State health insurance fund estimated to run $39 million deficit, begins looking at rate increases
The state health insurance deficit continues to grow with an estimated $39 million cash shortfall by the end of the fiscal year.
The State Employee Benefits Committee’s January meeting opened discussions on what changes to make for the upcoming fiscal year to avoid the shortfalls the Group Health Insurance Plan (GHIP) currently faces.
The latest report shows coverage claims came in almost $11 million over budget in December, and the Fund Equity Balance could go negative as early as this month.
The committee discussed several reasons as to why the deficit is running so high this year, but the biggest factor seems to be an increase in claims, not an increase in plan enrollment.
Willis Towers Watson consultant Brian Stitzel says large medical claims appear to be one of the biggest cost drivers, but they've asked insurance carriers for a more detailed exploration into the claim types.
He says although health insurance providers everywhere are seeing claim increases across the board, the GHIP trends specifically have been "pretty alarming."
Office of Management and Budget Director Cerron Cade notes the demographic of the state's workforce is also a factor, generally being older and utilizing their health insurance more.
Stitzel echoes these comments, saying that participants of the GHIP tend to have higher incident and cost rates compared to national benchmarks.
While the state must cover the predicted $39 million deficit by the end of June, the SEBC also needs to look into restructuring the GHIP to avoid future shortfalls.
Stitzel says a 27% across the board premium rate increase would be needed to cover FY24’s deficit and predicted shortfalls for FY25.
“Employee contributions would increase per paycheck from a range of $4.46 at the low end – a single employee in First State Basic – all the way up to $43.73 per paycheck for an individual enrolled in family coverage in the Comprehensive PPO," he says.
Department of Human Resources Secretary Claire DeMatteis says the real hit is to the state contribution: "The state is paying upwards of 90% of the cost of health care. Employees pay as a little as 4%. So, subtract that from what the state has to pay, and that's why the budget the governor just recommended for FY25 has such an increase in the state portion for providing health care."
Cade says if the state increases its share in paying for health coverage instead of increasing premium rates, it will eat away at other necessary costs the state has to cover.
"Health care costs have been increasing every year, even in years where we have not had to raise rates because we were able to dip into our surplus, and that is just not a sustainable model. Eventually we've got to get to a point where we have to pay the piper," Cade says.
The SEBC is also taking particular interest in restructuring how they cover weight loss medications — also known as GLP-1s.
Initial predictions had the state paying around $2 million total this fiscal year to cover weight loss drugs – instead, it’s paying an average of $2.5 million per month.
The state has also seen an uptick in bariatric surgeries. Prior to carving out coverage of weight loss surgeries, Delaware had 101 claims for the operation from July 2022 to December 2022. After the coverage when into effect July 2023, the number of surgeries increased by 18%.
Delaware currently resides on the more lenient side of coverage for weight loss drugs, leaving prescription factors largely up to BMI qualifications and a physician’s discretion.
Willis Towers Watson consultant Jen Manieri presented an array of options to save the state money, including limiting coverage or even opting-out altogether.
“Not many, but some employers are opting not to cover weight loss medications. They’re opting to only cover GLP-1s for those with a diagnosis of diabetes. It’s likely to lead to lower costs but potentially more member complaints and potential recruitment and retention issues," she says.
Other options include implementing higher BMI thresholds, lifetime dollar maximum limits, creating step therapy with behavior modification programs before drug prescriptions or even making community physicians ineligible to prescribe obesity drugs.
The Statewide Benefits Office is also consulting with other states on various cost-reduction programs they’ve implemented to see if any would be a fit for Delaware.