Mehlville seeks to lower medical coverage costs

By Alyson E. Raletz

In an effort to lower medical coverage costs from its current health care provider, the Mehlville School District soon will accept bids for its insurance plan despite a committee recommendation.

Mehlville Board of Education members voted 6-1 last week to direct administrators to issue a request for proposals and put out to bid a restructured insurance plan, designed and prepared by an administratively appointed district insurance committee.

The committee, after months of discussion and analysis, recommended that the district retain service with UnitedHealthcare, the district’s health care provider.

But board members indicated during their May 25 meeting they would like to seek more competitive prices and possibly leave UnitedHealthcare if the company’s prices don’t decrease through the bidding process.

The district offers medical insurance coverage to all full- and half-time employees, of which 1,450 heads participate.

About 220 of those are retirees — and that number is increasing, according to district administrators.

Based on premium increases, the committee has budgeted $6,086,701 for fiscal 2005’s budget, up $407,921 from this year’s budget.

However, the district experienced an increase nearly twice that amount in insurance coverage costs this year with fiscal 2004’s budgeted $5,678,780, up $800,000 from fiscal 2003’s $4,878,780.

The district could experience more than $1.2 million in insurance increases over a two-year period, according to the fiscal 2005 preliminary budget, if more competitive bids are not realized during the RFP process.

Insurance committee members also recommended that the district restructure its coverage plans, according to district documents, by allowing employees to choose from three different coverage options, which include a:

• Higher cost HMO with a higher amount of coverage.

• Lower cost HMO with a lower amount of coverage.

• High deductible option, including a $2,000 individual deductible with a $4,000 out-of-pocket maximum and a $4,000 family deductible with an $8,000 out-of-pocket maximum. For more details regarding the district’s new third option, contact the district at 467-5000.

Coverage purchased through the first two options would be reduced next year, according to the insurance committee’s proposal.

“This minimizes the amount of premium increase necessary to offset increasing medical costs,” according to district documents presented to board members during the May 25 session.

Other changes to the district’s medical coverage, under the committee’s plan through UnitedHealthcare, include:

• An increase to spouse and dependent coverage by 17 percent in the current high plan and 30 to 40 percent in the current low plan.

• An increase to individual employee premiums from 5.6 percent to 16.7 percent. Employees who choose the high option will be required to pay $40 per month, while the district will pay for the premiums of employees using the low HMO and high deductible options.

No increases would be seen in administrative fees under UnitedHealthcare, neither would dental, vision or life insurance plans change.

While board members did not dispute the restructuring of the district’s medical insurance coverage plan, board President Cindy Christopher questioned the projected total the district would have to pay during the 2004-2005 year in health costs.

“So, I guess my question is — this is the best number we’ve got? I mean, is there an assurance here that this is the best that we can do without taking this out to market?” Christopher asked Eric File of CBIZ Benefits & Insurance Services Inc.

File has worked as a consultant for the district and has attended numerous insurance committee meetings in past months.

“I can’t sit here and tell you that that’s the most competitive we could possibly get at the marketplace at this time because somebody out there would be willing to offer us a better fixed cost,” File answered.

Noting that $63 per subscriber per month — including retirees and employees — was what was, on the average, being proposed, he said he had seen, through a recent non-district request for proposals, bids come in $5 to $8 less per head underneath UnitedHealthcare’s bid.

“I am confident that yes, we can save $5 to $10 per head on an all-inclusive bundled product like UnitedHealthcare currently offers,” he said, cautioning board members to be careful when considering discounts and claims management if they opt to change carriers.

A 1 percent difference in either item would cost the district $170,000, he said.

“The other thing we have to take into consideration is we are currently under a self-funded plan with UnitedHealthcare,” File told board members. “So even if we do make a change, we’re going to have to pay UnitedHealthcare to pay our run-out claims. So, we (would) pay fees two months on top of paying somebody else those same two months.”

That situation would occur during any insurance carrier switch, several board members asserted.

Assistant Superintendent of Finance Randy Charles, who serves as the district’s chief financial officer, told board members the bidding process for the district’s triple-option insurance plan would take he and File about 60 days to complete. Charles acted as a facilitator of the insurance committee.

Christopher told Charles that the school board did not want employees’ benefits to change through the bidding process, referring to board discussion from its May 11 meeting.

“I would agree with that because (of) the work that the insurance committee went through. They believe that when you balance the proposed plan design against the proposed premiums … each option stands alone,” Charles said.

“It’s self-funded. It’ll cover the costs and it won’t matter if people shift from option A to B or vice versa or take the third new option. Each one is designed to stand alone. So, I think we would agree with you if we bid this out, take the plan out as it currently exists and see what kind of offers we get,” he added.

However, File warned, “And again the offers will have very little to do with plan design. The offers only have to do with what they’re going to pay for administration and risk.”

Board member Tom Correnti, who opposed beginning a bidding process for the district’s insurance coverage and was the sole board member to vote “no” during a roll-call vote, asked File how much risk would be involved while changing coverage at the beginning of the year.

File said it would have no effect since a contract does not have to be in place until Oct. 1, adding, “I think we’re still in OK shape. We’ll get it back in 60 days and then we can do the evaluations and put it in front of the insurance committee in … 40 days … and have it all analyzed and have another recommendation in 60.”

Since meeting the Oct. 1 deadline is crucial for the district, Christopher said that if the district is going to put the insurance up for bid, it has to do it now.

While Correnti believed saving every possible dollar is important for the district, he told the Call he voted against issuing an RFP for district insurance because of his respect for the insurance committee’s efforts.

“I was really happy with all of the diligent work of the committee,” he said after the meeting. “… I’ve been just concerned with the ease of our insurance … I thought they (the insurance committee) worked hard. I thought everybody worked very hard and I thought they did a really good job — and at this late moment, we are going back out (to bid).”

During the meeting, Correnti asked File, “Would you take UHC (UnitedHealthcare) for yourself and your family?”

“In a heartbeat,” File answered. “I think the employees and judging by the insurance committee’s comments — they’re happy with UnitedHealthcare. Even if there is a transition in the administration, there’s going to be a different administrator. There’s going to be a different network …

“There’s all these transitions. And that’s not a painless transition. There will be issues. But that goes along with changing. Anytime you make a change, there’s going to be those issues,” he added.

Correnti said File’s answer impressed him and influenced his “no” vote.

“It’s like those telemarketers that call up and say, ‘I want you to buy this credit card,'” Correnti explained. “Do you have this credit card? ‘Well, no.’ Then why do you want me to buy this credit card?

“So, if I’ve got somebody who is moving the product, who would own the product — So I got him owning the product, I’ve got him saying that we’re going to try and save as much as we can. The basis of the entire policy is going to stay the same …

“And I really believed him when he said we could get this product back to everybody in due time, nobody’s going to have a problem. I felt OK with that, but my vote ‘no’ was so that I wanted to show the respect to the people who worked really hard at it,” he said.