RD414 - Report on the State Employee Health Insurance Program’s Proposed Premiums and Plan Changes


Executive Summary:
Pursuant to Item 84 F of the 2013 Virginia Acts of Assembly, Chapter 806, this report details the assumptions included in Governor McDonnell’s introduced budget for the state employee health insurance program. The report includes the proposed changes to the benefit structure. It also includes provisional premium schedules. Consistent with FY 2014 premiums, all premium schedules herein assume that available premium rewards have been earned by the employee (and spouse).

Exhibit A contains the provisional premiums submitted on November 1, 2013 by Aon Hewitt, the health plan’s actuary, which were then provided to the Department of Planning and Budget. These premiums factored in utilization, inflation and the one-week Incurred But Not Reported (IBNR) funding amount.

Exhibit B contains the subsequent proposed premiums submitted by Aon Hewitt on November 19, 2013, which continue to factor in utilization and inflation. They also take into account additional IBNR funding over that included in the November 1, 2013 premiums in Exhibit A, to ensure that the health plan is on track to rebuild sufficient IBNR funds over the five year period beginning with Fiscal Year 2014. In total, these premiums include $24.5 million for the IBNR reserve. Lastly, these November 19, 2013 premiums take into account the four plan design changes recommended by Governor McDonnell.

The first change is the implementation of an onsite health center to be located in the Capitol Square area of Richmond. Although initial start-up costs are estimated to be $754,100, this is expected to produce long-term savings. The second proposed change is to increase copays for Tier 2-4 prescription drugs in COVA Care by $5 for retail (Tier 2--$30, Tier 3--$45, Tier 4--$55) and $10 for mail (Tier 2--$60, Tier 3--$90, Tier 4--$110). The third change is the introduction of a Value-Based Insurance Design (VBID) program for asthma/chronic obstructive pulmonary disease (COPD) for COVA Care and COVA HealthAware. The fourth change is the introduction of a VBID program for hypertension for COVA Care and COVA HealthAware. These VBID programs will allow drug co-pays (in COVA Care) and coinsurance (in COVA HealthAware) to be waived for Tiers 1 and 2 drugs for compliant members. In combination, the second, third and fourth changes are estimated to produce savings of $4,960,000 in COVA Care and costs of $48,000 in COVA HealthAware, for a total net savings of $4,912,000 to the plan.

Exhibit C contains the premium schedule and the General Fund Breakout developed by the Department of Planning and Budget for Governor McDonnell’s proposed budget. The premium schedule and General Fund estimates are consistent with the November 19, 2013 actuarial estimates, inclusive of the four plan design changes recommended by Governor McDonnell, developed by Aon Hewitt.

Premiums will be finalized at the conclusion of the legislative process.