HomeMy WebLinkAboutCouncil Update 06-03-25City of Meridian Employee Benefits Plan Trust (COMEBPT)
Bill Nary, Trust Chair
Alex Freitag, Trust Vice-Chair
Christena Barney, Trustee
Eli Daniel, Trustee
Justin Northway, Trustee
J. Kevin West, Trust Counsel
BENEFITS
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Council Questions from 5/20/25 Presentation
Questions during the meeting asked that needed follow-up:
GLP drugs driving higher costs of the plan?
They are not driving large claims which make up largest portion of plan costs. Of the top 30 drugs prescribed only 4 are GLP drugs, approximately >10% of the total cost of RX claims.
When was the last time the plan was marketed or pulse checked?
2017 for plan year 2018 - Marketed by Mercer (City’s Broker of Record at the time)
2020 for plan year 2021 - Benefits Committee decided not to market with transition to Self-Funding. Entered into two 3-year Rate Guarantee agreements with BCI, 2021-2023 and then
2024-2026 (ends 12/31/26) NOTE: There would be a financial penalty to cancel.
Why was there no increase last year and now a potential 17% increase this year?
The Trust to-date has tried to right-size fund the trust. Based on fund balance at end of 2023 and recommended rate increase from carrier, broker and actuarial (4%), Trustees made determination
that using part of fund balance would be appropriate to offset the potential 4%. However, as plan year progressed claims were higher than projected. Our estimates are currently 6%
- 13% higher, but final 2026 renewal estimates still pending.
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Council Direction from 5/20/25 Presentation
Direction provided to come back and present on:
Check the legal requirements of the Trust using the City’s procurement process.
Trust Attorney has advised not to use City’s processes, as the Trust is a separate entity by design and as a requirement of the Department of Insurance. It is required to operate and
function independent from City.
Follow-up with Procurement Division to determine if they recommend using the City’s procurement process.
Advised to use Benefits Broker to conduct the process they use as best practices, as they are subject matter experts in the field and have been contracted to do this work.
Recommendation on Market Pulse Check or RFP.
Remain with BCI for the duration of contract (ends 12/31/26).
Gallagher (City’s Benefit Broker of Record) to Market services for 2027 plan year.
Trust to make determination of preferred vendor and share recommendation with Council prior and discuss any questions or concerns before making final selection.
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Self-Funded RFP vs Fully-Insured RFP
City’s Benefit Broker of Record has always been consultant to market and make recommendations to City/Trust for carrier selections and negotiations.
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Points of Clarification
2018/2019 – Fully Insured: Less employees, but larger amount paid in Net Costs (Administrative Fees)
2020/2021 – Self-Funded: Less in Net Costs, more in claims due to COVID
2022 – Rebounding from COVID and earning some gains from plan designs
2023 – Surplus in Trust account to offset proposed 4% increase
2024 – Large spike in claims, far greater than the 4% proposed
2025 – Large Claims driving costs that have impacted plan surplus and reserves required by DOI. Anticipated budget amendment for FY25 planned by June 10th deadline.
Carriers propose rates for Medical and Rx claims based on claims experience, but do not set rates.
Carriers do, however, set rates for Admin Fees, shown here as Net Costs which include stop loss.
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Points of Clarification, continued
There was no increase to member cost share for the current plan year though claims costs have continued to increase. Specifically, plan claims costs have increased 30% from the 2023
to 2024 plan year and have continued to trend up in 2025 as well. Claims account for 90% of the total cost for self-funded plan, thus are the key driver of overall plan costs.
Specifically, in looking at utilization year over year, from 2023 to 2024, there was a $2,000,000 increase in claims. Our overall claims were $7,300,000 in 2023 and $9,300,000 in 2024.
The top drivers for those claims were Cancer, Gastrointestinal Disorder, and Musculoskeletal Disorders. In 2023 there were 5 members with more than $100,000 in claims. In 2024 that
increased to 11 members with over $100,000 in claims.
Stop Loss is the second part of your fixed administrative cost. This is in place to make sure the Trust does not have to pay claims on any individual that accumulates claims totaling
over $225,000.
There is also Aggregate Coverage, in case the total plan claims become catastrophic. In that self-funded plan structure, the Trust pays all claims for each member that are below $225,000.
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Points of Clarification, continued
17% renewal was highest of a projected range provided early in the year of 7.1% to 17.2%
Still awaiting the final renewal numbers.
To summarize, the Administration Fees and Stop Loss premium did not drive the increase that is needed for members it is the $2,000,000 increase in claims and trend of higher claims in
2025 that is causing the recommendation to increase funding.
Renewal increase on Admin fees (paid to carrier) is 3% for 2026. Of note: the fixed administrative cost is 10% of your overall plan cost. These administrative costs include Medical Administration
Fees and the Stop Loss Premiums.
Medical Administration for 2025 is $54.37 Per Employee Per Month (PEPM), with 467 subscribers, which equates to $330,080 for the year. PEPM in 2024 was $52.79 (based on same subscriber
count) totaling $295,835. That is a 3% increase, or $34,245 year over year. This fee is capped for 2026 at an increase of 3% based on the contract signed in 2024.
Stop Loss for 2025 is $126.07 PEPM (467 subscribers), which equates to $706,496 for the year. PEPM for 2024 was $115.77 (based on the same subscriber count) totaling $648,775. That
is an increase in premium of 8.9% for plan year 2025. Our Stop Loss Insurance also has a refund agreement, whereby if the claims to premium ratio is low, we are eligible for up to a
15% return of premium paid for the plan year which would reduce the cost of this coverage.
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Questions?
Thank you!
City of Meridian Employee Benefits Plan Trust
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