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Aon lays out five ideas to shore up City Plan finances; public and commissioners express concern
Summary
Aon presented five short-term proposals to bolster the City Plan—s long-term sustainability (create a separate plan for retirees without alternative plans, migrate UHC contracting, raise drug copays, raise out-of-network deductibles, rebalance dependent tier ratios). The proposals spurred public comment defending uniform subsidies for early retirees; board asked for rate sheets and more data before action.
Aon presented a diagnostic and a set of proposed actions aimed at preventing a worsening funding spiral for the City Plan, especially among early retirees.
The firm reminded the board that rate stabilization reserves have been used over multiple years to buy down rates and that the remaining reserve for 2019 application is modest (Aon reported approximately $1,661,000 available). Aon identified three major cost drivers: (1) spend-down of the stabilization reserve, (2) escalating prescription drug cost trends, and (3) adverse selection risks after the 2017 move of Medicare retirees to a fully insured platform (which previously helped reserve balances).
For 2019 Aon proposed five options (not yet actions): (A) create a separate "City Plan: Choice Not Available" plan for early retirees who lack Blue Shield or Kaiser options by geography (estimated subsidy cost $250k$500k to the system in year one); (B) migrate California coverage to UnitedHealthcare—s Select Plus contracting to capture deeper discounts (Aon projected ~$200k savings for early retirees from recontracting); (C) align City Plan pharmacy copay tiers with Blue Shield (increase retail copays by $5 and mail-order by $10); (D) increase out-of-network deductibles (propose doubling out-of-network deductibles to better differentiate in-network/out-of-network cost exposure; projected modest savings given low out-of-network utilization); and (E) rebalance family-tier ratios over a three-year phase to harmonize City Plan dependent ratios with Blue Shield, estimated at a multi-year cost phasing to limit enrollment shocks.
Commissioners asked for clarifying data: Aon provided counts (approximately 780 early retirees enrolled in City Plan; roughly 436 of those lack access to Blue Shield/Kaiser; ~321 live in the U.S. outside California; 47 live outside the U.S.). Commissioners and public commenters pressed on fairness, the charter mandate to keep City Plan viable and affordable, and whether subsidy policy should be reallocated rather than creating tiered plan treatments. Several public commenters representing retiree groups urged protecting early retirees from increased cost-sharing and opposed splitting members into different plan structures. The board did not vote on any of these proposals; it asked staff and Aon to provide detailed rate exhibits, the historical effect of reserve applications, subscriber counts by tier and geography, and proposed implementation timeframes before any actionable motion is considered (Aon suggested a possible follow-up on May 31).
