The City's health plan advisor, CBIZ, projected a potential total deficit to the Stay Well fund of $4.3 million at the end of the 2021 calendar year if no significant structural changes were made to the plan.
The Stay Well Committee made the following recommendations to the City Manager:
In addition to adjustments to deductibles and out of pocket maximums (OOP), the Committee recommended the addition of a Rational Medication Program and removing the vision plan from the Stay Well fund and making it a separate fully funded vision plan.
The Committee also recommended the creation of a new high deductible plan for members. The Local Plus plan is a new network with deeper discounts. The Network would use HCA facilities along with North Kansas City Hospital, and Children’s Mercy. The new Local Plus plan is estimated to cut the cost of claims by 5%.
Since the recommended plan design changes reduce the deficit by only $875,088, the Committee further recommended an eight (8%) percent increase to premiums. This increases funding to the Stay Well fund to $1,530,322.
A summary of the estimated impact of these changes to the Stay Well Fund are outlined below:
The City's ARP spending plan includes $2.9 million from America Recovery Plan (ARP) grant funds to subsidize the deficit for the 2022 calendar year. This amount, in conjunction with the rate increase and adjustments will close the deficit for 2022.
The Committee's initial recommendation (Attachment 1) was to increase premiums 8% for both OAP1 (the City’s PPO plan) and OAP2 (the City’s consumer-driven plan).
The concern with utilizing ARP funds is that the grant funds are masking the ongoing structural imbalance that the Stay Well fund is experiencing. 2021 claims experience shows the Loss Ratio of OAP1 is 113.8%, which indicates that claim expenses exceed premium funding, while OAP2 has a loss ratio of 68.7%, indicating that OAP2 is subsidizing OAP1. In consultation with CBIZ, the City Manager recommends splitting the premium increase between the two plans as 9% for OAP1 and 2% for OAP2. The impact of this is equivalent to an 8% increase to both plans.
The Resolution directs the City Manager to implement the premium changes of 9% for OAP1 and 2% for OAP2, adjust the deductibles and OOP, add an additional Consumer Driven Health Plan, remove vision from the Stay Well plan and convert to a fully funded plan, and to continue to work the Committee and Consultants to develop recommendations for redesign of the Plans prior to the 2023 open enrollment to ensure ongoing financial sustainability of the Fund.