Agenda Item AGENDA STAFF REPORT ASR Control 23-000548
MEETING DATE:	07/18/23
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	All Districts
SUBMITTING Agency/Department:	County Executive Office (Approved)
Department contact person(s):	Kim Derrick (714)834-2564
	Barbara Gondo (714)834-7072

Subject: 2024 Employee Self-Funded PPO Health Plan Rates

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement to Form

Discussion

3 Votes Board Majority

Budgeted: Yes

Current Year Cost: See Financial Impact Section

Annual Cost: See Financial Impact Section

Staffing Impact:

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: Self-Insured PPO Health Plans - ISF 292: 100%	County Audit in last 3 years: No
Levine Act Review Completed: N/A

Prior Board Action: 7/19/2022 #23, 7/13/2021 #24, 7/16/2019 #22, 7/17/2018 #30

RECOMMENDED ACTION(S):

Adopt the 2024 Plan Employee and non-Medicare Retiree PPO Health Plan Rates for the self-funded Wellwise and Sharewell PPO Plans.

Authorize the Chief Human Resources Officer or designee to approve change in County contribution to Sharewell Choice Employee only rate, only if necessary for the County to meet the requirement to provide affordable health benefits for all eligible County employees as required under the Affordable Care Act.

SUMMARY:

Adoption of the employee and non-Medicare retiree PPO health plan 2024 rates for the self-funded Wellwise and Sharewell Choice PPO Plans will allow the County to continue to provide health benefits for eligible employees and non-Medicare retirees and comply with the Affordable Care Act.

BACKGROUND INFORMATION:

Human Resource Services (HRS) administers two self-funded employee PPO health plans: Wellwise Choice and Sharewell Choice Health Plan. Effective January 1, 2024, the County will restructure health plans to include both active County employees and non-Medicare retirees, with the requirement that retiree health plan insurance premiums for non-Medicare retirees exceed the active employee premium by 20 percent. This will result in a decrease in the non-Medicare rates. Active employee premiums are not increasing beyond the determined increases related to active employee claims experience.

Attachment A contains the recommended rates for the Active employees and non-Medicare retiree Wellwise Choice and Sharewell Choice Health Plans for the 2024 Plan Year.

The County’s health and welfare benefits consultant, Mercer Health and Benefits, LLC (Mercer), has provided the analysis and assumptions used in calculating the 2024 rates in the Mercer Self-Funded PPO Health Plan Rate Requirements – Active Employees and non-Medicare Report Attachment B.

Rate Development

In developing the 2024 PPO rates, HRS, in coordination with Mercer, reviewed 2022 and 2023 medical and prescription claims data; taking into consideration plan enrollment and adjusting it based on future projected claims. Standalone active medical and pharmacy trend factors would be 5 percent and 9 percent, respectively. Standalone non-Medicare medical and pharmacy trend factors would be 7 percent and 10 percent, respectively. The current trend for other Mercer clients, for 2024, ranges from 5 percent to 9.5 percent for medical and 6.3 percent to 11.3 percent for pharmacy. Over the last three years, the County of Orange PPO trend for medical has been 7 percent, and 12.8 percent for pharmacy, for a combined medical/pharmacy trend of 8.2 percent.

Claims utilization continued to increase in 2022 and 2023. Inpatient utilization increased by 7 percent, professional services increased 29 percent, and pharmacy increased by 5 percent.

Rates are generally set to fund projected future claims and expenses and maintain the Board of Supervisors (Board) approved 30 percent target reserve of $21 million, which includes a 15 percent Incurred But Not Reported Medical Claim Reserve and a 15 percent Premium Stabilization Reserve. The current reserve level is estimated at approximately $20 million.

Therefore, HRS and Mercer recommend changes in the rates to the 2024 PPO plans as shown below.

-	Wellwise Choice – decrease of 1 percent from 2023 rates
-	Sharewell Choice – increase of 57 percent from 2023 rates
-	Wellwise non-Medicare – decrease of 52 percent from 2023 rates
-	Sharewell non-Medicare - decrease of 40 percent from 2023 rates

The relative value between Sharewell Plan and the Wellwise Plan is very different for actives employees and non-Medicare County retirees. The difference between the rates should be reasonably relative to the difference in the value of the benefits provided, particularly for non-Medicare retirees. With the blended pool, the active Sharewell Choice rates have been increased to develop non-Medicare rates bearing a reasonable relativity between Wellwise and Sharewell.

Projections are made based on currently available information and adverse fluctuations may arise as further experience emerges. HRS and Mercer will continue to monitor claims and trends on a monthly basis.

The County contribution for employees who complete the required activities to earn the Wellness Credit is an additional 5 percent of total health plan premium for Wellwise Choice. The amount of the credit ranges from $24 to $61 per pay period based on plan and enrollment. The County and employee rates for employees who choose to participate are identified in the rate table as “With Wellness Participation.”

Affordable Care Act (ACA) – County Provided Minimum Value Health Care Coverage

Under the ACA, Internal Revenue Code §4980H (see Attachment C), an employer with at least 50 full-time employees must offer health care coverage that meets certain minimum-value and affordability standards to at least 95 percent of full-time employees as defined by the ACA. While most employees qualify for County-provided coverage through existing contracts with labor organizations, there are some employees who do not qualify for these negotiated County benefits but should be offered minimum value coverage under the ACA.

In 2023, to meet the ACA’s minimum-value and affordability standard, Sharewell Choice was offered to this group of employees at $103.28 per month for employee-only coverage. Dependent coverage was offered with 100 percent of the premium paid by the employee. A total of seven eligible employees elected this coverage. The County will continue this option for 2024. The County contribution is based upon the 2023 affordability safe harbor and ACA benchmark. If the Internal Revenue Service (IRS) releases any changes to the benchmark for 2024, HRS requests that Your Honorable Board authorize the Chief Human Resource Officer or her designee to adjust the County contribution for the Sharewell Choice employee only rate for the purpose of meeting the IRS requirements.

Attachment A contains the 2024 recommended Sharewell Choice rates for ACA coverage.

Prior Board Actions

On July 19, 2022, the Board approved the 2023 Employee Health Plan Rate Tables for the Wellwise and Sharewell PPO Health Plans.

On July 13, 2021, the Board approved the 2022 Employee Health Plan Rate Tables for the Wellwise and Sharewell PPO Health Plans.

On July 14, 2020, the Board approved the 2021 Employee Health Plan Rate Tables for the Wellwise and Sharewell PPO Health Plans.

On July 16, 2019, the Board approved the 2020 Employee Health Plan Rate Tables for the Wellwise and Sharewell PPO Health Plans.

FINANCIAL IMPACT:

The estimated total current FY 2023-24 County cost for employees is $19 million (January 1, 2024 – June 30, 2024).

The estimated annual 2024 County cost for the employee Wellwise Choice PPO plan is $28.2 million. The actual amount will vary based on actual enrollment.

The estimated annual 2024 County cost for the employee Sharewell Choice PPO Plan is $9.5 million. The actual amount will vary based on actual enrollment.

The PPO health plan rates are brought to the Board annually for approval and appropriations are included in Fund 292 FY 2023-24 budget and will be included in the budgeting process for future years.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - 2024 Employee PPO Health Plan Rate Tables
Attachment B - Mercer Self-Funded PPO Health Plan Rate Requirements - Active
Attachment C - Internal Revenue Code Section 4980H