Travis County Commissioners Court
January 22, 2008
Item 23
23 is to consider and take action on the oni'll report on the employee benefits health fund.
>> good morning.
>> good morning.
>> executive manager for administrative operations am we're here to do our any you'll report on the employee health benefit fund. We provide quarterly and annual reports to the court on the state of the fund and healthcare benefits. This particular fund is the fund that takes in contributions from employees as well as the contributions from Travis County for employee healthcare. This fund is protected in terms of not being able, you can put money in but you can't really take it out. We look at several areas when we do aranalysis on the report and the state of the healthcare fund. As you know, we've been self-insured since '02, since fy '02, so we're going into our seventh year of health insurance. This particular report will take ya from October of '06 until the end of September of '07. We had total participant, and you have a breakdown in your actual report on page 1, we articipants of 7301 and active employees, retiries, and then dependents. In this particular period you about 3100 dependents. After that you had retirees of about 450 and cobra participants of 16. We offered three different plans. The e po provi"qahlllhpercent coverage. Ppo is a 90-10 plan with the plan covering 90 percent of the costs, and then the 80-20 plan which is the coinsured e p o. We saw an increase in participants in the last year. If you took it from October 1 to September 30, we saw anne carries of about --an increase of about 3.53. Comparing year to year we saw an increase of about six percent. As I said, we look at several years when when doing our analysis. We look at increase in participants, large claims, and then the utilization of the fund whether pharmacy or medical claims. The total plan cost for fy '07 was $3,1420,612. That was what we spent. In terms of the claims, we spent $26,234,000. So you have your actual medical claims, administrative costs and staff costs, those sorts of issues that would at up to your $31 million. The comment s to the plan were at $35,583,000 w$r(rhleft us a reserve of about 7 million. Ujjuu insurance of 150,000 ityuac stop loss.,000 is covereq we pay everything up to the that. We monitor all claims over 25,000 and up to 50,000 and then up to the 150,000.
>> tell me quickly, what doesn't jump out on the page is when you see the difference between 35 contribution and 3l costs, but yet in the same paragraph you use 7 million.
>> yes.
>> that's not, I mean, take everybody through. Even if your not good at math you know something is wrong.
>> contributions are for health coverage whether county payint or employees payingment we also have interest revenue and miscellaneous revenue from rebates that come in as wellif you look at page 11, tou(atadthe bottom of the page on the total column. I circled the 35,583,097 for you so that we could start there.
>> right.
>> then you have all claims, which would leave you then the 9 million, which I think is the number you may be thinking of.
>> right.
>> then we have the plan administrator, admin fees, and the total there them you add in there other revenue. You have depreciation expenses let's see, depreciations expenses, county administration, which is our staff, and the clinics are included in there too, right, norm? K"eurqruaajuyinvestment income, and that's where then you get your 7p million.
>> what is the biggest part of other revenue?
>> pharmacy rebates.
>> is that what it is?
>> mostly.
>> that's the detail in terms of $j you go to that nine million, a simachinedidn't y.
>> seven million.
>> didn't mean to get you off.
>> in terms of our claims, we have had had about 15 claisah that have again over 150,000 in the last two years. That was a decrease from the previouahvqpahin '05 where we experienced 20 claims of the cindy, do you want to talk a little bit about the large claims?
>> sure. In '05 we had 0 claims that penetrated the stop loss amount of 125,000. In '06, we increased the stop loss amount to 150,000, and we had 15 penetrations of the lm this the year in '07, this year we had5 penetrations. Of those 15, a couple of those we won't get any reimbursement on because some of the penetration was due to pharmacy. So 11 people we'll get reimbursement on. Starting in '08 we increased the stop loss amount to 175 and added pharmacy, so there won't be any claims we won't get reimbursement on. I think by raising our stop loss amount, the county was able to lower their stop loss premium and mitigate a little bit of the cost there, but we don't want to do completely without it because we do have a pretty standard number every year that do penetrate the stop loss amount. We had 37 last year. There were over 50,000 and 42 this year that were over 50,000 when I analyzed what was involved in those over 50,000 claims, it was pretty well across the board. There was a little bit of everything. We did have a lot of pregnancy related charges in '07 that were high claims.
>> so we watch, this will get it on there. We watch that pink line that's over 50,000. The number of stop loss is a blue and then over 50,000 is the pink. But we start watching once they get over 25,000. That is a red flag for us and we start watching to see.
>> we monitor all along the yea.
>> yes, how many we have, the first quarter and second quarter. Usually, a lot of times you don't see them until the fourth quarter because it takes time to accumulate those costswe see them coming.
>> yes.
>> we know pretty much right now we have one had a has penetrated in '08.
>> this year we saw overall claims increase by a little bit over 13 percent, 13.11 percent. It went from a tote thel of 26,234,839 compared to last year of 23,194,200 and it was a 13 percent increase. The other thing that happens in terms of monitoring the healthcare fund is you may not see a lot of those, a lot of the higher c&aims until the second part of the year. Also, in the last quarter of the plan year, if you have someone on epo or usually people will have met their deductible by then and they will go in and have procedures done towards the end of the year, so you may not see that jump until the last quarter. Again, people are watching their pennies, making sure that they meet the deductibles. As cindy talked about, some of the factors when we did the analysis that contributed to$q increase is that we did have an increase in membership by about six percent. We had an increase in claimants. Not everyone that is a member on the plan puts in a claim for medical care. You have members and then claimants. We had an increase both in membership and then in claimants. Managed pharmacy is something that went up 15.73 percent. I anticipate that we will continue to see that increase. With the advertisement of pharmaceuticals, you go get the purple pill to get better, it's something you see in healthcare plans throughout. We just take more medications.
>> also on that point, we have seen the biotech drugs we have been hearing about, seeing them start to hit our plan of the top 0 drugs, six were considered the biotechnical drugs where one application of the drug may be $6,000. We had six drugs that each prescription or each application was $,000 or--$6,000 or more. They are out there and beginning to filter down to the actual plan cost which is one reece wean added frarm si to the stop loss so we will have coverage for some of these high dollars.
>> so is there an instance where somebody goes and gets a $6,000 pill.
>> or shot.
>> or shot. And if they are on the 90-10 plan, they write a check right there for 600 bucks?
>> depends on where they are getting the medication. Medication like that is normally add ministered during a doctor's office visit. So they might just pay their copay. With drugs like this the doctors aren't absorbing the cost either. They may pay a copay for that and then you have a $6,000 drug. There's a lot of different ideas out there on how this should be handled. We got a program with united healthcare on the high dollar drugs. Iebral is one for rheumatoid arthritis. You can get that filled two times under your regular pharmacy and then you have to go through a special source that I they have lord the cost. So we've got a high dollar biotech program in place with united healthcare to try to mitigate some of these costs but it's going to be more expensive. It's very effective, they are good drugs and appropriate to be usedi.
>> I hope.
>> for $6,000 it ought to do something. Like immediately.
>> if you look at page 23, I think cindy that is it up there in terms of the areas that we have seen increase. And we've got, cynthia, put want to go through there and mention the increase in the cy --in the diabetes.
>> page 23. It's on the screen and on the t v. I compared '06 to '07 in types of diagnosis. The good news, the cost for diabetes went down, which was very, very good must for us because we've been battling had a for a couple years. I think this can be attributable in part to the clinic. The follow-up with the emp&auaj. We did show an increase in the cancer related cost. We showed annies in the respiratory related cost, which I was kind of sad to see because the year before that, we had done a special ad hoc program asthman and upper respiratory. This has been a bad year already in '08. But one of the highest cost pack --factors has been pregnancy related factors and newborn. As you notice, there are three areas on the chart where you can see the pregnancy costs are have gone up and newborn related charges have gone up and the peri natal, which is the last few months of pregnancy and the first couple months of life. We have had some sick babies and high risk pregnancies. Those costs went up. Even though our clinic doesn't treat pregnancy, maybe we can do some pregnancy education, get people under a doctor's care, get people, identify those high risk pregnancies right off the bat where we can mitigate a sick baby at the end, maybe, because the cost is just unbelievable when you have a sick baby. I thought this was very interesting. We have some success stories and some things that we could work on perhaps, but this certainly gives us our Marching orders as far as education and employee awareness.
>> the good news, we were able to reduce diabetes claims by about3.31 percent, which I think can be directly related to some of the activities and our health clinic, we really poe cud on that. The other good news is that we kd8p(()auysavings that we have reallized from people using our clinics as opposed to going to doctors is 155,770, the difference betwen last year and this year in terms of what we have paid for office visits. We have increased our reserve by seven million. If you look at page confidential 15, that will provide you a history of claims whan the change has been in reserve since we started. The actual reserve for what we would call contingency is at $30 791,000, a healthy reserve. One of the reasons why we were able not to have any increases in healthcare this year. We will continue to look at that. Milleman consultant and actuary have told us an appropriate reserve would przbably be 12 to 15 million. I think we need to ask them that every year. We also ask them how did we get the reserve so large. If you take a look at that particular page 15, you will see. Some of you remember that we had a scare in fy '04, which would have been October of '03, when we increased our rates by almost 40 percent. You had seen an increase in the brief yours year by 27.5 percent. I think that gave concern to the actuary that we would continue to see those sorts of increases. When the numbers came in really we had an increase of less than one first for that particular year, which shows that you our plan is small enough to still experience a lot of volatility with just a bad year, several clprsj, several transplants or things that can affect the plan, we still have, are not large enough to be able to experience had a the and --that and not see some volume it.
>> some volatility.
>> isn't that taken into consideration when the numbers come about? It is pretty amazing that we have these folks that say you need to be in the 12 million range and we have 30.
>> uh-huh.
>> somebody is going to ask, are we putting too many premiums, the question begs to be answered regarding do we need an adjustment in what we either get from employees, I mean, certainly what we give from the county side, I mean since the overwhelming majority of it comes out of the county coffers, what does the committee say to the actuary whenever they go, sensible, but 30 million? And growing. Because if we continue on like we are.
>> we are doing a crup --a couple of things. One, last year we didn't transfer funds we norm all transfer.
>> I realize.
>> we also didn't increase any claims last year. We need to see how we are going this year. More than likely at least the rate of increase of the reserve is going to decries seg--significantly.
>> right.
>> and we can probably have no increases next year to try to get a little more level as far as premiums verse us what we have in the health insurance fund. Pa don'tooeally want to much into the reserve every year on a premium basis because at some point then you're going to have to jump way back up. We have to(((atful. Also, we have retiry issues and things like that that we are probably going to experience a lot of expenditures related to our older population as well. So we need to be careful what we do with thatqaqaut. But yeah, I think it's healthy right now and probably too high.
>> go ahead.
>> as analicia said, our plan is big enough to have some credibility but also small enough to have some impact if a$q)qradcatastrophic losses. My guess is the reserve should be closer to 16 or 17 million. And to bring the reserve down to that level, I think it needs to be approached cautiously on a gradual basis, maybe over a eriod.qp) no question the contributions have exceeded claims. Then again, if we manage our claims, we're going to continue to see that balance in there.
>> I think multiyear plan where you then look at your expenses, if you look olatility here, in '03, 27 percent, to less than five percent and less than one percent and then in '07 you jumped up to 13 percent. So still a lot of volatility and fluctuation. I think we need to monitor it and do multiple year, create a multiple year strategy, much like we have with the risk fund. I think we had three years where we reduced that by a million, was it?
>> we're in our second year of reducing it 1.2 million.
>> 1.2 million. So one more year of that. I think taking a long-term look at tthe best thing. We also maintain an incurred but not reported reserve, and that is about 3.5 million. And that is for where people go to the doctor but it just hasn't reported and at some pint in time it will be. That estimate is done by the nother possible pool for reduction of the overall reserve is simply to eliminate that for a time period?
>> the emergency reserve is $30 million. That's a reserve required that the tnt keep --county keep to pay the claims in process. Need to something u report at the end of each fiscal period.
>> sure, that is available. But the actuary looks at the 3.4 reserve every year to make sure we have set that at the right rate. We have to expense those as claims in the sim --in the sim --in the system and we have a liability in the books.
>> I see.
>> in the event the plan were to terminate the reserve would be there to write off claims.
>> do we have an authority to transfer from the emergency reserve into the special reserve during the budget process? The.
>> the 3.4 million has already been expensed in the plan. The cash is sitting there because we already expensed it. There's need.
>> it's set up as liability. We already expensed it. Whenever expense comes in they are to be paid from funds collected. It's separate. The other is emergency.
>> do we have the ability to tyreserve during theserve from q budget process?
>> you have the money already. So it doesn't matter whether it comes--
>> the next budget process. What we've done in '08 is done. But '09 follows. See what I?m saying? Everybody beliefs the $30 million is too high. We cannot just take money from there and reduce it. But there are some things that you can do. So if one of those things to fund the other special reserve?
>> in effect--
>> seesahto be about three and a half million.
>> in effect because we already expensed those funds, it's not the correct term mole --terminology, but you could reduce further contributions current claims expense for any fiscal year that you are speaking ofre.
>> so reduce the formula by which portions of contributions--
>> in effect--
>> probably the own which you could do it, judge, to responds to your question, no.
>> we'll get legal opinion on it. The rating firms highlighted that also. We've known about it. I guess it's been pretty high. This is not the first year.
>> no.
>> although this report seems to hit that last year we were at 23. I thought we were closer to 30 last year.
>> at 23 and then 30 this year.
>> so we've been telling them we would reduce the reserves, though.
>> yeah.
>> and this one jumps $7 million. We (tu four years we would reduce the reserve because it stands out. Up to a certain point I think kd8(they question your abilityt to plan, I believe. Susan.
>> part of it, interestingly enough, the guidance on setting but one of the things that we talked about in the last budget and probably should talk about again, once the reserve sits in the health fund, it's very difficult to deal with it. So if you are kind of nervous, and we always are to have enough reserves, remember we talked very briefly about a health stabilization fund in the general fund. Perhaps we should work a little harder at thpa. Where we are working on getting those reserves, drawing down the reserve in the health pund to where we think it ought to be, and if we think more money is needed for our comfort level to have a health stabilization fund r'$q gets the too big, we absolutely have access to, and county is still putting money aside to mitigate risk. And it is a business call as to how much you would want sitting in there. That's, judge, I think a point well taken, that we need to look at in the next session. In this budget we did take some actions to reduce reserves period. And so, we'll just have to see. But yeah, there are, and it is ajrau .
>> andnthose points were communicated to the rators as well.
>> yes, yes.
>> they reminded us that we have study that point for several years.
>> yes.
>> and we get healthier and healthier.
>> that's right.
>> they are getting to the por'e
>> that's right.
>> yes.
>> this year. In fy '07 we deferred transferring county auaytibutions fj healthcare at the rate of about three million and then discontinued the general fund transfer for vacant slots at about 2.4 million for total of about 5.4 million.
>> they were aware of that too.
>> and we kept rates the same. One of the things, we are giving actuary different scenarios, if we didn't increase the rate or transfer these funds, how long d8uauurget to the appropriate fund. Or as susan said, you create then the health stabilization reserve and you don't have, you ittle money going into the actual healthcare plan.
>> may I have an answer to my question before the next budget cycle, miswilson--ms. Wilson.
>> Commissioner Daugherty kind of hit on the other thing, the they also attribute and accrue earnings were in a little bit of excess of 8 million in that fund. That helps out the reserve. And the slower the cash goes out. And interest rates went up. That may not be the same in '08. We're seeing, everyone is watching television, the softening and all of those things in terms of how '08 will turn out but it is certainly somethino look we nqq" at and have a strategy for.
>> how many healthcare reserves do we have?
>> just have, in terms of reserve, you have--
>> how many healthcare reserves do we have?
>> two.
>> two, okay. Anything further?
>> we have some expenditures that we'd like to show new terms of how we spent the money. Cindy, do you want to go through those?
>> sure. Again, this is just a visual to kind of visualize this for you, the operating budget that we have which is the dark blue line. The pink line is the reserves. You see they kind of poll --followhe page $q) from fy '03 to--'02 20 fy '07. They are fairly level until a little bum for fy '07. The light blue turquoise was our fixed costs and those have been on a very slow incline, pretty level actually. With a I think is interesting here, where the pink line and yellow intersect, that the your reserve and claims. The claims are now much under the reserve line. You can see at the very and '03 that our reserve was way way low, which is why we bumped it up on advice of our actuary, because you will remember the bad year that we had. This is just kind of a visual as to what's happened over the years. I think it's interesting that the reserve and operating budget lines follow each other so closely up$qptt. The percent s of increase at the various points.
>> anything you want to add? Hart?e rest of the okay.
>> if you look at the rest of the charts, we have@atr one. We are going to start going through the charts that you normally see as part of the annual reviewsstart on page 17.
>> this is the page that shows you, contrasting the managed pharmacy from the medicallve medical iah78 percent of the cost and managed pharmacy is 22 percent. This is a mu chart for you. We were trying to maybe give you somqa$r't to explain membership distribution versus the next claims cost. And if you will look, the blue, the bottom pie chart, the blue part where it says membership, 91.63 percent of the membership, that's your active members. And you will contrast it to the blue part in the upper pie chart that is your net claims cost. So 91 percent of the membership is responsible for 85 percent of the claims cost. So basically it's saying actives were spending 85 percent of the claims cost on active emplo+ttj. Then if you look at magenta part that's the percent of the claims cost responsible by the retirees. The yellow sliver is the cobra people, point 25 percent of membership responsible for two percent of the claims costs. The important thing to remember on cobra participants is just people don't pay the could bra rates and take that unless they have something medical going on and need the coverage because cobra rates are very expensive. So you expect to see higher claims cost frarfewer cobra people because when you are sick and your only option is to have cobra coverage, then you pay the premium because you need that coverage. It's not unusual to see high claims under cobra coverage.
>> I want to make a comment on that. Which is to say most people go without insurance between jobs. Hammer that home. Most people risk it, go --without insurance because they simply can't afford.
>> most healthy people do. Kd8aruupurjryou try to go on lth cobra if you can. Some people just cannot do it. The next one is the plan to man comparison. Comparing the epo to ppo and coinsured and the little pharmacy plan. You notice that the epo used to be the biggest component for the cost. We shifted a rot of people out of epo into ppo and now ppo has become our largest and most expensive plan. And then it goes to the epo and then the coinsured epo. We saw a good mi coinsured again this year at open enrollment. So people are moving around. And this does show that the ppo is 40 percent of the spend for medical and 11 percent for pharmacy. Epo is 26 percent of the spend for medical and 7 percent of the spend for pharmacy. And the coinsured important medical is 13 percent with three percent being pharmacy. We then have the type of service. What are we spendr'ardollar on, what types of services? And used to be that the in patient costs were highest but now we are showing physician services are slightly higher than in patient costs. It's 26 percent for physician services and 23 percent for in patient. Outpatient is 12 percent and managed pharmacy is 22 percent. Then all other are lumped together in the all eyed health for 17 percent. It's seen a shift. Could be just the luck of the draw as far as the type of hospitalizations we had this year and the type of doctors people went to because we usually have pretty high specialist out ation--utilization. This pay claims by plan and tier. This one rents the active employees. You see they are broken out by plan, epo, ppo, and coinsured. And the epo, the most money is spent in the epo on employee only. By far. Idyou look at the ppo, same thing. Again, that bar is higher because there's more people in po.$q but on the coinsured epo you notice the family bar is the highest one. We wanted our families in the coi'auaqqhqpo because it was more affordable to cover a family in the coinsured epo and we are seeing the family coverage is where they are spending the. I thought that was quite interesting.
>> yeah. In fact, this particular ceerwas created with the portability for families in mind.
>> yes. And we did have several sick n the co, I believe, coinsured e po this year. That probably accounts for a lot of that spike on there. Then we have the retiries. The retirees in the epo first blue bar, the money is going out on the retiry only on the epo. And that is your under 65. The over 65, almost equal. We're spending about the same amount of money on retiry only as we are retire we plus spouse. Probably half are covering spouse. If you look at retiree under 65, retiree plus spouse bar is the highest. We have a lot of our spouses in the ppo now, a lot of them moved last year from the epo. Then if you you look at the coinsured epo, retiree under 65, you see that again retiree only where the money is being spent. So that tells you that, to me, that it's still our retiree only is where the money is going out because we do fund a lot for our retirees. It's kind of interesting to see )qu'"r't.r wq a lot of it is still going for the retiree only. Then we have already seen the diagnosis chart.
>> what is the total amount of our budget for healthcare includint the reserves?
>> about 70 million, I believe, judge.
>> okay. And questions or comments? Thank you very much. Good information. A lot of it. We share that with our actuary.
>> yes.
>> and the united health.
>> yes.
>> I like ahe format. Easy to read and understand. Kudos.
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Last Modified:
Wednesday, January 23, 2008 8:09 PM