At the March 8, State Health Benefits Commission (SHBC) meeting, AON, the actuary for the SHBC provided the commission members a mid-year performance overview of the plan. The League included a briefer item about it in the March 10 League Weekly Roundup. AON also shared the Local Government Employer Group Mid-Year Experience Analysis for Plan Year 2022.
Among the findings that are of note to municipalities:
- Based on expected entrants and terminations of Local Government employers from the State Health Benefit Plan (SHBP), the medical and prescription drug trends have been increased by 25 basis points for Plan Year 2022 and 100 basis points for Plan Year 2023. This adjustment reflects anti-selection risk (employers with good experience are terminating or those with poor experience are joining which will affect the SHBP’s overall loss ratio).
- The PPO trend analysis for Plan Year 2023 is on point with assumptions. The Plan Year 2023 Active and Retiree total premiums are projected to decrease by 11.2% with updated enrollment projections from those shown in the Plan Year 2023 Rate Setting Analysis while total plan costs reflecting updated claims experience are projected to be 11.8% lower. This significant decrease is driven by local employers leaving the State’s Health Benefits Program. The combined overall projected net gain for Plan Year 2023 is $48.7 million.
- The updated financial results have produced a total projected claim stabilization reserve at December 31, 2023 equivalent to 0.5 months of plan costs (1.5 months for Actives and -1.5 months for Retirees). This is less than the recommended level of 2.0 months of plan costs, which accounted for 2% of the 22% increase.
For Plan Year 2022, there was a 1.5% decrease in total active plan costs from the results shown in Plan Year 2023 Rate Setting Analysis. This decrease in plan cost is primarily a result of the following:
- Total projected active cost decreased 1.8% due to updated medical claims experience through September 2022.
- The aggregate projected 2022 medical claims are 2.1% lower compared to the Plan Year 2023 Rate Setting Analysis. This is driven by a 2.0% decrease in the projected Per Member Per Mont (PMPM) medical claims amounts and a 0.1% decrease in average 2022 medical membership.
- Rolling 12-month medical claims experience through September 2022 shows a 4.0% increase in PMPM PPO claims and an 11.5% increase in PMPM HMO claims. Combined, these medical trends are lower than the 6.25% estimated trend in the Plan Year 2023 Rate Setting Analysis.
- Total projected active cost increased 0.6% due to updated prescription drug claims experience through September 2022.
- The aggregate projected 2022 prescription drug claims are 3.9% higher compared to the Plan Year 2023 Rate Setting Analysis. This is driven by a 4.2% increase in the projected PMPM prescription drug claims amounts and a 0.3% decrease in average 2022 prescription drug membership.
- Rolling 12-month prescription drug claims experience through September 2022 shows an 11.8% PMPM trend, higher than the 7.75% expected trend from the Plan Year 2023 Rate Setting Analysis.
Total estimated retiree cost is projected to increase 1.2% from the Plan Year 2023 Rate Setting Analysis. Total projected retiree cost decreased 0.7% as a result of updated medical claims experience through September 2022 and aggregate medical claims decreased 1.0% compared to the Plan Year 2023 Rate Setting analysis.
There is a 2.2% increase in total retiree cost due to updated prescription drug claims experience including an aggregate prescription drug claims experience has increased 4.6% compared to the Plan Year 2023 Rate Setting analysis.
For Plan Year 2023, total active plan cost is projected to decrease 11.9% from the results shown in Plan Year 2023 Rate Setting Analysis. This decrease in total plan cost is primarily a result of the following:
- There is a 11.4% decrease in total projected active cost due to updated enrollment. The updated enrollment is based on open enrollment data provided by the State and is adjusted for known employer entrants and terminations. Based on this data, there is expected to be a significant decrease in Local Government enrollment in Plan Year 2023.
- Total projected active cost is projected to decrease 1.7% due to updated medical claims experience, offset by a 0.8% increase due to updated prescription drug experience.
- Based on updated information from Optum, increases in active prescription drug rebates are projected to decrease projected active costs by approximately 0.3%.
- Projected active costs are expected to decrease by 0.1% as a result of reduced Horizon administrative fees effective February 1, 2023.
- There is a 0.8% increase due to the increase in the 2023 anti-selection assumption.
For Retirees, total projected cost decreased 11.7% from the results shown in the Plan Year 2023 Rate Setting Analysis. This decrease in retiree plan costs is primarily a result of the following:
- There is a 12.6% reduction in retiree cost due to lower-than-expected enrollment. The updated enrollment is based on open enrollment data provided by the State and is adjusted for known employer entrants and terminations. Based on this data, there is expected to be a significant decrease in Local Government enrollment in Plan Year 2023.
- Updated claims experience resulted in a 0.5% increase in total Retiree costs, consisting of a 0.9% decrease due to updated medical claims experience offset by a 1.4% increase due to updated prescription drug claims experience.
- Based on information from Optum, updated retiree EGWP credits is projected to decrease total retiree cost by 0.7%.
- Updated trend and anti-selection assumptions is projected to increase total retiree costs by 1.1%.
AON notes a 10.2% decrease in active employee enrollment from Plan Year 2022 to Plan Year 2023, after 1.1% and 1.3% increases over the past two plan years. Early retirees show a 12.4% enrollment decrease from PY 2022 to PY 2023, after 2.2% and 3.8% increases over the past two years and a 7.5% decrease for Medicare Retirees, after 3.5% and 3.7% increase over the past two years.
We encourage you to share this information with your municipal professionals.
Contact: Paul Penna, Senior Legislative Analyst, ppenna@njlm.org, 609-695-3481, x110.