HomeMy WebLinkAbout189-02 RESOLUTIONRESOLUTION NO. 189-02
A RESOLUTION APPROVING THE RENEWAL OF EMPLOYEE
GROUP POLICIES WITH US ABLE LIFE TO PROVIDE LIFE,
ACCIDENTAL DEATH AND DISMEMBERMENT, LONG TERM
DISABILITY INSURANCE COVERAGE, AND TO ADMINISTER
THE SECTION 125 CAFETERIA PLAN FOR POLICY YEAR 2003;
AND WITH BLUE CROSS/BLUE SHIELD FOR THE GROUP
MEDICAL PLAN FOR POLICY YEAR 2003.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
FAYETTEVILLE, ARKANSAS:
Section 1. 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, Long Term Disability
insurance coverage and to administer the Section 125 Cafeteria Plan for policy
year 2003.
Section 2. That the City Council of the City of Fayetteville, Arkansas
hereby approves the renewal of the Blue Cross/Blue Shield Group Medical Plan
for policy year 2003.
PASSED AND APPROVED this 3rd day of December, 2002.
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ATTEST:
By
.�ll�"i �liY�•1/
EATHER WOODRUFF, City l.0 erk
APPROVED:
By:
DAN COODY, Mayor
NAME OF FILE:
CROSS REFERENCE:
Item #
Date
Resolution No.189-02
Document
1
12/03/02
Resolution # 189-02
2
12/02/02
Staff review form
3
12/09/02
Memo from Heather Woodruff, City Clerk to Michele
Bechhold, Human Resources
NOTES:
• STAFF REVIEW FORM
X Agenda Request
_ Contract Review
Grant Review
For the Fayetteville City Council meeting of e(3 17 0 b Z
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FROM:
Name Division Department
ACTION REQUIRED:
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COST TO CITY:
$ In df 4t,d $
Cost of this Request
Category/Project Budget Category/Project Name
Account Number Funds Used to Date Program Name
Project Number
Remaining Balance Fund
BUDG
T REVIEW
Budget M{ ager
\<Budgeted Item Budget Adjustment Attached
Administrative Services Director
CONTRACT/GRANT/LEASE REVIEW: GRANTING AGENCY:
Accounting Manager i Date Date
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Purchasing Officer
Date
lalalb�
Date
ADA Coordinator
Internal Auditor Date
STAFF RECOMMEND TION: Approval of the Resolution a�.va,..d..47 cat-,tdc-'CCS),
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Date
Division Head
Cross Reference
Department Director Da r New Item: Yes No
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Adm' trative - rvices D rector Date' , Prev Ord/Res #: •
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Date Orig Contract Date:
Page 2
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STAFF REVIEW FORM
Description Meeting Date
Comments: Reference Comments:
Budget Coordinator
Accounting Manager
City Attorney
Purchasing Officer
ADA Coordinator
Internal Auditor
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FAYETTEVI LLE
THE CITY OF FAYETTEVILLE, ARKANSAS
HUMAN RESOURCES DIVISION
113 W. Mountain St.
Fayetteville, AR 72701
Telephone: 479-575-8278
TO: Mayor Coody and the City Council
THRU: Stephen Davis, Interim Administrative Services Directo
FROM: Michele Bechhold, Human Resources Director
DATE• November 22, 2002
SUBJECT: Group Insurance Contracts
The renewal date for the City's group insurance plans is January 1, 2003. This
year the City chose to utilize our broker of record, Ramsey, Krug, Farrell &
Lensing to bid out all our insurance products. The deadline for carriers to submit
proposals was November 15, 2002. Our consultant, Jeff Jackson, is still
engaged in negotiations with the top carriers. Additional information will be
provided on this item at the Agenda Session on Tuesday, November 26, 2002.
FAYETTEVILLE
THE CITY OF FAYETTEVILLE, ARKANSAS
HUMAN RESOURCES DIVISION
113 W. Mountain St.
Fayetteville, AR 72701
Telephone: 479-575-8278
TO: Mayor Coody and the City Council
THRU: Stephen Davis, Interim Administrative Services Director
FROM: Michele Bechhold, Human Resources Director
DATE: November 25, 2002
SUBJECT: Group Insurance Contracts
The renewal date for the City's group insurance plans is January 1, 2003. This
year the City chose to utilize our broker of record, Ramsey, Krug, Farrell & Lensing
to bid out all the insurance products in our benefit package. The deadline for
carriers to submit proposals was November 15, 2002.
Two factors weighed heavily in the City's decision to check the marketplace this
year. We wanted to find out if the marketplace had changed and seek out any
possible carriers that had not been identified in past years. From a financial
standpoint, we also needed to assess the value of the programs that we have in
place.
The information below is a summary of the final results of the bidding and
negotiation process. At the end of each section is Staffs recommendation for that
specific product.
Medical Insurance
Proposals from two carriers, Arkansas Blue Cross Blue Shield and Unicare were
considered to be the most competitive responses to the City because they fit our
needs in the respects of network access, (physician and hospital access), the
benefits offered closely matched our current plan design, and the cost of the other
proposals was significantly higher. The rates quoted by Blue Cross Blue Shield
without any benefit changes represent an annual cost savings of $280,277 from
the current rate structure. Unicare's rates would yield annual savings of $77,287.
There are some notable differences between these two plan designs. The Blue
Cross Blue Shield quote is an exact benefit match to our current plan Unicare's
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plan includes a $50 physician office co -pay, (our current plan does not utilize office
visit co -pays) and offers the employee a choice of networks. Unicare offers a
dual -network design with a third national network overlay. This design gives an
employee the opportunity to make a choice between Washington Regional Medical
Center and the physicians in that network and Northwest Medical Center with the
physicians who are in their network. Blue Cross Blue Shield's network includes
Washington Regional and provides national coverage, but providers in Springdale
are out of network. Basically then, the major difference between the two plans is
the element of employee choice. The quoted monthly rates are below.
Recommendation: It is in the City's best financial interest for Staff to recommend
AR Blue Cross Blue Shield as the carrier for medical insurance and take
advantage of the savings generated by the lower rates. There are no
disadvantages or benefit reductions to the employees under this option because
the plan will remain exactly as it is.
Staff is recommending that Council approve a premium structure that allows the
City to retain the cost savings. We propose to accomplish this by reducing the
employer's contribution to total premium and leaving the employee's premium at its
current amount. We are recommending this approach because of the large
increase in the City's contribution to the health premium cost since 1998. The
chart below outlines how employee contributions and City contributions to costs
have changed since 1998.
Individual Coverage Costs
Major Medical ,
Year Employee City Total Employee
1998 $11.06 $143.59 $15465 , N/A-
1999 $11.06 $159.26 $170.32 N/A
2000 _ $11.06. $159.26 $170.32 $0.00 $149.8.8 1$149188-
2001 $37.32 $159.84 $197.16 $0.00
2002 N/A
PPO'._"
City
Total
$159.84 $159.84
$0.00 $195.224' _ . $195.22
Family Coverage Costs
Major Medical PPO:
Year Employee City Total Employee City
1998 $99.27 $275.02. $374.29. N/A__
1999 $99.27 $312 96 $412.23 N/A
2000. $99:27 $312.96. $41223 $49':79_:
2001 $144.33 $332.80 $477.13 $49.79
2002 N/A $49:80:
Total
$312.97`i . $362:76,_
$332.81 $382.60
$425101. $474.81"
The cost to the employee for individual coverage has decreased from $11.06 per
month in 1998 to $0.00 in 2002. The City pays the full premium. On family
coverage the employee's premium was $99.27 per month in 1998 and is currently
$49.80 per month.
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BCBS
Unicare
Employee Only
174.00
185.00
Family
423.00
464.00
Recommendation: It is in the City's best financial interest for Staff to recommend
AR Blue Cross Blue Shield as the carrier for medical insurance and take
advantage of the savings generated by the lower rates. There are no
disadvantages or benefit reductions to the employees under this option because
the plan will remain exactly as it is.
Staff is recommending that Council approve a premium structure that allows the
City to retain the cost savings. We propose to accomplish this by reducing the
employer's contribution to total premium and leaving the employee's premium at its
current amount. We are recommending this approach because of the large
increase in the City's contribution to the health premium cost since 1998. The
chart below outlines how employee contributions and City contributions to costs
have changed since 1998.
Individual Coverage Costs
Major Medical ,
Year Employee City Total Employee
1998 $11.06 $143.59 $15465 , N/A-
1999 $11.06 $159.26 $170.32 N/A
2000 _ $11.06. $159.26 $170.32 $0.00 $149.8.8 1$149188-
2001 $37.32 $159.84 $197.16 $0.00
2002 N/A
PPO'._"
City
Total
$159.84 $159.84
$0.00 $195.224' _ . $195.22
Family Coverage Costs
Major Medical PPO:
Year Employee City Total Employee City
1998 $99.27 $275.02. $374.29. N/A__
1999 $99.27 $312 96 $412.23 N/A
2000. $99:27 $312.96. $41223 $49':79_:
2001 $144.33 $332.80 $477.13 $49.79
2002 N/A $49:80:
Total
$312.97`i . $362:76,_
$332.81 $382.60
$425101. $474.81"
The cost to the employee for individual coverage has decreased from $11.06 per
month in 1998 to $0.00 in 2002. The City pays the full premium. On family
coverage the employee's premium was $99.27 per month in 1998 and is currently
$49.80 per month.
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The City's cost for individual coverage has increased 35% since 1998, from
$143.59 to $195.22. For family coverage the cost has increased 54%, from
$275.02 to $425.01. To review these increases from an annualized standpoint, we
took December 1998 and December 2002 census information and projected the
City's annual cost based on this data. Annual cost for 1998 was estimated at
$1,357,144 and for 2002 at $2,309,501. This represents an 70% increase in cost
for the City's portion. Some of this increase can be attributed to a 10% increase in
the number of covered members and a shift towards more family contracts than
individual contracts in the plan.
Based on this data and the opportunity to cut costs without affecting benefits we
propose the following rate structure for medical premiums under a contract with
Blue Cross Blue Shield.
Proposed Blue Cross Blue Shield Rates 2003
This rate structure would place the employee's percentage of premium paid at
11% for family coverage, still well below the government industry average of 29%
as reported in the Hay Benefit Analysis.
The Unicare proposal is also a viable option because it generates savings over
current rates, but the amount is $202,990 less than the savings associated with the
Blue Cross Blue Shield rates.
As stated earlier the feature that really sets the plans apart is the element of choice
of network for the employee. Based on this and the fact that there are no major
benefit differences, Staff recommends that if the Council chooses to select
Unicare, the City still keeps their contribution to the premium cost at the rates
proposed above for the BCBS contract. In this scenario the employee would be
paying a higher premium for the opportunity to choose a network This would
create the following rate structure.
Proposed Unicare Rates 2003
Employee
City
Employee Only
0.00
174.00
Family
49.80
373.20
This rate structure would place the employee's percentage of premium paid at
11% for family coverage, still well below the government industry average of 29%
as reported in the Hay Benefit Analysis.
The Unicare proposal is also a viable option because it generates savings over
current rates, but the amount is $202,990 less than the savings associated with the
Blue Cross Blue Shield rates.
As stated earlier the feature that really sets the plans apart is the element of choice
of network for the employee. Based on this and the fact that there are no major
benefit differences, Staff recommends that if the Council chooses to select
Unicare, the City still keeps their contribution to the premium cost at the rates
proposed above for the BCBS contract. In this scenario the employee would be
paying a higher premium for the opportunity to choose a network This would
create the following rate structure.
Proposed Unicare Rates 2003
This rate structure places the employee's percentage of premium paid at 6% for
individual coverage and 20% for family coverage, still below the government
industry average of 29% from the Hay Benefit Analysis.
Dental Insurance
The City's dental insurance is currently provided by Delta Dental of Arkansas.
Their proposal was rated on the same coverage we currently provide and the rate
quoted is a 14% increase over 2002 rates. Among the bid responses, the rates of
other carriers were consistently 15% to 60% higher than the quote from Delta.
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Employee
City
Employee Only
11 00
174.00
Family
90.80
373.20
This rate structure places the employee's percentage of premium paid at 6% for
individual coverage and 20% for family coverage, still below the government
industry average of 29% from the Hay Benefit Analysis.
Dental Insurance
The City's dental insurance is currently provided by Delta Dental of Arkansas.
Their proposal was rated on the same coverage we currently provide and the rate
quoted is a 14% increase over 2002 rates. Among the bid responses, the rates of
other carriers were consistently 15% to 60% higher than the quote from Delta.
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Dental premiums are currently paid in full by the employee. The monthly rates
quoted are shown below.
Delta Dental Rate Comparison
Recommendation: Staff recommends that the City keep the dental coverage with
Delta Dental because their proposed rates provide the lowest amount of increase
of any responding carrier.
SUMMARY OF PROPOSED MEDICAL & DENTAL RATES FOR 2003
BCBS Opt Individual Coverage
Employee Cost Medical $0.00
Employee Cost Dental $15.83
Total Employee Cost $15.83
Total City Cost $174.00
BCBS Option Family Coverage
Employee Cost Medical $49.80
Employee Cost Dental $52.26
Total Employee Cost $102.06
Total City Cost $373.20
Unicare Opt Individual Coverage
$11.00
$15.83
$26.83
$174.00
Unicare Opt Family Coverage
$90.80
$52.26
$143.06
$373.20
Group Life and Long Term Disability Insurance
The City's benefit plan includes employer paid life and long term disability
coverage. Three carriers had competitive proposals for these products - USAble
Life, UNUM and Unicare The cost quoted below for USAble represents $36,028
in savings over current rates on the same life census. Rates and annualized costs
projected from these rates based on the September 2002 life census are detailed
below.
2002 Rates
2003 Rates
Employee Only
13.90
15.83
Family
45.80
52.26
Recommendation: Staff recommends that the City keep the dental coverage with
Delta Dental because their proposed rates provide the lowest amount of increase
of any responding carrier.
SUMMARY OF PROPOSED MEDICAL & DENTAL RATES FOR 2003
BCBS Opt Individual Coverage
Employee Cost Medical $0.00
Employee Cost Dental $15.83
Total Employee Cost $15.83
Total City Cost $174.00
BCBS Option Family Coverage
Employee Cost Medical $49.80
Employee Cost Dental $52.26
Total Employee Cost $102.06
Total City Cost $373.20
Unicare Opt Individual Coverage
$11.00
$15.83
$26.83
$174.00
Unicare Opt Family Coverage
$90.80
$52.26
$143.06
$373.20
Group Life and Long Term Disability Insurance
The City's benefit plan includes employer paid life and long term disability
coverage. Three carriers had competitive proposals for these products - USAble
Life, UNUM and Unicare The cost quoted below for USAble represents $36,028
in savings over current rates on the same life census. Rates and annualized costs
projected from these rates based on the September 2002 life census are detailed
below.
Recommendation. Staff recommends that we keep our life products with our
current carrier USAble Life. Unicare's rates do result in the greatest savings for
these products but they declined to quote short term disability. It is desirable to
have one carrier and one customer service center for all the life and disability
income products. UNUM and USAble are very close on their rates with UNUM
coming in a little under USAble's rate on the LTD. USAble provides flexible
spending account administration free of charge to its clients. If we changed to one
of the other carriers, we would have to pay a third party administrator to handle the
administration of our flex plan Staff believes that when the time to educate and
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USAble Life
UNUM
Unicare
Life Insurance
.21/1000
.21/1000.
.15/1000
Long Term Disability
.36/100
.34/100
.39/100
Annualized Costs
$140,047
$136,290
$124,989
Recommendation. Staff recommends that we keep our life products with our
current carrier USAble Life. Unicare's rates do result in the greatest savings for
these products but they declined to quote short term disability. It is desirable to
have one carrier and one customer service center for all the life and disability
income products. UNUM and USAble are very close on their rates with UNUM
coming in a little under USAble's rate on the LTD. USAble provides flexible
spending account administration free of charge to its clients. If we changed to one
of the other carriers, we would have to pay a third party administrator to handle the
administration of our flex plan Staff believes that when the time to educate and
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enroll employees is taken into consideration it would cost more than the $3757
difference between UNUM and USAble to change carriers.
Short Term Disability Insurance
The Hay Benefit Analysis pointed to a gap in our benefit coverage between sick
leave and the eligibility period for long term disability. A short term disability plan
would be one option to assist in bridging this gap Only two of the three carriers
listed 'above in the Life and LTD section provided a quote to the City on Short Term
Disability Unicare was not interested in quoting short term disability for
municipalities.
The rates for the STD coverage were:
USAble - .56/$10 of covered payroll, minimum benefit $100, max 70% or $750
UNUM - .38/$10 of covered payroll, 60% of income to $500 max
Recommendation: Staff is recommending that we add this coverage as a
voluntary, employee paid option. USAble's rate is higher, but it does provide a
higher maximum benefit.
Vision Coverage
The City's benefit package does not currently include any type of vision benefit.
Based on the quote of $5.30/month for employee only coverage, the projected cost
of adding employee only coverage as a group, City paid benefit is approximately
• $38,478.
Recommendation: In light of the City's current financial situation, Staff is not
recommending that we add any additional employer paid benefits at this time.
eDoc
eDoc is an Internet based, interactive medical advice resource. The Consultant's
recommendation includes implementing eDoc as a tool to possibly reduce the
number of office visits by members of our plan. The annual cost to the City for this
is projected to be $9075.00. This is based on a per employee, per month charge
and is incurred even if no one visits the website. Staff is recommending that we
utilize other, less costly education measures and gauge their effect on utilization
before we purchase a service that has a fixed cost.
Staff is available to answer any questions you may have.
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FAYETTEVILait.E
THE CITY OF FAYETTEVILLE. ARKANSAS
DEPARTMENTAL CORRESPONDENCE
To: Michelle Bechhold, Human Resources
From: Heather Woodruff, City Clerk
Date: December 9, 2002
Attached is a copy of Resolution No. 189-02 approving the renewal of employee group
benefits with US Able Life to provide life, accidental death and dismemberment, long
term disability insurance coverage and to administer the section 125 cafeteria plan for
policy year 2003 with Blue Cross/Blue Shield for the group medical plan for policy year
2003.
The original resolution will be microfilmed and filed with the City Clerk.
cc: Nancy Smith, Internal Auditor