MEMORANDUM DATE MAY 17 2012 TO JIL LEE CHAIR

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MAY 2 2000 MEMORANDUM FOR DEPUTY ASSISTANT SECRETARY


MEMORANDUM


Date: May 17, 2012


To: Jil Lee, Chair of EBC

EBC Members


From: Mayor Engen

Bruce Bender


Re: Recommendations for FY13


By the end of FY12 the City will have contributed $43,636.04 to the health benefit plan above and beyond the premium contributions and/or reductions that occurred starting in FY10. With the City’s plans to add $350,000 to the plan in FY13, the City will have cumulatively contributed $942,986.13 in excess of the reductions taken in FY 09-10. Even with the increased contributions the fund balance for FY13 is projected to be $200,000 short of what the plan will need to cover claims and operational expenses. (Please see the attached spreadsheet showing the City contributions and increases since FY2009.)


Allegiance Benefit Plan Management, Inc and Payne Financial group reviewed and analyzed the City health plan. Each group presented several ideas to the EBC to consider that would help stabilize the fund balance for FY13 and in the future. In all cases proposed below, the underlying concept is to match the trend in medical care cost increases.


Recommendations made to the EBC consist of:


  1. Increase the premium contributions for employee spouses who are eligible for health insurance coverage through another group plan, but have waived their own coverage to be on the City health plan. Missoula County Schools adopted the graduated premium rates for dependents with other coverage available in order to shift some of the risk of those dependents to other group plans.


  1. Increase the deductible by a minimum of $50 per year per participant (based on current year usage the projected savings is around $29,000).


  1. Start tracking gaps in care and provide outreach to individuals who have chronic illnesses but are not taking their medication, or not following up with a doctor on a regular basis.

  1. Deductibles – consider increasing deductible for employees not meeting benchmarks for cholesterol, glucose, blood pressure, BMI and tobacco use. Could increase deductible and employee could buy down based on meeting bench marks, or deductible can remain the same and employees could be charged with an additional $100.00 deductible for each of the bench marks not met. This could be set up during FY 2013 for implementation at the beginning of FY 2014.

  1. Look for cost and price stabilization by:

  1. Steerage to facilities and providers with the best pricing

  2. Index plan pricing to a percentage of Medicare, i.e. 200% of Medicare eligible charges

  3. Bundled benefits – Pay hospitals/surgery centers up front at a fixed amount based on data, this will cap payment at a pre-determined amount.


  1. Phase out City subsidy to retirees' premium. Currently the City subsidizes retirees by contributing 15% of their total premium costs. The phase out would be 5% reduction per year in City subsidy. By FY2016 retirees would be paying 100% of the premium cost .


For the health fund to be able to meet medical claim projections for FY13 and beyond the EBC might want to consider implementing these changes over the next couple of years. By taking small steps now, it could save the plan from a major over haul in the future.




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