On the heels of the State’s announcement early this week that state employees’ health care premiums would be rising nearly 18%, VSEA Benefits Advisory Committee Chair Dave Bellini penned the following letter to members, which lays out a timeline and explains some of the decisions that led to the announcement and the missed opportunities that could have helped lessen the blow to workers’ wallets.
Dear VSEA Members:
Folks are struggling to understand how our health plan premiums could increase by 18% after doing so well for many years. Here is a brief chronology of events to help you understand this issue.
In early 2013, the State decided to put our health plan out to bid, with three years still left on a five-year contract with Cigna. This was unprecedented. With Cigna, our administrative costs were guaranteed and our claims costs were doing very well. I even questioned why the State was trying give the business to Blue Cross since there did not appear to be logical reason to bid out the medical plan.
In previous bidding exercises, the State has shared information with the VSEA, and we were invited to interview the bidders with the State and see the actual bids. The year 2013 was different though. DHR tried to exclude the VSEA and then tried to restrict the questions we could ask. Finally, in June 2013, the State did grudgingly allow VSEA to participate in the interview process, but then refused to show the VSEA the actual bids, so we never saw the numbers BCBS put forward to win the bid. We didn’t get Cigna’s numbers either. Far as we could tell, the Commissioner of Human Resources made the recommendation to the State to hire Blue Cross and that was that. The then-Commissioner of Human Resources said she saw the numbers and her word would have to suffice for VSEA.
In July 2013, Cigna learned it had lost the bid to BCBS. Almost immediately thereafter, our claim costs began to shoot through the roof. This increase continued through the fourth quarter of 2013. This was Cigna’s final quarter. Did people suddenly fall ill? Was Cigna paying the same attention to our plan since they just got fired?In August 2013, the State proclaimed it would save more than $10 million annually by switching to BCBS and rebidding the drug plan. When asked how these savings would be achieved, DHR claimed again that the information was “proprietary.”
Sometime around October 2013, the BAC met with DHR and Milliman Consulting to set the premiums for the following year. We were told that the State intended to grant four premium holidays followed by a 0% rate increase in January 2014.This was designed to spend down a $30 to $37 million surplus in the plan. If a surplus had been kept in the plan, we wouldn’t have had a full 18% increase this year.
VSEA argued vehemently against the premium holidays and instead for a small premium increase. We believed that spending every last dime was a reckless course of action, but DHR wasn’t interested in the VSEA’s opinion on the subject. The premium holidays were going to happen and there would be no premium increase.
When the August and September 2013 claim numbers came out and were so high, it should have triggered an immediate full claims audit, prior to rate setting in October. But, there was some turmoil at DHR then, and VSEA was unsure how much attention was being paid to the claims spike. Then in the fourth quarter of 2013, the Benefits Director announced she was leaving state government. This is a critical position. Inquiries about a replacement were repeatedly made by VSEA, but on December 31, 2013, the Benefits Director departed.
That meant that in January 2014 there was no Benefits Director for the rollout of BCBS. There was actually less management of the plan, less management of BCBS, less management of Milliman and, yes, the nagging question of who is managing the claims? The Benefits Director’s position was left vacant for eight months, probably for vacancy savings. Again, this is a critical position and it was vacant at a critical time. Then in the summer of 2014, the Commissioner of Human Resources left. Following a transition, a Benefits “Manager” was hired to fill the vacant Benefits Director’s position, but in VSEA’s opinion, the personnel changes came too late to stave off the needed premium increase.
In October 2014, VSEA learned that the State needed to raise premiums at least 17.9% and that it would be performing a full claims audit; one that probably should have been in the fall of 2013.
Dave Bellini
VSEA Benefits Advisory Committee Chair
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