Loading...
Item 4BCITY OF SOUTHLAKE MEMORANDUM July 30, 2008 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 Action Requested: City Council approval of a twelve (12) month contract renewal with Aetna for employee medical and dental benefits, effective October 1, 2008 through September 30, 2009. Background Information: 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. The contract included a rate increase of 7.3 %, combined with changes in the plan benefits by increasing employee co -pays and deductibles. In 2007, City Council approved a contract renewal with Aetna with a rate increase of 9.9% for medical and 9.8% for dental benefits. No plan changes were made. 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. Sources predict 2008 trend as 11.4% (Buck Consultants, 18 National Health Care Trend Survey (2008) www.shrm.org The Dallas Business Journal (Tuesday July 15, 2008) reported that in 2007, health maintenance organization rate increases for the Southwest averaged 13.7% (13.2% nationally) and predicts that 2008 rate increases will average 7.3% (11.8% nationally). In regards to claims paid, the City has had a favorable year in 2007- 2008 in the HMO network, with claims paid less than expected. However, the PPO network (less than 3% of employees /retirees) has incurred very high claims this current year, and the dental plan has also incurred higher than normal claims. Aetna initially proposed a rate Shana Yelverton, City Manager July 30, 2008 Page 2 increase of 34.0% for the PPO (overall 2.9% for the medical plan) and 18.0% for the dental plan. Working through our broker, we have been able to negotiate a very favorable renewal with Aetna. For the first time in 15 years, we are able to renew our medical benefits at no rate increase, with no plan changes and were able to negotiate a reduction in the dental plan rate increase as well. There are no changes proposed to the level of benefits (i.e., co -pays and/or deductibles). • Medical benefits (HMO): 0.0% increase • Medical benefits (PPO): 0.0% increase Overall Medical Plan 0.0% increase • Dental benefits 12.0% increase The City currently pays the entire premium for "employee- only" medical and dental coverage, and a portion of dependent medical coverage. Financial Considerations: The estimated cost of medical insurance premiums is $168,027 per month, or $2.01 million annually (combined City and employee premium contributions). There is no increase in the estimated costs for FY 2009. The estimated cost of dental insurance premiums is $14,974 per month, or $179,692 annually (combined City and employee premium contributions). The City's estimated increase is $10,477. The proposed medical and dental insurance plan costs are included in the proposed budget for Fiscal Year 2008 -2009. Citizen Input/ Board Review: N/A 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. Supporting Documents: Summary of Renewal (medical plan) Dental Renewal /Proposed Rates Staff Recommendation: City Council approve renewal of contract with Aetna for medical and dental benefits. Summary Of Renewal City of Southlake Effective October 1, 2008 Policyholder Number - 57000 This exhibit outlines your renewal /proposed rates effective October 1, 2008. Please refer to the Financial Conditions and Plan Design Exhibits for an outline of the level of benefits quoted, as well as the terms and conditions of this proposal. Concession on 719108 to Pass. HMO Categories Assumed Em to ees Current Rates Proposed Rates % Change . Coverage Emp Only 135 $369.66 $369.66 0.0% Em + Spouse 24 $824.34 $824.34 0.0% Emp + Child(ren) 72 $728.24 $728.24 0.0% Em + Family 34 $1,208.79 $1,208.79 0.0% TOTAL 265 1 $163,220.40 1 $163,220.40 0A% PPO Coverage Categories Assumed Ernpl o ees Current Rates Proposed Rates % Change . Emp Only 6 $587.71 $587.71 0.0% Emp +Spouse 1 $1,280.95 $1,280.95 0.0% Emp +Child ren 0 $1,169.59 $1,169.59 0.0% Em + Family 0 $2,039.43 $2,039.43 0.0% TOTAL 7 $4,807.21 1 $4,807.21 0.0% Current Proposed Ern to ees Premium Premium % Change Monthly Totals 272 1 $168,027,61 1 $168,027.61 0.0% (Page 1 of 1) Dental Renewal/Proposed Rates City of Southlake Effective October 1, 2008. • This exhibit oudnes your RenewallProposed Rates effective October 1, 2008, • Please refer to the Financial Conditions and Plan Design Exhibits for an outline of the level of benefits quoted, as well as the terms and conditions of this proposal. • Concession from 418% to +12% on 713/08. Policyholder Number- 67000 Group Number - 886003 Employees Current Proposed Premium Premium % Change Monthly Totals 263 $13,370.07 $14,974.41 12.0% Financial Conditions Rates may be adjusted if: • covered population changes by 15% or more; current enrolled lives are 263; • 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. • Commi6sions payable to a broker or consultant change, Terms: > Rates include Middle Market Dental commissions. > 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. PF`01F`DN 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. 712912008 www.aetna.com Denta Concession FOC - DMO Dental Rates CurrentlAssumed Proposed/ Coverage Categories Employees Current Rates Renewal Rates % Change Employee 40 . 4 0 ....................... ..................... ................ $30.98 . ................ .......................................... ...................................................... 12.0% .......... .............................. 5 ............................. ......... . .... $56.49 ............. ..................... .. i $63.27 . ............................. 12.0% ........... .......................................................................................... 12 $67.02 $75..................................06 1 1 IEE+Family .................. ........................................................... 8 $95.85 ............................... .............................. ................................ $107.36 ............. 12.0% I Monthly Total 65 $2,959.89 $3,315.07 12,0 Employees Current Proposed Premium Premium % Change Monthly Totals 263 $13,370.07 $14,974.41 12.0% Financial Conditions Rates may be adjusted if: • covered population changes by 15% or more; current enrolled lives are 263; • 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. • Commi6sions payable to a broker or consultant change, Terms: > Rates include Middle Market Dental commissions. > 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. PF`01F`DN 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. 712912008 www.aetna.com Denta Concession FOC - PPO Dental Rates CurrentlAssumed Proposed/ Coverage Categories Employees Current Rates Renewal Rates %.C.h.a.92e- .......... Employee OniY 102 $27,66 $30.98 12.0% .......... .............................. ............. . $56.49 ............................... ... ........................... . .............. $6 ....... ................................... 12.0% .......................................................................................... .......................................................... $67,02 .............................................................. ................ $76.06 11--.11-1-1-111 .................. 12.0% ........................ I EE+FaMiIY 47 ...................... ............... $95.85 ................................... ........................................................ ..................... �il]7.3 5 12.0% IMonth! y Total 198 $10,410.18 $11,659.34 12.0% Employees Current Proposed Premium Premium % Change Monthly Totals 263 $13,370.07 $14,974.41 12.0% Financial Conditions Rates may be adjusted if: • covered population changes by 15% or more; current enrolled lives are 263; • 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. • Commi6sions payable to a broker or consultant change, Terms: > Rates include Middle Market Dental commissions. > 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. PF`01F`DN 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. 712912008 www.aetna.com Denta Concession