HomeMy WebLinkAboutReso 92-310 - Approve entering into & authorize mayor to execute renewal contracts for 07/01/92 through 06/30/93 for he Acordia Co, Unum Life Ins Co of Amer, Concept Admin Inc, and CEB Business Ins Serv RESOLUTION NO. q ? -_3 i Ca
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, 1992, THROUGH JUNE 30, 1993:
1) THE ACORDIA COMPANY (PREVIOUSLY ANTHEM COMPANIES)
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 CONCEPT ADMINISTRATORS INC.
4) BUSINESS INSURANCE CONSULTING AGREEMENT WITH
CHARLES E. BERTOLINA, DOING BUSINESS AS CEB
BUSINESS INSURANCE SERVICES
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WHEREAS, pursuant to the terms of the attached Report to
City Council (forming part of this Resolution) dated June 30,
i1992 , the Director of Personnel Services has recommended renewing
the following contracts for the period July 1, 1992, . through
June 30, 1993 :
1. The Acordia Company (formerly Anthem Companies) 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 Concept N
Administrators Inc. ; 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, 1992, through June 30, 1993, in the
amounts of and/or rates set forth in the attached Report to City
Council:
1. The Acordia Company ( formerly Anthem Companies) 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 Concept
Administrators Inc. ; 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
signature of the Mayor and to impress the official seal of the
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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
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the City of Redding on the 7th day of July , 1992, and was duly
adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Anderson, Arness, Dalh, Kehoe & Moss
NOES: COUNCIL MEMBERS: None.
! ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
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CHARLIE MOSS, Mayor
City of Redding
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A ST:
CONNIE STR HMAYER, #rty Clerk
F RM PROVED:
RAN ALL A. HAYS, City Attorney
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CITY OF REDDING,
ITEM NO 9-7 (a) REPORT TO C Y COUNCIL.
i MEETING DATE July-7, 1992
4 APPPOVED BY
DE°AATMENT DIRECTOR DATE : June 30 , 1-992
y992
James Bristow
CODE : P-100-150-000
GTv r�NAGEP
7�. FROM: Director of Personnel
i 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 , 1992 through June 30 , 1993 .
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
i industry as stop loss protection. In addition, we buy insurance for our life
and long term disability benefits .
jMedical Reinsurance
!i Currently the City purchases specific stop loss insurance to cover
exposure for specific medical claims above $75 , 000 and in the aggregate
for claims exceeding $3 , 537 , 801 . We currently pay insurance premiums
for this protection in the amount of $164 , 387 and $13 , 000 respectively.
Our Broker Consultant has shopped the market (please see attached
report) and delivered a renewal with the Acordia Company of $152 , 496 and
$15 , 000 . The annual premium for this coverage is lower than our current
i cost due to the recommendation of our Broker Consultant that a savings
of $65 , 000 ( over the renewal at the current stop loss level ) can be
achieved by assuming $25 , 000 more risk. While last year showed a few
i; claims approaching the stop loss level , overall experience in the last
few years indicates we have had few "catastrophic claims" , indicating
this is probably a sound business move .
Life Insurance
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;i 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 $ . 24 per $1 , 000 of life
it coverage . The Acordia Company is proposing a slight increase to 5 . 25
per $1 , 000 of coverage, representing approximately $5 , 500 a year
iincrease .
Loner 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 quaranteed another year of coverage
with no rate increase; in fact, the rate is reduced from . 80% to . 77% of
covered payroll .
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Employee Benefits Program
June 30 , 1992
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Third Party Administration
Currently, the City contracts with Concept Administrators to process
medical and dental claims . Concept is currently paid at a rate of $9 . 92
per employee per month representing an annual cost of $99 , 756 . Concept
is proposing a rate increase to $10 . 86 per employee per month for a
itotal annual cost of approximately S109 , 208 . This is an increase of
9 . 50, which represents an annual increased cost of $9 , 452 . Concept ' s
performance in processing and paying medical and dental claims has been
good and their quoted rate is the lowest obtained by the broker
consultant , therefore , staff believes the increase is justified.
Employee Benefits Broker Consultant
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j 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) . In addition, the broker
consultant has :
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1 . Recommended a change in 1988 in third party administrators from
Gallagher Bassett to Concept Administrators , a move that saved the
City $25 , 000 in the first year. Concepts current rate of $9 . 92 per
employee per month is lower than the rate Gallagher Bassett was
charging in 1988 ( $10 . 67 ) .
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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
i 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
I� Council policy of 50-50o premium sharing.
Last year staff made a commitment to go through a formal request for proposal
( RFP ) process for employee benefits broker consultant services . Since Mr .
Bertclina was selected in 1987 through a similar process ; this year a formal
process was again conducted. Given the fact the City, like every other
ii public and private employer, is experiencing disturbing increases in health
plan costs , it is the recommendation of a panel composed of the Director of
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Employee Benefits Program
June 30 , 1992
Page 3
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Finance , Director of Public Works , ', Risk Manager, Director of Information
Systems , and Director of Personnel that Mr. Bertolina ' s proposal in the
amount of $26 , 300 per year be accepted. While Mr . Bertolina ' s proposal is
h_gher than the next ranked competitor by $6 , 300 , we believe that with health
plan costs being such a significant issue in this upcoming year, and given
Mr . Bertolina' s specific knowledge and skill in dealing with employee
benefits issues facing local government , that it makes sense for the City to
,I continue to use the services of Mr. Charles Bertolina.
Conclusion
Surprisingly, even with the increase in the life and third party
administrator rates , the City' s overall fixed costs ( the sum of medical
reinsurance premiums , life insurance and third party administrator rates )
will be lower for fiscal year 1992-93 than for 1991-92 . Staff, therefore ,
recommends these renewals be accepted. Funds are included in fiscal year
'j 1992-93 budget to accommodate these costs .
Issues
Should the City implement the above recommendations to renew these elements
of the City' s employee benefits program?
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Alternatives
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1 . Make the renewals as outlined above .
2 . Do not renew and direct staff to do more research on municipal insurance
markets .
Recommendations
'i 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.
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Attachments
Letter from Charles E . Bertolina and resolution.
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BUSINESS INSURA' A SERVICES
We Make A Di!ference Insurance Special�sts
June 17 , 1992
Mr. James Bristow
Personnel Manager
CITY OF REDDING
760 Parkview Avenue
Redding, CA 96001
RE: JULY 1 , 1992 EXCESS LOSS RENEWAL
Dear Jim:
The time has come, once again, for us to present our report
and conclusions concerning the City of Redding' s July 1 , 1992
renewal . The process consists of several components and I
will address each one separately, below.
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STOP-LOSS COVERAGE
As is our standard practice , we extensively shopped the stop-
loss markets to be sure you have the most competitive package
available today ( see Bid List detail attached) . Our
preliminary survey revealed approximately twenty viable
markets who pursue public sector clients. Of those twenty
carriers , ten of them declined, as they were unable to be
competitive with the Anthem/Acordia renewal and three more
respondents' quotes were much to high to consider. Five more
carriers were outstanding at the time of our preliminary
presentation. Since then we have received declinations due
to their inability to be competitive.
We do have a competitive quote from one carrier and have
presented it for your review. Although their financial
ratings are solid, I am not convinced the savings are
sufficient to make the change. Additionally, our industry
awareness makes us a little hesitant to recommend it for
implementation. If implemented, we might expect an
unacceptable 1993 renewal ; thus, thrusting us into the
marketplace in a somewhat more desperate situation.
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) 947-0277 FAX (510) 947-1364
Mr. James Bristow
June 17 , 1992
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!; When reviewing our analysis , it is important to keep a few
'I items in mind. First , the costs of the current plan are
driven by plan design. Therefore , until we are able to
implement more managed care features in the plan, we can
II expect the costs to continue to increase at a, probably,
unacceptable rate. Also , the fact that we pay the full
II premiums for both Employees and Dependents , few of the
II employees carry other coverage . As one of the largest
employers in the area, I believe it is safe to say we are
carrying the brunt of the costs for medical coverage in the
area.
The renewal analysis includes a comparison of the City' s
current Acordia costs with the renewal offerings of $75 , 000 ,
$85 ,000 and $100 , 000 specific levels. It also includes
Option IV which presents the alternative discussed above .
Based on our market review, I would recommend the following :
j1 . As in the past , we believe it would be prudent to look at
making some plan design changes which would require the
employee to share a bit greater portion of the costs of
our claims dollars. At the very least , implementing
some managed care provisions such as Mandatory
Utilization Review and/or the where-with-all to include
other plan design changes to induce the use of a PPO
network.
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2 . Making our plan somewhat contributory on the dependent
premiums would assist in reducing the overall costs to
j the City.
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3 . It is time to consider increasing the Specific level from
1 $75 , 000 to either $85 , 000 or $100 , 000. The attached
Specific Level Analysis will give you an idea of the
savings versus the risk involved to making this change.
First, the large claims experience over the last several
years indicates it should be a good buy. This year, we
experienced nine large claims of which two have breached
j the specific stop-loss level . Looking at years past ,
this may well be a statistical aberration.
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Mr. James Bristow •
June 17 , 1992
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A second factor adding support to our consideration of a
higher specific level is the reinsurance market itself .
The market considers the normal ratio of Specific to
Aggregate to be 5%. If the $100 ,000 specific level is
chosen, our ratio would be more like 2 . 5% which indicates
we have definitely improved on this underwriting
guideline. Additionally, we are happy to report , should
you choose the $100,000 Specific Level option, your
overall fixed costs will be lower for the 1992/93 Plan
Year than they were for the 1991/92 Plan Year.
Therefore , I believe we need to discuss the
recommendation further.
Jim, although the points addressed above are valid and must
be considered, we are also aware that Benefits are
collectively bargained.
THIRD PARTY ADMINISTRATION
When reviewing the stop-loss coverage, we also surveyed
viable Third Party Administrators to be sure we were
receiving the most competitive rate for the quality services
we required. The results are as follows:
Current Renewal Option I Option II
Concept Concept ABA * WSA
Admin. 9.42 10. 36 13 . 25 9. 50
COBRA . 50 . 50 Included 1 . 10
Run-In N/A N/A Included . 79
Total 9 . 92 10 . 86 13 . 25 11 . 39
% Increase N/A + 9% + 34% + 15%
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* Set up fees of between $3000 and $5000 would have to be
added to each of these fees .
Concept' s fees are competitive, and, based upon your feedback
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and our experience, we evaluate their service as being very
good over the last several years . Additionally, our savings
through OUCH have served us well . Therefore, we recommend
staying with Concept Administrators .
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i Mr. James Bristow
June 17 , 1992
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LONG TERM DISABILITY
With regard to the Long Term Disability coverage , we have
j been able to achieve a reduction in rate from . 80% to . 77% of
covered payroll . The rate will be guaranteed until July 1 ,
1993 .
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I look forward to answering any questions you might have , so ,
please feel free to call .
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Sincerely,
Charles E. Bertolina,
Principal
Enclosures
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