Benefits committee hears rising claims, authorizes medical RFP; pharmacy rebates temporarily offset deficits

The Benefits Committee met April 19, 2022. Sean Fleming, presenter, reported that the city’s self-funded health plan is seeing higher-than-normal claims and announced that an RFP for the medical plan administrator will be issued this week, with the RFP open for about a month and a selection committee to follow.

The matter matters to employees and the city budget because Fleming said claims are the largest cost driver in a self-funded plan and changes to network discounts or benefits can materially affect plan funding and employer contribution levels.

Fleming said the committee should understand the RFP process for a self-funded plan, emphasizing network discounts and facility pricing rather than small differences in administrative fees. “Claims are on the rise, and they've continued to stay at some little bit higher levels,” Fleming said. He told the committee the RFP would go out on Friday, would run for about a month, and then a selection committee and staff would evaluate responses.

Fleming laid out recent financial and utilization details: plan funding for the period was roughly $1.66 million; about $68,000 went to plan administration and roughly $115,000 to reinsurance (stop‑loss) premiums. He said the plan ran deficits of about $225,000 in January and $441,000 in March, with a roughly breakeven February. Those deficits were partly offset when the plan received pharmacy rebates of about $1.277 million (compared with roughly $1.075 million the prior year), leaving the plan temporarily positive by about $635,000 after the rebate.

Fleming described several utilization trends the committee should watch. Medical costs were up about 2.7% year over year and pharmacy about 4.9% year over year in the most recent reporting; he said the two‑year compounded increase reflects larger cost pressures. Fleming and staff cited pandemic-related backlog — patients deferring preventive care and procedures during 2020–21 and returning now — and higher testing and hospitalization costs during COVID surges as contributors. He warned that delayed diagnoses can increase treatment costs.

Utilization details included rising emergency department (ED) visits and hospital admissions relative to benchmarks and higher delivery and ambulatory surgery rates per thousand members. Fleming noted ER visits are particularly costly and urged continued messaging to employees about appropriate care sites, including urgent care and the city clinic for non-emergent needs. He said clinic visits are included in the analytics even when billed at zero cost and that the clinic is not part of this year’s RFP: “The clinic is not part of that,” Fleming said, adding the city expects to review clinic arrangements next year to allow for any needed integration with a new medical administrator.

Fleming reviewed high-cost claimants, noting several individual members had claims over $100,000 so far this year; he explained that stop‑loss coverage restarts Jan. 1 each year, which can front‑load catastrophic exposure early in the calendar year. The committee also reviewed benchmarking data showing the city’s paid office-visit rates are lower than many peers, a difference Fleming attributed in part to clinic usage.

Committee members asked about telehealth coding, dental DHMO networks, and whether federal or ARPA funds reimbursed COVID testing costs. Fleming said he was not aware of any recent planwide government reimbursements for testing and that ARPA funds the city received have not been allocated to reimburse the plan. He described trends in dental networks (DHMO plans typically limit provider choice to larger chain providers) and said he has seen some primary-care practices adopt alternative access models (for example, concierge-style arrangements) but that those were not broadly replacing traditional medical providers.

Committee members also asked about wellness and incentive participation. Fleming said early participation in a diabetes and heart-disease prevention program (Armada) was high at rollout and that March incentive redemptions stood at about $2,800; staff will provide follow-up participation reports and benchmarks. The committee was told the city recently hired a wellness coordinator, Will Garrison, who will reach out to department heads to promote programs.

No formal votes were recorded at the meeting. Fleming and staff asked the committee to continue promoting employee use of preventive care, appropriate urgent‑care options, and wellness programs while staff and a selection committee run the planned RFP for the medical administrator.

The committee scheduled no formal decision at the meeting; Fleming said the RFP timeline and subsequent selection process would proceed and staff will return with budget projections and program participation updates.