Limited drug and network changes for the 2017 health plan have been designed to help better manage costs for employees and the City/Schools. These proposed changes, along with projected rates (monthly premiums based upon 12 months), were shared with City Council and the School Board.

At the City Council’s request, each upcoming year’s total health care costs are included in the annual proposed budget. Due to this timing, monthly premiums are projected – what our health care consultant determined to be based upon claims data to-date– and may slightly change when final rates are determined later this year. Final rates will also be provided as 10 month rates for School employees.

City/Schools contributed more than $3 million additional dollars to the health care fund in order to keep increases small for employees. As such, proposed employee premium increases range from zero to 6.3 percent. As in years past, City/Schools will continue to offer the same plans: Premier, Standard and Basic (Health Savings Accounts can be tied to Standard and Basic Plans).

2017 Preliminary Employee Monthly Rates & Contributions

The 2017 proposed health plan changes include:

A closed formulary – Formulary drugs include most generics and selected brand medications. A closed formulary means that only specific drugs in each drug class would be covered; it excludes those that aren’t found to have greater effectiveness. Nonformulary drugs must meet medical criteria to be covered by the plan (through an appeal process). Based on this proposed change, those with medications that will not be covered by the plan will be notified by Optima Health on or before November 2016 (via a letter to employees’ home address).

A network of quality care providers – You’ll need to see if your doctors are part of the Sentara Quality Care Network (SQCN), since this will impact your co-pays/coinsurance. In Standard and Basic Plans, employees’ share of the cost for office visits will be less in 2017 than what they are paying this year, if the doctors are in SQCN.

• Premier Plan, non-SQCN, co-pays for office visits would increase from $20 PCP/$40 Specialist to $40 PCP/$60 Specialist (for in-network)
• Standard Plan, SQCN provider, coinsurance for office visits would decrease from 20% to 10% (for in-network)
• Basic Plan, SQCN provider, coinsurance for office visits would decrease from 25% to 15% (for in-network)

To see if your doctors are part of the Sentara Quality Care Network (SQCN), visit Optimahealth.com then click on Doctor Search and enter your information. Look for doctors with a “CIN” symbol next to their names; this means they are SQCN providers.

Shift in costs for retirees – Currently, the average cost for retiree coverage is 38% greater than it is for active employees. So, retiree contributions, as well as the City/Schools contribution for retirees, are greater than what is contributed to active employees. A shift in cost to retirees is being made to narrow the difference between the City/Schools contribution provided to active employees vs. retirees. New projected retiree rates are below.

2017 Preliminary Retiree Monthly Rates & Contributions

To see the proposed 2017 plan design chart, click here.

These proposed changes are necessary for a few reasons. In February, the City/Schools Health Fund balance was $4.6 million, which is far below the recommended reserve amount of $11.5 million (equal to one month’s worth of health care claims). Unfortunately, City/Schools again experienced several very high claims, which have affected Health Fund balance and costs.

In addition, the potential impact of the excise tax continues to affect the City/Schools health care plans. Beginning January 1, 2020 (delayed from Jan. 1, 2018), the federal government will charge sponsors of self-funded group health plans (which are those provided by Virginia Beach) an excise tax – more commonly known as the “Cadillac” tax – of 40 percent on any benefits provided to employees that exceed $10,200 individual; $27,500 family (these are revised annually). A few 2017 Preliminary Employee Monthly Rates and Contributions of our plans are projected to reach the excise tax limit in 2020 and the tax penalty is estimated to be $176,000 and will increase as the years progress.

If no changes to plan design or funding are made for 2017, the total projected gross cost would be $154.3 million or $3.5 million greater than cost projections in the recommended changes.

City Council will vote on the proposed budget which includes the schools budget and health care funding on May 10. Final health care rates and additional details will be communicated by the Consolidated Benefits Office sometime in May/June.

 

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