Fiscal Affairs Committee Briefing Health Benefits RFP Results March 1, 2011
Health Benefits starting line – May 2011 • Health, dental, and other benefits contracts expire April 30, 2011. • City’s FY12 budget cannot bear any increase in health benefits costs. • The City’s plan covers 66,400 employees, retirees, and dependents. • Active employees = 71%; Retirees = 29%. • 45% of retirees are under age 65.
Health Benefits - Financials • If the health benefits budget stood alone as a separate department, it would be the 5th largest behind Public Works, Police, Aviation and Fire. • Projected FY11 healthcare contract cost is $289.8 million, reduced by 5.7% from $307.4 million budgeted in FY11.
Health Benefits - Procurement Process • RFP released in August 2010 for various benefits plans. Responses were received in October 2010. • 27 proposals received for various benefits plans; 5 were viable full-replacement health care proposals. • Proposals reviewed by Gallagher Benefits Consultants, The Segal Company, COH Benefits staff, and members of the Health Benefits Advisory Committee.
Health Benefits – Procurement Process (cont’d) • Criteria for evaluation of proposals: • Ability to handle the City’s population of 66,000+ participants • Financial competitiveness and ability to keep cost low or flat • Risk protection for the 3 new self-insured health plans • Robust health improvement guarantees include quality. • Broad geographic access to care
Health Benefits - procurement Process (cont’d) • RFP Results • Health plan: replace HMO/PPO model with 3 new self-insured plans: • CIGNA KelseyCare • CIGNA Open Access • Consumer Driven Health Plan • Contract with CIGNA for administrative services for 3-year term with two 1-year options. 1st year cost = -1.4% reduction from RFP baseline. • Dental plan:(employee paid)—retain DHMO/Indemnity model; contract with United Healthcare as follows: 3-year contract with two 1-year options; slight increase to participants’ premiums in year 1, flat rates in year 2 and year 3 • Supplemental insurance:(employee paid)—retain current cancer, hospital plans; enhance accident/disability benefit; contract with AFLAC; essentially flat rates since 1999. • Flexible Spending Account Administration: contract with Flex One to administer claims; no cost to the City.
Health Benefits - Consumer Driven Health Plan Concept • Features $1500/$3000 deductible and 80/20% in-network coinsurance. • Lowest per-paycheck cost of the three new plans • Highest out-of-pocket cost at time of service • Offered in conjunction with a health reimbursement account that reimburses first-dollar expenditure that applies to the deductible. • City will allocate $500/$1000 to the account each year. • Unreimbursed balance rolls over to the next year to offset the second year deductible. • Preventive services (well woman / well man, etc.) cost members $0.
Health Benefits - Networks • CIGNA KelseyCare plan features the Kelsey-Seybold clinics as the sole network. 45% of population is currently enrolled in Kelsey-Seybold. • CIGNA Open Access plan; nationwide network; higher monthly cost; 78% overlap of current PPO network. Services covered only if provided by network providers. • CDHP is the CIGNA Open Access Network; the only option for out-of-network coverage; higher time-of-service payments. • Texas Children’s Pediatric Associates will be accessible only through CIGNA Open Access and CDHP plans. 7% of population enrolled in the current HMO.
Health Benefits - Result • City faced at renewal: • $19 million increase in total HMO/PPO cost. • $14 million increase in City cost. • These steps reduced to: • $4 million increase total. • $3 million increase to City. • Net cost avoidance: • $15 million total • $11 million to City
Health Benefits - Plan cost mitigating strategies in FY 11 • Single Non-Profit Trust (SNPT) -- 2010 • Plan design adjustments -- 2010 • Employee / Retiree contribution increases -- 2010 • Allocation of costs to actives, retirees <65, and retirees >65 • Increased enrollment in Medicare plans: 6 options under $100 / month • Opt-out Opt-in feature for retirees -- 2010 • Dependent audit
Summary: Proposed May 2011 contribution structure • Contribution structure is prioritized: • Employees • Retirees • Dependents • FY12 aggregate contribution ratio is under development. • Maintains 79% / 21% contribution ratio for active employees in compliance with labor agreements. • Retiree opt-outs = 616 • savings to City = $4,913,600 • total savings = $9,527,701 • Medicare plans current enrollment: 3,325
Health Benefits - Active Employee Monthly Contributions(Introducing 4-tier contribution structure for active employees)
Health PlanResults and recommendations • 1. Change from fully insured to self insured funding. • 2. Replace HMO and PPO plans with three self-insured options: • CIGNA KelseyCare • CIGNA Open Access • Consumer Health-Driven Plan • 3. Establish Health Care Account with $500/$1000 for CDHP participants. • 4. Contract with CIGNA for administration of new plans. • 5. Establish wellness program with financial incentives and disincentives for participating in health improvement activities. • 6. Move contribution structure from 3 tiers to 4 tiers for active employees. • 7. Retirees covered by Medicare will only be eligible for the City’s 6 Medicare plans, not the new plans.
Health Benefits –Minority and Women Business Enterprise • These vendors have demonstrated commitment to award subcontracts to MWBE participants as follows: • CIGNA: 11-13% • UHC: 10% • AFLAC: Will make a good-faith effort to direct expenditures to MWBEs.
Health Benefits Recommendation • Approve: • Health plans • Dental plans • Supplemental insurance plans • Flexible spending account – new annual maximum, and account administration • Eligibility modifications: • New hire eligibility is contingent upon completion of a health risk assessment. • Retirees covered by Medicare will not be eligible for the new plans – eligible for Medicare Advantage plans only.