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2005-04-18 - Finance Committee - Minutes Board or Commission: ❑ Finance Committee Document Type: 0 A e g nda 0 Minutes Meeting ate: 04/18/2005 Type of Meeting: ❑ Regular Meeting The Village of Buffalo Grove Finance Committee met April 18, 2005 to discuss matters related solely to the proposed changes to the Village's health care program. Those in attendance were: Elliott Hartstein, Jeff Braiman, DeAnn Glover, Jeff Berman, Steve Trilling, Bruce Kahn, Brian Rubin and Jan Sirabian. In addition, Bill Balling, Bill Brimm, Ghida Neukirch, Art Malinowski, Scott Anderson and Joe Tenerelli. Lastly, the Village's health care consultant, Peter Wright of Wright Benefit Strategies. Bill Balling reviewed his summary memo regarding what he perceived were the issues to be discussed this evening. They involve whether the Village should terminate its relationship with the IPBC, how burdens relative to cost should be shifted to employees under a consumer-based initiative, should employee contributions increase beyond the current 10% of premium and how and when should multiple options be introduced in the future (multiple PPO/EPO/etc) as part of the continuing efforts in delivering health care. Peter Wright discussed the issues related to the IPBC. He noted the high level fixed costs inherent in operating the pool, the bias of the pool structure that appears to work against communities such as Buffalo Grove that have led to high rates despite increases in reserves, that risk sharing at various levels of coverage may be out of line when compared to newer community members with similar demographics, that the pool is limited by its own bylaws as to the ability to reduce rates and banding for older members as well as other structural concerns relative to the IPBC and the Village's participation. He also discussed a risk that will occur if we leave the pool as of July 1 st in that the excess purchased only runs through June 30th (a 12/12 purchase concept) and any claims will be the burden of a departing member regardless of when incurred. The concept of 15/12 coverage was discussed to address potential run out claims liability and this will be pursued. The Committee was also advised as to the apparent lack of responsiveness by the IPBC, which is reaffirmed by their lack of responding to plan design suggestions that were submitted to all potential plan bidders, which included the IPBC. Their only price quote was their initial submittal that was tied into the assumed July 1, 2005 plan roll-over discussed with all members but which applied to Buffalo Grove as a result of banding, etc. One question was posed as to why is Buffalo Grove swimming up stream so to speak and looking to leave the IPBC when others are joining. Some reasons for joining were suggested and there were other comments. However, it was noted that the Village is paying a rate and fee structure that is out of line and for various reasons, the IPBC cannot price such costs properly. We are also picking up too much risk for newer towns because the empirical data tends to show that their costs are not priced fairly, especially early on. There is no logical reason to be accumulating the levels of reserve that are reported and incurring such high rates and rate of escalation from year to year. Peter went on to note to the Committee that all plan design changes that were discussed with the Committee that were the end result of focus group discussion as well as broader staff and Committee discussion were the basis for the request for pricing that was distributed to the market. The market received the minimal plan design changes deemed acceptable under the current collective bargaining environment further segmented along the desire to pursue both insured and self-insured options. There were questions as to whether multiple plans and alternative designs were solicited at this time. It was noted that they were not due to a desire to manage the changes suggested (coupled with the possibility of leaving the IPBC, possibly shifting to a self-insured/insured product, obtaining a new TPA, dropping of the traditional HMO to a EPO, greater fixed cost potential, etc) which in an of themselves could provide cumbersome to do right. Multiple plans and design options are longer term concepts that will be addressed. Some options were discussed, post-IPBC. The CIGNA insured program was reviewed. It was noted that their network, while good, was not as extensive as the PHCS network that our employees are accustomed to. Also, while their TPA is viewed as good, it may not be as strong as Coresource or several local TPA's identified. As for self-insured options, the costs are similar but the decision may come down to the TPA to be selected, which will be important during the transition, for reporting and for the excess market credibility factors. It was noted that some of the smaller regional TPA's do provide strong customer service, reporting and tend to develop strong client relationships. With our current TPA (Coresource) the chance for conversion errors should be few and their relationship with large claim management and reporting systems may better our access to the reinsurance markets for excess coverage. The conclusion to this discussion was that there are several local/regional TPA's that are considered best of class in administration and reporting and a final recommendation will be made when the decision on coverage program is made. The dental plan will be placed with whomever is offering the health care option. This will be a later decision and ultimately may lead to remaining with Unicare or returning to a TPA such as Delta Dental under a self-insured program. Regarding medical, the key to self-insurance will be the proper placement and pricing of the excess reinsurance coverage and it was noted that Wright will need to continue to negotiate levels and pricing toward a final recommendation. The setting of plan reserves is also be critical and should be conducted annually and subject to policy development and adherence. In theory, reserves are 10% employee money and as such, should be identified and maintained as a premium stabilization fund or premium reserve fund so that the integrity and management of the fund/reserve is clear and directed as established in a policy. Premium rates under a self-insured plan were then discussed. Under such plans, the employer establishes the premium although reserves and trending enter into the ultimate premium rate. It was suggested that this work be undertaken annually by an independent advisor versed in trend and claim analysis coupled with actuarial validation. A few questions were asked regarding insured over self-insured programs. It was noted that while CIGNA's proposal would established a fixed cost for the first year, overtime fixed costs of administration and mature trend would catch up and more than likely exceed the cost structure of a self-insured plan. We also control the reserve with a self-insured plan, in essence retaining any program profit. While losses are retained by an insured plan carrier, their future rate trends will attempt to recover loss which will escalate rates outside of trend and costs. With self-insurance, employees, if communicated with properly and proactive, should see the program as "theirs", which is an important component toward consumerism within health care delivery and utilization. They should get to the point through communication to realize that the success of the plan can and will accrue to themselves (likewise the failures). Various questions and comments were related to the Committee. The one true decision was to leave the IPBC, which will be affirmed on May 2, 2005 with notice sent to the IPBC if affirmed. Staff was asked to prepare additional levels of analysis on a side-by-side basis to note cost comparisons between the IPBC, self-insured and insured options. In addition, it was suggested that some alternative plan design cost structures be reviewed along the line as suggested in Bill Balling's memo. Again, staff noted concern in moving plan design radically beyond a "substantially similar"test, especially in light of the current collective bargaining environment. It was point out that options suggested in Bill's letter were deemed by staff as either marginally substantially similar or in one case, not at all substantially similar. Staff will proceed to address questions with a final recommendation coming, hopefully by no later than May 16, 2005 in order to provide the maximum time for open enrollment, again, all prior to July 1, 2005.