Ocean City may investigate alternative options for town employee health insurance in 2019 following recent price hikes from CareFirst.

(Nov. 9, 2018) Projected price increases of more than four percent from CareFirst, has led Ocean City government to explore other options for employee health insurance after 2019.

Kathleen McAuliffe, senior consultant with Bolton Partners, presented details about employee benefits insurance contract renewals during the City Council work session last Tuesday.

“We’ve had several years where either we’ve offset the premium increase or there’s been no premium increase,” she said. “For the 2019 plan year, CareFirst is requesting a six percent increase, which was negotiated to 4.3 percent.”

Wayne Evans, Human Resources Director provided historical background on the city’s benefit packages.

“We added a high deductible health plan with a health savings account in 2012,” he said. “In 2014, we made a major change by adopting a self-funding arrangement with CareFirst, whereas before we had a fully insured product.” 

Evans said in 2015 the city made the high deductible health plan the default option for new hires.

“It’s the best, most generous plan the town offers,” he said.

Since that time, other changes have included altering the co-share premium for the PPO plan from an 85 / 15 split to an 80 / 20 split, Evans said.

Additionally, office visit co-pays were raised this year to $30 for primary care and $40 for specialists, with emergency room co-pays jumping from $100 to $150.

“As a result, … we’ve seen a slight decrease in the ER utilization of [about] four percent,” he said.

Evans also noted mandating use of generic drugs has resulted in a roughly two percent increase in their use.

McAuliffe said the city has managed to offset rate increases in the past, including the 4.9 percent hike proposed in 2016.

“In December 2016, the town implemented a premium free pay period which actually offset the 2017 rate increase,” she said. “In 2018, CareFirst requested a 2.8 percent increase and it was negotiated to arrive at no change.”

The recent pricing discussions were addressed through improved prescription drug rates, McAuliffe said.

“The actual increase to employees in dollars and percentage is pretty minimal,” she said.

Maintaining rate schedules is likely to become more difficult as CareFirst is changing methodology for rebate calculations, which are paid on brand name drugs and shared back to the plan sponsor to offset costs.

“CareFirst in the past would pass back the maximum of the actual rebate or a guaranteed amount per claim,” she said. “They’ve changed for 2019 to just a per claim fee and we don’t think this is going to be a favorable change for the town.”

McAuliffe estimated the adjustment would cost the town at least $90,000, and potentially as much as $130,000 per year.

“It’s what the manufacturer kicks back on rebates and then that comes back to the plan,” she said. “It’s one to two percent of overall plan cost, so we think it’s worthwhile looking at other options.”

With prescription drugs representing a growing portion of costs, McAuliffe said numerous coalitions have formed to reduce consumers’ bottom line. 

“There are a lot of plans I think we should look at,” she said.

McAuliffe also noted CVS Caremark’s recently approved purchase of Aetna will likely result in market fluctuations.

“CVS Caremark [is] the prescription provider for CareFirst, who is a competitor of Aetna,” she said. “We’re kind of waiting to see how that all shakes out, but it’s a good time to bid when this is going on in the industry.”

To balance out the 2019 rate increase, the town will institute two premium free pay periods, McAuliffe said.

“The bottom line is even though the rates are going up some, the dollar amount from the premium holiday will offset that increase,” she said.

Looking ahead, McAuliffe recommended the city solicit bids for the medical plan combined with prescription coverage, which may result in lower costs. 

“The HSA plan continues to be a rich plan,” she said. “Every year since the plan was put in the town has been in a positive settlement position.”

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