Item 10ACity of Southlake, 'Texas
MEMORANDUM
August 10, 2005
TO: Shana Yelverton, City Manager
FROM: Kevin Hugman, Director of Human Resources
SUBJECT: Approve renewal of a 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, 2005 with
guaranteed rates through September 30, 2006.
Background
Information: In September 2003, the City bid medical benefits due to an unsatisfactory rate
increase proposed by Cigna Healthcare, the medical benefits provider chosen
in August 2002. Aetna proposed the lowest rates consistent with continuing
the level of benefits that employees were being provided, and were 8 -10%
lower than the rate renewal proposed by Cigna. In October 2003, City Council
approved a contract with Aetna to provide medical benefits through an HMO
Plan and a PPO plan beginning December 1, 2003.
In September 2004, City Council approved a 12 -month contract renewal with
Aetna for medical and dental benefits. The medical plan incorporated an
overall rate increase of 119% and the dental plan rate increase was 8.0 %.
For Plan Year 2006, Aetna has proposed an 8.8 %* rate increase for the
medical plan and a 5.0% increase for dental benefits. The rate increases
proposed are:
• Medical Benefits (HMO): 8.7% increase
• Medical Benefits (PPO): 10.7% increase
Overall Medical Plan 8.8% increase
• Dental Benefits 5.0% increase
The proposed contract renewal makes no changes to the level of benefits (i.e.,
co -pays and deductibles will remain the same). The City currently pays the
entire premium for "employee- only" medical and dental coverage, and a
portion of dependent medical coverage.
* NOTE: the 8.8% rate increase includes 2.4% that is applicable to state -
mandated insurance premium taxes. These taxes have not been included in past
years for municipalities by the carriers. Under provisions of the Texas
Insurance Code, municipalities may be exempt if the insurance is provided
through a non -profit trust. The City Attorney is reviewing the feasibility of
this, and Aetna has indicated they will waive the taxes if we comply with the
Insurance Code requirements.
Shana Yelverton, City Manager
August 10, 2005
Page 2
Financial
Considerations: The proposed medical and dental insurance plan costs are within the budget
amounts for the proposed FY 2005 -2006 Budget.
The estimated cost of medical insurance premiums is $130,551 per month, or
$1.56 million annually (combined City and employee premium contributions).
Dental insurance premiums are estimated at $11,068 monthly, or $132,618
annually (City annual portion is approximately $72,000).
Citizen Input/
Board Review: Not Applicable.
Legal Review: Not Applicable.
Alternatives: Denial of contract; City seek sealed bids for medical and dental insurance.
Supporting
Documents: Summary of Renewal /Proposed Rates (Medical and Dental)
Staff
Recommendation: City Council approve renewal of a 12 -month contract with Aetna for employee
medical and dental benefits, effective October 1, 2005 with guaranteed rates
through September 30, 2006.
Staff Contact: Kevin Hugman, Director of Human Resources
Summary Of Renewal/Proposed Rates
City of Southlake
Effective October 1, 2005
CONCESSION - June 23, 2005
Policyholder Number - 302067
Control Number - 886003
• This exhibit outlines your renewal /proposed rates effective October 1, 2005.
• 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
PPO
TX - Dallas TX01
Covera Cate arias
Assumed
I Em to ees
Current Rates
Proposed Rates
%
Change
Emp Only
I 125
$297.30
$323.03 !
8.7%
Erns + S pouse
I 18
$662.97
I_ $720.35 _?
8.7%
I=mp + Child(ren _._ —�__
-- 58 _
1_... $585,68 ._ . _
_. $636.37
8.7 _
Em + Family
32
$972.16
$1,056.30
8.7 % °
TOTAL
233
$114,174,52
$124,056.21
8.7%
PPO
Current Proposed
Employees Premium Premium %Chan e
Monthly Totals 244 $120,042.64 $130,551.87 818%
(Page 1 of 1)
TX - Dallas TX01
Cove a Categories
Assumed
Employees
I
I Current Rates
Proposed Rates
%
Change
Emp Onl .__._ '._
-- 9 __. _.
_._.1 $439,26 _ _..
_ _ $4 86.23
— - 10.7% -
Emp + Spouse
2
5957.39
$1,059.77
? 10.7%
Emp + Child(ren)
_. _ -_
0
i $874.11
$967.64
— I
..__..._
10.7% _
_._ _._1_.
Em + Family
0
$1,524.20
$1,687.29
10.7%
TOTAL
11
$5,868.12
$6,495.66
10.7%
Current Proposed
Employees Premium Premium %Chan e
Monthly Totals 244 $120,042.64 $130,551.87 818%
(Page 1 of 1)
CITY OF SOUTHLAKE
880600 -31 -006
Renewal Rates Effective 1010112005
Volume/
Current Monthly
Renewal Monthly
Renewal
Coverage
Enrollment Current Rate
Renewal Rate
Premium
Premium
Change%
DENTAL
FOC PPO 1FOG DMO
Employee
238 $ 23.70
$ 24.89
$ 5,640.60
$ 5,922.63
Spouse
30 $ 24.71
$ 25.95
$ 741.30
S 778.37
Child
28 $ 33.74
$ 35.43
S 944.72
$ 991.96
Spouselchild(ren)
55 $ 58.45
$ 61.37
$ 3,214.75
$ 3,375.49
EE Medicare
$ 23.70
$ 24.89
$ -
$ -
Dep Medicare
$ 24.71
$ 25.95
$ -
$ -
MONTHLY DENTAL TOTAL
$ 10,541.37
$ 11,068.44
5%