HomeMy WebLinkAbout172-06 RESOLUTIONRESOLUTION NO. 172-06
A RESOLUTION APPROVING THE PLACEMENT OF GROUP
MAJOR MEDICAL COVERAGE WITH CIGNA; COBRA
ADMINISTRATION WITH DATAPATH, HSA ACCOUNT
ADMINISTRATION WITH DELTA TRUST & BANKING CORP.,
WITH FIVE ONE-YEAR OPTIONAL RENEWALS AT THE CITY'S
DISCRETION; AND RENEWING WITH DELTA DENTAL FOR
EMPLOYEE -PAID DENTAL INSURANCE FOR PLAN YEAR 2007.
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 placement of Group Major Medical coverage with CIGNA;
COBRA administration with DataPath; HSA Account Administration with Delta
Trust & Banking Corp., with five one-year optional renewals at the City's
discretion.
Section 2. That the City Council of the City of Fayetteville, Arkansas
hereby approves renewing with Delta Dental for employee -paid Dental
Insurance for Plan Year 2007.
PASSED AND APPROVED this 17th day of October, 2006.
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APPROVED. ATTEST: _ : FAYETTEVILLE:
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By: By: Att.),/hiir
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DAN GOODY, ayo, SONDRA SMITH, City Clerk
Michele Bechhold
Submitted By
City of Fayetteville
Staff Review Form
City Council Agenda Items
or
Contracts
10/17/2006
City Council Meeting Date
Human Resources
Division
Action Required:
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Operations
Department
Approve placement of group medical coverage with CIGNA, COBRA administration with DataPath, HSA account
administration with Delta Trust and five, one-year options to renew to be exercised at the City's discretion. Approve
placement of dental coverage with Delta Dental.
3,265,757.00
Cost of this request
Various
Account Number
Project Number
Budgeted Item
Category / Project Budget
Program Category / Project Name
Funds Used to Date Program / Project Category Name
Various
Remaining Balance Fund Name
Budget Adjustment Attached
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10,4.0 6
Date
City Attorney / Date
Finance and Internal Service Director
May
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Date
Date
Previous Ordinance or Resolution #
Original Contract Date:
Original Contract Number:
Comments:
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ARKANSAS
City Council Meeting October 17, 2006
CITY COUNCIL AGENDA MEMO
TO: Mayor Dan Coody and the City Council
THRU: Gary Dumas, Operations Director
FROM: Michele Bechhold, Human Resources
DATE: October 1, 2006
SUBJECT: Group Medical & Dental Plan Renewals
RECOMMENDATION:
Staff recommends placing group major medical coverage with CIGNA for the 2007 plan year,
selecting DataPath as the vendor for COBRA administration services, and requests approval of
five, one-year options to renew to be exercised at the City's discretion. Staff recommends
renewing with Delta Dental for employee paid dental insurance for the 2007 plan year.
BACKGROUND:
The 2007 healthcare plan renewal delivered by Arkansas Blue Cross Blue Shield, (BCBS),
presented an 11.5% increase in premiums for both the traditional PPO core plan and the
optional High Deductible Health Plan. The City's consultant negotiated with BCBS in an effort to
improve their proposal with no success. Following careful evaluation of the renewal offer, it was
determined that bidding the plan was in the best interest of the City and its employees. A
comprehensive RFP process was undertaken by Jeff Jackson, the City's benefits consultant.
Over thirty insurance carriers for healthcare and dental were invited to participate in the bid
process. After thorough review of the bid results, the recommendation is to move the
healthcare plan to CIGNA effective January 1, 2007. This recommendation is based on
premium rates and funding arrangements, plan benefits, as well as technology and service
capabilities. The CIGNA proposal represents a guaranteed total premium savings in excess of
$120,000 over the renewal rates offered by BCBS. This proposal also provides the opportunity
to minimize future plan costs depending on claims expense through the Minimum Premium —
Fully Insured Plan Funding Arrangement.
Mr. Jackson negotiated and reached agreement with CIGNA that will bring the 2007 premium
increase down to approximately 7.7% (from BCBS's proposed 11.5%) which generates a total
estimated premium savings of $122,160 over the renewal rates proposed by BCBS. CIGNA
has committed to match medical contract benefits. If this recommendation is approved,
representatives from CIGNA, Mr. Jackson and City representatives will meet to review the
current BCBS contract and ensure matching benefits from CIGNA.
The following rate illustration reflects current BCBS rates/cost, renewal BCBS rates/cost, and
CIGNA's proposed rates/cost based on the September 2006 census numbers
Discussion:
The Minimum Premium — Fully Insured funding arrangement offered by CIGNA is structured
differently from the funding arrangement offered by BCBS. The BCBS premium is a totally
traditional insurance arrangement — twelve months of premium would be paid at the rate shown
above. The CIGNA premium differs in that it has a fixed cost component to cover administrative
expenses and a variable cost component to cover claims cost. This variable cost component
provides flexibility and enables the City to reserve funds in years when utilization is lower than
projected claim costs. These funds can be used to mitigate the cost of future rate increases.
The numbers below reflects CIGNA's proposed Minimum Premium cost factors broken out by
fixed and variable cost. It is important to note that the "Variable / Claims" cost is not a fixed cost.
If the plan resumes more historically normal utilization patterns, the variable cost may be less
than the projected amount. This component of the funding arrangement enables the City to
maintain a fully insured plan
Breakdown of CIGNA's Minimum Premium Quote
Annualized Monthly
CIGNA/Fixed Cost
CIGNA Variable /
Claims (Maximum Cost)
Total
CIGNA
51,069,113.00
52,397,090.00
53,466,204.00
$89,092.75
5199,757.50
$288,850.25
Please refer to Attachment A for a graphical illustration of the Minimum Premium Plan Funding.
CIGNA is a "Best in Class" — nationally recognized insurance carrier. They have over 350
physicians in Washington and Benton counties in their provider network and are comparable
with BCBS from a service discount perspective. A close comparison of the physicians in the
BCBS network and the CIGNA network revealed some frequently utilized Fayetteville physicians
who were not in the current CIGNA network. It was determined that many of the providers were
members of MANA, Medical Associates of Northwest Arkansas physician group. Further
investigation yielded information that MANA has already begun the credentialing process with
CIGNA to join their network. Additional information regarding this important component of the
plan will be available to Council at the October 10 Agenda Session.
Rate
Illustration
# of
Contracts
Annualized
PPO - HDHP
PPO %Adj H'HP/H.S.A. %Adj
Current BCBS IND (210-39) $211.20 $131.24
53,218,353.00
FAM (405-36) $513.70 $286.59
Renewal BCBS IND (210-39) $235.48 11.50Y. $146.33 11 50%
53,588,364.00
FAM (405-36) $572.76 11 50% $330.69 15.30%
CIGNA Min.
53,466,204.00
Premium IND (210-39) $228.43 8.10% $139.57 6.34%
FAM (405-36) $553.01 7.70% $318.55 11.101/4
Total Premium
Savings
$122,160.00
Discussion:
The Minimum Premium — Fully Insured funding arrangement offered by CIGNA is structured
differently from the funding arrangement offered by BCBS. The BCBS premium is a totally
traditional insurance arrangement — twelve months of premium would be paid at the rate shown
above. The CIGNA premium differs in that it has a fixed cost component to cover administrative
expenses and a variable cost component to cover claims cost. This variable cost component
provides flexibility and enables the City to reserve funds in years when utilization is lower than
projected claim costs. These funds can be used to mitigate the cost of future rate increases.
The numbers below reflects CIGNA's proposed Minimum Premium cost factors broken out by
fixed and variable cost. It is important to note that the "Variable / Claims" cost is not a fixed cost.
If the plan resumes more historically normal utilization patterns, the variable cost may be less
than the projected amount. This component of the funding arrangement enables the City to
maintain a fully insured plan
Breakdown of CIGNA's Minimum Premium Quote
Annualized Monthly
CIGNA/Fixed Cost
CIGNA Variable /
Claims (Maximum Cost)
Total
CIGNA
51,069,113.00
52,397,090.00
53,466,204.00
$89,092.75
5199,757.50
$288,850.25
Please refer to Attachment A for a graphical illustration of the Minimum Premium Plan Funding.
CIGNA is a "Best in Class" — nationally recognized insurance carrier. They have over 350
physicians in Washington and Benton counties in their provider network and are comparable
with BCBS from a service discount perspective. A close comparison of the physicians in the
BCBS network and the CIGNA network revealed some frequently utilized Fayetteville physicians
who were not in the current CIGNA network. It was determined that many of the providers were
members of MANA, Medical Associates of Northwest Arkansas physician group. Further
investigation yielded information that MANA has already begun the credentialing process with
CIGNA to join their network. Additional information regarding this important component of the
plan will be available to Council at the October 10 Agenda Session.
Staff's recommendation to fund the premium increase for the PPO plan follows the pattern
established over the last few years. The City and the employees share an equal percentage
increase on the traditional PPO plan. 2007 will be the first renewal of the High Deductible
Health Plan and Staff recommends that the City fund the entire increase for the HDHP/HSA
participants. The overall 7% premium increase on the HDHP, estimated at lust over $13,000, is
a minimal cost increase. The premium difference is one of the incentives for employees to elect
the HDHP alternative. The performance of the HDHP has been excellent and it would be
beneficial for the City to reward this performance by not passing along to participants any of the
proposed increase. The chart below outlines the Staff recommended rate structure to fund the
premium increases. The City's contributions to the HSA accounts remain at the same level as
approved by Council for the 2006 plan year.
MONTHLY PREMIUM AMOUNTS — CURRENT AND PROPOSED BASED ON
STAFF RECOMMENDED PERCENTAGE SPLIT
PPO
2006
Individual
Proposed
2007 Individual
2006 Family
Proposed
2007 Family
City
$202.04
$218.52
$453.24
$487.92
Employee
$9.16
$9.91
$60.46
$65.09
HDHP
City Premium
$131.24
$139.57
$296.59
$318.55
City HSA Contribution
$70.80
$70.80
$156.65
$156.65
Employee Premium
$0.00
$0.00
$0.00
$0.00
Employee HSA Contribution
$9.00
$9.00
$9.00
$9.00
COBRA Administration
Along with the change of carriers from BCBS to CIGNA, Staff is recommending a change in the
COBRA administrator from Ceridian to DataPath. DataPath was recently selected as the City's
third party administrator for Section 125 Plan administration. DataPath charges a monthly fee of
$0.75 per covered employee, which is an annualized cost of $6,210.00 for 690 covered
employees. The cost for Ceridian to provide these services to the City was included in the
BCBS premium amount, but was not specifically identified.
HSA Account Administration
HSA Bank is the current provider, but the City has experienced numerous service issues with
this vendor. The City's benefits consultant and City staff have reviewed numerous proposals
and conducted interviews with different organizations to identify the best option for
administration of the health savings accounts.
The evaluation of potential vendors included consideration of a wide range of participant
services such as fees, interest rates, debit cards and employer specific services such as fees,
internet technology, on-line management, and wire transfer capabilities. Several proposals
were received and firms were eliminated based on service capabilities and competitiveness of
programs. The recommended firm is Delta Trust & Banking Corp. They offer the best interest
rate to the participants and extremely competitive fees.
There will be a one-time cost of $1875.00 to close the existing health savings accounts with
HSA Bank. Staff recommends that the City pay this cost to close the accounts.
Dental Plan — Dental was bid out and quotes were received from several companies. The
current carrier, Delta Dental proposed a 0% increase over current dental rates and has offered a
two year rate guarantee. The bid yielded two other competitive quotes both with very limited
savings, less comprehensive networks and a benefit reduction in TMJ coverage. Staff
recommends retaining the current plan with Delta Dental. Dental premiums are 100% employee
paid.
Monthly Dental Rates:
Gap Plan — As the City continues to move toward consumerism, Staff recommends the addition
of another optional plan that employees may choose to purchase to assist them with the
financial exposure associated with the deductible amount under the HDHP. Gap Coverage
Plans have become very popular over the past three years as employers have begun a
movement toward consumer driven plans with high deductibles. The recommended plan is
provided through Symetra and provides a schedule of surgical benefits, hospital benefits and a
pharmacy discount plan. This plan is an indemnity plan and provides an added level of
protection for those employees in the HDHP in the early years while they accumulate cash in
their Health Savings Account.
Budget Impact:
The estimated budget impact for 2007 is $3,265,757 and has been included in projections for
the 2007 Proposed Budget. The $6210.00 cost for COBRA administration through DataPath
can also be funded within the 2007 Proposed Budget due to the fact that the actual 2007
premium increase is less than projected. The $1875.00 cost to close the existing health savings
accounts can be funded within the 2006 Human Resources budget.
Staff is available to answer any questions you may have.
Delta
2006
Individual
2007
Individual
2006
Family
2007
Family
Dental
City
$0.00
$0.00
$0.00
$0.00
Employee
$21.98
$21.98
$72.64
$72.64
Gap Plan — As the City continues to move toward consumerism, Staff recommends the addition
of another optional plan that employees may choose to purchase to assist them with the
financial exposure associated with the deductible amount under the HDHP. Gap Coverage
Plans have become very popular over the past three years as employers have begun a
movement toward consumer driven plans with high deductibles. The recommended plan is
provided through Symetra and provides a schedule of surgical benefits, hospital benefits and a
pharmacy discount plan. This plan is an indemnity plan and provides an added level of
protection for those employees in the HDHP in the early years while they accumulate cash in
their Health Savings Account.
Budget Impact:
The estimated budget impact for 2007 is $3,265,757 and has been included in projections for
the 2007 Proposed Budget. The $6210.00 cost for COBRA administration through DataPath
can also be funded within the 2007 Proposed Budget due to the fact that the actual 2007
premium increase is less than projected. The $1875.00 cost to close the existing health savings
accounts can be funded within the 2006 Human Resources budget.
Staff is available to answer any questions you may have.
RESOLUTION NO.
A RESOLUTION APPROVING THE PLACEMENT OF GROUP
MAJOR MEDICAL COVERAGE WITH CIGNA; COBRA
ADMINISTRATION WITH DATAPATH; HSA ACCOUNT
ADMINISTRATION WITH DELTA TRUST & BANKING CORP.,
WITH FIVE ONE-YEAR OPTIONAL RENEWALS AT THE CITY'S
DISCRETION; AND RENEWING WITH DELTA DENTAL FOR
EMPLOYEE -PAID DENTAL INSURANCE FOR PLAN YEAR 2007.
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 placement of Group Major Medical coverage with CIGNA;
COBRA administration with DataPath; HSA Account Administration with Delta
Trust & Banking Corp., with five one-year optional renewals at the City's
discretion.
Section 2. That the City Council of the City of Fayetteville, Arkansas
hereby approves renewing with Delta Dental for employee -paid Dwtal
Insurance for Plan Year 2007.
PASSED AND APPROVED this 17th day of Octo
APPR
OODY,
Clerk
1(10.24.06) Clarice Pearman -'Res. 172-06
.07101
From:
To:
Date:
Subject:
Attachments:
Clarice Pearman
Bechhold, Michele
10.24.06 12:54 PM
Res. 172-06
172-06 CIGNA -Delta Dental.pdf
CC: Audit
Michele,
Attached is a copy of the above resolution passed by City Council, October 17, 2006 regarding CIGNA and Delta Dental
Insurance. If anything else is needed please let me know.
Thanks.
Clarice
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