 139 149 182 208 *ISL increased from$200K to$400 K From FY 2020 through FY 2025, the Health Insurance plan has experienced increases in the frequency and severity of large claimants, overall increases in gross claims, and growth in plan enrollment. From FY 2024 to FY 2025, the cost of total claims increased by$2,803,277 or approximately 19%. Of that increase, medical claims increased by $768,001 or approximately 8%, while pharmacy claims increased by over $2 million or 40%. Cost of Claims Actuarial analysis from NCHIP recommends a 12.5% rate increase to both the employee and employer share of premium equivalents to meet the cost of expected claims. If the County absorbs the entire cost of this increase and does not increase employee contributions, the County's cost would need to increase by a total of 13.7%. Pharmacy Cost Drivers One of the primary cost drivers for pharmacy claims is the increased use and high relative cost of GLP-1 drugs for weight loss. o Approximately 100 members are using GLP-1's for weight loss. o The cost of covering these medications for weight loss is approximately $1 million. o Other employers that have continued to cover the GIP-1's have also needed a "catch up" increase as employers did not anticipate the demand associated with these drugs. 3 Medical Cost Drivers The primary cost drivers for medical claims are more varied. • The cost of cancer treatments and other cancer therapies have increased by 34%. New treatments are being discovered, approved, and put into use with unprecedented frequency. As the covered population continues to age, cancer rates are also expected to increase. • The cost of musculoskeletal outpatient surgeries has increased by 11%. • The cost of psychiatry, primary care, and specialist visits has increased by 12%. The utilization of these services by individuals covered by the Orange County plan is above the industry standard. Enrollment Increases In addition to the cost of claims, employee enrollment in the County plan has increased over time. Enrollments have increased 7% over the past five (5) years. The most significant increases have occurred in employee-only plans which are 100% County funded. The number of enrollments for employee-only plans has increased by 12% over the past five (5) years, or by approximately 80 enrollments. Considerations for Cost Containment Measures Staff have explored several strategies to manage rising costs while maintaining current benefits and is recommending that the Board consider two changes to the health insurance plan design. 1. Implement a RxSaveCard for GLP-1's used for weight loss • The RxSaveCard offers a projected savings of $500,000 annually based on current utilization. • The RxSaveCard provides a mechanism for consumers to have direct relationships with GLP-1 drug manufacturers through Lilly Direct and NovoCare. • This direct-to-consumer relationship lowers the cost to the health plan by eliminating the premium associated with the Pharmacy Benefit Manager that would otherwise serve as an intermediary between the manufacturer, pharmacy, and consumer. For example, the cost of a Wegovy prescription under the County's current plan is $950 per month. The direct- to-consumer price is $350, saving the health plan $600 per month. • Instead of insurance plan coverage for this drug, employees would purchase medications directly from the manufacturer. In practice, employees would receive an RxSaveCard, and the County would provide a subsidy of $375 on this card each month for the employee to purchase their medication. If the actual cost of the prescription is less than the $375 monthly subsidy, the excess funding is returned to the County. For example, the direct-to- consumer price of the Wegovy injectable medication is $350. Since the County subsidy ($375) is greater than the direct-to-consumer cost, the employee receives the drug for $0, and $25 is returned to the County at the end of each month. The savings and cost to the employee under this plan are detailed in the table below. 4 CURRENT PBM RxSaveCard Drug Dose Estimated Employee Direct Price OC Subsidy Employee Insurance Price Monthly monthly (after rebate) Cost(PPO) cost Wegovy(inj) all $950 $25 $350 $375 $0 Zepbound (inj) low $850 $25 $299 $375 $0 Zepbound (inj) mid $850 $25 $399 $375 $24 Zepbound (inj) high $850 $25 $449 $375 $74 Wegovy(oral) low $800 $25 $149 $375 $0 Wegovy(oral) mid $800 $25 $249 $375 $0 Wegovy(oral) high $800 $25 $229 $375 $0 • The only drug for which the employee would have to contribute is for the Zepbound injectable at medium and high doses. Those prescriptions would carry an employee responsibility of $24 and $74 respectively. The current co-pay under the County's current plan is $25. 2. Implement a Surcharge for Spousal Health Insurance Coverage when Alternative Coverage is available to the Spouse • Implement a $200 per month surcharge to the employee contribution for spousal coverage when spouse has health insurance coverage with their employer. • Currently, 144 spouses are enrolled in the County's health plan. Staff from the North Carolina Health Insurance Pool (NCHIP) estimate that 20% of spouses or approximately 29 spouses would choose to remain on the County plans despite having alternative coverage. • If those employees were charged an extra $200 to maintain spousal coverage, direct revenue to the plan would increase by $70,000. Below is a chart showing the estimated direct financial impact: Spousal Surcharge Modelin Current Covered Spouses 144 Estimated % w Other Coverage 20% Monthly Surcharge Amount $200 Estimated Spouses Impacted 29 Estimated Surcharge Revenue $69,120 Surcharge Revenue Offset $69,120 • The spousal surcharge may also have an indirect savings to the plan by discouraging migration to the County's plan from coverage available to the spouse of a County employee. The County currently contributes an additional $600 per month to move from an employee only plan to an employee plus spouse plan and an additional $800 per month to move from an employee plus children plan to a full family plan. Discouraging migration to the County plan has the potential to save the additional County premium contribution associated with coverage a spouse as well as the 5 additional cost of claims incurred by the spouse. Predicting the claims savings is difficult without direct experience. Dental Insurance The County provides dental coverage for active employees. No rate increase is recommended for FY 2026-27. 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 2026-27 Health and Dental Fund budget request is anticipated to increase by a maximum of $2,117,040 for health insurance and $0 for dental insurance. RECOMMENDATION(S): The Manager recommends that the Board: 1. Approve continued participation in the North Carolina Health Insurance Pool (NCHIP), and 2. Consider and approve one of the plan design options and the associated employer costs as outlined in the table below: Employer Employer Funding RxSave Total Net Contribution Rate Increa Card Increase Employer L. am I FY25/26 $15,470,177 Option 1 status quo $17,587,217 13.68% $2,117,040 $2,117,040 13.68% Option 2 RxSave Card $16,486,356 6.57% $1,016,179 $450,000 $1,466,179 9.48% Option 3 Spousal Surcharge $17,517,217 13.23% $2,047,040 $2,047,040 13.23% Option 4 Option 2 and 3 $16,416,356 6.12% $946,179 $450,000 $1,396,179 9.02% 3. Approve 0% increase for dental rates and funding. 6 ATTACHMENT ONE-Renewal Projection for Health Insurance Rates for FY 2026-27 March 5, 2026 Meeting-Abstract for Approval of Rate Renewal of Employee Health and Dental Insurance and Continued Participation in the North Carolina Health Insurance Pool Orange County WHIP Funding Rate FY27 Plan Year July 1, 2026 through June 30, 2027 PPO PLAN July 7,.2o2s thrmgh lune 3o,2025 !uf�1-2725 throup unf 3]202-7 Cu rr Ent Renewal Rate @ N CHIP Rates Rate @ N CHIP Fkatas TOTAL FUNDING RATE EE Only 656 7934.42 5652,340 $1,054.09 $691,481 EE+Sparse 56 $1,985.439 $111,165 $2,104.19 5117,835 EE+Children 183 $1,547.40 $29[3;911 $1,6447.24 $308,366 EE+Family 43 $2,780.439 $136,224 $2,946.90 $144,398 Employee EE Only 656 50.017 $0.470 �17 EE+Spouse % $409.20 $22,915 $409.20 $22,915 EE+Children 188 $229:90 $43,221 $224.90 $43,721 EE+Family T $734.34 534.OW $334.84 $36,4707 4O ra awe Co u arty EE Only 6% 5994:42 $652,340 $1,05#64.439 $691,481 EE+Spouse S $1,575.89 M 25 $1,694.99 $94;920 EE+Children 188 $1,317.50 $247,690 $1,410.34 $265,145 EE+Family 49 $2045.25 $100,217 $2,21206 $1. 391 Total LlgQfAl 53.262,079 Ora _ .d in g RxS $200 , 1" 200 per 1 7 HDHP PLAN lul�r1,at]z5throughJune W.2026 1uhl],2L725throw- TOTAL F U l•J OI W-3 RATE EE Only 119 5&3&.99 $`99,x: $889.33 $1 cq,83D EE+Spouse 18 $1,67.0.74 $3C,._-3 $1,77'-.=E $31,973 EE+Children 32 $1,3703.34 $41,7x07 $1,3&1.54 $44,20 EE+Family 21 52,33&Q7 $4%099 $2,47&35 $52,045 Emp Inyee EE Only 173 $i7 OD $ Sam W EE+Spause 15 $271.80 $4,592 5271-BD "$4,892 EE+Children 32 $151.82 $4,858 $151.82 $4,858 EE+Family 21 5484:74 510,2&5 $489.74 510,285 Ora rige County EE Only 179 5538.94 $99;54Cr 5889.33 $105,830 EE+Spouse 1& 51,398.94 $25,1&1 $1,499.18 $26,985 EE+•Children 32 51,151.52 $315,949 $1,229.72 539,351 EE+Family 21 51,54&33 $38}&15 51,9&&61 $41,761 Tmal Tota I Ma nth�j .� x 52444-22 Ora nge County An rKial 62Aa, i COMBINED PLAINS :a Ora nge Ca u My An nu M r