The health plans for public school and state employees spent less than expected last year on medical care and drugs, building reserves that can be used to offset the need for rate increases in future years, an actuary said Friday.
According to reports by Cheiron, a McLean, Va.-based actuarial consulting firm, the school employees' plans last year spent $284.4 million on medical, drug and other expenses -- about $29 million less than the amount the firm projected when the rates for the year were set in 2015.
The state employees' plans spent $279.2 million, about $18 million less than projected.
John Colberg, an actuary with the firm, said lower-than-expected enrollment contributed to lower costs for state employees' plans.
Enrollment in the school employees' plans exceeded expectations, but more employees chose cheaper plans with fewer benefits, which helped keep down those plans' costs.
After the state hired a new pharmacy-benefits manager last year, both sets of plans on July 1 also cut the dispensing fees paid to pharmacists and the prices paid for drugs.
The plans cover about 148,000 people, including 45,000 school employees and 26,000 state employees in addition to retirees and the spouses and dependents of employees and retirees.
The lower-than-expected spending prompted Cheiron to revise its predictions for when the plans will need to adopt large rate increases, assuming taxpayer funding for the plans doesn't increase.
For instance, based on its projections, Cheiron predicted last year that the rates for state employees would need to increase by about 25 percent next year.
Colberg, who made a presentation to the State and Public School Life and Health Insurance Board's benefits subcommittee on Friday, said he no longer expects such an increase to be needed until 2019.
Similarly, Colberg said a large increase for the school employees' plans may not be needed until 2020.
In the meantime, the plans will likely have enough reserves to keep the rates the same next year as they are this year, he said.
But, he said, the State and Public School Life and Health Insurance Board might consider increasing rates next year to build more reserves, further offsetting the need for large increases in the future.
That's what the board decided to do last year when it set this year's rates. Starting Jan. 1, the rates increased 2 percent for school employee plans and 3 percent for most state employee plans.
The board will set rates for next year in June or July.
Jeff Altemus, the subcommittee's chairman, said his panel will likely consider recommending small increases for both sets of plans.
"We've got to look more long-term than what's going to happen next year," he said.
Metro on 04/08/2017