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HomeMy WebLinkAboutResolutions 2002 (03) . RESOLUTION ADOPTING PREMIUM AND FUNDING POLICY FOR COUNTY SELF - INSURED EMPLOYEE MEDICAL PLAN Resolution No. 3 ( a 6 St. Croix County, Wisconsin WHEREAS, St. Croix County offers health care benefits to its employees in the form of a partially self - insured medical plan; and WHEREAS, the establishment of procedures for funding and setting the premium of the medical plan will benefit supervisors, department heads and employees by creating a consistent and predictable policy; and WHEREAS, the Personnel Committee and the Finance Committee have reviewed the policy and recommend adoption. THEREFORE, be it resolved by the St. Croix County Board of Supervisors that the attached St. Croix County Self - Insured Employee Medical Plan Premium and Funding Policy is hereby adopted. Offered by the Finance Committee this 15 day of January, 2002. NEGATIVE AFFIRMATIV rfrt-q ;a ST. CROIX COUNTY SELF - INSURED EMPLOYEE MEDICAL PLAN Premium and Funding Policy Purpose The purpose of this policy is to establish guidelines for funding and setting the premium of the Employee Medical Plan, a partially self- insured health and medical benefits plan offered to employees of St. Croix County, their spouses, and their dependents. This policy is intended to create consistency and predictability in the administration of the Employee Medical Plan for the County Board of Supervisors and employees by: (1) identifying the cost components used to establish the premium; (2) minimizing funding spikes and budgeting volatility; (3) utilizing a segregated fund; and (4) maintaining the Plan's solvency. II. Glossary Actuary — A specialist in the mathematics of risk, especially as it relates to insurance calculations such as expectancy, premiums, etc. Administration Fee — The amount the County pays to a Third Party Administrator (TPA). Aggregate Stop Loss — Insurance which pays claims after the total of all claims exceeds a certain amount per year. The coverage is often expressed as a percentage relating to Anticipated Claims. For example, Aggregate Stop Loss providing coverage at 125% of Anticipated Claims means the policy will pay all claims after total claims exceed 125% of Anticipated Claims. Anticipated Claims — A prediction of the dollar amount of claims the County will pay in a calendar year. This amount is determined by an actuary. Contingent Costs — Conversion Costs, Lasered Claims, the cost of a claims audit, and/or the cost of consideration of other providers. Conversion Cost — A cost that would arise if claims were incurred but not reported or paid in the event the County converted from the Employee Medical Plan to a fully insured plan, or the cost of an Administration Fee if the County contracted with a different Third Party Administrator. The period for which funding is provided for the cost — commonly called the "run -out" period — is usually three months but may cover six months or more. Drug Claims Processing Fee — The cost of participating in a prescription drug plan and processing prescription drug claims. January, 2002 Employee Medical Plan — A partially Self - insured Health Plan for employees under which the risk for the cost of the benefits provided is partially borne by St. Croix County. The plan and benefits are described in the Summary Plan Description. Gap Claims — The amount of claims, if any, between the amount of Anticipated Claims and the amount at which the Aggregate Stop Loss starts paying. Lasered Claim — A known situation which has not yet become an incurred claim which a Stop Loss policy will not cover. This situation could arise if the County purchases a new Stop Loss policy from a different insurer, or otherwise changes coverage. Maximum Claims Cost — The total amount of claims that the County is responsible for before Stop Loss starts to pay. Premium — The amount paid for the Employee Medical Plan. It is expressed as an amount per month per Employee Health Plan participant. The Premium is comprised of contributions made by the County, employees, and retirees. Reserve — An amount equal to 25% of Anticipated Claims. This amount is reserved for and anticipated to cover Contingent Costs, Conversion Costs, and Lasered Claims, should any of these costs arise. The 25% represent a 3 -month run -out period. Self - insured Fund — A fund specifically dedicated to the operation of the Employee Medical Plan. All receipts, disbursements, funding, and accounting regarding the Employee Medical Plan is done through this fund. Self - insured Health Plan — A group health plan under which the risk for the cost of the benefits provided is wholly or partially borne by the employer. Specific Stop Loss — Insurance which pays the claims of individuals after the claim exceeds a specified amount. Stop Loss — Insurance which pays claims after a specified amount is reached. The insurance may be Specific Stop Loss or Aggregate Stop Loss. The County utilizes both Specific Stop Loss and Aggregate Stop Loss policies. Third Party Administrator (TPA) — An entity which administers the Employee Medical Plan and processes claims on behalf of St. Croix County, provides a network of health care providers, pre- certifies medical procedures, and provides other administrative services. January, 2002 • III. Premium A. Components. The Premium for the Employee Health Plan shall consist of the following components: 1. Maximum Claims Cost. 2. Administration Fee. 3. Drug Claims Processing Fee. 4. Specific Stop Loss cost. 5. Aggregate Stop Loss cost. 6. Reserve amount. B. Computation. Annually, as part of the County budget process, the total amount of each Premium component shall be determined. Those amounts are then added together. The sum is divided by the number of Employee Medical Plan participants. That number is then divided by twelve to arrive at the Premium. IV. Funding the Employee Medical Plan 1. The Employee Medical Plan shall be funded out of the Premium. 2. Anticipated Claims is an estimate. Actual claims may be less than or more than Anticipated Claims in any year. Aggregate Stop Loss does not start paying claims until total claims exceed a certain amount in excess of Anticipated Claims according to the terms of the insurance policy (presently the amount is 125% of Anticipated Claims). Since the Premium includes the amount required to cover Gap Claims and Reserve costs, the Employee Medical Plan should always be funded adequately. However, there is a possibility that in any given year the Reserve may not be adequate. The shortfall would have to be added to the Premium in the subsequent year. 3. If actual claims are less than Maximum Claims and/or costs paid out of the Reserve are less than the Reserve amount in any year, there will be a positive balance left in the Self - insured Fund at the end of the year (determined by an audit completed in July of the following year). This balance will always be applied to the next Premium to be determined after the audit is completed; it cannot be used for other County expenses or costs. 4. Any interest accruing on amounts representing the Self - insured Fund will be applied to the Self- insured Fund. V. Contingent Costs 1. Periodically, a claims audit of the Employee Medical Plan may be advisable. Additionally, it may be desirable to consider other providers through January, 2002 comparison shopping." The cost of consultants to perform services for the County relating to audits or comparing providers may be paid out of the Self - insured Fund. 2. If the County changes TPAs or converts from a partially Self - insured Health Plan to a fully insured plan, Conversion Costs and Lasered Claims may occur. These costs may be paid out of the Self - insured Fund. VI. Effective Date This policy takes effect January 18, 2002 and remains in effect until amended or repealed by the Board of Supervisors. January, 2002