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.