Loading...
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.