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Health Service Board credits $7.43M stabilization reserve after unexpectedly favorable City Plan claims, preliminary 2015 rates decline
Summary
Aon Hewitt told the Health Service Board City Plan claims trended far below prior projections, producing a roughly $17 million favorable swing and a $7.431 million stabilization credit the board applied in preliminary 2015 rate calculations, producing proposed rate decreases for active and retiree cohorts.
The Health Service Board voted to apply a $7,431,000 stabilization credit to 2015 City Plan rates after an actuary reported unusually favorable claims experience.
Anil Kocher of Aon Hewitt told the board that recent claims were "incredible," noting the plan generated roughly $17,000,000 of favorable experience compared with expectations and that, under the board's three-year amortization policy, "$7,431,000 will be put against the rates." Kocher presented preliminary rate-development slides showing decreases in the preliminary renewal: about minus 16% for active members, minus 16% for early retirees, and about minus 20% for retirees, before final data updates.
Board members pressed for the underlying math and were directed to tab 8 of the packet, where the stabilization-reserve calculations and the surplus roll‑forward are shown. Kocher said the presentation used enrollment and claims data through December 2013 and that final 2015 rates would be updated with additional months of experience before the June meeting.
President Breslin summarized the action and the process, noting the board would carry forward surplus consistent with prior policy. The board did not change policy in this vote; it applied the existing three-year amortization rule to the recently reported surplus and accepted the preliminary rates for further refinement.
Next steps: staff and the actuary will update rate exhibits with the next months of claims and return with finalized 2015 rates at a future meeting, including the exact rate cards and the final stabilization-reserve applications.
