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SFHSS board acknowledges $1.66 million available for 2019 rate stabilization, directs further actuarial work
Summary
Aon Hewitt told the San Francisco Health Service Board that a $6.19 million stabilization reserve existed as of 12/31/2017, leaving an actuarially calculated $1.661 million for future stabilization; the board moved to apply one-third ($554,000) to 2019 rates and asked staff and the actuary to develop additional options and an RFP for actuarial services.
The Health Service Board of the City and County of San Francisco on Thursday received updated actuarial estimates showing $1,661,000 available to stabilize City Plan rates for 2019 after applying prior allocations to 2018 premiums.
Mike Clark of Aon Hewitt presented the 2017 claim and utilization review for the City Plan, saying the conversion of Medicare retirees to fully insured plans freed stabilization funds for active employees and early retirees. Clark reported that the December 31, 2017 stabilization reserve for the City Plan was about $6,190,000 and that $4,529,000 had already been allocated into 2018 rates, leaving $1,661,000 available for future use.
"Based on that, dollars 1,661,000 is available for stabilizing rates for 2019 and beyond," Clark said during the presentation.
Board members pressed for context about the numbers'018 loss ratios for active employees were high: Clark said incurred loss ratios ran about 128 percent (123 percent on a paid basis), meaning claims continued to exceed premiums.
Commissioner Sass warned that applying a small share of reserves would have a limited effect on rates and could exhaust stabilization funds while leaving the system exposed to larger deficits. "A $500,000 stabilization amount is going to have a very small impact on rates," Sass said, urging caution about exhausting reserves.
Following discussion, Commissioner Sass moved that one-third of the $1,661,000 (approximately $554,000) be applied to buy down 2019 rates per current SFHSS policy; the motion was seconded and carried. Board discussion made clear the actuary and staff will return with alternative scenarios and recommendations when presenting final rate proposals.
Separately, President Scott opened a discussion on issuing a request for proposals for actuarial services. Commissioners stressed the board's need for an actuary with core competencies beyond compliance work: strategic support, research capability, and a clear fiduciary accountability to the board. Some commissioners also urged that potential conflicts (for example, firms serving other city departments) be disclosed or avoided.
Next steps: staff will publish an RFP for actuarial services, the actuary and staff will develop alternative rate-stabilization scenarios for 2019, and the board will consider the final rate recommendations in the spring.
Outcome: Motion to apply one-third ($554,000) of the available stabilization funds to 2019 rates adopted by the board; staff and Aon Hewitt to return with additional options and the recommended actuarial RFP process.
