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Home My WebLink AboutItem 06 Employee 2022 Benefit Contract RenewalAGENDA ITEM SUMMARY Meeting Date: 10/4/2021 Meeting Type: Regular Meeting Staff Contact/Dept.: Tom Mugleston Staff Phone No: 726-3724 Estimated Time: Consent Calendar SPRINGFIELD Council Goals: Financially Responsible and Stable CITY COUNCIL Government Services ITEM TITLE: EMPLOYEE 2022 BENEFIT CONTRACT RENEWAL ACTION Authorize City Manager to negotiate and execute 2022 employee benefit renewal REQUESTED: contracts for self-funded medical, prescription, vision, stop -loss, dental and disability insurance and third -party administrative services. ISSUE Existing contracts with PacificSource Health Plans, MODA Dental and Hartford STATEMENT: Insurance for Third -Party Administration, stop -loss coverage, and disability insurance coverage will expire on December 31, 2021. ATTACHMENTS: Attachment 1: CBM Employee 2022 Benefit Contracts Renewal DISCUSSION/ FINANCIAL IMPACT: The City provides a comprehensive self-funded health insurance plan for eligible employees, dependents, and retirees. PacificSource is the City's third -party administrator (TPA) for self-funded medical benefits. The city pays all claims valued less than $150,000 and purchases stop -loss insurance to cover claims more than $150,000. MODA Dental provides TPA services for self-funded dental claims. Hartford Insurance provides life, accidental death and dismemberment (AD&D), and short- and long-term disability coverage. Annual Cost Current Renewal Medical Claims Liability at expected $6,310,324 $6,310,324 MedicalNision Administration $241,613 $246,557 Medical Stop Loss $785,898 $785,898 Dental PPO @ expected $658,858 $660,634 Dental DMHO $52,879 $53,877 Life/AD&D $42,832 $42,832 Pre -Retirement Life $1,221 $1,221 Short -Term Disability $82,817 $82,817 Long -Term Disability $117,834 $117,834 FSA/HRA Administration $26,697 $26,697 Annual Total $8,320,973 $8,328,691 Change from Current $7,718 Percentage Change .09% *Medical claims liability will be finalized in January. Barring any major unexpected claims, 2021 claims should roughly match 2020. Overall projected renewal rates are favorable, and staff recommends Council authorize the City Manager to negotiate and sign benefit renewal contracts with PacificSource, MODA Dental, and Hartford insurance. MEMORANDUM City of Springfield Date: 10/11/2021 To: Nancy Newton COUNCIL From: Chaim Hertz & Tom Mugleston BRIEFING Subject: EMPLOYEE 2022 BENEFIT CONTRACTS MEMORANDUM RENEWAL ISSUE: Existing contracts with PacificSource Health Plans, MODA Dental and Hartford Insurance for Third -Party Administration (TPA), stop -loss, and disability insurance coverage will expire on December 31, 2021. The value of these three contracts exceeds $100,000 each and renewal authorization is brought to Council for approval. Renewing contracts with PacificSource, MODA Dental and Hartford Insurance will allow the City to continue to obtain these employee benefits. COUNCIL GOALS/MANDATE: Provide Financially Responsible and Innovative Government Services BACKGROUND: The City provides comprehensive medical, dental and disability coverage for eligible employees, dependents, and retirees covering approximately 1450 lives. The City contracts with USI insurance services for benefit broker services. USI approached the market and received favorable renewal terms on all lines of coverage and Third -Party Administration (TPA) services. An overview of this year's cost proposal is included below in Table 1. Table 1 Annual Cost Current Renewal Carrier Medical Claims Liability projected' $6,310,324 $6,310,324 PacificSource Medical/Vision Administration $241,613 $246,557 PacificSource Medical Stop Loss $785,898 $785,898 PacificSource Dental PPO at expected $658,858 $660,634 MODA Dental Dental DMHO $52,879 $53,877 Willamette Dental Life/AD&D $42,832 $42,832 Hartford Pre -Retirement Life $1,221 $1,221 Hartford Short -Term Disability $82,817 $82,817 Hartford Long -Tenn Disability $117,834 $117,834 Hartford FSA/HRA Administration $26,697 $26,697 PacificSource Administrators Annual Total $8,320,973 $8,328,691 Change from Current $7,718 Percentage Chane .09% Notes: 1. Voluntary life / AD&D is omitted because this benefit is fully employee -paid 2. Medical claims liability at October 2021 is $5,563,137. Claims liability as shown above is anticipated to roughly match 2020 totals, barring any unexpected large claims. 3. Costs associated with the Patient -Centered Outcomes Research Institute (PCORI) fee are not included in the totals above. PCORI fees are fled within the form 720 due July Attachment 1, Page 1 of 3 MEMORANDUM Page 2 31 st based on future enrollment that is not yet available and a fee not yet released. PCORI fees apply to self-insured plans and health reimbursement accounts (HRA). PacificSource PacificSource provides third party administrator (TPA) services for self-funded medical benefits. The city pays all claims valued less than $150,000 and purchases stop -loss insurance to cover claims valued over $150,000. It is remarkable that while the market trend for medical claim costs is an 8% annual increase, we have been able to hold net claims essentially flat for almost 8 years. See the net claims column in Table 2 — PacificSource Claim Utilization below. Table 2 — PacificSource Claim Utilization Year Employees Expected Claims Net Claims* Net Claims /Exp Total Fixed Costs Total Net Plan Costs 2013 422 $4,859,183 $4,533,255 93.3% $742,828 $5,276,083 2014 422 $4,962,965 $5,073,878 102.2% $854,769 $5,928,648 2015 421 $5,233,235 $5,046,724 96.4% $868,995 $5,915,719 2016 421 $5,622,747 $4,737,549 84.3% $859,842 $5,579,391 2017 416 $5,552,679 $5,677,458 102.2% $830,003 $6,507,461 2018 415 $5,810,377 $5,553,766 95.6% $865,198 $6,418,964 2019 417 $6,508,853 $5,831,427 89.6% $913,380 $6,744,807 2020 416 $6,375,084 $5,229,620 82.0% $975,836 $6,205,456 2021 Annualized 419 $6,434,533 $4,449,491 69.9% $1,044,969 $5,544,460 * 2021 Net claims include claims through September and barring any unexpected major claims, are expected to roughly match the 2020 totals. This stability is attributed to a four -component medical plan design consisting o£ 1) a high - deductible Insurance (HIP) plan, 2) a city -paid Health Reimbursement Account (HRA), 3) stop- loss coverage for claims exceeding $150,000, and 4) a free onsite Wellness Center. The HIP -HRA plan design allows employees to use HRA funds to pay for deductibles should they need them. But because the HRA can roll over from year to year and be used after retirement, this plan encourages employees to be judicious healthcare consumers and save HRA funds when they can. The Wellness Center provides free preventative and light urgent care services which encourages employees to utilize lower-cost services at negotiated rates rather than seeking high-cost urgent care or doctor office services. And finally stop -loss coverage protects the city's reserves against infrequent but catastrophic medical costs. There are no significant changes to this coverage proposed this year. MODA MODA Dental provides TPA services for self-funded dental benefits and the City pays all covered dental claims. There are no significant changes to this coverage proposed this year. Hartford Hartford Insurance provides life, accidental death and dismemberment (AD&D), and short- and long-term disability coverage. There are no significant changes to these coverages proposed this year. Attachment 1, Page 2 of 3 MEMORANDUM Page 3 RECOMMENDED ACTION: Overall projected rates are favorable, and staff recommends Council authorize the City Manager to negotiate and sign benefit renewal contracts with PacificSource, MODA Dental, and Hartford insurance. Attachment 1, Page 3 of 3