GIC FY10 Rates To Increase 3.19%

For Immediate Release

March 5, 2009

In the face of escalating health care costs and contracting state revenues, the Group Insurance Commission (GIC) was able to hold the line in its health plan rate increases for Fiscal Year 2010. At yesterday’s Commission meeting, the Commission approved 3.19% average rate increases across its fifteen employee and Medicare health plans for the upcoming fiscal year, which begins July 1. The GIC has consistently had more modest increases than other employers. For FY09, the GIC average rate increase was 6.37% and for FY08 it was 3.75%. These rate increases compare favorably with other employer trends. The 2008 Mercer National Survey of Employer-sponsored health plans found that, among large employers of 500 or more employees, cost increases were projected to increase 6.4% for 2009 and had increased 6.3% in 2008, and these numbers were achieved largely through benefit cuts.

“The GIC original $1.4 billion appropriation for the current fiscal year, represents a sizable line item in the Commonwealth’s budget and we have a responsibility, particularly with our current fiscal crises, to keep our expenses in check so that the many worthwhile services of the Commonwealth can be funded,” said GIC Executive Director, Dolores L. Mitchell. “Our health plans rose to the challenge to better manage expenses and also committed to level fund their administrative fees. However, our members will also be sharing the burden, with some increased co-pays, depending on what services as well as what providers they use,” she added.

Unlike other large employers, the GIC has not gone the route of instituting high deductible plans or co-insurance, where the member pays a percentage of the cost of service. According to the Mercer study, the median deductible for large employers was $1,000 in 2008 and twenty percent of large employers have implemented high deductible plans. Additionally, most employers are shedding retiree benefits with only 27 percent still offering the benefit to new hires. Over 40% of the GIC’s members are retirees. “We’re very pleased with these rates and our members continue to enjoy more comprehensive benefits than most in the private sector have today” said Dolores L. Mitchell. “While helping our members, we are pleased to be part of the solution to reining in costs for state and participating municipality taxpayers,” she added. As part of the FY10 rates, the GIC was also able to lower the administrative cost charged to administer the municipal program from 0.75% to 0.33% of the full cost premiums.

With the GIC’s employee health plans, members pay lower copays when they see physicians with the highest combined quality and efficiency scores. Called the Clinical Performance Improvement Initiative, this program has continued to evolve since its inception in 2004. For FY10, all GIC health plans will tier eight core specialties, with most plans tiering more. “This program gets employees to think about differences in physician quality and efficiency, and more importantly gives physicians an opportunity to improve their own performance,” says Dolores Mitchell. Other changes employees will see are tiered hospital copays for the GIC’s self insured plans. Members will pay lower inpatient copays for the plan’s Tier 1 quality and cost hospitals. Prescription drug copays will also increase, emergency room copays will be standardized across all plans, and a new high tech imaging copay will be implemented.

Despite the notable premiums achieved for FY10, the GIC still faces formidable challenges in its upcoming budget. Fourteen new municipalities are joining the GIC, which represent over 15,000 members and approximately $135 million in additional expenditures, helping to boost the GIC’s FY10 projected expenditures to $1.68 billion. The GIC’s premium increase coupled with the benefit changes have helped to mitigate this budget challenge. Additionally, the Governor has proposed premium changes for state employees with higher salaries. The legislature will take up his proposal as part of the FY10 budget.