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HomeMy WebLinkAbout07-24-07 Chapter 172 Employee Retiree Insurance and Benefits Board Meeting Chapter 172 Employee Retiree Insurance and Benefits Board Meeting Minutes Tuesday, July 24, 2007 The Chapter 172 Employee Retiree Insurance and Benefits Board Meeting was called to order at 5:34 pm by Robert Swanagan. Attendees: Clark Askins Karen Beerman Michael Dolby Steve Valerius Robert Swanagan Absent: Matt Daeumer Juliane Graham Sammy Jacobs George Van Dyke 172 Board Member 172 Board Member 172 Board Member 172 Board Member Staff Representative 172 Board Member 172 Board Member 172 Board Member 172 Board Member Guest: Kathy Clark, HRH Consultant Neal Welch, HRH Consultant Robert Swanagan called the meeting to order at 5:34 pm. The Minutes of the July 5, 2007 Chapter 172 Meeting were reviewed for approval by the board. Motion was made by Karen Beerman to accept the minutes as written and seconded by Clark Askins. The motion carried. The meeting was turned over to guest, Neal Welch & Kathy Clark of HRH. Consultants Kathy Clark and Neal Welch presented information to Chapter 172 members about the Health Insurance RFP. Comments Neal Welch: Let's go to Tab three (3) because that is the way Kathy lays it out. Each one of the tabs is based upon our prior meeting. The last time we were here some questions came up that we wanted to respond to. The first two pages discuss pharmaceuticals relating to tiers. We have a three tiered program. Our co-pays are 10, 25, and 50. The concern is, whenever you change Administrator's sometimes the drugs will change tiers. That is primarily because they have arrangements that will move people from one brand name drug to another if there is a better value out there. Humana, TML and Aetna are our three finalists that we talked about last time. You can also see that there are some migrations. For instance the top drug is Lipitor, which is the number of prescriptions filled for that particular drug and indicates it is a very popular drug. It is in Humana's and TML's 2nd tier but it is in Aetna's 3rd tier. What is the reason for that? Don't they all cost the same regardless of what insurance company you use to administer your plan? The answer is yes! But the reason it is in tier three in Aetna's case is because now there is a generic form of Lipitor. The idea as you will see it expressed in financial terms is if someone wants Lipitor they can certainly still have it, but they will pay a higher co-pay to receive it because there is a generic available that would cost far less. On the second page you will see we have added up all of the drugs specifically used by the actives and retirees here at the City of La Porte. Also, you will see there is not a whole lot of difference averaging the Is, 2s, and 3s between what we have right now with Humana averaging 1.9 Aetna averaging 2.0 and TML averaging 1.7. Question Karen Beerman: Are these all of the drugs? Answer Neal Welch: No, these are the drugs we saw that were used by actives and retirees at the City of La Porte. Neal continues with presentation: With regards to Pharmaceuticals we have a retail program and a mail order program. As I said earlier people have a great deal of allegiance to their dentist and to their drugs. That's good, because we want people that are on maintenance medications to take them. Unfortunately we have a lot of people that have problems affording those drugs. So we want to be very sensitive to the issues relating to generic alternatives and substitutes. Developing alternative medication for the same particular illness is something all the formularies are trying to accomplish. Ten or fifteen years ago doctors were real sticklers and would tell you that you better take the brand name drugs only, because that is the guy I go hunting with and etc. Today for routine drugs you rarely find a doctor that will not agree to a generic substitute. As a result, the drug expense in our plan has kind of leveled out. The next item deals with expense versus revenue in our plan. The question raised was regarding the employer/employee contributions, where are they going versus the cost in our plan? As you can see in 2005 and 2006 the City was contributing money, when we had some steep increases to try and keep up with the cost of the plan. The City pledged an additional contribution increase in 2007 it looks like some of our claims cost have leveled off. The difference between the contributions and expenses is now called reserves. You are contributing to yourself and at some time if the delta continues to stay nice and wide we will be able to fully reserve our plan. This is the goal of any self-funded plan. If you terminated your plan tomorrow you would have enough money in your plan to pay your run-outs between the cost for claims being incurred and when they were ultimately paid. On the left you see the things that are included in the revenue numbers and included in the cost numbers. Question Clark Askins: Where it says, 2007 what does that mean? Answer Neal: That is just for January 2007 thru June 30, 2007. Unlike a School District where there might be a real anomaly season by season on claims utilization, which is not your situation. Probably more important and more revealing is a comparison of cost over a two and a half year period. When you self-fund you act as the insurance company and there only seems to be peaks and valleys. There never is a straight line in anything. Our plan for the period of February thru October 2005 and 2006 and even February thru June of 2007 look pretty plotable and somewhat predictable and then you get to October 2006 and we go right off the chart. You must keep in mind we are talking about raw claims data. These are catastrophic claims for the most part. We know what happened in October, November and December of 2006 as it relates to large claims. We know who those folks are, we know what happened to them and so forth. It is very difficult to forecast what our claims and related cost might be like at any given time. You would like to think you have a handle on forecasting expense cost. Weare real good at predicting the revenue but not very good at predicting the cost. Question Karen Beerman: I am trying to understand this. Looking at the 2007 average covered employee it is less than other years. Does that mean we have less employees or does it mean just the employees that utilize the plan? Answer Neal Welch: There is a group of people that is not included for some reason. The cost per member per month is probably right but there are thirty or fifty people that are not accounted for. Question Steve Valerius: I don't want to get into the details here, but could that account for some of the increase in cost per employee? Answer Neal Welch: No, because the claims dropped as well. As you notice in June you have 335 versus 367. This is probably going to be a sub group/ sub department. The next thing you asked was,"were those expenses occurred by category?" What this next exercise shows you for calendar year 2006 is the Administrative Cost, which does not change much month by month. It doesn't change much because we pay per employee per month for all of those Professional Services and the participation stay pretty even every month. Actually the Physician Cost stayed pretty much the same except for month two which increased a little. The Pharmacy certainly stays pretty constant. So, what's the variable, what's the catastrophic? It is the hospital expense. That is not surprising to anybody; except what it does show is when we have an extraordinary expense it usually comes in the form of a hospitalization. You know we buy Stop Loss; we buy specific and aggregate Stop Loss. Ifwe have a claim over $125,000.00 we are only responsible for the first $125,000.00. We re-coup the amount over that $125,000.00 from the insurance carrier. Our plan runs 4/1 thru 4/1. The most important thing to remember here is that the volatility really comes from hospitalization. The next page is in response to questions from the board members at our last meeting. It shows cost sharing's in the Pharmacy Program as it relates to fixed co-pays versus something like co-insurance. On the top Kathy used calendar year 2006. Our co-pays today are $10, $25 and $50 for our three different tiers. You can see the number of prescriptions those represent. You can see what the members share is in dollars and what the plan paid. You can see what the percentages are for members and the totals. We had a comment from a board member at our last meeting and he said, "Hey I went to the Pharmacy and I paid $10 but the whole prescription was only $12.71. Am I paying a higher percentage when I go and buy a generic drug? The answer is yes. What's wrong with that? Nothing, the answer is you don't spend money in percentages, you spend money in dollars. So, if you look down at the bottom in level one the average cost for a level one drug is $13.42. If you pay $10.00 the plan pays $3.42. You might not think that is not the proper percentage but in reality you are paying $10.00. If you go to tier two which is a $25 co-pay, the member is paying about 34-35% and the average cost is $71. Does the client pay a higher percent if they buy a brand name drug in tier two? The employee pays a smaller percentage. The plan pays a higher percentage but the employee also pays 150% more between $10 and $25 in co-pay. The same thing happens at tier three at $50. By the way, tier four is inject able higher cost medications. Essentially, under the program we have today 60% is employer paid 40% is employee paid. Now the question is, "what if the co-pay was a percentage versus a flat amount?" Well at one time we had that. However, the insurance companies came up with co-pays which are fine, except the co-pay is designed to stratify cost sharing among the employees. As an example, below is a co-pay of 10%, 20% and 40%. You can see what the difference is between the cost to the member and the cost to the plan. In this case we end up with the member paying 25% and the employer paying 75%. If we do something like that we would have a large increase in premium but those type options are available. Question Steve Valerius: Do you loose some of your steerage here? Answer Neal Welch: Yes, you sure do. Comment Steve Valerius: You want to steer them towards generic drugs because that has the same effect. Neal Welch: The last page is a look at our premiums categories. We have four plans with deductibles of $1500, $1000, $500 and $300. The interesting thing is the participation is spread pretty evenly. As long as the premium contribution on the part of the employees or retiree is actuarially sound for the difference in benefits between those programs we should allow folks to have this many selections. Of course they cannot have ten, but four is quite a few for a group our size. If you look down at the bottom the total employer annualized premium versus the employee represents about an 80/20 split between employer/employee. At this point I would like to go back to Tab 1 to look at the comparison of our fees, because I think tonight unless Robert tells us differently we might want to make a recommendation to Staff. When Donnie put these spreadsheets together he looked at the lowest overall cost alternative for the top three. The reason he came up with a choice of Aetna as number one is because of the Discount Differential. Aetna generates the lowest overall discount for hospital and physician components. Therefore, when we add in the Administrative Fee we get the total differential and that number starts with zero. That way the calculation works is if we had selected United Healthcare thru TML there would have been a $211,000.00 increase in cost, and Humana $628,000.00 increase in cost. That is just how 1, 2 and 3 were ranked. Keep in mind the difference between $20,000 and $30,000 in Administration cost might seem like a lot. However, when compared to $2.8 million in claims cost you spend a lot more time talking about Pharmacy, medical, hospital and physician claims because that is where 85% of the cost of the plan happens. The next page is just a re-cap of the top three to look at their services versus their fees. All of them are relatively close. Below are the various programs guarantees which is why Aetna is a little bit higher. One such item is Run-Off Claims, which means if you terminated this program Aetna would pay the Run- Offs at no additional fee. Question Robert Swanagan: Is there a ceiling on the Run-Offs? Answer Neal Welch: No, there is no ceiling. Essentially, you are buying a fifteen month contract under Aetna where the other two would be a twelve month contract. Question Clark Askins: Would Aetna be looking for a three year contract kind of like what we have with Humana? I say that because when we started with Humana we had a three year contract and there was a cap on the increase of administrative fees for the subsequent years. Answer Neal Welch: First of all understand we have the option as a public entity under Professional Services to certainly go for three years if we so choose. However, that doesn't mean we cannot get out of it if we don't like it, within sixty (60) days with or without cause. We like the option of three years and we are allowed to negotiate two additional years, two additional one year options if it is in the best interest of the City. Basically, you put together a five year deal if you want to do so. The carriers are willing to do so because of electronic medical records and electronic claims processing. The actual incremental cost to adjudicate a claim today is less than it was fifteen years ago. Many of the claims are auto- adjudicated, which means it is processed without ever being touched by human hands. Question Steve Valerius: I have one. Please don't take this wrong, but I think we need to ask it. Do you guys have any difference in compensation based upon which of the entities we choose? Answer Neal Welch: No, we don't get any compensation. Comment Steve Valerius: Bob do you want a recommendation? Answer Robert Swanagan: Yes I would like to have one if the board feels it is prepared to make a recommendation at this time. Comment Michael Dolby: You guys get paid a commission. Response Neal Welch: Wait let me clarify. We get a commission of$2.00 per month per employee. It is all disclosed. Comments Robert Swanagan: At this time I would welcome a discussion or a motion recommendation that we can move to Council. Steve Valerius: I make a motion that we recommend Aetna to City Council for the Medical Insurance carrier for the City of La Porte. Michael Dolby seconded the motion. Question from Clark Askins: Should we look to have a meeting with the full body before we make that recommendation. Really, there has been a motion made and it has been second. I know I am speaking out of order. That was the only thought I had. I am not saying I am disagreeing with the recommendation. Question from Steve Valerius: Could we do something like a roll call or by E-Mail? Answer Clark Askins: These meetings need to take place in public under the auspices of the Open Meeting Law. I would not be comfortable with original members sending notices by E-Mails. Question Robert Swanagan: Can we do a quick call meeting? Answer Clark Askins: Yes. Comments Karen Beerman: But then if not everyone shows up at the Call Meeting we are in the same situation and we do have a quorum present tonight. Comments Clark Askins: We do, I am not speaking as a Lawyer I am just speaking as a member. We have several members that are very vocal members that are not here tonight and may be very interested in participating in the vote. I thought we could have a meeting without a presentation just keep the other folks in mind. Comment from Michael Dolby: What if these people would have questions then we would have to push it back more. Comments Steve Valerius: I sympathize with you extremely for what you are saying Clark from a political stand point. However, those people could have shown up. I move that we have a quorum we accept the quorum's recommendation and we see what the rest of the folks have to say. Comments Clark Askins: This is to recommend to Council that the contract be awarded to Aetna. Robert Swanagan: Ok, Steve Valerius made the motion, Michael Dolby second the Motion. All in favor show of hands. The Motion carries. We will make a recommendation to Council that the Chapter 172 recommends Aetna as the administrator of the plan January 1,2008. Comments Robert Swanagan: We do have in place all of the mechanisms to begin to have employee education meetings in August. We will be able to have Open Enrollment in October and still have the months of November and December to make sure everything goes into effect January 1, 2008. This way all retirees and active employees know exactly what is in the new plan and how it works. I do not have an administrative Report. Comments Clark Askins: I am looking forward to our next meeting so that we can have a chance to look at re- working/re-vamping the Ordinance that established the Board. There were a number of things that impacted the establishment of this Board and I think that at the next called meeting we should began to address some of these issues/ questions. Clark also mentioned that he wanted to ask that we amend the retiree health policy to specify that under Chapter 175 of the Local Governrnent Code retirees who qualify under TMRS but don't have 80 points can participate in the plan at their own expense. Motion was made to adjourn the meeting at 6:28 pm by Steve Valerius. Motion seconded by Karen Beerman. Motion carried. Meeting adjourned. Respectfully submitted, ~.L.~~ Robert Swanagan, HR Staff' Approved this 6th day of September, 2007