State employee health plans will see a 17.9 percent premium increase in 2015, the Department of Human Resources said Monday.
That translates to a $286 increase in annual premiums for individuals and $780 for a family in the most popular standard plan, according to figures from Dave Bellini, chairman of the Vermont State Employees Association’s committee on benefits.
Retired state employees covered by Medicare will not be impacted, and will instead see premium rates shrink or increase only slightly. There are 17,500 active employees and dependents, and 6,700 retirees and dependents on state medical plans.
The increase was necessitated by “significantly greater than expected” high cost claims starting in the third quarter of 2013, according to the Department of Human Resources, including more hospital admissions and more time spent as hospital inpatients.
The state employee plan is self-insured and the rate increase is necessary to offset the plan’s deficit and maintain a solid financial footing, according to the department.
High cost claims are $75,000 or more, according to Maribeth Spellman, the commissioner of the Department of Human Resources. The number of high cost claims in 2012 was in the mid-80s. In 2013 that number jumped to 141, mostly for heart disease and cancer treatment, she said.
The plan has already seen 87 high cost claims in 2014, and she expects roughly 10 more before the year is over, she said.
Projections made in 2012, when the state was considering rates for 2013 plans, anticipated the trend of high cost claims to hold steady at a lower number. Had that been the case, the plan would have accumulated a surplus of $30 million by the end of 2013.
Instead, the state decided to return some of the anticipated surplus to employees through premium holidays.
There were four premium holidays in 2013 and three in 2012, worth $1,183 for a family in the standard plan. The 2013 premium holidays were worth a combined $23 million, Spellman said. There were no premium increases for the past two years either.
But the greater than expected high cost claims wiped out the anticipated $30 million surplus as well as millions in reserve funds leaving the state employee health plan with a $3 million deficit, and necessitating the increase this year, Spellman said.
The VSEA “vehemently” objected to the premium holidays, as well as having no premium increase in 2013, out of concern that doing so would keep coverage costs artificially low, Bellini said, calling those decisions “fiscally irresponsible.”
“What you’re seeing is a rebound effect,” he said, “We’re getting hit all at once.”
The VSEA would have preferred to see more modest increases this year and over the past two years, he said, but the Department of Human Resources insisted on the flat rate and premium holidays, Bellini said.
Department officials told the VSEA that any surplus left in the state employee health plan would be raided by lawmakers looking to balance a tight budget, Bellini said.
“We’ve been hearing that same line since the Dean administration,” Bellini said, adding that he’s not sure lawmakers would draw down those funds for another purpose.
Spellman said there would need to be a “discussion” with the Legislature about why such a large surplus, if one had existed, should be left alone.
Bellini also blames the consulting firm Milliman for providing the state with overly rosy projections on the use of health care services by those covered.
Spellman said it would have been difficult for anyone to project the spike in high cost claims.
State employee plans will be “in line with the increases seen over the same [sic] three year period of time in comparable public employee plans, such as the Vermont teacher medical plans,” according to a statement from the HR department.
The higher premiums are a hardship for state workers who have to pay the increase all at once, Bellini said.
Spellman recognizes the difficulty it will create, she said, and thanked the VSEA and the Vermont Troopers Association — the other affected group — for the willingness of their leadership to discuss the reasons for the increase and the wisdom of addressing the plan’s deficit in the near term.
State employees can reduce health plan costs, Spellman said. One example is making the premium payment a pre-tax deduction from earnings. About 1,200 state employees aren’t doing so currently.
Only 20 percent of state employees use the “flex-accounts,” essentially a Health Savings Account, which allow workers to put pre-tax dollars in an account that can be used toward out-of-pocket-costs, such as copays, she said.
The increase in high cost claims predates Blue Cross Blue Shield of Vermont taking over as the plan’s administrator and Express Scripts becoming the pharmacy benefit manager, Spellman said.
When Blue Cross and Express Scripts were hired, Gov. Peter Shumlin said it would save the state $10 million per year. Those results are hard to verify, because the governor, according to the department, meant costs would be $10 million less than what the state would have otherwise paid.
The wellness program operated by Blue Cross has shown promising results, Spellman said, and the state will use the 2013 claims experience to target specific wellness programs to state employees.
The state employee health plan covers 80 percent of premiums versus 84 percent nationally, according to a Pew study, but Vermont’s employee health plans offer better overall coverage than the national average.
The premium rate hike is more than twice what the majority of people covered through the Vermont Health Connect exchange will see in 2015.
State employee health plans are typically more generous than what private sector employers offer, and the Vermont state employee plan would be considered a “platinum” plan on the exchanges.
