Item 4I
ITEM 4I
M E M O R A N D U M
July 29, 2015
TO:
Shana Yelverton, City Manager
FROM:
Stacey Black, Director of Human Resources
SUBJECT:Approve a contract renewal with CignaLife Insurance Companyto
provide employee Life Insurance, Accidental Death and Dismemberment
Insurance and Long Term Disability Insurance for Plan Year October 1,
2015to September 30, 2016.
Action
Requested:
Approve a contract renewal with Cigna Life Insurance Company to
provide employee Life Insurance, Accidental Death and
Dismemberment Insurance and Long Term Disability Insurance for
Plan Year October 1, 2015 to September 30, 2016.
Background
Information:
As part of itsstandard benefit package, the City provides all full-time
employees with Life Insurance,Accidental Death and Dismemberment
(AD&D) Insurance and Long Term Disability(LTD)Insurance.Cigna is
the City’s currentcarrier for all three coveragesand has been the LTD
carrier since 2006 and the carrier for Life and AD&D insurance since
2014.
As reflected in the table below, employees are provided with one times
their annual salary (up to $50,000) in Life insurance, one times their
annual salary (up to $50,000) in AD&D coverage for an on the job
accidental death or dismemberment, and the LTD plan provides
employees with 60% of their salary after a 90 day waiting period if the
employee is unable to return to work due to a disability.
Basic Life InsuranceAD&DLTD
1x Annual Salary1x Annual Salary up to 60% of salary aftera
up to $50,000$50,00090 day waiting period
Last year, the City issued a Request for Proposals (RFP) for Life,
AD&DandLTD insurance. The City last issued an RFP in 2006, and
will typically issue an RFP every six years, depending upon renewal
proposals. Five carriers submitted proposals in response to the RFP,
and Cigna was selected because they offered the lowest overall
premium rate at the existing benefit level. In addition, Cigna offered a
Shana Yelverton, City ManagerITEM 4I
July 29, 2015
Page 2
three year rate guarantee. This proposed contract renewal is the
second year of the three year rate guarantee. The premium rates are
displayed in the table below.
Est. Cost
CoverageRateVolume
MonthlyAnnual
Life
$ 0.11$14,171,000$ 1,559$ 18,708
Rate / $1,000
AD&D
$ 0.03$14,171,000$ 425$ 5,100
Rate / $1,000
LTD
$ 0.191,470,974$ 2,795$ 33,540
Rate / $100
Total:$4,779$57,348
There are a number of advantages to renewing the contract withCigna
forLife, AD&D and LTD insurance, including:
This is the second year of a three year rate guarantee.
The City has had a favorable experience withCigna and having
onecarrier for the three different coverages consolidates billing
and administrative processes;
Cigna offers employees the opportunity to purchase additional
voluntary supplemental Life and AD&D insurance at their own
cost; and
Cigna offers additional services for employees as part of the
basic life insurance coverage including will preparation,
emergency travel assistance and identity theft assistance.
Financial
Considerations:
The estimated cost ofLife, AD&D and LTDInsurance is $57,348
annually. There is no rate increase FY 2016.
The proposed Life, AD&Dand LTDplan costs will beincluded in the
proposed budget for Fiscal Year 2016.
Strategic Link:
Performance Management and Service Delivery: attract, develop and
retain a skilled workforce.CBO2: Become an employer of choice by
developing a plan to recruit, develop and retain employees committed
to excellence.
Citizen Input/
Board Review:
N/A
Shana Yelverton, City ManagerITEM 4I
July 29, 2015
Page 3
Legal Review:
N/A
Alternatives:
Deny the contractrenewal withCignaand seek alternative options.
Supporting
Documents:
The following supporting documents are attached:
2014 Cigna Proposal
Staff
Recommendation:
Approve a contract with Cigna to provide employeeLife Insurance,
Accidental Death and Dismemberment andLong Term Disability
insurance for Plan Year October 1, 2015to September 30, 2016.
To accept the terms of this proposal, you must notify Cigna of your acceptance by that date, and pay premium equal
to the Total Basic Estimated Monthly Cost on the Schedule of Benefits Summary. This proposal may be withdrawn
by Cigna at any time before acceptance.
Eligibility
Cigna's eligibility requirements assume that employees are working on a full-time basis, and citizens of the United
States, and working in the United States. Part-time, seasonal, temporary, contracted, leased or severed employees are
not eligible, unless otherwise noted.
• Policy on Rate Changes
The rates and fees quoted within the proposal are based on information furnished to Cigna for the purpose of
developing a proposal of group insurance. Cigna has assumed that the demographic and plan design information
provided will be an accurate representation of your company at the time of implementation. Premium rates are
guaranteed as noted in the product schedule of benefits. These rates and the guarantee assume that the number of
eligible or insured employees does not change by more than 15% from the date of the census provided.
• Policy on Contractual Language
Cigna's contract language will be used without modification. Cigna will attempt to match the intent of disclosed
policy provisions at the time of quote, but will not duplicate the existing policy language.
• Medical Underwriting Status
Medical Underwriting Activity Status Reports are sent to the location(s) designated by the employer and are typically
distributed on a monthly basis. If online Medical Evidence of Insurability is quoted, Medical Underwriting Activity
Reports (reporting status of medically underwritten coverage) are sent electronically to the employer and are typically
distributed on a weekly basis.
• Producer Compensation
Cigna may have entered into, or may enter into, agreements with brokers, under which the insurance company
compensates brokers for providing marketplace intelligence and other services intended to enhance the effectiveness
of the insurance company's business. Cigna may also invite brokers to participate in events sponsored by the
insurance company for the same purposes.
Any compensation paid may be based on meeting targets for new business production and persistency, and, if paid, is
funded from the insurance company's overhead and is based on the broker's overall book of business with the
insurance company. Any such payments are separate from commissions and, if applicable, will be included in ERISA
Form 5500, Schedule A information provided by the insurance company.