City works to address health plan imbalance

The city will contract with a new third-party administrator for its self-insured health care plan next year, a move City Manager David Frasher said could save as much as $400,000 a year.

The Hot Springs Board of Directors adopted a resolution last week that approved QualChoice to process its employee insurance claims in 2017. HealthSCOPE benefits is the city’s current third-party administrator. The switch is the continuation of a program Frash-

er began when he took office in March to address the imbalance in claims and premiums contributions.

According to the city’s finance department, claims exceeded premium payments by an estimated $900,000 in 2014 and $1.8 million last year. Medical claims in 2015 exceeded the $3.8 million cap in the city’s insurance plan, requiring stop-loss coverage to pick up the $612,474 difference. The city’s stop-loss coverage kicks in when an individual claim exceeds $85,000.

Through August of this year, claims have outpaced contributions by more than $300,000.

The city set aside a $1 million contingency to cover a shortfall for the current year, allocating the safeguard according to the personnel costs of each city fund. The budgets with the highest outlays for personnel were cut the most to pay for the contingency fund.

The city pays 100 percent of employee premium costs, and employees pay for dependents. The city increased its monthly contribution by $12 in both 2015 and 2016, raising it to $394 a month. Employees pay $695 a month to add spouses and children to their coverage and $413 to add a spouse or a child.

The city has said joining the larger risk pool offered by a fully insured plan would require it to pay the markup insurance carriers charge to generate shareholder profits. The extra cost is avoided with self-insurance, but the smaller risk pool of more than 500 employees increases the likelihood of claims exceeding contributions.

In May, the board approved higher out-of-pocket costs for emergency room visits and made employees responsible for out-of-network nonemergency claims. Co-payments for emergency room visits qualifying as a true emergency increased from $150 to $250. Coinsurance payments for nonemergency visits doubled, going from 20 percent to 40 percent. Medical coding differentiates emergencies from nonemergencies.

The city’s insurance broker said, based on the 122 total emergency room visits last year, the higher out-of-pocket costs will save the city $75,914. Out-of-network coverage for nonemergency claims was eliminated, saving a projected $12,813 based on the $89,249 paid on claims charged by providers who don’t contract with the city’s insurance plan. The Affordable Care Act requires plans to cover out-of-network emergency care.

“The board approved some changes in how our health care is accessed, and I think we’ve closed a few loopholes,” Frasher told the board. “It’s made the system work better and got our spending under control. My goal is to get us where we’re structurally balanced with our health care demands and our revenues.”