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City Council |
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Agenda Request |
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Agenda Of: |
10-17-06 |
Agenda Request No: |
V A |
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Initiated By: |
Mary House, Director of human resources |
Responsible Department: |
human resources |
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Presented By: |
mary house |
Department Head: |
mary house, Director of Human resources |
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Additional Department. Head (s): |
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Subject / Proceeding: |
2007 health benefits |
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Exhibits: |
Aetna Renewal Letter, Letter of agreement from safeguard |
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Clearances |
Approval |
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Legal: |
Meredith Wilganowski, Assistant City Attorney |
Executive Director: |
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Purchasing: |
Cindy Stanfield Administrative Services Director |
Asst. City Manager: |
David ellison |
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Budget: |
jennifer brown assistant fiscal services director |
City Manager: |
Allen Bogard |
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Budget |
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Expenditure Required: $ |
4,035,729 (Medical Only) $81,941 (Dental & Vision Only) |
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Amount Budgeted/Reallocation: $ |
4,205,117 |
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Additional Appropriation: $ |
n/a |
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Recommended Action |
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Staff recommends City Council award a contract with Aetna insurance for group medical insurance in an amount not to exceed $4,035,729, and Safeguard insurance for group dental and vision insurance in an amount not to exceed $81,941. |
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Executive Summary |
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This summer the Human Resources Department solicited proposals for Medical, both Fully insured and Self-funded, and Dental/Vision insurance providers. On August 17, 2006, the proposals were opened. Since 1997, the City has had three (3) health insurance providers: NylCare (1997-1999); Methodist/UniCare (2000-2002), and Aetna (2003-Present). In recent years, the City has benefited from annual costs increases that have been below the market average. Compared to the Houston area market over plan years 2004, 2005, 2006 the city’s average cost increase has been 5.8% compared to the Houston area at 9.4%.
Medical Insurance
A total of nine proposals (4 Fully Insured, 5 Self Funded) were received from the following firms: Aetna, Cigna, Humana, United Healthcare, and Blue Cross Blue Shield. FULLY INSURED PROPOSALS
SELF-FUNDED
PROPOSALS
We do not
recommend going Self-funded at this time due to the favorable rates for full
insurance coverage and because of the additional 374,972 of estimated reserve
for claims run out to change to a self funded plan. This decision eliminated Blue Cross Blue
Shield. United
Healthcare’s proposal came in as the most expensive plan and did not include
an HMO. This would not be a good fit
for our organization since 86% of our employees are covered under an HMO and
our HMOs have always trended favorably against the PPO. Humana’s proposal reported a high physician
disruption rate, 30% on the HMO and 14% on the PPO. Their network discounts
were not as good as other companies, which indicates that they may have to
raise their rates substantially higher in year two and three. Also, their prescription plan is a not of
equal benefit value. An employee
committee including three employees from Human Resources, two from Fiscal
Services, and one from the Purchasing Office met with representatives from
the top two insurance providers, Aetna and Cigna, for on site visits. Both providers demonstrated the products,
services and tools they could offer our employees. In determining the
best provider for the City, both insurance companies were rated on ten
criteria: ·
Benefits and
costs ·
Financial and
market stability of vendors and ratings: AM Best, S&P, Moody ·
Claims
administration/member services. Comprehensive nature of all integrated
services and product components necessary for a complete plan. ·
Physician
network/contractuals/Pharmacy benefit manager ·
Care
coordination and disease management ·
Enrollment/care
submission ·
Reports ·
Demonstrate
the ability to develop and evolve innovative products and services necessary
to assist the City in stabilizing costs in the out years of the initial
contract. ·
Ability to
demonstrate an understanding of the RFP package and content of the initial
contract ·
Any other
relevant factor specifically listed in the request for proposals The criteria were
then given a score based on a scale of 1 (unacceptable) to 5
(Outstanding). The final scores were:
Aetna 48, Cigna 47.5. Cigna costs
approximately $80,000 less than Aetna. With the proposals being so close to
equal, other factors were considered in making the final decision: ·
Loss of
employee medical history instrumental in good disease management ·
Aetna has
2,367 doctors in Ft. Bend compared to Cigna’s 1,266 doctors ·
Aetna has
approximately 64 more doctors (50 on HMO, 14 on PPO) of those doctors that
our employees are frequently using. ·
Soft dollar
costs associated with changing vendors such as the time employees are away
from work signing papers and listening to new company vendors. ·
Disruption in
service from loading 1,000 participants benefit information into new computer
system with accuracy. An issue requiring
more elaboration is the importance of disease management. Managed care in the
form of HMO’s were yesterday’s effort in managing the rise of health care
costs. The latest strategy in keeping
health care costs down is using a disease management model. Disease management involves an integrated
data sharing process. Claims
information on all medical procedures, diagnoses, prescriptions, lab reports
etc. are captured in an insurance carrier’s database. Physicians, pharmacists and nurses evaluate
the information to see if an insured is trending toward future major illness
or if there are problems that the insured’s physician should know about such
as drug-drug interaction, food-drug interaction, etc. They then reach out to the insured and
offer medical information and provide
information to the insured’s physician(s).
They involve the insured more fully in managing their own current and
future health. Our current provider,
Aetna, has led the industry in disease management and is now scrutinizing up
to 30 different conditions. Cigna emphasizes disease management as well, but
would have to start from scratch in establishment of a database for our
workforce. Weighing all of
these additional factors we are recommending staying with Aetna as our
medical provider. Dental/Vision Insurance
A total of six
bids were received and opened from the following firms: Delta, Aetna,
CompBenefits, Cigna, Safeguard, and National Pacific.
National Pacific
came in as the low bid. In reviewing their dental plan design we discovered
National Pacific has a high out of pocket cost to the employee and therefore
is not an equal benefit. Safeguard costs approximately $9,473 less than the
current provider (CompBenefits), it is a richer benefit, and there is minimal
disruption in dentists. The employees
are very dissatisfied with the current provider. Therefore, Safeguard is
being recommended as the dental insurance provider with the best value to the
City. Voluntary Employee Benefits The following plan
is voluntary, paid for by the employee and there are no City funds involved: The vision plan being recommended is
Safeguard. Since this plan is bundled
with the dental plan it is provided at a favorable rate for our
employees. The plan allows for the employee
to receive discounts by paying a monthly premium cost and co-pays for annual
exams, lenses and frames. This information was reviewed with the City Council Compensation Sub-Committee on October 4, 2006. |
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Exhibits |
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Renewal letter from Aetna and Letter of Agreement from Safeguard
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Robert
L. Ritter Sr.
Account Manager One
Prudential Circle, 4th Floor Sugar
Land, TX 77478 (281)
637-3068 (281)
637-3556 Fax |
October 11, 2006
Ms. Mary House
Human Resource Director
City of Sugar Land
P. O. Box 110
Sugar Land, Texas
77487-0110
Re: City of Sugar Land –
2007 Medical Rates Confirmation
Dear Ms. House,
Aetna is excited
that the City of Sugar Land has chosen to renew for the 2007 plan year. This letter confirms the agreement that the
City of Sugar Land will renew for the 2007 plan year at an increase in rates of
7.5%. See attached rates. This increase is contingent on the following
plan changes:
- The PPO medical plan moves to the Open Access
Managed Choice product with a plan change to the proposed plan in the
RFP. See attached revised plan
design.
- The HMO Premier plan will change to the proposed
plan in the RFP with the exception of the Outpatient Surgery copay which
will remain at $250. See attached
revised plan design.
- The less rich HMO plan will change to the
proposed plan in the RFP with the exception of the Outpatient Surgery
copay and the Hospital Admission copay which will remain at $500 and
$1,000 respectively. See attached
revised plan design.
This group is
prospectively rated. Prospectively rated
means retention is guaranteed. Deficits
are not carried forward, and surpluses are not refunded. These rates will be in force until the policy
anniversary in the absence of any revision in benefits, or any other material
change in the conditions under which your plan operates. A material change may be defined as a 10%
change in the employee population by medical product and site.
Attached
worksheet entitled “Rate Change Development” is an example of the renewal
methodology to be used for the City of Sugar Land’s fully insured renewal with
Aetna. This will represent the
methodology applied to the next year’s renewal (01/01/2008), pending any
changes in regulatory requirements. This
presentation is only good for one year.
On 10/15 of each year Aetna can publish the expected methodology for the
next upcoming year. Changes in funding,
as well as significant changes in employee lives may require changes to the
methodology outlined on the Rate Change Development attachment.
To demonstrate
our commitment to your wellness program, Aetna is prepared to offer
the City of Sugar Land a $20,000 allowance for 2007 to use toward wellness
activities. We understand that you have used vendors in
the past to provide health screenings and this allowance could be applied to
those charges. In addition, Aetna has partnered with Retail Health
Network to provide these services to our plan sponsors. I've included a
brochure of the services they offer and I'd be happy to coordinate any activity
for you. In addition, Aetna has three on-site
medical professionals that have volunteered their time to attend some of your
Wellness Committee meetings. Dr. Susan Mueller, Dr. Thomas Lin and Mary
Dunford RN, BSN, CCN all support the Sugar Land office and are excited to help
your Committee.
As we mentioned
in our finalist presentation, Aetna has several communication tools to help
roll out our Simple Steps to a
Healthier Life Program (Aetna's Health Risk Assessment). To
encourage participation and completion of the health risk assessment forms,
Aetna will donate $500 in prizes.
We look forward
to working with you throughout 2007 and have enjoyed our partnership over the
past three years.
Sincerely,
Robert L. Ritter
Sr. Account Manager
Cc: Bob
Treacy, Sunday and Associates Inc.
Sandy
Jones, Aetna
Paula Kutchka,
City of Sugar Land
