Daviess Fiscal Court faced issues in rising healthcare costs when developing its 2019-20 budget earlier in the summer, and those woes were exacerbated when the county's insurance adviser, Peel and Holland, reported to them that renewing with current provider Anthem would cost roughly $1 million more than anticipated.
While that number came as a shock to court officials, Peel and Holland also provided an alternative that would not only save the court money but provide comparable care at reduced prices to county employees, said County Treasurer Jim Hendrix.
"The renewal we received on Sept. 11 was horrible, unaffordable and unacceptable," he said. "Fortunately Peel and Holland didn't just bring us the bad news and dump it on us; they brought us a viable alternative. That alternative is the Kentucky Employee Health Insurance Plan. They have brought that to us over the past few years. We kept thinking that the trend we were seeing would turn around but after the past five years, it has gotten worse. The risk profile of our account is spread over too few people so it makes it unaffordable. We have tweaked it and kept punting it and we hit the wall and now we simply have an insurance plan that is no longer affordable for us."
In the past, the court has been self-insured, paying up to $125,000 for every employee claim. Any claim past that mark was covered through reinsurance, a form of insurance that an insurance company or entity purchases from another insurance company to insulate itself from the risk of a major claims event, essentially mitigating the cost. Statistically, the court was prepared for up to three to four of those "high-level" claims a year, but have had an unexpected uptick, Hendrix said.
"We are self-insured so we pay our own claims," he said. "For the past five years, we continued to exceed the expected statistical averages. We hoped it was a spike, but it looks like a new baseline that isn't dropping. Statistically, we should have about four high claims; we are experiencing a dozen or more a year. Our claims activities have been such that it has been too high. By being in the bigger pool, which performs better than we do as our own insurer, it will drop our costs."
Luckily for court officials, Peel and Holland, despite losing roughly one-third of its service fee for recommending that the court enter into the state system, had the county's best interest at heart, said Hendrix.
The new plan, beginning Jan.1, will ultimately save the court between $1.5 million and $2.5 million annually in healthcare costs. The savings will also be noticeable to the roughly 220 county employees who will, depending on the plan they choose, not only avoid the almost $80 a month bump they would have seen had the county not transitioned into the state plan, but see a $41.47 monthly decrease in their Plan 1 (Core Plan) cost from $266.55 in 2019 to $225.08 in their 2020 Plan 1 (Consumer Driven Health Plan) and a $109.72 drop in their Plan 2 (Buy-up Plan) cost from $377.84 in 2019 to $268.12 in their 2020 Plan 2 (PPO) plan.
"We are going from a two-option plan to a four plan," Hendrix said. "Plan 1 and plan 2 are very similar to our original two plans. The coverage will be basically the same, with a few minor differences with the biggest one being it will be cheaper. Prices and rates will change annually, but they won't be as extreme and we will still be in an Anthem network, so our doctors will be in the network and it will be at a greatly reduced price because you are spreading the risk over 268,000 employees (statewide). There is a three-year commitment, but based on my knowledge of our risk profile, there is no way we are coming out in three years anyway."
Jacob Mulliken, 270-228-2837, firstname.lastname@example.org.