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Home My WebLink About173-04 RESOLUTIONRESOLUTION NO.17 3- 0 4 A RESOLUTION EXERCISING THE FIRST OF FIVE ONE-YEAR OPTIONS TO RENEW EMPLOYEE GROUP POLICIES WITH USABLE 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 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 exercises the first of five one-year options to renew employee group policies with USAble Life to provide Life, Accidental Death and Dismemberment, and Long Term Disability insurance coverage. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby exercises the first of five one-year options to renew the Blue Cross/Blue Shield Group Medical Plan. PASSED AND APPROVED this 1s` day of November 2004. APPROV By: D II ./ dta COODY, Mayor ATTEST: 00174,,,..1/40,,, c S..,a. _ GST Y •�O�c '• S.G'P By: ,Thoka0 SON RA SMITH, City Clerk E ;FAYETTEVILLE: — 'A. — 9.9 co:Alm ' s :iWANSP.e\) S 'i1>1hi GTON„Ge..,. • NAME OF FILE: CROSS REFERENCE: Date Resolution No. 173-04 Document • 1 10/01/04 memo to mayor & City Council 2 draft resolution 3 Staff Review Form 4 memo to mayor & City Council 5 memo to Michele Bechhold 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 • • // City Council Meeting of October 19,2004 / 1-3 S7u1 /OSS/ 157u2 SAktJ// CITY COUNCIL AGENDA MEMO TO: Mayor Dan Goody and City Council THRU: Hugh Earnest, Chief Administrative Officer Stephen Davis, Finance & Internal Services Directo FROM: Michele Bechhold, Human Resources Directo DATE: October 1, 2004 SUBJECT: Group Insurance Renewals RECOMMENDATION: Staff recommends approval of the renewal for group benefit plans for the year 2005. Council approval will authorize Staff to exercise the 2005 option to renew our current benefit plans with Arkansas Blue Cross Blue Shield and USAble Life BACKGROUND: In 2003 Council approved the renewal of group benefits and provided for five one-year options to renew the plans with existing carriers. The medical, life and disability plans have continued to operate smoothly. The combination of effective cost controls, favorable claims experience, and aggressive negotiation have been successful in keeping recent medical premium costs below the double digit increases seen throughout the country. The chart below illustrates national increase trends and actual City premium increases. *Information obtained from the Kaiser Family Foundation's Employer Health Benefits 2004 Summary of Findings. Ramsey, Krug, Farrell & Lensing, the City's broker of record, facilitated the renewal process for 2005. After negotiations, BCBS has presented a renewal offer to the City for a 7.6% increase which incorporates a change to the benefit plan. DISCUSSION: Medical Plan - The initial Blue Cross Blue Shield renewal offer for our current plan came in at a 10.89% increase. The majority of this increase can be attributed to projections for future medical and drug cost trends. BCBS is projecting a trend increase factor of 13% for medical and 14% for drug cost. During the negotiation process, we requested BCBS to quote our plan with a benefit change to increase the out-of-pocket maximum. Currently the individual plan out-of-pocket maximum is $1,000; family plan out-of-pocket maximum is $2,000. The family maximum is met when two individuals in the family experience $1 000 out-of-pocket costs. (The $500 deductible is not counted towards the out-of-pocket maximum.) BCBS offered a 7.6% increase to the City if we elect to change our out-of-pocket maximum as stated. They also offered to shave another 1% from this quote if the City moved the dental insurance plan from Delta Dental to BCBS. 1 /46/4tf ',/z/o4 et»J5 10 (/0-.S-7Gf %s% Plan Year 2003 Plan Year 2004 National % Increase* 13.9% 11.2% City's % Increase 11.45% Decrease 9.5% *Information obtained from the Kaiser Family Foundation's Employer Health Benefits 2004 Summary of Findings. Ramsey, Krug, Farrell & Lensing, the City's broker of record, facilitated the renewal process for 2005. After negotiations, BCBS has presented a renewal offer to the City for a 7.6% increase which incorporates a change to the benefit plan. DISCUSSION: Medical Plan - The initial Blue Cross Blue Shield renewal offer for our current plan came in at a 10.89% increase. The majority of this increase can be attributed to projections for future medical and drug cost trends. BCBS is projecting a trend increase factor of 13% for medical and 14% for drug cost. During the negotiation process, we requested BCBS to quote our plan with a benefit change to increase the out-of-pocket maximum. Currently the individual plan out-of-pocket maximum is $1,000; family plan out-of-pocket maximum is $2,000. The family maximum is met when two individuals in the family experience $1 000 out-of-pocket costs. (The $500 deductible is not counted towards the out-of-pocket maximum.) BCBS offered a 7.6% increase to the City if we elect to change our out-of-pocket maximum as stated. They also offered to shave another 1% from this quote if the City moved the dental insurance plan from Delta Dental to BCBS. 1 /46/4tf ',/z/o4 et»J5 10 (/0-.S-7Gf %s% This information was presented to the Wage & Benefit Committee. Their recommendation was to accept the benefit change and ask the City to fund the entire increase in exchange for the employees agreeing to expose themselves to additional potential out-of-pocket costs. (Refer to Exhibit 1 for a history of out-of-pocket costs.) Life & Disability Insurance — USAble presented a renewal with no change to the rates for Life, Accidental Death & Dismemberment, and Long-term Disability coverage. Dental Plan — Dental premiums are 100% employee paid. Delta Dental proposed a 17% increase over current rates. As a part of their renewal presentation, Delta suggested that the City change the benefit structure to mirror the market more closely. The City's plan currently provides 100% coverage for Basic Restorative Services; most of the plans that Delta insures cover Basic Restorative services at 80%. Delta offered to hold the current rates steady for 2005 if the City would agree to accept the more prevalent plan design. Dental was bid out and quotes were received from several companies. This information was presented to the Wage & Benefit Committee. They recommended that the City retain Delta Dental, but move to the suggested 100/80/50 plan design and maintain current premium rates. These rates are below. Voluntary Vision Plan — Starmount, the current carrier, was selected 'n 2003. They provided a rate guarantee for 2004 and 2005. There will be no change in the premiums for 2005. Budget Impact: The only renewal that carries additional costs to the City for 2005 is the medical plan. Staff supports the recommendation of the Wage and Benefit Committee to incorporate the benefit change and requests Council to approve funding the entire 7.6% increase. The cost to the City of this proposal is $187,800. The significant elements of this proposal are 1) a benefit change that increases the out-of-pocket maximum, and 2) the City absorbs the entire increase. As you evaluate this option, it is important to consider the following information. If the City accepts the original 10.89% increase and prorates the increase between the City and employees as Council approved last year, the cost to the City would be approximately $262,000. Based on these numbers, the City can accept a benefit change, maintain current employee premium levels, and fund the entire increase for fewer dollars than rejecting the benefit change and sharing the cost of the increase with employees. The chart below details the breakout of the 2004 and proposed 2005 medical premium rates. MEDICAL PREMIUM AMOUNTS — STAFF RECOMMENDED PERCENTAGE SPLIT 2004/2005 Monthly Dental Rates Individual 19.46 Family 64.28 Voluntary Vision Plan — Starmount, the current carrier, was selected 'n 2003. They provided a rate guarantee for 2004 and 2005. There will be no change in the premiums for 2005. Budget Impact: The only renewal that carries additional costs to the City for 2005 is the medical plan. Staff supports the recommendation of the Wage and Benefit Committee to incorporate the benefit change and requests Council to approve funding the entire 7.6% increase. The cost to the City of this proposal is $187,800. The significant elements of this proposal are 1) a benefit change that increases the out-of-pocket maximum, and 2) the City absorbs the entire increase. As you evaluate this option, it is important to consider the following information. If the City accepts the original 10.89% increase and prorates the increase between the City and employees as Council approved last year, the cost to the City would be approximately $262,000. Based on these numbers, the City can accept a benefit change, maintain current employee premium levels, and fund the entire increase for fewer dollars than rejecting the benefit change and sharing the cost of the increase with employees. The chart below details the breakout of the 2004 and proposed 2005 medical premium rates. MEDICAL PREMIUM AMOUNTS — STAFF RECOMMENDED PERCENTAGE SPLIT Staff is available to answer any questions you may have. 2004 Individual 2004 Family 2005 Individual 2005 Family City 182.20 408.73 196.67 443.94 Employee 8.26 54.52 8.26 54.52 Staff is available to answer any questions you may have. • EXHIBIT 1 • HISTORY OF OUT-OF-POCKET COSTS MAJOR MEDICAL PLAN Typically, the percentage of members who meet the out-of-pocket maximum averages about 4%. # of Plan Members # of Plan Members Who Met the $1,000 Out -of- Pocket Maximum % of Plan Members Who Met Maximum 1-1-2003 to 12-31-2003 1198 55 4.6% 1-1-2004 to 7-31-2004 1020 37 3.6% Typically, the percentage of members who meet the out-of-pocket maximum averages about 4%. • • RESOLUTION NO. A RESOLUTION EXERCISING THE FIRST OF FIVE ONE-YEAR OPTIONS TO RENEW EMPLOYEE GROUP POLICIES WITH USABLE 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. 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 exercises the first of five one year options to renew employee group policies with USAb1e Life to provide Life, Accidental Death and Dismemberment, and Long Term Disability insurance coverage. Section 2. That the City Council of the City of FayetteVte,°Arkansas hereby exercises the first of five one-year options to renethefD" - s/ Blue Shield Group Medical Plan. :,,,, PASSED AND APPROVED this 19th day,ot October 2001 APPROVED , 000,04 / bA L-1.0DY, Mayor 3TTES By: SONDRAMITIi tty Clerk i XX AGENDA REQUEST CONTRACT REVIEW GRANT REVIEW • STAFF REVIEW FORM - FINANCIAL OBLIGATIO For the Fayetteville City Council Meeting of: October 19, 2004 FROM: Michele Bechhold Name Human Resources Finance & Internal Services Division Department ACTION REQUIRED: Approve renewal of the City's group benefit plans for 2005. Staff recommends that the City exercise the 2005 option to renew with Arkansas Blue Cross Blue Shield and USAble for health and life plans. COST TO CITY: $2,659,000.00 $ Cost of this request Category/Project Budget Program Category / Project Name Various $ Account Number Project Number Funds Used to Date Program / Project Category Name $ 'I MtooS Remaining Balance Fund Name BUDGET REVIEW: Budgeted Item Budget Manager Date Budget Adjustment Attached CONTRACT/GRANT/LEASE REVIEW: Accounting Manager Date Internal Auditor Date CityAtto1y Date Purchasing Manager Date S-TAAF7F�R MMEND I prove contracts with rkansas BCBS and USAble Life. 'L A ?J!ge/ kJ / —,5 0 Received in Mayor's Office �D Aet Date Date/Me ivision Head Department Director P Finance & Internal Services Dir. Date Date m nistr ive Officer Cross Reference: Previous Ord/Res#: Orig. Contract Date: Orig. Contract Number: New Item: Yea No • • • CITY COUNCIL AGENDA MEMO B\ @cte)S e- osKaxe ( e w Plan Rest/00.\ City Council Meeting of November 1, 2004 TO: THRU: FROM: DATE: SUBJECT: Mayor Dan Coody and City Council Hugh Earnest, Chief Administrative Officer Stephen Davis, Finance & Internal Services Director Michele Bechhold, Human Resources Director /146 October 25, 2004 Additional Information Regarding Group Medical Renewal Attached is an informational sheet outlining the proposed change to the annual stop loss provision. Included on this page are two optional benefit and funding scenarios. These cost estimates have been updated using the November 2004 group medical census numbers. Annual out-of-pocket maximum and annual stop loss refer to the same plan provision. Stop loss is used in this example in an effort to avoid confusion with the annual deductible amount. To summarize the group medical information: From the City's point -of -view: 2004 Plan Cost $2,392,272 2005 Proposed Plan Cost $2,595,030 Other options result in higher costs for the City and/or City and employee. From the Employees' Point of View: Deductible Amount 2004 2005 Change Individual $500 $500 -0- Family $500 x 2 $500 x 2 -0- Stop Loss Amount Individual $1,000 $2,000 +$1,000 Family $2,000 $4,000 +$2,000 For your information, I have also attached a summary of the proposed changes to the dental plan. Staff isavailable to answer any questions you may have. • • PROPOSED MEDICAL STOP LOSS CHANGES AND PREMIUM PAYMENT OPTIONS Current Annual Stop Loss Individual $1,000 = 20% of $5 000 in charges Family $2,000 = 20% of $10,000 in charges Proposed Annual Stop Loss Individual $2 000 = 20% of $10,000 in charges Family $4,000 = 20% of $20,000 in charges No change is proposed to the $500 deductible. Current (2004) BCBS Monthly Premium Amounts Current Cost to the City — $2,392,272 Monthly Cost Individual Family City 182.20 408.73 Employee 8.26 54.52 Proposed 2005 Monthly Premiums WITH Increased Stop Loss & All Increase Paid by City Incremental Cost to the City 7.6% - $202,758 Monthly Cost Individual Family City 196.67 443.94 Employee 8.26 54.52 Option A: 2005 Monthly Premiums NO Change to the Stop Loss & Increase Shared by City and Employees Incremental Cost to the City 10.89%— $260,511 Monthly Cost Individual Family City 202.04 453.24 Employee 9.16 60.46 Option B: Proposed 2005 Monthly Premiums NO Change to the Stop Loss & All Increase Paid by City Incremental Cost to the City 10 89% — $290,537 Monthly Cost Individual Family City 202.94 459.18 Employee 8.26 54.52 • PROPOSED CSNGES TO THE 2005 DEAL PLAN Delta presented the City with a 17% increase to the premium rates for 2005. Below are our current dental premiums and the premium amounts if the City were to accept the 17% rate increase. Type of Coverage 2002 Monthly Rates 2004 Monthly Premium 2005 Monthly Premium with 17% Increase & No Benefit Changes Individual 19.46 22.77 Family 64.28 75.21 A brief history of dental renewal increases and premium rates is outlined below. 2004 premiums reflect a realized increase of 40% on individual rates and 41% on family rates since 2002. Type of Coverage 2002 Monthly Rates Renewal Increase for 2003 2003 Monthly Rates Renewal Increase for 2004 2004 Monthly Rates Individual 13.90 14% 15.84 23% 19.46 Family 45.84 14% 52.26 23% 64.28 Faced with another double dig't increase this renewal period, dental was bid out. Delta offered 0% increase if the City would move to a plan with the much more prevalent 100/80/50 benefit structure. After reviewing the bid options, the Wage & Benefit Committee recommended moving to the 100/80/50 benefit structure, and Staff supported this recommendation. This proposal holds premiums steady for 2005 The chart below outlines the changes to the plan There will be no change to the $1,500 annual max per person or to the $1,000 lifetime max for child orthodontia. Current Plan Benefit Structure Coverage Class 2004 Plan % Paid $50 Deductible Applies Preventive 100 No Basic Restorative 100 No Major Restorative 50 Yes Orthdontic 50 Yes Proposed Plan Benefit Structure Coverage Class 2005 Plan % Paid $50 Deductible Applies Preventive 100 No Basic Restorative 80 Yes Major Restorative 50 Yes Orthdontic 50 Yes Listed below is a brief example of some of the most frequently utilized procedures for each class of coverage. This list does not include all procedures. Preventive Cleaning Xrays Exams Basic Restorative Fillings Root Canals Oral Surgery Periodontic Major Restorative Crowns Bridges Dentures/Denture Repair FAYETTEALLE THE CITY OF FAYETTEVILLE, ARKANSAS City Clerk Division DEPARTMENTAL CORRESPONDENCE • 113 West Mountain Fayetteville, AR 72701 Telephone: (479) 575-8323 Fax: (479) 718-7695 city_clerk@ci.fayetteville.ar.us To: Michele Bechhold Human Resource Director From: Clarice Buffalohead-Pearman City Clerk Division Date: November 8, 2004 Re: Resolution No. 173-04 The City Council passed the above resolution November 1, 2004, authorizing the renewal of the employee group policies with Blue Cross/Blue Shield and USAble Life. I have attached a copy of that resolution. This resolution will be recorded in the city clerk's office and microfilmed. If anything else is needed please let the clerk's office know. Thanks. /cbp attachments cc Nancy Smith, Internal Auditor