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Home My WebLink AboutOrdinance 4526 0 ORDINANCE NO. 4526 AN ORDINANCE WAIVING THE REQUIREMENTS OF FORMAL COMPETITIVE BIDDING TO ALLOW FOR THE RENEWAL OF EMPLOYEE GROUP POLICIES WITH US ABLE LIFE TO PROVIDE LIFE, ACCIDENTAL DEATH AND DISMEMBERMENT, AND LONG TERM DISABILITY INSURANCE COVERAGE, AND WITH BLUE CROSS/ BLUE SHIELD FOR THE GROUP MEDICAL PLAN. WHEREAS, multi-year renewals of employee life, health, and disability insurance plans provide cost savings to both the City of Fayetteville and her employees; and, WHEREAS, such renewals offer employees and their family members a greater degree of predictability and stability in their benefit plans; and, WHEREAS, the City Council finds that such circumstances constitute an exceptional situation where formal competitive bidding is not feasible or practical. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1 . That the City Council of the City of Fayetteville, Arkansas, hereby waives the requirements of formal competitive bidding to allow for the renewal of employee group policies with US Able Life to provide life, accidental death and dismemberment, long term disability insurance coverage, and with Blue Cross/ Blue Shield for the group medical plan. Section 2. That the City Council of the City of Fayetteville, Arkansas hereby approves the renewal of employee group policies with US Able Life to provide Life, Accidental Death and Dismemberment, and Long Term Disability insurance coverage, with five one-year options to renew thereafter. Section 3. That the City Council of the City of Fayetteville, Arkansas hereby approves the renewal of the Blue Cross/Blue Shield Group Medical Plan, with five one- year options to renew thereafter. PASSED AND APPROVED this 4t^ day of November, 2003. I;F pY E rq. / , APPRO By. 4v DAN COODY, Mayor s� ! SON RA SMITH, City Clerk NAME OF FILE: Ordinance No. 4526 CROSS REFERENCE: Item # Date Document 1 11 /04/03 memo to mayor & city council draft ordinance staff review form 2 11 /07/03 memo to Michele Bechhold NOTES: pR � �Szb L4 rudV F " ETTEVI LLE THE CITY OF FAYETTEVILLE, ARKANSAS HUMAN RESOURCES DIVISION 113 W. Mountain St. Fayetteville, AR 72701 Telephone: 479-575-8278 TO: Mayor Dan Coody and the Fayetteville City Council THRU : Hugh Earnest, Chief Administrative Officer Stephen Davis, Finance & Internal Services Directo7d FROM : Michele Bechhold , Human Resources Director DATE : October 16 , 2003 SUBJECT: Group Insurance Renewals RECOMMENDATION : Staff recommends approval of the renewal for the group benefit plans for the year 2004 with five, one-year options to renew. Staff requests a bid waiver for the group medical plan and the various group life products. A further decision will need to be made on how the increased cost of the medical plan will be shared by the City and the employees. Staff recommends that the cost sharing decision be made concurrent with any decision regarding possible pay range adjustments. If proposed pay plan adjustments are approved , Staff recommends that Council approve an option to fund the increase in which the employees and the City share the cost of the new premium. This option , as well as others, is outlined on page three of this memo in the Budget Impact section. BACKGROUND: Our complete benefit package was bid out in 2002, for plan year 2003. The 2003 BCBS premium rates generated cost savings for the City by reducing the premiums by 12% on family contracts and 10.9% on individual contracts. This savings amount is projected to be approximately $219,052.51 by year end. The chart below shows actual and projected total premium costs over a three year period . (Figures exclude COBRA and retiree amounts. ) 2002 Actual Premium Paid2003 Projected Premium 2004 Estimated Premium $2,484,022.41 1 $2,2643969.90 $2,4761879 Our broker negotiated with Arkansas Blue Cross Blue Shield and reached agreement with them on a renewal increase of 9.5%, which generates rates for 2004 that are still less than the rates the City paid in 2002. The use of aggressive cost containment measures and the small number of large claims in 2003 have had a positive impact on the renewal rates. During the 2002 bid process we identified Unicare's quote as the second most competitive response. The 2004 renewal rates offered by Blue Cross Blue Shield are 1 0 still extremely competitive with the rates Unicare submitted for 2003. The new individual rate is $5.09 greater than Unicare's 2003 rate and the new family rate is $.31 less than the rate Unicare quoted in 2002. It would not be prudent to incur the expense and reallocation of productive resources to bid out and change to another carrier in this renewal scenario. After evaluating these factors, we determined that the most financially responsible option was to recommend approval of BCBS's 9.5% renewal increase. The life insurance products were quoted with a two year rate guarantee, so there is no rate change for 2004. These plans are running very smoothly and we decided that there was no need to bid these products this year. Staff is requesting approval for five, one-year options to renew these plans to simplify the renewal and Council approval process. If Council approves the options to renew, Staff will continue to carefully evaluate the pricing and value of the various products each year. Bids will be taken when any concern over the cost or value of a plan arises. These options to renew would allow Staff to request the broker to bid the products only when there is a business reason to do so. Staff would be able to bring renewals forward supported by a resolution rather than an ordinance. DISCUSSION : Medical Plan — The initial Blue Cross Blue Shield renewal offer for our current plan came in at a 13. 1 % increase. A significant portion of this increase can be attributed to current medical and drug cost trends. As of October 1 , 2003, BCBS projected the medical increase trend at 13.5% and the drug trend at 22.98% . During the negotiation process, we evaluated discounts that we could achieve by increasing our large claims pooling level. The decision was made to increase our large claims pooling amount from $ 100,000 to $ 150,000 and we agreed upon a renewal increase of 9. 5%. BCBS offered a 9% increase to the City if we elected to change our dental insurance plan from Delta Dental to BCBS. Life & Disability Insurance — The rates that were quoted during the bid in 2002 for Life, Accidental Death & Dismemberment, and Long-term Disability coverages had a two-year rate guarantee. Based on our previous decision to remain with USAble in 2003 and the fact that there would be no change in the rates for 2004, we did not seek bids on these coverages. Any change in carriers for these products would require the expense of a City-wide enrollment and educational efforts. Dental Plan — Dental premiums are 100% employee paid. Our current carrier, Delta Dental has proposed a 23% increase over the current dental rates. Utilization of the plan is the driving factor behind this rate increase. Based on these renewal rates, dental was bid out and quotes were received from several companies. This information was presented to the Wage & Benefit Committee, and after consideration, they voted to retain our current plan with Delta Dental . A summary of the change in employee cost from this year's rates to the new rates is below. 2003 Monthly Rates 2004 Monthly Rates Individual 1 15.83 19.46 Family 52.26 64.28 Vision Plan — The City added a voluntary vision plan offered by AIG-NVA in 2003. About 200 employees are currently enrolled in the plan. During the year we experienced 2 0 continuing administrative difficulties with NVA's billing processes and this led us to take bids for vision coverage. The Wage & Benefit Committee has evaluated the quotes received. The Committee has selected Starmount as the carrier for our voluntary plan. This package offered both premium reductions and enhanced benefits to the participants. Budget Impact: The only item that generates a potential increased cost for the City is the group medical plan. As stated earlier, the life insurance rates did not change, dental is 100% employee paid, and the cost of voluntary vision coverage is paid entirely by the employee. Based on a group medical census of 242 individual contracts and 355 family contracts, the renewal rates generate a total increased cost of $219, 183. As presented in the opening paragraph, Staff is recommending that Council's decision regarding the funding of the increased premium amount be linked to the decision regarding proposed changes to the salary structure. If changes to the salary structure are approved as presented in the proposed 2004 Budget, Staff recommends that the City and the employee share in the increased premium cost. The charts below outline the Staff recommended option and other potential rate structures to fund the premium increase. PREMIUM AMOUNTS — STAFF RECOMMENDED PERCENTAGE SPLIT 2003 Individual 2003 Family 2004 Individual 2004 Family City 173.94 373.26 182.20 408.73 Employee 0 49.80 8.26 54. 52 OTHER POSSIBLE RATE STRUCTURES CITY FUNDS ENTIRE INCREASE 2003 Individual 2003 Family 2004 Individual 2004 Family city 173.94 373.26 190.46 413.45 Employee 0 49.80 0 49.80 DOLLAR AMOUNT OF INCREASE SPLIT EVENLY 2003 Individual 2003 Family 2004 Individual 2004 Family City 173.94 373.26 182.20 393.37 Employee 0 49.80 8.26 69.88 EMPLOYEE FUNDS ENTIRE INCREASE 2003 Individual 2003 Family 2004 Individual 2004 Family city 173.94 373.26 173.94 373.27 Employee 0 49.80 16.52 89.98 Staff is available to answer any questions you may have. 3 ORDINANCE NO, AN ORDINANCE WAIVING THE REQUIREMENTS OF FORMAL COMPETITIVE BIDDING TO ALLOW FOR THE RENEWAL OF EMPLOYEE GROUP POLICIES WITH US ABLE LIFE TO PROVIDE LIFE, ACCIDENTAL DEATH AND DISMEMBERMENT, AND LONG TERM DISABILITY INSURANCE COVERAGE, AND WITH BLUE CROSS/BLUE SHIELD FOR THE GROUP MEDICAL PLAN. WHEREAS, multi-year renewals of employee life, health, and disability insurance plans provide cost savings to both the City of Fayetteville and her employees; and, WHEREAS, such renewals offer employees and their family members a greater degree of predictability and stability in their benefit plans; and, WHEREAS, the City Council finds that such circumstances constitute an exceptional situation where formal competitive bidding is not feasible or practical. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas, hereby waives the requirements of formal competitive bidding to allow for the renewal of employee group policies with US Able Life to provide life, accidental death and dismemberment, long term disability insurance coverage, and with Blue Cross/Blue Shield for the group medical plan. Section 2. That the City Council of the City of Fayetteville, Arkansas hereby approves the renewal of employee group policies with US Able Life to provide,Ze Accidental Death and Dismemberment, and Long Term Disability insuranrgeeco4rage, with five one-year options to renew thereafter. Section 3. That the City Council of the City of Fa7f" ville, Arkansas hereby approves the renewal of the Blue Cross/ Blue S " Id Group Me 'cal IFI , with fiv one- year options to renew thereafter. PASSED AND APPROOVVED 4 day of No em.. , 2003 P OVED 4 DAN COODY, Mayor A7E -- � By: . SAO D4 ITH, City Clerk AREVIEW FORM - FINANCIAL OBLIGAVION XX AGENDA REQUEST CONTRACT REVIEW GRANT REVIEW For the Fayetteville City Council Meeting of : November 4, 2003 FROM : Michele Bechhold Human Resources Finance & Internal Services Name Division Department ACTION REQUIRED : Approve renewal of the employer group benefits for the year 2004 with five one-year options to renew. Staff is requesting a bid waiver for the medical and life insurance products. To be determined $ - Cost of this request Category/ Project Budget Program Category / Project Name Account Number Funds Used to Date Program / Project Category Name $ Various Project Number Remaining Balance Fund Name BUDGET REVIE Budgeted Item Budget Adjustment Attached Budget Manager Date CONTRACT/GRANT/LEASE REVIEW : & / i 03 AA n couting Manager DInternal Au itor Date � Dz o P �" to a \ I03 City Atto ney Da e Purchasing Manager Date STAFF R . OMME � N Approve insurance renewals and contracts. 221 v �D / 71 Received in Mayor ' s Office ivision Head Date Date Cross Reference : Department Director Date Previous Ord/Res # : —f � iF nance & Internal Services Dir . �c Date Orig . Contract Date : Orig . Contract Number : Chief m , nis tive O ' cer Date New Item : Yes No Mayor Date FAYETTEALLE THE CITY OF FAYETTEVILLE, ARKANSAS DEPARTMENTAL CORRESPONDENCE To: Michele Bechhold Human Resources From: Clarice Buffalohead-Pearman City Clerk's Division Date: November 7, 2003 Re: Ord. No. 4526 Attached hereto is a copy of the above ordinance passed by the City Council, November 4, 2003, waiving the requirements of formal competitive bidding for US Able Life and Blue Cross/Blue Shield for the appropriate insurance. The original ordinance will be microfilmed and recorded in the city clerk's office. If anything else is needed please let the city clerk's office know. /cbp Attachment(s) cc: Nancy Smith, Internal Auditor