2006-06-07 Special Called Regular Meeting of the La Porte City Council

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City Council Special Called Regular Meeting - June 7, 2006 Page 4 they are self funded and are not rolling the dice but have to make educated projections on where they think the claims in and that is the expected number. It was recommended to be conservative and have a little money for the rainy day. All of that is important from a budget process and then ultimately what the city's contribution would be and what the employee's contribution would be. Council had a question on the stop loss how it had saved the City anything in the last 2-3 years? Mr. Welch noted it always amazed him why stop loss companies are in business because if we went over 10 years we would have well over 100% recoveries of our premium. In prior days it used to be a cash flow business and interest rates are high and risk capitol was a real interesting investment for many people and they'd say we may have a 100% loss ratio but if we get to hold on to those millions and millions of dollars and make money on that money we're willing to take a loss. Today the industry probably is at 93% loss ratio which the City certainly wouldn't want to run our plan at that kind of ratio but yes and a group the City's size can't be out there unprotected. Where we get reimbursements from are on the specific catastrophic plans. He estimated specific stop losses may be $115,000 deductible, noted not to quote him on that, but estimated this was the year that we did not have to increase our deductible the market was pretty competitive so anything up to $115,000 per individual in our plan per year, we are responsible for the first $115,000 then after that they are fully insured. The second page was discussed. It was noted it was important and to some of Council this is new because up until a year or so ago we only ever had one plan. When the City went from TML to Humana, one of the things that they were able to do was introduce in this case 4 different programs that our folks both active and retirees could choose from. It was demonstrated where the numbers were in 2005 when we introduced the program and where they are in 2006. A couple of observations about this is a positive here and that is more people are covering themselves. One of the tragedies in this country we have 40-50 million uncovered individuals who are eligible for insurance coverage. It was noted it's not that these people can't get insurance that's true in some cases it's also that some choose not to buy the insurance whether the employer doesn't provide it or they just choose not to take it, but it's still a figure that's very, very difficult for the healthcare delivery system because of indigent care that comes back and affects us so dramatically when we try to negotiate a contract with a hospital or a physician group. There are right now probably in Harris County 20-30% of the hospital costs are contributed to indigent care and when they write that amount off whether they are for not for profit or for profit that write off has to go against something and essentially it goes against those plans and those employers and those employees who see it in the form of what they pay every time they go to the hospital or physician. The positive trend here is that we're getting more people. The understanding that the population may be growing a bit also. Mr. Welch noted he did not like it when he sees it going the other way. Part of the reason may be is that we do have a better choice of plans. One of the things that is somewhat unique at La Porte is that we do have more people taking the coverage first program $1,500 deductible. It has the lowest premium. The coverage first with $1,000 deductible has a dramatic increase in that and a dramatic decrease in the $500 deductible PPO. The reason is with the benefit program, the coverage first $1,000 deductible has a $500 upfront benefit for every member of the plan and then a deductible behind it. There is a premium difference between the coverage first $1,000 deductible and the PPO 500. The PPO 500 is more expensive. There has been a shift in those people. They are crissed-crossed between the two plans and that is not a problem for the City. That means the plans are meeting the needs of the people. We're not planning on any significant plan