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32 <br /> 1 Funding for the health plan is based on estimated premium equivalent rates that are calculated <br /> 2 to pay for incurred claims, administrative and reinsurance costs, and expected liability of claims <br /> 3 incurred but not reported (IBNR). The plan also carries a reserve balance which ensures the <br /> 4 County's ability to pay claims if the total cost of claims exceeds the total funding generated by the <br /> 5 premium equivalents. <br /> 6 <br /> 7 A reserve policy or the fund ratio target should range between 1.5 and 3.0 over IBNR to ensure <br /> 8 the ability to pay for future claims based on current claims experience. This means that the <br /> 9 County's reserve target should be between $1.1 million and $2.2 million. The County's current <br /> 10 fund ratio is 0.2 through January 2024 or a total balance of$167,000. In FY 2024-25 and beyond, <br /> 11 staff recommends a targeted reserve amount of two times of the expected IBNR liability. This <br /> 12 means that the targeted reserve would grow to $1.5 million over time. <br /> 13 <br /> 14 Although the plan currently has a negative balance of $574,261, the reserve is expected to be <br /> 15 positive by year end due to significant rebate payments due in March and June 2024. However, <br /> 16 additional funding is necessary to cover projected total plan costs for FY 2024-25 and to continue <br /> 17 to build reserve levels up to the targeted two times of expected IBNR liability. The actuarial <br /> 18 analysis conducted by the North Carolina Health Insurance Pool recommends an increase of five <br /> 19 percent (5%). <br /> 20 <br /> 21 Comparatively, increases for self-funded plans in general have averaged 8.4% for FY 2023-24, <br /> 22 7.4% in FY 2022-23 and 7.3% in FY 2021-22. For fully insured plans, increases are 2% to 4% <br /> 23 points higher than self-funded trends depending on the employer size. Contributing to the <br /> 24 increase in cost of services is the rising popularity and utilization of weight loss medications. <br /> 25 Pharmacy trends overall are up 11% in FY 2023-24 compared to prior years. Orange County, <br /> 26 costs have increased by 5% annually in the past three years, which outperforms market trends in <br /> 27 the same comparison period. In addition, sharing costs as a member of NCHIP for high-cost <br /> 28 claimants has benefitted the County. <br /> 29 <br /> 30 The Manager recommends that the County assumes 100% of the recommended 5% increase <br /> 31 and that the employee contribution continues at current rates. This represents a total budget <br /> 32 increase of$740,643. <br /> 33 <br /> FY 2024-25 Health Insurance Rate Renewal <br /> Year Rates Monthly Cost Annual Cost Employee Employer <br /> Contribution Contribution <br /> 2023 Current Rates $1,234,404 $14,812,846 $1,438,222 $13,374,624 <br /> 2024 Current Rates with Employer $1,296,124 $15,553,489 $1,438,222 $14,115,267 <br /> Increase Only(Renewal) <br /> Netlncrease $61,720 $740,643 $0 $740,643 <br /> 34 <br /> 35 <br /> 36 Dental Insurance <br /> 37 Delta Dental is the County's Dental provider, and the County would continue to provide coverage <br /> 38 with Delta Dental. No rate increase is recommended for FY 2024-25. The total annual Dental <br /> 39 budget is currently $685,376. <br /> 40 <br />