HomeMy WebLinkAboutReso 93-246 - Approve entering into & authorize the Mayor to execute renewal contracts with The Acordia Co, The Unum Life Ins Co of America, for period 07/01/93 through 06/30/94 RESOLUTION NO. .3
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING ENTERING INTO AND AUTHORIZING THE MAYOR TO
EXECUTE RENEWAL CONTRACTS WITH THE FOLLOWING COMPANIES
FOR THE PERIOD JULY 1, 1993, THROUGH JUNE 30, 1994:
1) THE ACORDIA COMPANY FOR INSURING EMPLOYEE LIFE AND
DEPENDENT LIFE INSURANCE BENEFITS, AS WELL AS THE
CITY'S EXCESS HEALTH AND DENTAL POLICY
2) THE UNUM LIFE INSURANCE COMPANY OF AMERICA FOR
LONG TERM DISABILITY
3) AMENDMENT TO THE AGREEMENT TO ADMINISTER HEALTH
CARE PLAN WITH CORESOURCE [change of name from
Concept Administrators Inc. effective April 1,
1993]
4) BUSINESS INSURANCE CONSULTING AGREEMENT WITH
CHARLES E. BERTOLINA, DOING BUSINESS AS CEB
BUSINESS INSURANCE SERVICES
WHEREAS, pursuant to the terms of the attached Report to
City Council dated June 16, 1993 , the Director of Personnel
Services has recommended renewing the following contracts for the
period July 1, 1993 , through June 30, 1994 :
1. The Acordia Company for insuring employee life and
dependent life insurance benefits, as well as the
City' s excess health and dental policy;
2 . The UNUM Life Insurance Company of America for long-
term disability;
3 . Agreement to Administer Health Care Plan with
CORESOURCE [change of name from Concept Administrators N)
Inc. effective April 1 , 1993 ] ; and
4. Business Insurance Consulting Agreement with Charles E.
Bertolina, doing business as CEB Business Insurance
Services;
AND WHEREAS, based on said recommendations, the City Council
deems it to be in the best interests of the City to renew said
contracts;
AND WHEREAS, it has been determined that this matter is
categorically exempt from the provisions of the California
Environmental Quality Act;
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of
the City of Redding that the City renew the following contracts
for the period July 1 , 1993 , through June 30 , 1994, in the
amounts of and/or rates set forth in the Report to City Council
attached hereto and incorporated herein by reference:
1 . The Acordia Company for insuring employee life and
dependent life insurance benefits, as well as the
City' s excess health and dental policy;
2. The UNUM Life Insurance Company of America for long-
term disability;
3 . Agreement to Administer Health Care Plan with
CORESOURCE; and
4. Business Insurance Consulting Agreement with Charles E.
Bertolina, doing business as CEB Business Insurance
Services.
BE IT FURTHER RESOLVED that the Mayor of the City of Redding
is hereby authorized and directed to sign the necessary
contracts, when available, on behalf of the City of Redding; and
the City Clerk is hereby authorized and directed to attest the
2
signature of the Mayor and to impress the official seal of the
City of Redding on the aforesaid documents, when appropriate.
I HEREBY CERTIFY that the foregoing Resolution was
introduced and read at a regular meeting of the City Council of
the City of Redding on the 25th day of June, 1993 , and was duly
adopted at said meeting by the following vote:
AYES• COUNCIL MEMBERS: Anderson, Dahl, Kehoe, Moss and Arness
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
l
CARL ARNESS, Mayor
City of Redding
A ST:
CONNIE STROHMAYER, City Clerk
FORM PPROVED:
RANDALL A. HAYS, City Attorney
3
CITY OF*JDING
ITEM NO. 3 REPORT TO CITY COUNCIL
MEETING DATE 06-25-93
APPROVED BY
DEPARTMENT DIRECTOR
Jams Bristow .
CITY' ANAGER
DATE : June 16 , 1993
v CODE : P-100-150-000
FROM: Director of Personnel
SUBJECT: Employee Benefits Program
Background
Each year staff researches the employee benefit insurance market in order to
obtain the most competitive prices for our employee benefit program to be
effective July 1 , 1993 through June 30, 1994 . As you know, the City is self
insured for employee group medical/dental benefits and we purchase excess
medical coverage; commonly referred to in the industry as stop loss
protection . In addition, we buy insurance for our life and long term
disability benefits .
Staff is pleased to announce achievement of one of the lowest insurance
renewals in recent years . Specifically, the only increase this year is for
specific stop loss coverage with all other elements of the City' s employee
benefits program remaining at current levels .
Medical Reinsurance
Currently the City purchases specific stop loss insurance to cover
exposure for specific medical claims above $100 , 000 and in the aggregate
for claims exceeding $4 , 712 , 154 . We currently pay insurance premiums
for this protection in the amount of $155 ,439 and $15 , 000 respectively.
The approximate 10 percent increase in the specific stop loss premium is
lower ( $170 , 974 ) than what had been anticipated and budgeted, while no
increase in the aggregate premium is, of course, good news .
Life Insurance
Currently the City provides life insurance for City employees in the
amount of two times the annual salary plus dependent coverage. The
current premium rate for this insurance is $ . 25 per $1 , 000 of life
coverage . The Acordia Company is proposing no increase in the rate;
again a positive development .
Lona Term Disability Coverage
Currently, the City of Redding provides long term disability coverage to
employees in the amount of 600 of salary after a 90 day waiting period.
We are very pleased that UNUM has guaranteed another year of coverage
with no rate increase; thus maintaining the . 77% of covered payroll .
i •
Employee Benefits Program
June 16 , 1993
Page 2
Third Party Administration
Currently, the City contracts with Coresource Administrators to process
medical and dental claims . Coresource is currently paid at a rate of
$10 . 86 per employee per month representing an annual cost of $110 , 640 .
Coresource is proposing no rate increase for the coming year; another
positive development . While we have experienced a few bumps in the road
during the last few months, we believe the problems have been identified
and straightened out .
Employee Benefits Broker Consultant
Since 1985 , the City has utilized the services of an employee benefits
broker consultant . The function of this consultant has been to yearly
shop and negotiate renewals in the volatile municipal employee benefits
market (not just passively accepting renewals ) .
1 . Recommended a change in 1988 in third party administrators from
Gallagher Bassett to Coresource (Concept) Administrators , a move
that saved the City $25 , 000 in the first year.
2 . In 1990 our broker consultant was instrumental in negotiating and
implementing an agreement with Occupational Urgent . Care System
(OUCH) , which offered substantial discounts at OUCH facilities .
Between July 1990 and December 1991 claims discounts have saved the
City approximately $500 , 000 .
3 . The broker consultant has offered advice on the complex
relationship between Federal legislation and the employee benefits
field. For example, a recent case was resolved having to do with
COBRA and dependent eligibility in a divorce case.
4 . The broker consultant also conducts a funding analysis used for
budget purposes and the premiums retirees should be paying given
Council policy of 50-50o premium sharing.
5 . Negotiated non-exclusive arrangements with the City' s major health
providers to save additional money.
As with other elements of the City' s group insurance program Mr.
Bertolina is proposing no increase in his broker consultant fee of
$26 , 300 .
0 o
Employee Benefits Program
June 16 , 1993
Page 3
Conclusion
With the increase in the specific stop loss premium and the other elements of
the City' s group insurance premium holding constant, the City' s overall fixed
cost increase will only go up 5 . 4%; representing an increase significantly
below the medical inflation rate which has greatly exceeded the consumer
price index. Staff, therefore, recommends these renewals be accepted. Funds
are included in fiscal year 1993-94 budget to accommodate these costs .
Issues
Should the City implement the above recommendations to renew these elements
of the City' s employee benefits program?
Alternatives
1 . Make the renewals as outlined above .
2 . Do not renew and direct staff to do more research on municipal insurance
markets .
Recommendations
Based upon research of the insurance market conducted by the City' s employee
benefit broker consultant, it is staff' s recommendation the above outlined
actions be taken.
Attachments
Letter from Charles E . Bertolina and resolution.
BUSINESS INSURANCE SERVICES
We Make A Difference Insurance Specialists
June 4, 1993
Mr. James Bristow
Personnel Manager
CITY OF REDDING
760 Parkview Avenue
Redding, CA 96001
RE: CITY OF REDDING
EXCESS LOSS RENEWAL
EFFECTIVE JULY 1, 1993
Dear Jim:
Once again, I am pleased to present our report and
conclusions concerning the referenced Excess Loss renewal for
the policy period commencing July 1, 1993.
I would like to point out a few things to keep in mind as you
C review the attachments.
1. Stop-Loss Coverage
As we proceeded through the marketing process, we not
only requested stop-loss quotes from other carriers; we
also were able to negotiate with Acordia to lower the
original renewal by 15%. We continue to discuss the
renewal with Acordia in an attempt to further reduce the
costs.
You will also note that we have been able to secure quite
competitive quotes from two other stop-loss carriers. It
is important to point out that the options have quoted
15/12 contracts and Acordia has quoted a "paid" contract
which is better. A "paid" contract allows for payment of
all claims no matter when they were incurred. A "15/12"
contract limits us to a window of claims incurred 90 days
prior to the renewal date. This could be meaningful
depending upon the claims lag and explains some of the
cost differential.
47 Quail Court, Suite 313, Walnut Creek, California 94596
Employee Benefits: Property&Casualty: Life& Disability:
(510) 947-1831 FAX (510) 947-1364 (510)947-3505 FAX(510)947-1364 (510) 947-1831 FAX (510)947-1364
James Bristow
June 4, 1993
Page 2
Again, I must stress, whenever considering making a move
in stop-loss carriers, it is imperative to know the
potential claims that are sitting in the wings.
Sometimes, it is more prudent to accept the renewal even
though it might be a bit more expensive in fixed dollar
costs.
Therefore, based upon the information compiled, I believe
it would be in the best interest of the City to renew
with Acordia, effective July 1, 1993.
2. Administration Comparison
The second attachment will give the City some of the
administration options available, should you determine a
change is appropriate. You will see that, dollar wise,
CoreSource is the least costly. We were able to convince
Core Source to hold their costs for another year due to
the recent challenges presented to the City.
3. Long Term Disability
The renewal for the Long Term Disability (LTD) program
has been delivered and we are pleased to tell you we have
been able to negotiate no increase in rates through June
of 1994. We recommend accepting the renewal as
negotiated.
4. PPO Arrangement
The last step to final implementation of the PPO
arrangement consists of the approval by all parties to
the provisions. I recommend that the final agreement be
reviewed by the City Attorney as well as an ERISA
attorney so that we may be certain the contents are in
the City's best interest. We have access to an ERISA
attorney and would be happy to find out what his charges
would be. Jim, we will discuss this further at our
earliest opportunity.
James Bristow
June 4 , 1993
Page 3
I believe this data will give you the necessary information
to make your final renewal decision.
Jim, I have calendared to attend the Special City Council
meeting slated for June 23rd if my services are needed.
Please give me a call to confirm the date and time. Also,
after you have had a chance to review the enclosures, feel
free give me a call with any questions.
Sincerely,
Charles E. Bertolina,
Principal
CEB/j m
Enclosures
T-