Translate[Archived] Question #45: Provide the estimated expenditure savings that would be achieved by consolidating all employees and dependents on either Kaiser or our self-funded United Healthcare Insurance offerings?
Question:
Can you provide the estimated expenditure savings that would be achieved by consolidating all employees and dependents on either Kaiser or our self-funded United Healthcare Employee Health Insurance offerings?
Response:
For FY 2019 a total of $24.29 million was included in the proposed budget for United Healthcare and Kaiser Permanente employer health insurance costs. Kaiser Permanente is the lower cost option for both the employee and employer. Additionally, Kaiser Permanente sets premiums based on the company’s view of the market, while United Healthcare is a self-insured plan and the premiums are set based on the City’s experience. Having United Healthcare as a competitor for employee health care dollars results in Kaiser Permanente pricing the premiums they charge the City slightly lower than United Healthcare. The City currently offers five health options through the two providers: Deductible HMO (Kaiser Permanente), HMO (Kaiser Permanente), PPO Choice and Choice Plus (United Healthcare), and CDHP (United Healthcare).
The FY 2019 proposed budget assumes 2,246 participants with 1,116 enrolled in United Healthcare plans and 1,130 enrolled in Kaiser Permanente plans. Consolidating all employees and dependents to Kaiser Permanente health insurance plans, assuming the current cost differential remains, could theoretically result in a $3.23 million paper savings. Without a healthcare competitor, it is highly likely that Kaiser Permanente would raise its rates which are set on “what will the market bear” and not actual experienced based cost data. Hence, there would be over the long-term no savings, and possibly potential cost increases.
While there might be a short-term expenditure savings, the main advantage of offering United Healthcare insurance plans is that it allows more flexibility when selecting medical providers and/or facilities and there is more flexibility to utilize out-of-network providers (which is important for retirees), albeit usually at a higher cost. Employees selecting Kaiser Permanente plans are restricted to Kaiser Permanente medical providers and/or facilities, except in an emergency. It is important that employees have health care choices and a shift to a single vendor would create substantial morale issues within the workforce.