The cost for health insurance is going up for RE-1 Valley School District, but not as much as originally anticipated. Options for health insurance were provided to the school board by Cindy Pilkington and Sandy Zimmerman, of Pilkington Financial, the district’s insurance broker, at a business meeting Monday.
According to Pilkington, RE-1 has had a lot of claims in the last couple of years, leading the initial renewal cost from UnitedHealthcare to come in at a 25.7 percent increase.
She shared that the HSA PPO plan that was in existence last year for six months and then replaced with another HSA in July saw nine claims that came in at $122,000. The “Cadillac” PPO plan didn’t have many enrollees, but there were 12 claims that came in at $131,000. The HSA that replaced the HSA PPO plan had 69 different claims at $270,000. Lastly, the HMO Navigate plan, which is what the majority of employees — 171 — enrolled in, saw 240 claims at $1.9 million.
Pilkington explained that insurance companies look at the number of large claims a business has, typically those over $50,000. RE-1 had four claims that came in at about $226,000, which averaged about $56,000 a claim; three came in at about $327,000, which averaged $110,000 a claim; one came in at $150,000; and one came in at $395,000. Those large claims led to the $1.9 million total in claims under the HMO plan.
“We have had nine very large claims this last year and we know that we have three fairly significant claims going on right at the moment,” Pilkington said. “Typically in a large group you’ll have one bad year out of four and we haven’t been that lucky, we’ve had a number of really bad years the last three, four years.”
Based on that information the best rate they could get from UnitedHealthcare for the HMO plan was a 19.4 percent increase and the HSA still came in at 22.5 percent.
Even though there were few employees on the PPO plan last year they chose to keep that option, because of people that have ongoing claims and they might need to go out of network; however employees have to buy up to that plan, so it’s out of their pocket if they want to stay on that plan. The rate for this plan went up significantly from $840 to $1,056.
Pilkington spoke about how a carrier looks at claims. In a large group market like RE-1, every carrier looks at the overall demographic of the group, including total enrollment and the area factor, which she said is huge for RE-1, because there is a higher cost of care due to less competition in health care here than in other places, so insurance companies are then forced to reimburse doctors and hospitals more because of the lack of competition.
Carriers also look at age and sex factor; if a group has a higher than average female population or older population, meaning a potentially higher rate of pregnancies, possible surgeries and prescription utilization, the factor is increased from the norm. United’s underwriting views the age and gender of RE-1’s members as 24 percent higher than the norm. Currently, RE-1 has 70 employees over age 50 and 40 employees over 60.
Lastly, carriers look at the overall health of the group, how many large claims there are, people that have ongoing issues and the people that are on COBRA (Consolidated Omnibus Budget Reconciliation Act).
As an independent broker, Pilkington went to every single carrier she could, which included Cigna, Humana, Anthem and Aetna. Anthem and Aetna declined to quote RE-1, which is allowed in a large group market, but Cigna and Humana did come back with numbers based on the claim information and data from UnitedHealthcare.
“I was pretty much shocked that we got quotes back,” Pilkington said.
Humana offered a fully insured plan option like the district has with United, but the rates were not solid, and there could be a 5 percent increase or decrease depending on enrollment, so she considered them a no go.
Cigna offered a level funded plan, which has two pools of money. The first pool is administrative costs, which the district wouldn’t get back, but with the middle fund the district has the ability to get some of the medical claims funding back, if it has a few good years with low claims.
Pilkington compared United’s plan to a store bought cookie, while the level funded plan Cigna is offering is more like a cookie made from scratch; you get to choose the ingredients you want to use.
“With a level funded plan you have more ways to tweak it along the way” she said, explaining as rates go up the district can tweak the individual stock loss of $50,000, which means any claim over $50,000 would no longer be RE-1’s responsibility, it would go to Cigna and the reinsurance carrier that Cigna pays to take over large costs.
The district’s number of high claims isn’t a worry for Cigna, as they expect a group RE-1’s size to have eight to 10 large claims over $50,000 a year.
Cigna originally provided numbers that were similar, but better than United. However, when Pilkington went to the district’s health and wellness committee they asked her to tweak the benefits to get the rate down in hopes that eventually the money that would be saved would be allocated toward their salaries.
So, Pilkington and Zimmerman went back and got different numbers from Cigna. At this point, the proposal includes an Open Access Plus plan, which would raise the deductible staff are paying from $3,000 to $4,000 and raise pay for office visits from $30 for a primary and $60 for a specialist to $35 and $75. Also, the major diagnostic copay was taken away; it can be added back in, but it raises the rates.
Ultimately, that rate now comes in at $749.30, which is a 13.6 percent increase over the current plan, versus the 19 percent increase United had offered for next year. The HSA would now be $696.86 and the PPO would be $820.84 versus $1,056 with United.
There are also HMO plans like those currently offered, but referrals are not needed as is required now.
Additionally, Cigna is offering RE-1 a $62,000 transition credit for moving medical and dental insurance, which would go to the district right off the bat. Pilkington questioned why they do that and the Cigna representative told her “rather than sharpen their pencil on a new piece of business, they prefer to invest a little bit with credit” and it’s something that’s extremely common in groups over 100.
Ultimately, Pilkington recommended moving to Cigna, using the Open Access Plus plan as the base plan and giving staff the choice of going to the HSA. Dental insurance would be moved to Cigna and life insurance, which is currently through UnitedHealthcare, would either be moved to Cigna or put it with the VSP insurance for vision.
“The whole thing with Cigna is we do have the potential to get money back down the road, chances are it’s not going to happen in the first year, but the potential to get money back is there,” she said.
The board will take action to approve health insurance for next year at a special meeting April 23.
Callie Jones: 970-526-9286, cjones@journal-advocate.com
