Board approves $9M stabilization buy‑up for certain medical plans and alters dental stabilization policy for 2025
April 11, 2024 | San Francisco City, San Francisco County, California
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At the April meeting the Health Service Board approved Aon’s recommended stabilization and rate actions that will be incorporated into the 2025 rate setting. Aon’s actuary Mike Clark described plan‑specific results from 2023 and the policy‑driven approach to amortizing prior stabilization balances into next year’s rates.
Key figures Clark presented include a combined stabilization deficit in certain Blue Shield HMO and UHC EPO plans of roughly $27.08 million as of 12/31/2023, from which Aon recommended applying one‑third (about $9.03 million) into rate buyups for plan year 2025. Clark said the 2023 experience produced a large shortfall in those HMO plans (a stated $29.4 million shortfall versus expected) that the stabilization actions and contingency reserve adjustments address in part. For other plans: the non‑Medicare PPO plan flipped to a surplus, with one‑third of the surplus (~$2.00 million) recommended as a buy‑down; Health Net Canopy Care showed a smaller surplus with ~$332,000 available to buy down rates.
On the Delta Dental active employee PPO plan Clark recommended a one‑time amendment to the stabilization policy to permit using two‑thirds of the 12/31/2023 stabilization surplus (approximately $6.01 million of a $9.02 million balance) to buy down 2025 rates, citing multi‑year pandemic impacts and prior conservative amortization. He explained that dental utilization has been increasing and that the change aims to reduce the excessive stabilization balance accumulated since 2020.
After board discussion — which included questions about the size and causes of the HMO shortfall and the goal of returning the dental plan to a per‑policy (one‑third) amortization schedule — a motion to accept the actuary’s recommendations was moved and seconded. The board approved the stabilization recommendations and the dental policy amendment by unanimous roll call vote.
The board directed staff and the actuary to reflect these stabilization amounts in the 2025 rate cards and to present the complete rate schedules at the May meeting(s). No changes to employee contribution tiers set by MOUs were proposed at this meeting.
Key figures Clark presented include a combined stabilization deficit in certain Blue Shield HMO and UHC EPO plans of roughly $27.08 million as of 12/31/2023, from which Aon recommended applying one‑third (about $9.03 million) into rate buyups for plan year 2025. Clark said the 2023 experience produced a large shortfall in those HMO plans (a stated $29.4 million shortfall versus expected) that the stabilization actions and contingency reserve adjustments address in part. For other plans: the non‑Medicare PPO plan flipped to a surplus, with one‑third of the surplus (~$2.00 million) recommended as a buy‑down; Health Net Canopy Care showed a smaller surplus with ~$332,000 available to buy down rates.
On the Delta Dental active employee PPO plan Clark recommended a one‑time amendment to the stabilization policy to permit using two‑thirds of the 12/31/2023 stabilization surplus (approximately $6.01 million of a $9.02 million balance) to buy down 2025 rates, citing multi‑year pandemic impacts and prior conservative amortization. He explained that dental utilization has been increasing and that the change aims to reduce the excessive stabilization balance accumulated since 2020.
After board discussion — which included questions about the size and causes of the HMO shortfall and the goal of returning the dental plan to a per‑policy (one‑third) amortization schedule — a motion to accept the actuary’s recommendations was moved and seconded. The board approved the stabilization recommendations and the dental policy amendment by unanimous roll call vote.
The board directed staff and the actuary to reflect these stabilization amounts in the 2025 rate cards and to present the complete rate schedules at the May meeting(s). No changes to employee contribution tiers set by MOUs were proposed at this meeting.
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