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Item 4BITEM 4B 15CITY OF SOUTHLAKE MEMORANDUM August 2, 2013 TO: Shana Yelverton, City Manager FROM: Stacey Black, Director of Human Resources SUBJECT: Approve a contract with United Healthcare to provide employee medical benefits for Plan Year October 1, 2013 to September 30, 2014. Action Requested: Approve a contract with United Healthcare to provide employee medical benefits for Plan Year October 1, 2013 to September 30, 2014. Background Information: In mid -June, the City received its medical insurance renewal from Aetna, the current provider. To maintain the current plan designs for the "buy -down" HDHP plan, the "base" HMO plan, and the "buy -up" PPO plan, Aetna proposed a rate increase of 35.2%. Rate renewals are based on various factors, with the most important factors being- (1) actual claims paid for the current and past plan years in comparison to premiums paid, (2) health industry trends, and (3) inclusion of components required by the Patient Protection and Affordable Care Act. As part of the renewal process, Aetna provided the City with basic claims data. The chart on the right compares the monthly premium paid to Aetna to the monthly claims paid by Aetna. The blue line on the chart represents the claims Aetna has paid and the red line represents the monthly premium. Aetna has received $2,607,364 in premiums and has paid $2,475,663 in $400,000 $350xw $300.000 $250,000 $200,000 51s0,000 si00000 - Medical Premiums Paid vs Claims Paid q11 OL'ry +Monthly Claims -*-Monthly Premium Shana Yelverton, City Manager August 2, 2013 Page 2 ITEM 413 claims. This results in a claims ratio of 95%. Last year, claims were slightly lower with a claims ratio of 86%. In response to Aetna's proposed rate increase, the City issued a Request for Proposals (RFP) for its employee medical insurance benefits. The City last issued an RFP for medical insurance in 2010, and will typically issue an RFP every four to five years depending upon renewal proposals. Four carriers submitted proposals for fully insured medical benefits, including the current provider, Aetna. Each proposal was reviewed and evaluated based on the following criteria: • experience, qualifications, reputation and references; • rates; • schedule of benefits; • network access; • reporting and ease of billing; and • inclusion of a wellness component. Staff carefully reviewed each proposal and analyzed proposed plan alternatives to determine the best option for the City. Following an initial review, Aetna and United Healthcare were selected as finalists and invited to meet with staff. Both carriers offered a buy -down HDHP plan, a base HMO or EPO plan, and a buy -up PPO plan. The charts below provide a summary comparison of the plans offered and the percentage rate increase over current rates. A more detailed comparison is attached. HDHP HSA HMO PPO Ded. + 20% $35 Office $35 Office Office Visit Visit Copay Visit Copay 80% 70% 80% Coinsurance Coinsurance Coinsurance $3,000 $1,500 $1,500 Individual Individual Individual Deductible Deductible Deductible 10% 12% 11.7% Ratelncrease Rate Increase Rate Increase United Healthcare HDHP HSA EPO PPO Ded. + 20% Office Visit $35 Office Visit Copay $40 Office Visit Copay 80% Coinsurance 70% Coinsurance 80% Coinsurance $3,000 Individual Deductible $1,500 Individual Deductible $1,000 Individual Deductible 0% Rate Increase 2% Ratelncrease 7.7% Ratelncrease After meeting with both companies and analyzing plan options, staff recommends selecting United Healthcare as the provider for employee health insurance. United Healthcare provides the best plan design Shana Yelverton, City Manager August 2, 2013 Page 3 with the lowest premium structure. ITEM 4B Advantages to switching medical insurance coverage to United Healthcare Aetna include: • Given the claims history, the proposed plan designs and premium structures are favorable; • United Healthcare offers a wellness program called "Simply Engaged" that provides onsite biometric screening, a robust wellness website that helps drive long-term behavior change, and incentives to employees for completing a health risk assessment, online health coaching, or telephone based coaching; • United Healthcare offers a very robust member website and mobile application, making it simple for employees to manage healthcare; and • United Healthcare is the City's current provider for dental insurance which allows the ability to coordinate medical and dental care for employees and consolidates billing and administrative processes. In addition, during the first year, United Healthcare will provide a multiple policy rebate of $5 per month per covered employee. This should result in a rebate of approximately $16,000. Financial Considerations: The estimated cost of medical insurance premiums is $227,006 per month, or $2,724,080 annually (combined City and employee premium contributions). The annual estimated increase in the City's portion of medical insurance premiums is $27,621 for FY 2014. The proposed medical insurance plan costs will be included in the proposed budget for Fiscal Year 2014. Strategic Link: Performance Management and Service Delivery: attract, develop and retain a skilled workforce. C13O2: Become an employer of choice by developing a plan to recruit, develop and retain employees committed to excellence. Citizen Input/ Board Review: N/A Legal Review: N/A Alternatives: Deny contract United Healthcare and seek alternative options. Shana Yelverton, City Manager ITEM 4B August 2, 2013 Page 4 Supporting Documents: The following supporting documents are attached: • RFP Finalist Comparison • United Healthcare Medical Proposed Rates Staff Recommendation: Approve a contract with United Healthcare to provide employee medical benefits for Plan Year October 1, 2013 to September 30, 2014. City of Southlake RFP Finalist Comparision Rates Effective 10/01/2013 Physician Copay Covered Persons under age 19 Specialist Copay Urgent Care Copay Emergency Room -Facility Diagnostic Laboratory Diagnostic X-ray Diagnostic Major Inpatient Hospital Outpatient Surgery Deductible - Individual Deductible - Family Coinsurance Out of Pocket Max - Ind.* Out of Pocket Max - Fam.* Lifetime Maximum Retail Prescriptions Employee Employee/Spouse Employee/Child(ren) Employee/Family Monthly Annual HDHP ..Comparison Aetna United Healthcare HDHP (Buy -down Plan) HDHP (Buy -down Plan) Renewal 1 TX-P In -Network Out -of -Network In -Network Out -of -Network Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% $5,000 $8,000 $3,000 $5,000 $10,000 $16,000 $6,000 $10,000 80% 60% 80% 60% $5,500 $9,000 $6,000 $10,000 $11,000 $18,000 $12,000 $20,000 *Deductible included *Deductible included Unlimited Unlimited $10/$25/$45 $10/$35/$60 Proposed Rates Current Rates Proposed Rates Current Rates 1 $ 467.64 $ 407.00 1 $ 406.14 $ 407.00 0 $ 1,042.14 $ 907.00 0 $ 905.69 $ 907.00 0 $ 920.35 $ 801.00 0 $ 800.10 $ 801.00 0 $ 1,527.02 $ 1,329.00 0 1 $ 1,328.08 $ 1,329.00 1 $ 3,954.84 $ 3,442.00 $ 3,435.94 $ 3,442.00 $ 47,458.08 $ 41,304.00 $ 41,231.28 $ 41,304.00 RFP Health Insurance Finalists July 15, 2013 City of Southlake RFP Finalist Comparision Rates Effective 10/01/2013 BENEFITS Physician Copay Covered Persons under age 19 Specialist Copay Urgent Care Copay Emergency Room -Facility Diagnostic Laboratory Diagnostic X-ray Diagnostic Major Inpatient Hospital Outpatient Surgery Deductible - Individual Deductible - Family Coinsurance Out of Pocket Max - Ind.* Out of Pocket Max - Fam.* Lifetime Maximum Retail Prescriptions PREMIUMS Employee 114 Employee/Spouse 1 E Employee/Child(ren) 7E Employee/Family K thly ual 24C • -RhIM Comparison Aetna United Healthcare HMO (Base Plan) EPO (Base Plan) Renewal UBN-P In -Network Out -of -Network In -Network Out -of -Network $30 Copay N/A $35 Copay N/A $30 Copay N/A $0 Copay N/A $40 Copay N/A $35 Copay N/A $75 Copay N/A $50 Copay N/A $200 Copay N/A $150 Copay + 30% Same as In -Network $40 Copay N/A $35 Copay N/A $40 Copay N/A $35 Copay N/A Ded + 30% N/A Ded + 30% N/A Ded + 30% N/A Ded + 30% N/A Ded + 30% N/A Ded + 30% N/A $1,000 N/A $1,500 N/A $2,000 N/A $3,000 N/A 70% N/A 70% N/A $4,000 N/A $5,000 N/A $8,000 N/A $10,000 N/A *Deductible included *Deductible included Unlimited Unlimited $10/$40/$60 $10/$35/$60 Proposed Rates Current Rates Proposed Rates Current Rates $ 546.92 $ 476.00 114 $ 484.25 $ 476.00 $ 1,216.79 $ 1,059.00 16 $ 1,079.88 $ 1,059.00 $ 1,075.46 $ 936.00 78 $ 953.97 $ 936.00 $ 1,784.40 $ 1,553.00 32 $ 1,583.50 $ 1,553.00 $ 258,511.59 $ 224,989.00 240 $ 229,234.21 $ 1 224,989.00 $ 3,102,139.08 $ 2,699,868.00 $ 2,750,810.52 $ 2,699,868.00 RFP Health Insurance Finalists July 15, 2013 City of Southlake RFP Finalist Comparision Rates Effective 10/01/2013 Physician Copay Covered Persons under age 19 Specialist Copay Urgent Care Copay Emergency Room -Facility Diagnostic Laboratory Diagnostic X-ray Diagnostic Major Inpatient Hospital Outpatient Surgery Deductible - Individual Deductible - Family Coinsurance Out of Pocket Max - Ind.* Out of Pocket Max - Fam.* Lifetime Maximum Retail Prescriptions use d(ren) thly ual Aetna PPO (Buy -up Plan) Renewal PPO Comparison Out -of -Network $30 Copay Ded + 40% $30 Copay Ded + 40% $40 Copay Ded + 40% $50 Copay Ded + 40% $150 Copay Ded + 40% No Charge Ded + 40% $30 Copay Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% Ded + 20% Ded + 40% $1,000 $2,000 $2,000 $4,000 80% 60% $4,000 $6,000 $8,000 $12,000 Deductible included Unlimited $10/$30/$60 Proposed Rates Current Rates $ 574.50 $ 500.00 $ 1,281.14 $ 1,115.00 $ 1,130.62 $ 984.00 $ 1,877.47 $ 1,634.00 $ 4,860.28 $ 4,230.00 $ 58,323.36 11 $ 50,760.00 United Healthcare PPO (Buy -up Plan) TOZ-P In -Network Out -of -Network $40 Copay Ded + 50% $40 Copay Ded + 50% $40 Copay Ded + 50% $50 Copay Ded + 50% $150 Copay + 20% Ded + 50% No Charge Ded + 50% $40 Copay Ded + 50% Ded + 20% Ded + 50% Ded + 20% Ded + 50% Ded + 20% Ded + 50% $1,000 $2,000 $2,000 $4,000 80% 50% $4,000 $8,000 $8,000 $16,000 Deductible included Unlimited $10/$35/$60 Proposed Rates Current Rates $ 538.45 $ 500.00 $ 1,200.74 $ 1,115.00 $ 1,060.75 $ 984.00 $ 1,760.73 $ 1,634.00 $ 4,555.28 $ 4,230.00 $ 54,663.36 $ 50,760.00 RFP Health Insurance Finalists July 15, 2013 City of Southlake I Medical Proposed Rates and Alternate Plans UnitedHealthcare Medical Proposed Rates Customer Name: City of Southlake Effective Date: October 1, 2013 • The numbers below are on an illustrative basis. Rates are subject to Underwriting approval. Plan Name Product Option Plan Offering Multiple Option with: HRA or HSA Benefits" Office Copay (PCP/SPC) Other Copays (IP/ER/UC) Other Deductible Coinsurance Out -of -Pocket Pharmacy Deductible Coinsurance Out of Pocket Enrollment Employee Employee + Spouse Employee + Child(ren) Employee + Family Total Rates Employee Employee + Spouse Employee + Child(ren) Employee + Family Monthly Cost Annual Cost •• HDHP HSA PPO Choice' Insurance Choice Plus' Insurance Choice Plus' Insurance EPO Middle PPO Base PPO Buy up Multiple Option Multiple Option Multiple Option Option(s) any option Option(s) any option Option(s) any option No No Network Single/Family $35 ($0 if <19) Per Visit Network Single/Family N/A Per Visit Network Single/Family $40 Per Visit N/A/$150 + 30%/$50 N/A/N/A/N/A N/A/$150 + 20%/$50 N/A N/A N/A $1500/$3000 $3000/$6000 $1000/$2000 70% 80% 80% $5000/$10000 $6000/$12000 $4000/$8000 $10/35/60 $10/35/60 $10/35/60 •qmmnz Out • 0 $5000/$10000 $2000/$4000 0% 60% 50% 0 $10000/$20000 $8000/$16000 118 1 30 14 0 4 64 1 16 28 0 7 224 Rates (Billed) 1 Rates (Billed) 57 Rates (Billed) $484.25 $406.14 $538.45 $1,079.88 $905.69 $1,200.74 $953.97 $800.10 $1,060.75 $1,583.50 $1,328.08 $1,760.73 $177,652 $1,206 $50,254 $2,131,823 $14,475 $603,043 "High level benefit summary. Please see your plan summary for more detailed benefit description. The numbers above are on an illustrative basis. Rates are subject to Underwriting approval. For markets moving to service fees, current rates (applicable forrenewals only) include commission expenses. Proposed rates, for your convenience, include any applicable producer service fees. Producer service fees are not a contingency of obtaining insurance coverage but are fees agreed to between you (client) and your producer/service provider for service rendered on behalf of client. For markets continuing to pay commissions, both the current (applicable for renewals only) and proposed rates include commissions. City of Southlake I Medical Quote Assumptions UnitedHealthcare Medical Quote Assumptions Customer Name: City of Southlake Effective Date: October 1, 2013 The rates quoted here are based on the following assumptions. Changes to these assumptions may result in an adjustment to rates or revocation of the quote. Rates are guaranteed for the contract period of 10/1/13 through 9/30/14. United Healthcare is the only carrier offered. United Healthcare reserves the right to adjust the rates if the enrollment at issue varies by +/- 10% from the submitted census. Employer contributes a minimum of 100% toward the employee only rates and 55% toward the dependent rates. Requires a minimum participation level of 75% excluding spousal waivers and a minimum of 50% overall. COBRA continuees make up 10% or less of covered employees. Quote is subject to final underwriting which may have conditions. Additional paperwork and/or information may be required. United Healthcare reserves the right to adjust rates if supplementary census or utilization information is received prior to effective date. United Healthcare will work exclusively with the broker designated when an agent of record letter is issued by the prospective client. If this quote has been provided based upon a RFP that did not include claims experience or renewal rates, final approval will be contingent upon receipt of renewal rates at the time the employer form is submitted. If the current carrier's composite renewal exceeds 25%, United Healthcare reserves the right to re -rate. - INS -Choice plans are not available for subscribers in AL, AR, AZ, HI, KS, LA, MN, MS, MT, NC, NM, OK. Rates are contingent upon review and approval of Employer Form by Medical Underwriting and assume no large ongoing claims or conditions. Quote includes Simply Engaged 2.0 UnitedHealthcare reserves the right to adjust the rates and/or fees (i) in the event of any changes in federal, state or other applicable legislation or This premium includes state and federal taxes and fees, including the Insurer Fee (about 2.3% of premium) and the Reinsurance Fee (about $5 per member per month) under the Affordable Care Act. These estimates will vary based on renewal date and state reinsurance fees. At your request, a service fee to be paid to your producer/service agent of 4.17% has been added as an expense item in sites where service fees apply. Agents may receive commissions and other compensation from us for sale and solicitation of the products in this proposal and these costs may be directly or indirectly reflected in your premium (for fully insured business) or fee (for self funded business). Separately, in certain fully insured markets, you may have elected to contract with producers/service provider to provide services directly to your group health plan and have agreed to pay them a 'service fee'. Since 'service fees' are not a contingency of the purchase of health insurance such fees are not part of your premium - Please refer to the vendor bank collateral for HRA/HSA account fee information. - HRA and HSA plans may include a non -embedded deductible and out of pocket. In that instance, no individual family member's deductible or out of pocket is considered satisfied until the full family deductible or out of pocket amount has been met. Pharmacy copays will only apply after the deductible has been satisfied on HRA/HSA plans with integrated medical/pharmacy deductibles. - Rates assume the Employer funds no more than 50% of the HSA/HRA deductible. United Healthcare reserved the right to adjust rates if this assumption changes. HSA accounts must be paired with qualified HDHPs as determined under section 223 of the Internal Revenue Code For calendar year 2013, the HDHP annual deductible cannot be less than $1,250 for self -only coverage or $2,500 for family coverage Medical and pharmacy expenses covered under an HSA program are not eligible for reimbursement under an FSA program Funds in the HSA account continue to accumulate and are fully portable to another HSA account. Any unused HRA funds can be rolled over to next year's HRA, but are not portable as a cash out option. Only medical expenses covered under the medical plan are reimbursable from the HRA.