Item 5HCity of Southlake, Texas
MEMORANDUM
July 21, 2006
TO: Shana Yelverton, City Manager
FROM: Kevin Hugman, Director of Human Resources
SUBJECT: Approve a contract with Aetna to provide employee medical benefits
Action Requested: City Council consider approval of a contract with Aetna to provide employee
and dependent medical benefits for Fiscal Year 2006 -2007.
Background
Information: In May 2006, the City bid out its employee insurance benefits. These benefits
include medical, dental, group life insurance (basic, supplemental and
Accidental Death and Dismemberment), long term disability, flexible spending
account (Section 125) administration, and optional vision coverage. Bids were
received on June 26, 2006.
A total of 28 carriers submitted 57 proposals for employee benefit plans. A
summary of bids received is attached (Attachment A). Proposals were
reviewed on the following criteria:
• Experience and reputation
• Proposed schedule of benefits
• Rates
• Provider network access / penetration
• Reporting and cost management
Three carriers submitted proposals for medical benefits, including Aetna, the
current provider. Following initial review, United Health Care and Aetna were
invited to meet with staff to make a presentation and answer questions
regarding their plans. Aetna had proposed the same plan design as currently
(dual option -- HMO and PPO); UHC proposed a single option PPO.
Staff has determined that Aetna provides the best plan offering combined with
the best rate. It should be noted that Aetna's initial proposal with the same plan
design as currently, proposed a 22.9 rate increase. After initial discussion of
plan changes to increase co -pays and deductibles, Aetna reduced the increase
to a 10.6 average rate increase.
Through follow -on negotiations, we have been able to gain an additional
concession from Aetna for multiple lines of coverage (medical and dental
benefits), and an underwriter review of more recent, favorable claims data. The
rate increases proposed are:
• Medical Benefits (HMO): 7.1 % increase
• Medical Benefits (PPO): 13.1% increase
Overall Medical Plan 7.3% increase
Shana Yelverton, City Manager
July 21, 2006
Page 2
The proposed plan will increase co -pays and deductibles for doctor office visits
( +$5), hospitalizations (20% co- insurance), Out-of-Pocket maximums ( +$500
individual/ +$1000 family), and pharmacy benefits ( +$0 generic / +$5
preferred / +$10 non - preferred).
In addition to providing the best overall benefit plan and lowest rates, there are
also other advantages to maintaining coverage with Aetna:
• We have had very good customer service with Aetna over the past two
years and employees have been generally satisfied with the plan
coverage;
• Changing carriers would result in some disruption to employees
through changes in network providers, drug formularies, and ongoing
treatment plans;
• There will be less staff administrative work required than if we had
changed to another carrier;
• There are significant benefits to employees in having the same carrier
for medical and dental benefits since there are occasions when the two
coverages can and will overlap.
Financial
Considerations: The proposed medical insurance plan costs are within budget amounts for the
proposed FY 2006 -2007 Budget.
The estimated cost of medical insurance premiums is $134,221 per month, or
$1.61 million annually (combined City and employee premium contributions).
Citizen Input/
Board Review: Not Applicable.
Legal Review: The City Attorney reviewed the Request for Proposals (RFP) and applicable
documents.
Alternatives: Denial of contract with Aetna; seek alternatives.
Supporting
Documents:
Summary of Bids Received
Aetna Summary of Alternate Plan Rates (Medical)
Staff
Recommendation: City Council approve a contract with Aetna for employee medical benefits,
effective October 1, 2006 with guaranteed rates through September 30, 2007.
Staff Contact: Kevin Hugman, Director of Human Resources
Siimmary of Bids Received
Insurance Company
Agent
Medical
Dental
Basic
Supp Life
I AD &D
LTD
Vision
f=lex Plan
Aetna
Lifetime Benefits 1 Bob Mundlin
X
X
X
United Health Care
Lifetime Benefits 1 Bob Mundlin
X
X
Blue Cross Blue Shield
Lifetime Benefits 1 Bob Mundlin
Al Boenker Insurance
X
X
Ameritas Group
Lifetime Benefits I Bob Mundlin
X
Total Administrative Service Corp.
Lifetime Benefits / Bob Mundlin
X
X
CompBenefits
Lifetime Benefits 1 Bob Mundlin
X
X
Guardian Life Insurance Co.
Greg Thompson
X
X
Guardian Life Insurance Co.
Lifetime Benefits 1 Bob Mundlin
X
X
Delta Dental
None
X
Sun Life Financial
Lifetime Benefits 1 Bob Mundlin
X
X
Safeguard
Lifetime Benefits I Bob Mundlin
X
X
MetLife
Lifetime Benefits 1 Bob Mundlin
X
AIG American General
Lifetime Benefits / Bob Mundlin
X
X
Dental Select
Lifetime Benefits / Bob Mundlin
X
Principal Financial Group
Summit Financial / Jim Vollmer
X
Mutual of Omaha
Lifetime Benefits 1 Bob Mundlin
X
Unimerica
None
X
Jefferson Pilot Financial
Lifetime Benefits / Bob Mundlin
X
Standard Insurance Company
Lifetime Benefits 1 Bob Mundlin
X
Prudential Financial
Lifetime Benefits I Bob Mundlin
X
X
Fort Dearborn Life
Lifetime Benefits / Bob Mundlin
X
X
CIGNA
Lifetime Benefits / Bob Mundlin
X
X
Unum Provident
Lifetime Benefits I Bob Mundlin
X
X
LifeRe
Lifetime Benefits / Bob Mundlin
X
X
Benefit Mana ement Admin (BMA)
Lifetime Benefits 1 Bob Mundlin
X
AdminOne Corporation
Summit Financial 1 Jim Vollmer
X
Spectera
Lifetime Benefits / Bob Mundlin
X
VSP
Lifetime Benefits 1 Bob Mundlin
X
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7/25/2006
Summary Of Alternate Plan Rates
City of Southlake
Effective October 1, 2006
Policyholder Number- 57000
• This exhibit outlines your renewal /proposed rates effective October 1, 2006.
• 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.
HMO Current - $20130 Spec/Non Spec, $500 Hosp, $200014000 OOP, $250 SPU, $100 ER, $50 Urg Care , $101
HMO Alternate - $25/35 Spec/Non Spec, 20% Hosp', $250015000 OOP, $150 ER, $70 Urg Cara, $10130145 RA
HMO
Coverage Categories
Assumed
Em to ees
Current Rates
Proposed Rates
%
Change
Emp Only
138
$32103
$346.00
7.1%
Emp + Spouse
15
$720.35
$771.57
7.1%
Emp +Child ren
56
$636.37
$681.62
7.1%
Em + Family
28
$1,056.30
$1,131.41
7.1%
TOTAL
237
$120,596.51
$129,172.24
7.1%
PPO Current - $151$25 Non Spec/Spec, $5001$500 Ded, 01500 Hosp, $20001$3000 Coins Limit, $10120135 RX
PPO Alternate - $201$30 Non Spec /Spec, $5001$750 Ded, 2501500 Hosp, $20001$4000 Coins Limit, $1012515(
PPO
Coverage Categories
Assumed
Em to ees
Current Rates
Proposed Rates
Change
Emp Only
7
$486.23
$550.09
13.1%
Emp + Spouse
1
$1,059.77
$1,198.95
13.1%
Emp + Child ren
0
$967.64
$1,094.72
13.1%
Em + Family
0
$1,687.29
1 $1,908.88
13.1 0 /0
TOTAL
8
$4,463.38 1
$5,049.66
13.1
Current Proposed
Em to ees Premium Premium % Change
Monthly Totals 245 1 $125,059.89 1 $134,221.80 7.3%
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