05-H Award Health InsuranceDRAFT
F:kAttorney\LisahO. esolutions\CURRENT~Health Insurance Award Res.wpd
March 5, 2004
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS,
PARIS, TEXAS, APPROVING AND AUTHORIZING THE AWARD OF A
CONTRACT FOR MEDICAL, DENTAL, VISION, LIFE, AND LONG-TERM
DISABILITY FOR THE EMPLOYEES AND EMPLOYEE DEPENDENTS OF
THE CITY OF PARIS; MAKING OTHER FINDINGS AND PROVISIONS
RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE.
WHEREAS, the City Council of the City of Paris, Paris, Texas, previously created a City
Council Subcommittee to review and study benefits provided to City employees, including medical
and associated insurance benefits; and,
WHEREAS, the aforesaid City Council Subcommittee recommended that the City solicit
proposals from interested and qualified insurance providers to review and consider in determining
whether or not the City should change its insurance program and plan; and,
WHEREAS, based on the recommendations of the aforesaid subcommittee, the City Council
authorized the City Finance Director to solicit proposals from qualified insurance providers for
medical, dental, vision, life, and long-term disability insurance for the employees and the employee
dependents of the City of Paris; and,
WHEREAS, City Council likewise instructed the City Finance Director to solicit proposals
that would include both self-funded coverage and fully-funded coverage for such insurance; and,
WHEREAS, the City Finance Director has received said proposals, reviewed same for
compliance with the City's specifications, identified those proposals which met the minimum
requirements of the City's specifications, and has recommended to the City Council a potential
provider for said insurance as a fully-funded plan and a potential provider for said insurance as a self-
funded plan; and,
WHEREAS, based on said recommendations, the City Council desires to award a contract
for medical, dental, vision, life, and long-term disability insurance for the City's employees and their
dependents; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS,
TEXAS:
Section 1. That the findings set out in the preamble to this resolution are hereby in all things
approved.
Section 2. That the proposal of _, to provide medical, dental, vision, life,
and long-term disability insurance for the employees and employee dependents of the City of Paris,
shall be, and is hereby, accepted.
Section 3. That the City Manager be, and he is hereby, authorized to execute and the City
Clerk to attest to a contract for medical, dental, vision, life, and long-term disability insurance for the
City's employees and their dependents, said contract to be with , containing such
terms and provisions as are consistent with the aforesaid provider's proposal, and in such form as shall
be acceptable to the City Manager, City Finance Director, and City Attorney.
Section 4. That this resolution shall be effective from and after its date of passage.
PASSED AND APPROVED this 8th day of March, 2004
Curtis Fendley, Mayor
ATTEST:
Mattie Cunningham, City Clerk
APPROVED AS TO FORM:
Larry W. Schenk, City Attorney.
3-5-2004
MEMO
TO: MICHAEL E. MALONE, CITY MANAGER
FROM: GENE ANDERSON
SUBJECT: INSURANCE PROPOSALS
The City of Paris received proposals for medical, dental, vision, life, and long term
disability coverage on February 17, 2004 in both fully insured and self insured formats.
The basis for the proposals was a set of benefit levels discussed by the City Council in
last year's budget workshops and also reviewed and approved later by the Council's
Benefit Committee. I also allowed providers to propose alternate plans with the
understanding that those plans would only be considered if no proposals were received
which matched the proposal specifications and had a reasonable cost. The reasoning
being these alternates might prevent the necessity of a second round of proposals. This is
clearly stated in the proposal document. The City received 12 variations of fully funded
plans. Two of these proposals matched our specifications, and 10 did not in a significant
way. The City received 48 variations of self funded plans. Four of these proposals clearly
met specifications. Twelve proposals lacked enough information for me to verify that
they met specifications, but for comparison purposes I assumed they did meet our
criteria. Thirty-two self funded proposals did not meet specifications in a significant way.
The City received both fully funded and self funded proposals which met the requested
specifications and fall within the amounts budgeted for this coverage.
Of the fully funded proposals that met specifications, the Capps Insurance Agency
proposed option one represents the best combination of price and coverage. Of the self
funded proposals that met specifications, the Texas Municipal League proposed option
one represents the best combination of price and coverage. A copy of their complete
packets would be too bulky to distribute in the Council's packet, but attached is a copy of
cost summaries for both the recommend proposals. I will bring to the Council meeting all
of the proposals received.
My recommendation is that Council decide which type of plan they prefer, and direct the
staff to go forward with implementation of that choice. The following is a list of things
that the Council should consider in making its decision.
1. The cost of a fully funded plan is a known amount assuming that the employee
and dependent census does not change. Under the Capps proposal, the City knows
that it will spend $2,116,800 (392 x $450 x 12). Employees will pay another
$456,855 for dependent coverage.
2. The cost of a self funded plan is unknown because it has both fixed and variable
costs. Under the TML proposal, the fixed costs total $410,811. This total consists
of $309,181 for stop loss reinsurance and $101,630 for plan administration.
In the way of explanation, two types of stop loss reinsurance are typically used. Specific
Stop Loss coverage protects the City for plan year claims on an individual which exceed
a certain limit. In this case that limit is $75,000. If claims exceed this amount on any
individual, the reinsurance company reimburses the City for those claims. Aggregate
Stop Loss coverage puts a limit on the City's liability for all eligible claims in a plan
year. If that limit is exceeded, the reinsurance company reimburses the City for those
claims.
Under a self funded arrangement, the City would hold in reserve the funds it has
budgeted for its share of insurance costs ($2,116,800) as well as City employee
contributions for dependent coverage ($456,855). Over the course of the plan year, the
City would pay TML $101,630 for administration (processing claims, billing, Cobra
administration, etc.) and pay the reinsurance company $309,181 for both types of stop
loss coverage. As TML approves and processes claims, the City pays them. In this case
there would be $2,162,844 available to pay claims. Because of the aggregate stop loss
coverage, the maximum liability for claims would be $2,689,912. This leaves the City
with a potential additional liability of $527,068 in a worse case scenario. TML used an
expected claims amount of $2,151,930 in calculating its rates. Claims paid through the
first 8 months of the cun'ent plan year are $996,512. Annualized this number would be
$1,494,783. If City claims next year equaled that same $1,494,783, the City would profit
by $668,061. The advantages of a self funded plan are (1) The City controls its own
reserves. Any reserves not used represent savings to the City. This number will be
$2,162,844 less actual claims paid. (2) Claims are paid only as they are presented rather
than as part of fully funded premiums. (3) City retains control over benefits, appeals, and
the network. (4) The City's plan is not an ERISA plan which results in some claims cost
savings. (5) Employees know that their current providers are in the network. Not all local
providers are in the Humana network. Capps Insurance has indicated that Humana will
attempt to recruit local providers requested by the City but there is no obligation of the
provider to join the network.
Capps Insurance Agency Recommendations for the City of Paris
Option 1
Fully-Insured Medical, Dental, Life, Vision & LTD
With Voluntary Long Term Care Option
Medical Humana $414.25 $61.00 $150.00
Dental Humana 18.19 16.90 22.76
Life
AD&D
Dependent
Life
Ft. Dearborn
(.18/$1,000)
Ft. Dearbom
(.03/$1,000)
Ft. Dearborn
Retiree Life Ft. Dearborn
Vision Guardian
2.70
$240.00
40.31
.45
7.25 5.20 4.96 12.45
7.16'
LTD * Mutual of
Omaha
Total $450 $83.10 $177.96 $292.76
I Optional Long[ I Rates vary as to age & are medically
Term Care Unum $7.85 underwritten
FULLY INSURED RATES ARE FIRM
Medical Plan - $500 deductible, 80/50 coinsurance; $2,000 OOP; 10/25/45/25% RX
· Dental Plan - $50 deductible (waived on Preventative); 100/80/50 coinsurance; $1,000 annual max; Ortho not
quoted, but available.
· Life - $15,000 active employees, $5,000 retired employees; (See Reduction features & Buy-Up rates for
Voluntary Life in Proposal)
· AD&D - $15,000 active employees, $0 retired employees
· Vision - Plan B; 12/12/24 (Exam everyl2 months, Lenses every 12 months, Frames every 24 months)
· Long Term Disability- Per specifications, rates vary with payroll.
CAPPS AGENCY CAN ASSUME CURRENT LTD PLAN WITH UNUM
CITY OF PARIS
PLAN YEAR 04-05
ITEM
Aggregate Stop Loss (ASL)
15/12 - Includes Medical & Rx
Composite
American Stop Loss
Standard Security
Individual Stop Loss (ISL)
15/12 - Includes Medical & Rx
EE
Dependent
Total ISL
Total Stop Loss
RATE E...~E MONTHLY .ANNUAL
$3.68 393 $1,446 $17,355
$75.000 Deductible
$32.24 393
$44.46 262
STANDARD FIXED COSTS
A$OFEEMEDICAL* $12.85 393
ASOFEEDENTAL $2.10 393
ASOFEEVISION $0.00 393
U.R. FEE** $2.75 393
PPNFEE** $3.85 393
TOTALADMINISTRATION $21.55
Total Fixed Cos~
$12,670 $152,044
$11,649 $139,782
$24,319 $291,826
$25,765 $309,181
$5,050 $60,601
$825 $9,904
$0 $0
$1,081 $12,969
$1,513 $18,157
$8369 $101,630
$8,469 $101,630
$179,327 $2,151,930
$179~27 $2,151~30
$224,159 $2A$9,912
$224,159 $2~89~12
EXPECTED IVIED CLAIMS - Comp $456.30 393
Expected Clahn, Stop Loss & Admin. Liability
IVIED ATTACHMENT POINT - Comp $570.38 393
Maximum Claim, Stop Loss & Admin. Liability
OPTIONAL FIXED COSTS
COC ADMINISTRATION $0.50
TOTAL OPTIONAL FIXED COSTS $0.50
393 $197 $2,358
$197 $2,358
NOTE - SEE MGU QUOTE SHEET FOR ANY QUALIFICATIONS TO OFFER
1. Actively. at. work and pre-exls#ng conditions, ff applicable, may be v41ved upon receipt, review and acceptance of a signed Disclosure $tatsmenL
Please fill out the Disclosure Statement carefully in consultation with your Claims Admlnistretor and each of your medical management vendors,
ff appropriate, and include all applicable parsons even ff Shay were previously reported to ASL or dlrsctiy to the Carrier.
2. Need diagnosis/prognosis on all large, potentlally large, ongoing or pending eislms as higher deductibles (teaors) may apply.
3. Need monthly paid claims, enrollment through April 30, 2004.
4. Assumes duplication of current plana and noa~orks.
5. Nead current ur proposed plan document[s) and all amondmenis.
$. Need updated census as of the effective data.
7. ]'PA is the TML IEBP.
8. Access fees are not covered.
9. Proposal assumes Madicare is primary for retirees age 65 and older.
10. Coverage fur Disabled and COBRA participants Is subject to disclosuro and cartier approval.
11. Rates and attachment factors are subject to re. rating if enrollment changes by more than 10~.
12. $ee atiached addltional contingenclea from $tandard Security of Naw York.
12. In ot~lar to ensure accuracy, all data should bo transmitted In an electronic funnat.
Susan Smith, Executive Director
Date
Authorized Signature of Acceptance