Health care premiums for educators in the School Employees Health Benefits Plan (SEHBP) will see an increase of 13 percent in their health insurance premiums next year, compared to an 8.4 percent increase in 2017. And, around 40,000 early retirees (those who retire before they are Medicare-eligible) will see an even bigger increase of 15.9 percent. Medicare-eligible retirees will see a 5.8 percent decrease in their 2018 rates.
The School Employees’ Health Benefits Commission approved the 2018 rates, which were recommended by the state consultant Aon, at a meeting on August 8. The projected cost for the School Employees’ Health Benefits Plan next year is about $3 billion.
According to Aon, the health plan for state and local government workers, which approved its rates last week, included a zero percent increase in premiums. One of the main differences is that average medical trend over two years, the rate at which medical costs increase, is 10.1 percent for active educators and about 5 percent for active state employees. Medical trend is higher in the school plan because of adverse selection by school districts with healthy employees who are choosing to leave the state plan and self-insure. This means the sicker, more expensive members are remaining in the state plan, which drives up the cost of premiums.
Another reason active workers in the educators plan are seeing an increase is because the SEHBP needs to build up its claim stabilization fund. The plan is supposed to have two months worth of claims sitting in reserve, but the Aon consultants said the plan has only 1.4 months of reserves. The 2018 rates include a 2 percent margin in order to build up the reserves, according to Aon.
While the school benefits plan adopted a series of cost-saving measures in recent years, including restrictions on compound drugs and limiting out-of-network coverage for certain services, the commission has not adopted the full extent of changes the state and local government workers did last year.
In good news, the SEHBP will see a reduction in prescription drug costs due to the new three-year pharmacy benefits manager contract with OptumRx. This change is expected to save about $93 million next year – $6 million for active employees and $87 million for retirees.
In its rate renewal report, Aon noted two benefit changes that will impact medical costs for the state plan. The first was legislation Gov. Chris Christie pushed for earlier this year to expand inpatient coverage for substance abuse treatment. That law, which took effect May 16, is expected to increase non-Medicare medical claims in the state plan by around 1.1 percent each year, according to Aon’s estimates. The second is passage of a federal law requiring coverage for medically necessary gender reassignment services is expected to increase claims by around 0.17 percent annually, according to the report.