(Oct. 2, 2020) Although the Ocean City government’s annual benefit premium rates will increase by 7 percent, or $611,660, previous savings will allow it to coast through the year with little to worry about.
Originally, CareFirst, the city’s health benefit provider, initially set the renewal rate at 8.7 percent. However, that rate was reduced after an independent analysis by Bolton, the city’s consulting firm, found a 7 percent increase to be more appropriate.
This puts the city slightly above the national average of six percent.
Human Resource Director Katie Callan said an increase in large claims was the driving point for the rate increase.
In 2019, there were 12 large claimants over $100,000, totaling $2.3 million, compared to six in 2018, totaling $1.17 million.
This year, from March to May, claims were historically low because of covid-19, but were starting to creep up as the year progresses. Such low numbers were not expected for 2021, and not factoring them in could result in the city incurring a deficit.
Another factor for the renewal rate increase was the gender and age of city employees.
“More than 70 percent of our plan participants are male, and males over the age of 35 incur greater health care costs than females on average,” Callan said. “Additionally, the average age of an employee participant in the town’s plan is 53.5, compared to CareFirst Book of Business where the average is 42. So you can see we have some demographic factors working against us.”
On a positive note, while the number of employees and retirees on the city’s plan has grown since 2014, the number of members, which includes family, has declined.
However, the cost per member has slowly grown, with the worst case in 2019 when it was $537.01.
Another driving force was specialty drug costs, which grew by 47 percent from 2018 to 2019.
These include drugs to treat oncology, IBS, arthritis and psoriasis.
If this trend continued, the city might need to change its pharmacy plan.
In terms of what employees are using their health plans for, diabetes has topped the list since 2017, followed by, in rotating order, cerebrovascular disease, osteoarthritis, skin cancer, leukemia, pregnancy complications, mental health and pneumonia.
Costs associated with preventative and administrative health encounters also have grown, but this was a good sign. Following the “prevention is the best cure” mentality, this would hopefully lower the need for more expensive procedures, medicines and specialty visits.
There were area of concerns, as the number of women’s health screenings, including regular mammograms and cervical cancer checkups, and men’s prostate exams have fallen.
In terms of changes to the plan, Human Resource Representative Amanda Bayline said staff recommended limiting the number of therapy visits under the Health Savings Account (HSA) plan to 60 per year, rather than unlimited.
This would make it match the health maintenance organization (HMO) and preferred provider organization (PPO) plans and prevent abuse, Bayline said.
Another change this year would be in dental coverage.
Bayline said staff also recommended adding adult orthodontia coverage (50 percent to $1,500 lifetime maximum), which was highly sought by city employees.
Although the renewal rate has increased, the city is in a good position financially as it has received a rebate for its claims and expenses almost every year since 2014, resulting in $2.3 million in funds that can be used to cover the rate increase.
Overall, city officials were pleased with the report, although Councilman Tony DeLuca inquired about the last time staff had looked at other health plan companies and financial consulting firms.
“I think it’s always good to compare and I think it’s needed,” DeLuca said.