Medical, Dental, Vision 2008 Renewal

Talking Points

Medical

·        The plan design and contribution changes effective January 1 2007 have helped to bring claim coast in line.

·        Claims experience has produced an incurred loss ratio of 74% through June. This will deteriorate some throughout the second half of the year due to members satisfying deductibles and reaching their out-of pocket maximums.

·        As expected, the High Plan (with 53% of employees and 55% of  employee contributions) is experiencing 80% of the claim costs.

·        The initial renewal proposal by CIGNA includes an 8% increase in claims administration coasts and a 0% increase in access fees for a total increase in administrative fees of 5%, not an unreasonable increase.

·        There have been 2 members with claims in excess of the $150,000 individual stop loss threshold, and nearly $270,000 was received in stop loss payments through June. In addition, there were 15 other members with claim costs between $25,000 and $90,000 through June.

·        CIGNA is also proposing a 17% increase in stop loss coverage rates. This seems high Leif.

·        Leif will be negotiating with CIGNA to lower the stop loss increase.

·        Leif is using CIGNA’s suggested 12% medical trend and 14% prescription drug trend, for a blended trend of 12.6%.

·        The renewal calculation assumes no changes in plan design.

o       Leif is recommending two different scenarios.               

o       Scenario A would impose a 1% increase in High Plan rates, which   would         be passed on to participants. This would acknowledge the considerably higher utilization of High Plan participants, and provide a little more differentiation in rates between the High Plan and the Low Plan.

o       This translates to a 6.3% increase in High Plan employee contributions or an additional $5 per month for Employee only, $10 per month for Employee+1 and $16 per month for Employee + Family. The Low Plan contributions would stay at 2007 levels.

o       Scenario B would leave all rates at 2007 levels.

o       Either scenario would be acceptable from a financial perspective.

·        Both scenarios result in no increase in Denver Water (Board) expenditures for 2008 from 2007 (keeping in mind that 2007 Board costs were pegged to 2005 levels).

·        Denver Water may also want to consider increasing the stop loss attachment point from $150,000 to $165,000. this will lower premium costs by $98,000 for the year, but increase exposure by $15,000 per member. This would not affect the renewal rate recommendations detailed above.

·        Leif recommends increasing the stop loss threshold annually or every other year with medical trend running at 12% per year. A 12% increase in the stop loss level would actually be $168,000.

Bottom Line: The new plan designs have helped to bring overall medical costs in line. We have the option of keeping all premiums at 2006 levels or giving a $5/$10/$16 dollar bump to the High Plan for 2008.

Dental

·        The dental plans remained at 2006 employee contribution levels and plan design to 2007.

·        The dental plans are running at slight deficits through June with an incurred loss ratio of 93%.

·        Delta is maintaining its administrative fees at 2007 levels and no plan design changes are contemplated at this time.

·        Leif is using a 6% dental trend.

·        Projections for 2008 call for about a 4% increase in premium.

·        Leif recommends increasing the Premier Denver Water contribution by $2/$4/$4 per tier and increasing Premier employee contributions by $1/$1/$2 per tier.

Bottom Line:  Since rates were not adjusted for 2007, a small increase is required for 2008. Leif recommends increasing the Premier Plan by $1/$1/$2 for employees with a comparable increase in Denver Water contributions.

Vision

·        The vision plan also stayed with the 2006 plan design and pricing for 2007.

·        The incurred loss ratio is 91% through June, but paid claims and administrative costs have exceeded premium slightly in each month of 2007.

·        Superior vision has proposed maintaining administrative fees at $1.90 PEPM, a rate in effect for many years.

·        Leif recommends an overall rate adjustment of 11%, however, this will increase rate tiers by just $1.00, from $5 to $6 for Employee Only, $9 to $10 to Employee + 1 and $16 to $17 for Employee + Family.

·        The market bid process slated for 2008 will allow Denver Water to explore other ways of providing a yearly eye exam and structuring vision benefits.

Bottom Line: The vision plan needs a $1 increase per tier to meet the claims costs expected for 2008. There was no change in premiums for 2007.