Officials from Pasquotank and Perquimans counties as well as those at Albemarle Regional Health Services and other government agencies have good reason to be reviewing the costs they are paying for employee health insurance. Those costs could be affected by Chowan County’s pulling out of the regional insurance agency that has covered these local agencies’ employees since 1990.
What effect Chowan’s decision has on future premium rates and coverage within the Northeast Albemarle Health Group is still uncertain. But planning ahead is one way to remove some of that uncertainty and protect both workers and taxpayers. Of course, adding to the uncertainty are pending changes in the nation’s health care environment under the Affordable Care Act.
Still, before anyone boards the same train that Chowan is taking away from the regional insurance consortium, we’d urge them to consider three words: not so fast. The agency apparently has been a sound investment for most employees — and taxpayers — based on past performance on claims and premiums. It may be that the time has come to reassess, but it’s premature to jump ship just yet.
Of course, in Chowan’s case, the die is already cast.
Chowan apparently will be leaving the Northeast Group this year after officials there concluded last summer that they could save on insurance premiums by going with another carrier.
The potential savings were discovered after Chowan County Manager Zee Lamb reviewed records of costs and benefits provided by the Northeast Group on the claims made by county employees over a five-year period. The data revealed that claims totalled about $3.3 million while premiums had run the county about $5 million, or an average claims-to-premium ratio of 66 percent. According to Lamb, a fairer ratio — for the insured and the provider — is about 85 percent.
In its rate study, Chowan also noted that county costs for health insurance increased 25 percent in January 2011 and another 9.8 percent in July 2012, while co-insurance costs had decreased from 80 percent to 70 percent. Employee deductibles increased to $500 during that period.
Lamb said he believes Chowan can find an insurer with better rates and benefits, saving the county about 25 percent of its coverage costs. He may have good cause to believe that. The town of Edenton left the insurance consortium in 2011 for much the same reason.
Such a savings to taxpayers, especially during a period when medical costs are soaring, cannot be overlooked by any public agency that provides insurance coverage to employees. Accordingly, other members of the health insurance consortium should also feel compelled to study their own cost-benefit ratio to determine if it falls into an acceptable range.
As it turns out, the premiums-payout ratio for other Northeast Group members — except in the case of Perquimans County — is closer to the 85 percent ratio.
In Pasquotank’s case, health insurance premiums for its 291 employees and 14 retirees cost the county $8.99 million during the past five years, according to Pasquotank County Manager Randy Keaton. In that time, claims for medical care totalled $8.55 million — about a 95 percent ratio.
That’s still high of the target ratio, indicating a smaller margin for the insurance carrier. The effect of a smaller margin is still a concern, since it could result in a premium increase — or fewer benefits.
At ARHS, according to spokeswoman Jill Jordan, premiums cost the health agency $8.04 million to cover the agency’s 222 employees and 21 retirees during the five-year period. ARHS plan participants made $7.61 million in claims during that time — a ratio, like Pasquotank’s, of about 95 percent.
In Perquimans County, premiums cost $3.06 million for 91 employees over five years, according to County Manager Frank Heath. But during that period, employees made $3.67 million in claims. That’s a ratio of 115 percent — a whopping 30 percent higher than what it should be. Also, most, if not all, insurance carriers would have a hard time staying in business paying out more than what they take in.
The obvious common denominators — both difficult to manage or predict — are the health of public employees and the rising costs of medical care. Still, what planners in local governments and agencies have to work out is the best ratio between what it will take to cover workers and what the taxpayers can bear. There’s no easy answer for that, but it’s one they should be evaluating. Potentially, the answer may lead to more decisions like Chowan’s.