Hike in health insurance costs less than anticipated for MFPD
January 12, 2005 - By KAREN CALLANAN
Mehlville Fire Protection District officials will not see the projected high increase in health-care premiums that they had anticipated in their preliminary budget.
The Board of Directors last week heard from Paul Wirth of J.W. Terrill, who explained that the health insurance industry is beginning to "soften" and insurance companies now are focusing on retaining business.
Therefore, the district's anticipated 19 percent increase in health insurance costs now could be as little as a 7.9 percent hike to re-new its insurance with United HealthCare.
"Why that is, I can speculate," Wirth said Jan. 3. "Insurance companies have made and posted profits. I've lived through cycles like that and we're beginning a new cycle where their immediate attention starts to focus on regaining and adding market share. And that's exactly what you, the insured, want.
"So this is the beginning of, I hope, a three- to four-year cycle where we're starting to see some extreme competition from these carriers wanting to retain and attract new business,'' Wirth added.
The district provides medical, dental and vision coverage for its employees and 100 percent dependent coverage for all em-ployees.
Wirth presented the district's 2004 history of claims, which showed a 92.9 percent loss ratio — meaning that United Health-Care paid 92.9 percent in claims of what it received in premiums — which does not include administration fees of roughly 12 percent.
"So if you add admin to that, United HealthCare is paying out more than they received in premiums," Wirth said.
In February, the loss ratio was 58 percent, which he said was a "good month." Other months, the loss ratios were 96 percent, 69 percent, 103 percent, 160 percent, 106 percent and 70.72 percent, Wirth said. United HealthCare's projections per employee, per year in claims were $9,480 for 2005, up from the previous year's $5,779 — a variance of 64 percent, Wirth said.
Wirth also noted that the fire district's 470 claimants represented $1,050,000 in claims. In the $10,000 to $15,000 range, there were seven claimants, which is only 3 percent of the total claims, but 47.6 percent of the total dollars paid out, he said.
"So our claims have escalated enormously," he added, noting that under the old cycle of high increases in health insurance, the district would see an 18 percent to 23 percent hike.
Instead, United HealthCare's renewal cost would change from 2004's $1,397,700 to 2005's total of $1,508,236 — a 7.9 percent increase. The 7.9 increase that United HealthCare quoted for the renewal plan actually changes a few things from the current plan, such as increasing the emergency room co-payment from $50 to $75.
The co-insurance level decreases, and so out-of-network actually improves, Wirth said. The district's purchasing plan has 100 percent co-insurance, he added.
Other options that Wirth presented to the district were option 1, a 7.1 percent in-crease in health insurance costs with a $250 inpatient co-payment before the in-surance pays anything; option 2, which in-creases costs only 5 percent and includes a $500 inpatient co-pay, plus the office visit cost increases to $15; option 3 with a 3.7 percent increase that adds a $250 de-ductible; and option 4 with a gain to the district of 1 percent and a $500 deductible.
Of the 10 requests for new medical coverage quotes, only one company submitted a quote for the Mehlville Fire Protection District. Blue Cross & Blue Shield quoted at a 5.4 percent increase in costs.
"There isn't another carrier in the St. Louis marketplace that would be interested in quoting on your group that isn't on this sheet of paper," Wirth said.
Although Wirth said Blue Cross's quote was competitive, he was concerned that the agency knows it will not have many claims in the beginning and could increase costs at renewal time.
For retirees, the same 7.9 percent increase also would apply, but Wirth presented another option that adds a $500 deductible before the co-insurance becomes effective.
"The reason I like this option is because employees are going to save more than $500 a year on their premium, so it's a no-lose situation. And for those who insure more than just themselves, they're going to save more than $1,000. So in the event that a retiree doesn't have a deductible, then they save the money in premium; in the event that they have a deductible, they haven't lost any money because they're just using the money they saved in premium," Wirth said.
He added that the over-65 group has the deductible paid by Medicare anyway, so that is automatic savings for it.
In addition, Wirth requested dental quotes from six other insurance agencies, two of which submitted quotes — Aetna and United HealthCare.
Renewal with Essex Dental — BJC — will increase 8 percent from $120,267 annually to $129,890 this year.
Wirth said that United HealthCare has offered the district the same price on dental insurance that Essex has offered on the renewal, plus a 1 percent credit to United's medical rates if the district uses United HealthCare for dental insurance too — in essence, decreasing the amount of the cost increase in health insurance to 6.9 percent.
On paper, the benefits are very similar, but the network of dentists may differ, he said.
Chris Francis, president of Local 1889 of the International Association of Fire Fight-ers, commented that the union favored keep-ing the same health insurance plan that it had in 2004.
Wirth said if the district was going to change insurance plans, he would need a week or so to get the change started.
The board tabled the issue to its meeting Monday night — after the Call went to press.