As you’re likely now aware, there are some mid-plan year changes coming related to health insurance. This FAQ is an effort to provide more information and address common questions for UFEA and UFSPA members. Information is included at the end about sending additional questions so we can continue to add to this and make it as helpful as possible for members.
Background
What’s a self-funded insurance plan?
We’ve had a self-funded insurance plan for several years in Unit 5. There are a couple important things to know about how that works for us.
- Unlike many self-funded plans, the employer is not simply paying claims directly. We have an insurance fund that is used to cover claims costs. The fund gets revenues from 1) bargained board contributions per member (UFEA / UFSPA) per month, 2) contributions from those purchasing insurance for dependents or buying higher coverage, and 3) from retirees buying coverage from the plan.
- We have bargained an Insurance Committee to monitor the insurance fund and to make decisions about changes to the plan – and we have bargained employee (UFEA + UFSPA) control of that committee. So, when decisions do need to be made, the Insurance Committee, controlled by UFEA and UFSPA members, makes those decisions within the parameters of our bargained agreement and based on member interests and priorities.
Essentially, we have bargained control of the benefits of our plan and the fund in exchange for limiting the district’s exposure to additional cost. The district contributes the negotiated amount per member, per month, which creates a budget for the Insurance Committee to utilize to purchase benefits. Generally it has provided us stability and allowed for more gradual changes than we might experience if the employer had total control or if we bought an off-the-shelf standard plan from an insurer like BCBS.
What are the benefits of our self-funded plan?
One benefit of being self-funded is financial. Because we are not paying premiums directly to an insurance company, but instead paying claims directly as the insurance is utilized, we are only paying for the actual use of the benefits. In a “good” year from a plan perspective – where the cost of insurance claims is less than projected – the additional “premium” dollars (the contributions to the fund by the board per member, per month and from those buying additional coverage) stay in the insurance fund and provide some reserves. In a traditional, off-the-shelf plan, if the premium per participant per month is $720, that $720 goes to the insurance company and they pay claims. If claims were less than the premium payments, the insurance company keeps the additional dollars. In our case, those additional dollars remain in our insurance fund and are available for future costs (such as minimizing a higher-than-desired increase in renewal rates as we have in the past, or off-setting a bad year where claims are more than anticipated, like this year).
Another benefit of being self-funded is flexibility. We primarily benefit from this flexibility when changes are needed to the plan — enhancements or reductions depending on our experience and fund balance. In a traditional plan, the insurance company decides the benefit package. A consumer (like the school district or an individual) could purchase a different plan from year to year that had different benefits, but they’d have to choose from plans that were available. In our self-funded plan, we get to choose what benefits are included as long as they meet legal requirements. So, when reductions are needed, we can ask our consultant (currently Clemens and Associates) to provide options and their associated projected cost-savings, get feedback from members about priorities, and make decisions based on that information. That kind of control and flexibility only comes in a self-funded plan.
Could we either stop being self-funded or bid out our plan to other providers?
Yes, we could do either. Those on the Insurance Committee are not convinced that switching to an off-the-shelf plan makes sense for our group, given the benefits we have from being self-funded. And the Insurance Committee does have the ability to put our plan out for bid. Each time we have done that, our existing arrangement has come back as the best option, but it’s something the Insurance Committee can and should explore as we move forward.
It’s worth noting that our experience (higher than expected claims, especially related to prescriptions as explained below) is not unique to our district, our group or our plan.
How did we get here?
The past several years, we’ve seen renewal rates climb, but within predictable ranges. And generally, our actual claims experience has been relatively close to the projections, resulting in reasonable renewal rate increases each year. In those years, the increases in renewal based on claims experience has been matched or covered by the bargained increases to the board contribution. We’ve had some changes to benefits, but the insurance fund was regularly remaining steady at about $3 million in reserves.
For the insurance year that we are currently finishing (July 1, 2023 through June 30, 2024), the board is contributing $725 per member, per month. In our last contract (summer of 2023), we negotiated increases to the board’s contribution per member per month into the insurance fund which were consistent with what our average experience has been for the past several years:
- For the insurance year July 1, 2024 through June 30 2025, $765.
- For the insurance year July 1, 2025 through June 30, 2026, $805.
- For the insurance year July 1, 2026 through June 30, 2027, $845.
This year, our claims costs have been significantly higher than projected. That’s not unique to Unit 5. But it’s put a lot of pressure on our insurance fund reserves. There are two primary drivers of the cost increases:
- We’ve had multiple individuals with significant claims (~$200,000) this year — about twice as many as usual.
- Just as we’re seeing nationwide, our prescription costs have skyrocketed. Our Rx costs are currently 40% higher than they were a year ago.
As a result, the insurance fund has paid out about $1.1 million of our reserves toward higher medical costs and about $1.5 million toward higher prescription costs this school year. That’s caused our reserves, which had been steady at about $3 million for several years, to mostly disappear.
What’s next?
The bargained board contribution toward insurance increases about 5% starting July 1. That will help bring in some additional revenue to the fund. But it won’t bring in enough. As a result of our high claims costs this year, our renewal rates for our existing benefits will have to increase more than 5%. And, we likely need to start directing more money toward rebuilding reserves as well.
As a result, the Insurance Committee had to make mid-year changes to our benefit plans and packages. Virtual meetings were held with Dave Underkoffler from Clemems to go over those changes. More information is also available below.
While the changes aren’t ideal or preferable, they’re a necessity given the current status of our fund reserves. Hopefully these changes will reverse the trend and stabilize the fund as we move forward.
In the meantime, employees will need to use this special enrollment to make some choices regarding their health insurance – at least for July 1, 2024 through December 31, 2024. There will be a regular open enrollment period ahead of the start of the January 1, 2025 plan year where employees can change again. The decisions employees make right now only have to be for the next six months – you will have a chance to make a different choice for January 1, 2025!
What is changing?
First, the dental and vision benefits are not changing.
The medical coverage plan options employees may choose between are changing.
Employees currently choose between three plans:
- A gold “buy-up” PPO plan
- A silver free PPO plan
- A silver free HSA plan
Starting with this special enrollment period (for changes to take effect July 1, 2024), employees may choose between four plans:
- A gold “buy-up” PPO plan
- A silver “buy-up” PPO plan*
- A silver free HSA plan
- A bronze free PPO plan
*The silver “buy-up” PPO plan is our current plan (with some Rx changes that are applying to all plans). In other words, employees who want to keep their existing coverage as-is may choose to do so by selecting that plan and paying the associated costs toward the premium ($17.50 per pay period).
While the HSA plan was and will continue to be free to employees, it was important to the Insurance Committee to continue to have a PPO plan that was completely free to employees as well. As a result, the bronze plan becomes the free PPO plan with no contribution from employees toward the premium (though with reduced benefits and higher out-of-pocket costs).
The following changes will take effect for all plans starting July 1, 2024:
- Performance Select drug list
- Rx Utilization Management
Including prior authorization for some medications, step therapy for certain chronic conditions, and quantity dispensing limits for some prescriptions. - 90-Day at Retail + Home Delivery
This will require all covered maintenance medications to be filled as a 90-day supply either through select retail pharmacies or through Home Delivery. This is a cost-savings to both the employee and the insurance fund. - Flex Access for Specialty Rx
- Split-Fill Programs
- Preferred Rx Pharmacies
There will now be preferred pharmacies and a chance in the in-network pharmacy options. The preferred pharmacies include Walgreens, Osco, Walmart, and Sam’s Club — these are where you will pay the lowest cost for prescriptions.
What are my options?
Here is a link to a summary of the four available plan options.
What do I need to do?
You don’t have to do anything. This is a “passive” special enrollment. If you don’t do anything, you will remain on your current plan.
If you do want to make a change for July 1 through December, you will need to access Employee Navigator and actively make the choices you wish to make.
When is the special open enrollment period?
The special open enrollment ends May 21, 2024.
How can I get more information?
There will be Q&A sessions for staff with general questions on the dates below. Links to the meeting are provided below. Reminders will be sent the day of the session.
- May 7 : 4 – 5:30pm : Video call link: https://meet.google.com/efn-ujzv-xee
- May 15 : 4 – 5:30pm : Video call link: https://meet.google.com/dya-pbgc-emu
- May 21 : 11:30-1pm : Video call link: https://meet.google.com/iov-gcfr-mtd
Feel free to reach out to UFEA or UFSPA via the comments on this post or by emailing president@ufea.org or ufspaorg@gmail.com with questions and we will add additional information to this FAQ. If you have specific questions about your coverage or what coverage might make the most sense for you, you may contact David Underkoffler at david@clemensins.com. The district also will take questions using this Google Form or by email at payroll@unit5.org.