The city of Little Rock is thinking about moving away from a traditional, fully insured health insurance plan for its employees and, instead, self-funding insurance by directly contracting with local hospital providers.
"This is a new concept for some people, but it's been around for some time," said Tom Kane, a Stephens Inc. adviser who consults with the city on its health insurance contract.
"We would negotiate with a group of physicians and a hospital, and then we set a budget. They will try to manage the health of the [city's employee] population to a budget," Kane said. "The purpose is to provide higher-quality care by identifying individuals within the city who have a chronic disease, aligning them with the primary care doctor, and they are managing the chronic disease of those individuals to a lower cost with higher quality outcomes."
The city's 2016 claim-to-premium ratio was 106 percent. The city and its employees paid $13,228,051 in premiums, and United HealthCare paid out $14,056,223 in claims.
Kane reported that last year the city had 19 employees with health insurance claims exceeding $100,000. One person's claims exceeded $1 million, he said.
It's anticipated that United HealthCare will quote the city an increase in health care cost for 2018.
The city has budgeted $13.1 million for its share of premium payments to United HealthCare in 2017. That's up about $1 million from the 2016 budget, although Little Rock didn't actually spend the full budgeted amount in 2016.
At-large City Director Dean Kumpuris pointed out that the claim-to-premium ratio Kane provided doesn't take into consideration any interest money United HealthCare made from holding the city's premium payments in an investment account.
Nevertheless, Kumpuris said the self-insured plan with direct contracts with local providers is the way to go.
The city calls it a "self-funded with reinsurance with direct contracts of Clinically Integrated Networks" plan.
Requests for proposals for three health insurance options will be released in the next few weeks with the due date of August. That will allow for negotiations and a decision in time for employees to go through open enrollment in November, Kane said.
The options are a traditional, fully insured plan like the city has always had, a traditional self-funded plan with reinsurance or the self-funded plan with local contracts.
If the third option is chosen, the idea is to give employees a choice of which area hospital to make their "in network" option -- Baptist Medical Center or CHI St. Vincent -- and to give everyone access to Arkansas Children's Hospital and the UAMS Medical Center.
Kane said there would be a "national wrap" add-on in case an employee or retiree is out of Arkansas and needs access to a national network.
"I think you are on exactly the right course," Kumpuris said. "I can promise you United will come back and will probably recommend a double-digit increase."
Mayor Mark Stodola asked whether the city was large enough to change to a self-insurance plan without taking an inordinate risk. Little Rock has about 1,900 full-time employees.
Kane said the city is big enough. It would purchase reinsurance that sets an aggregate cap to define what the city's liability is, and the reinsurance would cover anything over that amount.
"Really with a clinical network, what we are talking about is improving the health of the populations," Kane said. "We didn't get where we are today in the last six months. So this is a three- to five-year strategy for engaging employees on their health. We really think that is the key to changing this whole dynamic."
Kumpuris, who is a gastroenterologist at CHI St. Vincent, said contracts with a clinical network force health care providers to work together for the better of the patient at the lowest cost possible.
Metro on 05/15/2017