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