Title
Employee Health Insurance Renewal FY2025
History
Market Analysis
The Horton Group (Horton) conducted a competitive market analysis for health insurance and all benefit lines for the Village of Orland Park’s (VOP) 2025 plan year.
The results showed the Health Insurance market remains volatile due to higher hospital, provider, and pharmacy costs. In addition, patient risk has also escalated. There is greater use of specialty drugs which accounted for approximately 70% of the plan’s overall pharmacy spend. In addition, GLP-1 drug use (Ozempic, Mounjaro) has also increased for weight loss associated with diabetes. These drugs cost on average $1k per month and their use is ongoing. Yet to hit the VOP plan but concerning to underwriters for all plans are gene and cell therapy drugs, which have an average cost of $3M. They are considered cures for some conditions which were once untreatable. There are 19 cellular and 13 gene therapy treatments in the market today with 200+ in late-phase development.
Despite the market negatives, the VOP plan ran closer to target this year than last. Data through September ran 98.4% of expected. There are 20 large claimants over $50k, 5 over the $100k specific reinsurance limit. Mid-size claimants fell slightly to 28 from 31 but dropped in spending by $186,000.
The preliminary renewal was released with an overall spreadsheet increase of $528,007 or 9.24%. After negotiations and market comparisons, the best and final renewal came in at +$344,325 or 6.03%. As a comparison, Price Waterhouse Coopers (PWC) medical trend is projected to be 8% for 2025. Pharmacy trend is projected to be 10%.
In the process, Rx rebates were improved by 53% and included additional pass-through language unique for Horton clients if rebates turned out higher. There is no claw-back if rebates turn out lower. Also improved in negotiations was the stop-loss contract, Blue Cross has included a second layer of reinsurance for the gene and cell therapy treatments to mitigate the cost to the traditional reinsurance market. In addition, Horton negotiated an enhanced contract to include a No New Laser provision, with a renewal cap of 50% on stop loss premiums in year 2. This added protection is valuable to the plan. With risk and potential cost increasing so much, a laser (which is adding an additional specific for a large claimant), can be added for an extremely high-risk individual, causing pressure to the whole plan.
All existing carriers and plan designs remain the recommended programs of choice including:
- Medical and Rx
- Dental Administration
- Vision
- Life and AD&D/Voluntary Life and AD&D
- Short Term Disability Administration
- Flexible Spending Account (FSA)
- Employee Assistance Program (EAP)
- CHC Biometric Screenings (Wellness Initiatives)
- HealthJoy
The summary of results is as follows:
1. 2025 Medical Market Analysis & Recommendations
i. Approached three (3) alternative carrier markets, Aetna (Meritain) Cigna and UHC, all declined due to non-competitiveness. Twelve (12) stop loss markets were also approached, five (5) quoted to compare specific and aggregate stop loss quotes. Due to group size being under 500 employees, these could not be used other than for negotiations. Horton recommends remaining with Blue Cross based on favorable fixed cost, stop-loss contract improvements, long historical consistency, and least disruption.
ii. Based on group size and being 85% credible, higher stop-loss options were not recommended. Blue Cross and Horton underwriters recommend keeping stop loss at $100k.
2. Ancillary Market Analysis & Recommendations
i. Approached six (6) alternative dental markets (two (2) quoted, three (3) declined). Only one (1) option was self-funded. The 2025 dental premium equivalent rates are recommended at a 9.40% increase over 2024. Horton recommends staying with BCBS to maintain the bundled discount (savings) off medical rates of $23,058.
ii. Approached seven (7) alternative vision markets, four (4) declined. Horton recommends remaining with BCBS to maintain the bundled discount. There is no increase to BCBS vision premium rates for 2025.
iii. Approached six (6) alternative life markets (three (3) declined, and one (1) quoted). Horton recommends staying with BCBS to maintain the bundled discount. There is no increase to BCBS life premium rates for 2025.
iv. Approached five (5) alternative disability markets (four (4) declined). Horton recommends staying with BCBS to maintain bundled discounts. There is no increase to BCBS ASO rate for 2025.
Financial Impact
The FY2025 budget will include the amount necessary to fully fund the various benefits listed above.
Recommended Action/Motion
I move to approve the employee medical annual premium in the amount $6,057,427, an increase of $344,325 or 6.03% from $5,713,102 in 2024;
AND
Approve the employee ancillary spend for Dental, Vision, Life and Disability Administration in the amount of $517,104, a $30,766 increase which is a 9.40% increase on Dental, 0% increase on Vision, Disability Admin and Core Life and AD&D, adjusting employee contribution equivalents to the increase in premium cost, effective January 1, 2025;
AND
Authorize the Village Manager to execute said agreements, subject to Village Attorney review.