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.
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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