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Home My WebLink AboutItem 07- Employee 2023 Benefit ContractsAGENDA ITEM SUMMARY Meeting Date: 10/17/2022 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 2023 BENEFIT CONTRACTS ACTION Authorize City Manager to negotiate and execute 2023 employee benefit insurance REQUESTED: and self-funded third -party administrative service contracts for medical, prescription, vision, stop -loss, dental, disability and Paid Family Medical Leave Insurance lines of coverage. 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, 2022. Medical, dental and disability contracts each exceed $100,000 and require council approval. ATTACHMENTS: Attachment 1: CBM Employee 2023 Benefit Contracts DISCUSSION/ The City provides comprehensive benefits for eligible employees, dependents, FINANCIAL and retirees. The City sought quotes from vendors through its broker, USI IMPACT: Insurance Services. Medical & Dental Medical and Dental plan costs are expected to increase 4.4% or $316,035. Staff recommends Council authorize the City Manager to negotiate and sign benefit renewal contracts with PacificSource and MODA Dental. Disability Coverage In 2019, the Legislature passed House Bill (HB) 2005, which established a Paid Family and Medical Leave Insurance (PFMLI) program within the Oregon Employment Department (OED). Employers must either join the State plan or purchase equivalent coverage through a third -party vendor. The City intends to purchase coverage through the open market and asked USI to seek quotes from vendors. City staff are in the process of evaluating which vendor can best meet the City's products, price, service and administrative needs. PFMLI premiums are expected to cost between $290K and $370K. The City also intends to consolidate PFMLI, short-term disability (STD), long- term disability (LTD), life and Accidental Death and Dismemberment (AD&D) coverage under one vendor. Preliminary quotes from vendors for STD, LTD, Life and AD&D coverage indicate flat or a slight decrease in premiums. Staff recommends Council authorize the City Manager to select, negotiate and sign disability coverage contracts. MEMORANDUM City of Springfield Date: 10/17/2022 To: Nancy Newton COUNCIL From: Chaim Hertz & Tom Mugleston BRIEFING Subject: 2023 BENEFIT CONTRACTS MEMORANDUM ISSUE: Current contracts with PacificSource Health, MODA Dental, and Hartford Insurance will expire on December 31, 2022. Each of these contracts exceed $100,000 and requires City Council approval to execute. 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 meets annually with its broker, USI Insurance Services, to review program goals, performance, address any legal or other structural changes and seek quotes from vendors. DISABILITY COVERAGE The City currently purchases Short-term Disability (STD), Long-term Disability (LTD), Life, and Accidental Death and Dismemberment (AD&D) coverage through the Hartford. In 2019, the Legislature passed House Bill (HB) 2005, which established a Paid Family and Medical Leave Insurance (PFMLI) program within the Oregon Employment Department (OED). Employers must either join the State plan or purchase equivalent coverage through a third -party vendor. The City intends to purchase PFMLI coverage through the open market. The City also intends to consolidate PFMLI, STD, LTD and AD&D coverage under one vendor and has asked USI to seek quotes from vendors. City staff are in the process of evaluating which vendor can best meet the City's products, price, service and administrative needs. PFMLI premiums are expected to cost between $290K and $370K. Premiums for STD, LTD and AD&D coverage are expected to remain flat or decrease between 9.5% to 21%. MEDICAL AND DENTAL USI insurance approached the market and received favorable terms on medical and dental Third - Party Administration (TPA) services. An overview of this year's cost proposal is included below in Table 1. Table 1 Annual Cost 2022 2023 Carrier Medical Claims Liability ro'ecte& $5,522,629 $5,788,103 PacificSource Medical/Vision Administration $244,762 $252,075 PacificSource Medical Stop Loss $780,176 $826,998 PacificSource Dental at expected $620,568 $616,994 MODA Dental FSA/HRA Administration $26,067 $26,067 PacificSource Administrators Annual Total 1 $7,194,202 1 $7,510,237 MEMORANDUM Change from Current $316,035 Percentage Change 4.4% Page 2 Notes: 1. Medical claims liability at October 2022 is $5,522,629. Claims liability as shown above is anticipated to roughly match 2021 totals, barring any unexpected large claims. 2. Costs associated with Patient -Centered Outcomes Research Institute (PCORI) fees are not included in the totals above. PCORI fees are due July 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). Medical - PacificSource PacificSource provides third party administrator (TPA) services for the City's 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 averages about an 8% increase per year, we have been able to hold net claims essentially flat for almost 9 years. See the net claims column in Table 2 — PacificSource Claim Utilization below. Table 2 — PacificSource Claim Utilization Year Employees Expected Net Claims Claims* Net Total Claims Fixed /Exp 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 416 $6,393,581 $5,101,368 79.8% $1,038,319 $6,139,687 2022 Annualized 406 $5,478,263 $4,713,420 86.0% $1,016,704 $5,730,123 * 2022 Net claims include claims through August and barring any unexpected major claims, are expected to roughly match the 2021 totals. This stability is attributed to a four -component medical plan design consisting of: 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) an 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, emergency room, or doctor office services. And finally stop- loss coverage protects the city's reserves against infrequent but catastrophic medical costs. Dental - MODA MODA Dental provides TPA services for self-funded dental benefits and the City pays all covered dental claims. Costs are anticipated to remain flat or decrease in 2023. There are no significant changes to this coverage proposed this year. MEMORANDUM RECOMMENDED ACTION: Authorize City Manager to negotiate and execute 2023 employee benefit insurance and self-funded third -party administrative service contracts for medical, prescription, vision, stop -loss, dental, disability and Paid Family Medical Leave Insurance lines of coverage. Page 3