County saves millions by staying with provider

UNION COUNTY — Although in February it looked as if the county could have saved millions if it switched health plan carriers, it actually ended up saving several million by going with the plan recommended by the insurance broker.

Last week, the Union County Freeholder board voted to renew its contract with Horizon Blue Cross Blue Shield of New Jersey, after new health initiatives and low claims resulted in $2.2 million in savings, or a 4.1 percent decrease for the previous contract year.

“This is great news and a win-win situation for our budget and for our employees, who will pay less,” Freeholder Chairman Linda Carter said at last week’s board meeting, adding, “Our renewal negotiations have paid off and our provider has stepped forward to the plate with a good deal for Union County.”

Controversy first surfaced in February concerning the health plan because the county insurance broker never looked into the New Jersey State Health Benefits Plan, which county union representatives claimed would have resulted in $5 million in savings.

Jeff Robinson, a fraud investigation employee for the county social services department and representative of the county employee Communication Workers of America union, felt the insurance broker bypassed the state plan for a reason and brought forward information to prove his case.

Robinson explained in a LocalSource article in February that, when the county contracted with Brown & Brown Benefit Metro Inc., the county health insurance broker, the firm only took bids from private carriers because the state does not pay commissions to brokers. He claimed, had the broker gone with the State Health Benefits Plan, they would not have received the $800,000 commission they did from a private insurance carrier because the state does not pay commissions to brokers.

The county employee also provided evidence that the state plan was millions less than the plan the county had at the time, as well as the one the insurance broker recommended they switch to for the 2012-2013 contract year.

But while Robinson and others felt Brown & Brown did not recommend the state plan because they would not received a commission, both the county and the insurance broker denied the charge. County officials agreed, though, that the state plan appeared to be the lowest cost, but pointed out benefits from any plan they chose had to be “equal to or better than” the plan they had.

“We have 22 unions to negotiate with and health benefits are a big part of those contracts,” Union County Communications Director Sebastian D’Elia said in February, noting the county had never had the state plan in the past because the benefits were simply not equal to or greater than those offered by private sector carriers. He also said the unions and retirees would never agree to switching to a plan that did not offer equal benefits, regardless of the savings.

“The fact we have unions has to be a consideration,” D’Elia stressed.

So while the county had been with Cigna for the 2011-2012 contract year, they switched to Horizon for the 2012-13 period, which Brown & Brown recommended for a number of reasons. A strong motivator, the insurance broker said, was the incentives and cost savings Horizon offered if claims turned out to be lower than projected. County officials said that move paid off in the end.

“Our current plan is actually costing us less than the State Health Benefits Plan,” said Union County Administrative Services Director Matt Di Rado in an interview with LocalSource, adding, “Horizon wants to keep us, so they come to the table 8 to 10 percent lower than other carriers.” When the first three quarters of the contract year was completed, these incentives kicked in and the county saved $2.2 million.

Citing a combination of increased efficiency in the way employees utilized healthcare benefits along with greater network discounts offered by Horizon, Di Rado said the county was able to slash the one cost that has continued to rise at an alarming rate in the public sector. How did they do that?

“Well, we knew it was a challenge, but we worked with employees and unions in a number of areas to educate them about wellness programs to economize on costs and ended up coming in below Horizon’s projections for our contract year,” said Di Rado, adding that the county’s contract year runs from July 1, 2012, through June 30, 2013.

Some of the programs included a weeklong wellness fair at various locations, so all county employees could participate, a men’s health check and the creation of an Executive Wellness Committee to communicate health programs between management, union representatives, employees, administrators and Horizon.

Also helping, Di Rado said, was the creation of an onsite Weight Watchers program and use of newsletters and emails directly relating to wellness and health-care tips.

“We all worked very hard to ensure we were doing everything we could to inform our employees about wellness programs and, with Horizon’s help, we had a very good run on insurance claims for the first three quarters of our contract year,” Di Rado explained.

One change, he said, which had a significant impact on claims, was that Summit Medical Group, one of the county’s largest employers, joined the Horizon network in 2013. Di Rado said this group being included in the network had a positive impact on claims. A “network,” set up by an insurance carrier, includes certain doctors that accept the insurance plan. Although employees can choose to go to a doctor out of network, the co-pay for this liberty costs more than if they went to a doctor in network.

Costs were also driven down, he said, because the county encouraged employees to utilize both generic drugs and filling prescriptions through the mail. Contracts are also being negotiated with union bargaining units to provide concessions to drive more employees “in network,” which will continue to reduce expenses in the future. When employees decide to visit doctors that are not included in the Horizon network, this causes health benefit costs to increase.

Another factor that played a big part in the county saving the $2.2 million was that Horizon provides excellent network discounts. But low claims are also an incentive for other insurance companies to encourage the county to change carriers. The county pays $3.69 million a month for health benefits, but when claims fall below projected averages, the county and taxpayers reap the rewards.

“We send our claim information to all insurance companies so we can get bids and, when you have low claims, it helps,” Di Rado explained, pointing out that this is an incentive for Horizon to offer discounts so the county stays with them. The county did just that from the 1980s through 2009, but then changed carriers.
“We also shifted our prescription plan to Horizon Prime and that saved us money,” he added. However, while the county did fare very well the first three quarters of the contracted period, in the last quarter, April, May and June, things were not as good.

“We were not running as well in the last quarter but, until we take a better look at things, we won’t know why,” Di Rado said, but was not concerned.
“For whatever reason, we just had more claims and that happens,” he said, adding that he would be concerned if the trend continued.
Di Rado pointed to a recent article in the New York Times citing major new studies from researchers at Harvard University and elsewhere that concluded healthcare costs are beginning to slow down and some of the slowdown is unrelated to the recent recession. The article also noted there could be some variability, as provisions from the Affordable Care Act continue to kick in. Also helping is employees in the public sector being required to contribute to the cost of their health care.

Prior to new state laws requiring public employees to pay a percentage of their salary toward their health benefits, most public sector employees paid nothing towards this costly perk. As the law kicks in, county and local municipalities will begin to see a reduction in escalating health benefit costs.