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Item 4ECITY OF SOUTHLAKI✓ MEMORANDUM July 13, 2009 TO: Shana Yelverton, City Manager FROM: Kevin Hugman, Director of Human Resources SUBJECT: Approve renewal of contract with Aetna for employee medical and dental benefits for Plan Year October 1, 2009 to September 30, 2010 Action Requested: Background Information: City Council approval of a twelve (12) month contract renewal with Aetna for employee medical and dental benefits, effective October 1, 2009 through September 30, 2010. In May 2006, the City bid out its employee insurance benefits, including medical and dental benefits. Aetna was chosen for providing the best coverage plan for the best cost and on August 1, 2006 City Council approved a contract for medical and dental benefits. A summary of the contract renewals since 2006 is shown below: * Proposed (1) Source (Segal Health Plan Cost Trend Survey, The Segal Company; www.shrm.org (2) Plan changes included increased co -pays and deductibles Plan Year City Rate Increase Medical Predicted Trend (1) Plan Changes Y/N 10 -01 -2006 7.3% 12.0% Y 10 -01 -2007 9.9% 11.1% N 10 -01 -2008 0.0% 10.7% N 10- 01- 2009` 5.0% 10.0% N Rate renewals are based on various factors, with the most important factors being: (1) claims paid for the current and past plan years, and (2) health industry trends. "Trend" is the direction in which medical costs are heading and includes such things as medical cost inflation, changes in volume of services used, cost shifting from government entitlement programs such as Medicaid and Medicare to the private sector, etc. Shana Yelverton, City Manager July 13, 2009 Page 2 In regards to claims paid, the City has had favorable years in 2007, 2008 and 2009 in the HMO network, with claims paid less than expected. However, the PPO network (less than 3% of employees /retirees) has incurred high claims each year. Dental plan claims have been about average this past year. The proposed rate increase represents a "below trend" rate increase with no plan changes (co -pays, deductibles) for the 3 I straight year. • Medical benefits (HMO): 5.0% increase • Medical benefits (PPO): 5.0% increase Overall Medical Plan 5.0% increase • Dental benefits 5.0% increase The City currently pays the entire premium for "employee- only" medical and dental coverage, and a portion of dependent medical coverage. We have had very good experience with Aetna, both in plan coverage and customer service. Staff recommends the renewal with Aetna. Financial Considerations: The estimated cost of medical insurance premiums is $181,564 per month, or $2.18 million annually (combined City and employee premium contributions). The estimated increase in the City's portion of medical insurance premiums is $60,762 for FY 2010. The estimated cost of dental insurance premiums is $16,011 per month, or $192,130 annually (combined City and employee premium contributions). The City's estimated increase is $2,661 for FY 2010. The proposed medical and dental insurance plan costs are included in the proposed budget for Fiscal Year 2009 -2010. Strategic Link: The contract with Aetna links to the city's strategy map relative to the focus areas of Performance Management and Service Delivery. The specific corporate objectives that are met by this contract include: (132) Collaborate with select partners to implement service solutions; and (L3) Attract, develop and retain a skilled workforce. Citizen Input) Board Review: NIA Legal Review: The 2006 Request for Proposals (RFP) and the original agreement with Aetna were reviewed by the City Attorney. Alternatives: Changes as may be desired by City Council. Shana Yelverton, City Manager July 13, 2009 Page 3 Supporting Documents: Summary of Renewal/Proposed Rates (medical plan) Dental Renewal/Proposed Rates Staff Recommendation: City Council approve renewal of contract with Aetna for medical and dental benefits for Plan Year October 1, 2009 to September 30, 2010. s A N `m E z O .c • O a W �I C f1 L Cl � a o U LU m C 1� 6 C 0 O a co N C r m s t s al Q 100, ��- C w xs e �v C C � W N � � � O m N 0. O • a G H W W t q u i7 aE 0000. EOCR a UcriuiuiLOcci a x U ui to Ln LOA W c� C o_ O p Lo 1Q Ylc. OO V►u►�sy� w j eq � U n. �I�PPPP W ri co co cd vi 44 n qiq co 61, 0 � d m � CWUNP ( pNp (pp G C'�WI� O(O N �40 to 49 - a G* vlk cq 40 v� x F 7 g N N 4 M � E W N T O N W Cell.. 2 0 �to6u o + + +� 0EEEE0 el CL CL la U W W W W H G H W W t q u i7 . a G. C 7 U� 1— _A c EOCR a x U ui to Ln LOA W c� C o_ O C3. O n. cp �3Q3���3E W ri co co cd vi 44 n qiq N 11�'� 61, 0 � CL 46 0; to -7 G* vlk cq 40 to � E W N T O M W Lo �to6u o + + +a '�oEEEEO CL L U W W W W F . a G. C 7 U� 1— _A c Dental Renewal/Proposed Rates City of 5outhlake Effective October 1, 2009 • This exhibit outlines your RenewaUProposed Rates Effective October 1, 2009. • Please refer to the Financial Conditions and Plan Design Exhibits for an outline of the level of benefits quoted, as well as the terns and conditions of this proposal. Policyholder Number - 880600, 886003 Group Number - US302067 Employees Current Proposed Premium Premium % Change Monthly Totals 269 $15,248.45 $16,010.87 1 5.0% Financial Conditions Rates may be adjusted if: > covered population changes by 15% or more; current enrolled lives are 269; a legislation or regulation is enacted that affect the benefits payable, eligibility or contractual provisions; > there is any other material change in the condition under which the plan operates. > Commissions payable to a broker or consultant change. Terms: a Rates include Middle Market Dental comissions. > For Voluntary plans, where permitted by state law, late entrant rules will be applied at annual enrollment (i.e., no true "open enrollment') as well as throughout the year. "Aetna" is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies. PPOIPDN is underwritten by Aetna Life Insurance Company. DMO is underwritten by Aetna Life Insurance Company, except as follows: Arizona, Georgia: Aetna Health Inc. California: Aetna Dental of California Inc. Maryland, Missouri, North Carolina, Texas; Aetna Dental Inc. New Jersey; Aetna Dental Inc. and Aetna Life Insurance Company. 05/27/2009 www.aelna.com Future Program Costs - Dental FOC Rates Coverage Categories Current/Assumed Employees DMO Breakout PPOlind Breakout Current Rates Proposedl Renewal Rates % Change Employee Only 144 45 99 $30.98 $32.53 5.0% EE +S ouse 26 6 20 $63.27 $66.43 5.0% EE+ Children) 46 18 28 $75.06 $78.81 5.0% EE +Famii 53 1 41 $107.35 $112.72 5.0% Monthl Total 269 81 188 $15,248.45 $16,010.87 5.0% Employees Current Proposed Premium Premium % Change Monthly Totals 269 $15,248.45 $16,010.87 1 5.0% Financial Conditions Rates may be adjusted if: > covered population changes by 15% or more; current enrolled lives are 269; a legislation or regulation is enacted that affect the benefits payable, eligibility or contractual provisions; > there is any other material change in the condition under which the plan operates. > Commissions payable to a broker or consultant change. Terms: a Rates include Middle Market Dental comissions. > For Voluntary plans, where permitted by state law, late entrant rules will be applied at annual enrollment (i.e., no true "open enrollment') as well as throughout the year. "Aetna" is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies. PPOIPDN is underwritten by Aetna Life Insurance Company. DMO is underwritten by Aetna Life Insurance Company, except as follows: Arizona, Georgia: Aetna Health Inc. California: Aetna Dental of California Inc. Maryland, Missouri, North Carolina, Texas; Aetna Dental Inc. New Jersey; Aetna Dental Inc. and Aetna Life Insurance Company. 05/27/2009 www.aelna.com Future Program Costs - Dental