Item 4B AudioSOUTHLAKE
Honorable Mayor and City Council. This presentation will cover Item 4B on the
August 7, 2012 City Council Agenda.
Item 4B
Approve a contract renewal with
Aetna to provide employee medical
benefits for Plan Year October 1,
2012 to September 30, 2013.
The purpose of this item to is to request City Council approval of a contract renewal
with Aetna to provide employee medical benefits for Plan Year October 1, 2012
through September 30, 2013.
Ir
City of Southlake
Strategy Map
The (City of Southlake provides municipal services that support the highest quality of lif,,
for our residents and businesses. We do this
by delivering outstanding value and
unrivaled quality in everything we do.
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Areas
safety Quality
Mobility infrastructure ty
Ferfnershlps& Performance Managemen
Security Development
Volunteerism &Service Delivery
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Approving the contract renewal with Aetna links to the City's strategy map relative to
the focus area of Performance Management and Service Delivery and specifically to
the corporate business objective of Attract, develop, and retain a skilled workforce.
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Background
• Current carrier: Aetna
— 10/01/96 — 09/30/02
— 12/01/03 — present
• Bid insurance in 2002, 2003, 2006, 2010
• 3 plans: HDHP, HMO and POS (Point of
Service)
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The City's current medical insurance carrier is Aetna. Aetna has been the City's
medical carrier for 15 of the last 16 years. Medical insurance was competitively bid
in 2002, 2003, 2006, and 2010. Currently, employees are offered three plan
options: a "base" HMO plan, a "buy- down" High Deductible Health HSA plan, and a
"buy -up" Point of Service plan. You may recall the City's plan experienced a 40%
increase in utilization during the last renewal period. Because of this, staff worked
closely with Aetna to incorporate significant plan modifications to contain costs.
Aetna Renewal History
• Consistently below Aetna Renewal vs Industry Trend
16.0'k
trend 14.6% 13,4% 14.4%
14.0% I ._13.3 %
12.0"/
0.0%
• Plan changes in 10-0
8.0% 7.5%
FY11 & FY12
6.0%
a.o%
• No plan changes in 2.0% _
FY07, FY08, FY09 or 0.0% FY2007 FY2008 FY2009 FY2010 F (2011 FY2012
FY10 Renewal flndustry Trend — Average Renewal — Average Trend
The chart on this slide illustrates the City's most recent renewal history with Aetna.
The blue line is the actual renewal increase and the green line represents the
renewal average over the six year period. The red line represents the health
industry trend, while the purple line is the trend average. Trend is a forecast of
claim costs that includes such things as price inflation, utilization, government
mandated benefits and new treatments, therapies and technologies. For Fiscal Year
2013, the predicted trend increase is 9.1 %. As you can see on the chart, Aetna has
provided the City with favorable renewals when compared to the industry trend.
Over the last six years, premiums have increased an average of 6.1 % compared to
the average industry increase of 12.9 %. In addition, the City made plan changes
Fiscal Years 2011 and 2012. No plan changes were made in the other four fiscal
years.
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Medical Claims Ratio
Total Premium Paid Premium Paid vs Claims Paid
• $450.000
$2,450,130 $4WOB0
$350,000
• Total Claims Paid: $3W
$2,107,548 $250,00
$200,000
$150.000
• Claims Ratio:
$100,000
86% $
May lun lul Aug Sep W New Dec ]an Feb Mar Apr
2011 2411 2411 2011 2011 2011 2011 2011 2012 2012 2012 2012
�MOnthty Billed Premium -4W— Monthly Claims
As part of the renewal process, Aetna provided the City with basic claims data. The
chart on the screen compares the monthly premium paid to Aetna to the monthly
claims paid by Aetna. The red line represents the claims Aetna paid each month
while the blue line represents the monthly billed premium. The City has paid two
million, four hundred and fifty thousand, one hundred and thirty dollars in premiums,
while Aetna has paid two million, one hundred seven thousand, five hundred forty -
eight dollars in claims. Claims over the previous 12 months have been more
favorable than the previous year and the cost ratio has decreased from 102% to
86 %. However, the two most recent months again reflect high utilization and it is
uncertain if that trend will continue.
A
Aetna Proposed Renewal
Industry
Trend
Premiums Claims
Paid Data
Renewa I
Rate
• 3.5% Rate Increase
• No plan changes
• Estimated increase:
$52,800
In early June, the City received its medical insurance renewal from Aetna. To
calculate the renewal, Aetna reviewed the premiums paid, claims data, industry
trend, and inclusion of components required by the Patient Protection and
Affordable Care Act. Aetna originally proposed a 14.1% increase; however, after
negotiation, Aetna's final proposal includes a rate increase of 3.5% with no plan
modifications. The annual estimated increase in the City's portion of medical
insurance premiums is fifty -two thousand, eight hundred dollars for FY 2013.
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Advantages with Aetna
There are a number of advantages to maintaining medical insurance coverage.
These advantages include:
• Given the high claims history, the proposed renewal is favorable;
• The City has received very good customer service 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; and
• Aetna has been the City's provider for medical insurance fourteen of the last
fifteen years and during that time has worked with the City to keep the renewal
rate at or below the predicted trend increase.
0
Financial Considerations
• Estimated cost of medical insurance
premiums:
included in the proposed FY 2013 budget.
The estimated cost of medical insurance premiums is two hundred and twenty
thousand, two hundred and forty -eight dollars per month, or $2,642,976 two million,
six hundred and forty -two thousand, nine hundred and seventy -six dollars annually.
Both of these numbers include the City and employee premium contributions. The
annual estimated increase in the City's portion of medical insurance premiums is
fifty -two thousand, eight hundred dollars for FY 2013.
The proposed medical insurance plan costs will be included in the proposed budget
for Fiscal Year 2013.
0
• Funding for medical insurance will be
Staff Recommendation
Approve a contract renewal with
Aetna to provide employee
medical benefits for Plan Year
October 1, 2012 to September
30, 2013.
Staff recommends City Council approve to renew the contract with Aetna to provide
employee medical benefits for Plan Year October 1, 2012 to September 30, 2013.
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CITY OI
SOUTHLAKE
Stacey 4
Black • • • •
i
+ a1L. , JAI
Thank you for your attention. If you have any questions about this item, please
contact me at 817- 748 -8063. Thank you.
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