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Departmental Matters Indian River County f E Inter -Office Memorandum Office of Management and Budget To: Members of the Board of County Commissioners Date: January 25, 2016 Subject: Health Insurance Financial Update and Summary s aving Options From. Jason E. Brown - Director, Management & Budget Background Indian River County operates a self-insured health insurance program for employees and retirees of the Board of County Commissioners as well as the five (5) Constitutional Officers. County staff, with assistance from our broker (The Gehring Group), regularly monitors our claims experience and evaluates options to reduce and control costs going forward. Healthcare costs in the State of Florida have increased by about 9% per year. In order to manage these costs and avoid passing such increases on to the taxpayers each year, the County has made various plan changes aimed at reducing cost increases and sharing the burden of such costs between the employer and employees. The County made plan adjustments in fiscal years 2005/06, 2006/07, 2007/08, and 2009/10 to manage these expenses. In recent years, however, two factors have prevented the County from making plan changes. First, the Affordable Care Act ("Obamacare") placed certain requirements on health insurance plans beginning on March 23, 2010. Any new plans must provide new benefits, such as certain preventative services and women's health initiatives, free of charge. Plans in existence prior to March 23, 2010 are considered "grandfathered" and do not have to comply with these requirements under Obamacare. If plan changes are made to an existing plan, however, it loses its "grandfathered" status. It has been estimated that the cost to fund these additional requirements is between 3% - 5% of total plan costs. The County's health insurance program is a "grandfathered" plan. In order to avoid the additional costs associated with the new requirements, the County has not made any plan changes since 2010. As an additional challenge, any plan changes that would save money now have to overcome the additional "Obamacare" costs. An additional consideration for the County has been the reluctance to shift significant healthcare costs to the employees in light of the fact that most received little or no wage increases for several years. Through a combination of wellness programs, outreach, and good fortune, the County's healthcare costs experienced relatively modest cost increases for several years (see Table 1 below). Over the last two years, though, expenses have begun to increase substantially. The fund experienced reasonable surpluses for fiscal years 2008/09 through 2012/13. In fiscal year 2013/14, the fund experienced the first loss in recent history. During fiscal year 2014/15, claims expenses increased significantly, resulting in a substantial loss ($2.8 million — see Table 2). In light of the increase and expected losses, staff presented some potential plan changes to the Board of County Commissioners on June 23, 2015. At that meeting, the Board directed staff to provide additional background and present various alternatives at a future date. This agenda item represents the first report, which includes the history and current status of the health plan along with a brief discussion of potential alternatives. Based upon feedback and direction received at this meeting, staff intends to provide more in-depth information on selected alternatives at a future meeting. 75