County’s insurance premiums expected to increase by more than 6 percent

The Montgomery County Board of Supervisors is bracing for a potential increase to the county’s insurance premiums.
Tom Schuetz, senior partner of the Alera Group, a client-centered national insurance and financial services firm spoke to members of the Board of Supervisors at the last meeting. At the last renewal of the county’s Iowa Public Employers Pool, the renewal rate for UnitedHealthcare was 9.6%
“We kept the same plan and had a reserve account continuing to grow, so we implemented a strategy to stop the growth and use some of that balance to offset the rates and allowed us to lower what the payroll reductions would have been,” Schuetz commented.
Schuetz said the county was currently operating at a higher loss ratio than the premium being paid.
“The numbers fluctuated a bit, but we’re running at about a 104% loss ratio. So for every dollar being paid to United Healthcare in premium, UHC is paying out roughly $1.04 in claims. That’s not exactly their ideal model,” Schuetz explained. “The bigger question mark is that pretty consistently, the Iowa Public Employers Pool trust as a whole has been running anywhere between a 98% to 102% loss ratio. That’s for all the counties as a whole. Usually the way a trust is set up is that in any given year, some perform well and some have bad claims years. Over the past three years, we’ve seen a trend of a general increase in claims paid throughout the whole trust.”
While that would indicate that for every dollar UHC was collecting, it was paying right back out in claims and not covering operating expenses, however, that isn’t entirely correct.
“There is income they receive that doesn’t count to the numbers, and they’re getting rebates on pharmacy usage and those kinds of things, but we don’t get any of that, so it doesn’t figure into the calculations,” said Schuetz.
With the current state of things, Schuetz said he received a question from County Auditor Jill Ozuna as to whether the county should budget at 10% or 16%. Schuetz made the recommendation to budget for the higher amount.
“I’ve seen renewals for four other counties not in the Iowa Public Employers Pool trust, and consistently, they are all in the 15% to 16% range. Some of that is loss ratio, but the other part of that is inflation. Rate projections are being made now through June, 2024, and in everything I’ve seen, the percentages of the trend are higher than what they were a year ago. The loss ratio will impact the renewal, and when you put the trends on top of it, that’s going to lead to higher costs of renewals,” Schuetz stated.
Schuetz added plans were being made to explore what could be done to offset the costs of the increase. Also, there was increased usage of the county’s self-funded part of the insurance plan. Since the county’s liability was limited, that meant there was more usage by county employees across the board than there had been in prior years.
“In FY 2019, we spent about $192,000 out of the self-funded part of the plan. In 2020, that dropped down to $137,000, and in 2021, it was just over $150,000. Currently, we took six months of expenses in the self-fund, and looking at the averages, were on a path to spend about $210,000 out of the self-fund, and only budgeted about $125,000,” Schuetz advised. “I don’t think we’re going to hit that $210,000 because when we come to Jan. 1 of the new year, the new deductible starts and things will slow down, but I do think we’re going to exceed the high we had before of $192,000, and use more of the reserve fund than we had anticipated.”
The county still has around $154,000 in its reserve fund, and the county intended to use some of the reserve fund was included in the county’s budget for last year, but Schuetz said the county likely didn’t anticipate that increased usage of the county’s reserve fund that would occur at the same time of an increase in the county’s insurance activity.
“My message today is that we’re probably going to have some work to do as the renewal comes out, and I think it’s good for the county to know what to expect as it continues in the budget process. I think the trends are indicating there’s going to be an increase,” Schuetz said.
When it comes to the county’s dental and vision insurance, the dental rate was 2%, and Schuetz anticipated the rate would stay about the same. The vision insurance was coming off of a two-year rate guarantee, so there may be an increase, but Schuetz didn’t anticipate a substantial increase. Schuetz said they would be working to get the official renewal numbers as quickly as possible.
Supervisor Mike Olson questioned the amount needed in the county’s self fund, now that it had slipped to $154,000. Schuetz said the target amount was in the $100,000-$125,000 range, so the county was still in decent shape.
“My suggestion is to get through the next couple of months and see what the renewal is like. We’ve definitely used up more this year than we thought we were going to, but we’re not at a point where I’m ready to sound an alarm. It’s just getting us more quickly into the range we were working for. The message is that we won’t have the flexibility to adjust the rates with that fund as we did last year, but we might be able to use some,” Schuetz explained.
No further action was taken.