AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 22-000607
MEETING DATE:	07/19/22
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: 2023 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

Prior Board Action: 7/13/2021 #24, 7/14/2020 #29, 7/16/2019 #22, 7/17/2018 #30

RECOMMENDED ACTION(S):

Adopt the 2023 Employee PPO Health Plan Rates for the self-funded Wellwise Choice and Sharewell Choice PPO Plans.

Authorize the Chief Human Resource 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 PPO health plan 2023 rates for the self-funded Wellwise Choice and Sharewell Choice PPO Plans will allow the County to continue to provide health benefits as required under the various Memorandums of Understanding and 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. Attachment A contains the recommended rates for these employee health plans for the 2023 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 2023 rates in the Mercer Self-Funded PPO Health Plan Rate Requirements – Active Employees Report Attachment B.

Rate Development

In developing the 2023 PPO rates, HRS, in coordination with Mercer, reviewed 2021 medical and prescription claims data taking into consideration plan enrollment and adjusting it based on future projected claims. Standalone medical and pharmacy trend factors would be 4 percent and 7 percent, respectively. The current trend for other Mercer clients for 2023 ranges from 4.5 percent to 9 percent for medical and 6.5 percent to 12 percent for pharmacy. Over the last three years, the County of Orange PPO trend for medical has been 6.8 percent, and 12.3 percent for pharmacy, for a combined medical/pharmacy trend of 7.9 percent.

Claims utilization for 2021 increased from 2020. Inpatient utilization increased by 7 percent, professional services increased 24 percent, and pharmacy increased by almost 14 percent. The large increase in professional services is due to avoidance of care in 2020 because of the COVID-19 pandemic.

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 to $22 million, which includes a 15 percent Incurred But Not Reported Medical Claim Reserve and a 15 percent Premium Stabilization Reserve. In 2021, the plan costs for the Wellwise and Sharewell plans exceeded premiums collected by approximately $7 million or 10 percent. The current reserve level is estimated at approximately $15 million

The combination of a decreasing fund balance and high claims experience in 2021 means the 2023 rate increase must be higher than trend to ensure premiums cover the cost of claims and begin to increase the fund balance back to Board target reserve level.

Therefore, HRS and Mercer recommend an increase in the rates to the 2023 PPO plans as shown below.

• Wellwise Choice – increase of 20 percent

• Sharewell Choice – increase of 20 percent

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. 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.”

Wellness Program Impact

Employees continue to actively participate in the County’s Employee Wellness program. In 2021, 89 percent of employees completed the required activities to earn the Wellness Credit, compared to an industry average of 47 percent participation and an increase of 3 percentage points from 2020. Additionally, registration for the wellness portal increased from 80.8 percent in 2020 to 91 percent in 2021. Of those registered on the portal, 1,015 participants tracked their daily steps by either syncing their device or manually logging steps on the portal, with an average daily number of 6,965 steps tracked.

Among those individuals that completed the Health Assessment in 2020 and 2021, the risk prevalence decreased or remained steady for all risk areas except exercise and depression. The increase in both depression and exercise risk prevalence is likely due to the remaining effects of the pandemic.

Body Mass Index measurements remained steady for participants in 2021. The 70.4 percent of participants at risk and is below WebMD’s overall book of business at 74 percent. 96 percent of participants avoided fried food and 73 percent avoided soda on a daily basis. 65 percent of participants took part in strength training on a daily basis. The percentage of employees who use tobacco (2021 = 1.2 percent) is significantly lower than the national average of 19 percent and is lower than WebMD’s overall book of business at 2 percent.

There are many published studies that demonstrate wellness programs can provide positive return on investment, particularly over a three to five-year period. Results such as these can be achieved through programs that shift the focus to activities that promote sustained lifestyle change. The County’s Wellness Program empowers employees to take charge of their health and well-being and provides cost-effective health management interventions and tools to assist employees in maintaining or improving their health and wellbeing so they can be happy and productive in their service to the citizens of Orange County. These positive indicators are in part due to the high employee participation and success of our Wellness Program.

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 2022, to meet the ACA’s minimum-value and affordability standard, Sharewell Choice was offered to this group of employees at $103.15 per month for employee-only coverage. Dependent coverage was offered with 100 percent of the premium paid by the employee. A total of 11 eligible employees elected this coverage. The County will continue this option for 2023. The County contribution is based upon the 2021 affordability safe harbor and ACA benchmark. If the Internal Revenue Service (IRS) releases any changes to the benchmark for 2023, HRS/Employee Benefits requests that Your Honorable Board authorize the Chief Human Resource Officer or his 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 2023 recommended Sharewell Choice rates for ACA coverage.

Prior Board Actions

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.

On July 17, 2018, the Board approved the 2019 Employee Health Plan Rate Tables for the Wellwise and Sharewell PPO Health Plans.

FINANCIAL IMPACT:

The estimated total current FY 2022-23 County cost for this action is $17,098,000 (January 1, 2023 – June 30, 2023).

The estimated annual 2023 County cost for the Wellwise Choice PPO plan is $27,713,00 The actual amount will vary based on actual enrollment.

The estimated annual 2023 County cost for the Sharewell Choice PPO Plan is $6,483,000. The actual amount will vary based on actual enrollment.

The PPO health plan rates are brought to the Board annually for approval and are included in the FY 2022-23 adopted budget.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - 2023 Employee PPO Health Plan Rate Tables
Attachment B - Mercer Self-Funded PPO Health Plan Rate Requirements - Active Employees’ Report
Attachment C - Internal Revenue Code Section 4980H