Health Service Board approves lower medical contingency reserves, sets active dental reserve to zero
March 14, 2024 | San Francisco City, San Francisco County, California
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The San Francisco Health Service Board on March 14 approved a package of reserve‑policy changes aimed at easing 2025 health‑plan rate pressure.
The board voted unanimously to modify the statistical method used to calculate contingency reserves for self‑funded and flex‑funded medical plans from the more conservative 99th‑percentile approach used earlier this year to a 95th‑percentile method. Aon actuary Mike Clark said applying the 95th‑percentile calculation reduces the medical contingency reserve to about $17,992,721 and would lower the immediate 2025 rate impact by an estimated $4.2 million while allowing roughly $6.4 million to cascade into future rates.
"What I'm asking you to approve today is the modification using the 90 percentile calculations, that add up to almost $18,000,000," Clark said during the presentation.
The amendment also included a one‑time change to set the active dental PPO contingency reserve to $0. Clark told the board that, because dental plan exposure is limited by annual and lifetime benefit maximums (for example, a $2,500 annual maximum per covered life on the active PPO), the plan historically has not exhibited the type of high‑cost, low‑probability claims that contingency reserves are designed to protect against.
"The funding method on the active employee dental PPO plan does not change. It remains self funded," Clark said. "All we're doing is removing this emergency fund from the active dental PPO plan."
Board members asked for clarifying monthly reporting on utilization and monthly trend monitoring so trustees can track whether the reserve reduction produces the expected rate relief without undermining plan solvency. Executive Director Abby Yant and the CFO said SFHSS will present utilization reports and additional financial detail in upcoming meetings.
The motion passed unanimously by roll call vote. The board directed the governance committee to examine whether the active dental PPO should be removed from Policy 2‑10 on an ongoing basis and scheduled further stabilization decisions for April.
The board voted unanimously to modify the statistical method used to calculate contingency reserves for self‑funded and flex‑funded medical plans from the more conservative 99th‑percentile approach used earlier this year to a 95th‑percentile method. Aon actuary Mike Clark said applying the 95th‑percentile calculation reduces the medical contingency reserve to about $17,992,721 and would lower the immediate 2025 rate impact by an estimated $4.2 million while allowing roughly $6.4 million to cascade into future rates.
"What I'm asking you to approve today is the modification using the 90 percentile calculations, that add up to almost $18,000,000," Clark said during the presentation.
The amendment also included a one‑time change to set the active dental PPO contingency reserve to $0. Clark told the board that, because dental plan exposure is limited by annual and lifetime benefit maximums (for example, a $2,500 annual maximum per covered life on the active PPO), the plan historically has not exhibited the type of high‑cost, low‑probability claims that contingency reserves are designed to protect against.
"The funding method on the active employee dental PPO plan does not change. It remains self funded," Clark said. "All we're doing is removing this emergency fund from the active dental PPO plan."
Board members asked for clarifying monthly reporting on utilization and monthly trend monitoring so trustees can track whether the reserve reduction produces the expected rate relief without undermining plan solvency. Executive Director Abby Yant and the CFO said SFHSS will present utilization reports and additional financial detail in upcoming meetings.
The motion passed unanimously by roll call vote. The board directed the governance committee to examine whether the active dental PPO should be removed from Policy 2‑10 on an ongoing basis and scheduled further stabilization decisions for April.
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