Agenda Item   

AGENDA STAFF REPORT

 

                                                                                                                        ASR Control  22-000609

 

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 

 

 

Lauren Pierson (714) 834-5376

 

 

Subject:  2023 Employee HMO 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:

No

# of Positions:

Sole Source: No

    Current Fiscal Year Revenue: N/A

  Funding Source: ISF 290: 100%

County Audit in last 3 years: No

 

 

    Prior Board Action: 3/8/2022 #8, 7/13/2021 #27, 1/12/2021 #19, 7/14/2020 #27

 

 

RECOMMENDED ACTION(S):

 

Adopt the 2023 Cigna Healthcare of California and Kaiser Foundation Health Plan Employee HMO Health Plan Rates.

 

 

 

SUMMARY:

 

Adoption of the Cigna Healthcare of California and Kaiser Foundation Health Plan Employee 2023 HMO health plan rates will allow the County to continue to offer benefits to eligible County of Orange employees.

 

 

BACKGROUND INFORMATION:

 

Rate Development

Human Resource Services (HRS) currently administers two Cigna Healthcare of California (Cigna) insured HMO health plans and one Kaiser Foundation Health Plan (Kaiser) insured HMO health plan for County employees.

 

Attachment A contains the recommended rates for the Cigna and Kaiser health plans. Rates for the plans are negotiated annually. The County contribution for employees who participate in the Wellness Credit Program by completing the required activities is an additional 5 percent of total health plan premium. This generated an 89 percent participation rate for the 2022 Wellness Credit Program. The County and employee rates for employees who choose to participate in the Wellness Credit Program are identified in the rate table as “With Wellness Participation.”

 

Cigna HMO Rates

The proposed 2023 rates for Cigna Choice and Select HMO plans will be increasing 4.07 percent, which is much lower than the annual Cigna trend of 6.14 percent.

 

The renewal increase is being driven by an overall increase of 10.3 percent. Medical cost increased by 8.5 percent. This medical cost increase is primarily being driven by increases in the number and cost of catastrophic claims, and an increase of 33 percent in urgent care visits. However, the aggregate medical cost is still below Cigna’s norm. Pharmacy cost increased 15percent, which includes at 29.7 percent increase in Specialty Drugs spend. Pharmacy claims include one catastrophic claim of $1.6 million.

 

Cigna has used the County’s experience plus a trend factor of 6.14 percent to build the 2023 rate. Cigna has also made a reduction to the rate renewal of 7 percent as an investment and in consideration of the long-standing relationship with the County.

 

Cigna’s renewal includes reimbursement or direct payment of $75,000 for wellness center and $250,000 for wellness programs expenses. It also includes an onsite wellness coach and well-being strategist. In consideration of the County renewal for 2023 rather than conducting a Request for Proposal (RFP), Cigna is adding an onsite Clinical Therapist who will be available to support County employees’ mental health needs.

 

The proposed changes in rates for Cigna Choice and Cigna Select for 2023 are set forth below.

 

Cigna Choice HMO and Cigna Select HMO Plans: Amount of increase 4.07 percent.

 

The Kaiser HMO Rates

The proposed Kaiser rates reflect County employee claims utilization experience for this past year and projected medical and prescription costs for 2023.

 

The renewal increase of 10.32 percent is driven by an overall increase of 22.4 percent in per member per month claims cost from 2021 to 2022. The main cost driver is outpatient which increased by 42.8 percent. Costs for outpatient visits increased by 30.6 percent. The County experienced a cost increase in key categories including mental health (71 percent), outpatient surgery (43.6 percent for facilities and 50.8 percent for professional), and lab (104.9 percent) which is primarily due to COVID-19 testing.

 

Kaiser’s renewal includes: $100,000 towards biometric screening expenses. In consideration of the County renewal for 2023 rather than conducting an RFP, Kaiser is adding an additional $50,000 towards the County Wellness Program.

 

The proposed changes in rates for 2023 are set forth below.

 

Kaiser Health Plan: Amount of increase 10.32 percent.

 

Kaiser does not negotiate rates. However, Mercer has reviewed Kaiser’s rates with HRS and has confirmed that the County’s rates are reasonable.

 

Wellness Program Impact

Employees continue to actively participate in the Your Pathway to Wellness Program, previously called OC Healthy Steps. In 2021, 89 percent of employees completed the required activities to earn the Wellness Credit for 2022, compared to an industry average of 47 percent participation and an increase of 3 percentage points from 2020. 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 effect of the pandemic.

Body Mass Index measurements remained steady for participants in 2021, 70.4 percent of participants at risk and is below WebMD’s overall book of business at 74 percent. Ninety-six percent of participants avoided fried food and 73 percent avoided soda on a daily basis. Sixty-five 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 Your Pathway to 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 that HRS observes in our County health plans are in part due to the high employee participation and success of our Wellness Program.

 

PRIOR BOARD ACTION

 

On March 8, 2022, the Board approved the 2022 Employee Insured (HMO) Health Plan effective January 1, 2023.

 

On July 13, 2021, the Board approved the 2022 Employee Insured (HMO) Health Plan Rates effective January 1, 2022.

 

On January 12, 2021, the Board approved the 2022 Employee Insured (HMO) Health Plans effective January 1, 2022.

 

On July 14, 2020, the Board approved the 2021 Employee Insured (HMO) Health Plan Rates effective January 1, 2021.

 

 

 

FINANCIAL IMPACT:

 

The estimated total current FY 2022-23 County cost for this action is $65,693,500 (January 1, 2023 - June 30, 2023).

 

The estimated annual 2023 County cost for the Cigna Choice plan is $41,326,000. The actual cost will vary based on enrollment.

 

The estimated annual 2023 County cost for the Cigna Select plan is $12,893,000. The actual cost will vary based on enrollment.

 

The estimated annual 2023 County cost for the Kaiser plan is $77,168,000. The actual cost will vary based on enrollment.

 

Appropriations are included in Fund 290 FY 2022-23 Budget and will be included in the budgeting process for future fiscal years.

 

 

STAFFING IMPACT:

 

N/A

 

ATTACHMENT(S):

 

Attachment A - 2023 Employee HMO Health Plan Rate Tables