8.3 Health Insurance Benefits AgreementCITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1/07/2013 4:00 P.M.
AGENDA SECTION I ORIGINATING DEPARTMENT
NO: 8 Human Resources
ITEM BY: Natalie Fischer
NO. 3
Page 1
APPROVED FOR
AGENDA:
BY:
ITEM: Resolution No. 13 -6964
Authorize City Manager to execute renewals of Agreement to Provide Administrative Services For A
Self- Funded Health Benefit Plan and Individual and Aggregate Stop -loss with BlueCross BlueShield of
Kansas.
BACKGROUND:
The City of Salina health insurance program has self- funded the health insurance program since
1997. BlueCross BlueShield of Kansas (BCBSKS) has provided administrative services and stop -loss
coverage to the City of Salina since that time, and the agreements are renewed on an annual basis
prior to the new plan year beginning February 1. Self- funded programs involve the employer
contributing funds to cover expenses in exchange for lower fees from the insurer, versus fully insured
group insurance where the employer pays all premiums to the insurer. Administrative duties covered
by BCBSKS include claims processing, data entry, marketing, provider discounts and cost control.
Stop -loss coverage is similar to a maximum "deductible" for a self- funded program, whereas the
additional expense beyond the limit is covered by the stop -loss insurer. The City of Salina carries
individual stop -loss of $150,000 on any one covered life in the policy year and the aggregate stop -loss
coverage for all covered lives attaches when claims exceed 120% of expected claims, which is
calculated on plan experience.
The attached summary outlines the rates for coverage provided by BCBSKS. Over the past few years
staff has anticipated that the plan would be forced to move to a higher deductible or provide an
alternate structure. However, continuing the current one has been favored as a change in plan will
result in other cost implications. Under health care reform provisions, changes that increase
employees' expenses cause employers to cover additional mandated services that are not currently in
place with the current plan. In other words, making the increase to the deductibles would result in the
City of Salina's loss of "grandfathered" status. By increasing deductibles, the City of Salina would
trade the savings from the additional burden to the covered employees in exchange for a rate increase
since additional preventative services /claims are factored into the projections.
FISCAL NOTE:
Funds for health insurance related expenses, including services provided by BCBSKS, are budgeted
in the Employee Benefit Fund. This fund is sustained by monthly "premiums" from employer,
employees, and sub - groups. The 2012 budget factored in a 10% decrease for both the employer and
the employee premiums since we ended 2011 with a surplus of approximately $400,000 in the fund.
The target balance is $1,500,000. Rather than provide rebates directly to the subgroups and
employees and then increase rates for the following benefit year, staff opted to reduce premiums 10%
with the presumption that claims would increase 5 %, leveling the balance to target amount by year
end. Without accounting for December claims we are currently at $2,029,000 and anticipate claims to
reduce the fund to $1,500,000- 1,600,000, which will be slightly below the amount desired to begin
2013. The 2013 budget contains a 7% increase to premiums, and staff will monitor throughout the
year to make sure the plan is adequately funded or make any necessary adjustments.
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1/07/2013 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT
NO: 8 Human Resources
ITEM BY: Natalie Fischer
NO. 3
Page 2
APPROVED FOR
AGENDA:
BY:
The estimated maximum cost for both administrative services and stop -loss coverage provided by
BCBSKS is $620,000 for the 2013 -14 benefit plan year based on current contract counts and
expected claims. Claims are projected at $4,290,000 - $30,000 below the 2012 expected claims and
over $200,000 lower than 2011. Even though our plan has had favorable claims years, our proposed
stop -loss insurance rates from BCBSKS increased. Originally, our stop -loss was quoted at more than
an 18% increase, which would have increased fees at nearly $60,000. BCBSKS does not allow
groups like ours for whom they provide only administrative services to obtain the stop -loss insurance
from other entities. Based on the low claims year but a large increase, we asked that our proposal be
reviewed. A revised quote was provided. The individual stop -loss is quoted at 9% above the current
rate, with the aggregate stop -loss up 7.3% over current, combining for a stop loss increase of
approximately 8.9 %. The result is a $30,000 increase over 2012. The stop -loss rate offered by
BCBSKS is determined by a formula that accounts for our plan's experience and the pool of similar
plans in Kansas, at 15% and 85% respectively. (The formula used for the City of Salina's renewal was
requested but was not disclosed.) In theory, this formula- driven pool approach should offer protection
to our rates during years when our plan experiences high claims. In the event our plan has high claims
years, as long as most of the other entities in the pool do not also have high claims years, the rates
should not have large fluctuations. BCBSKS continues to be a good claims administrator with
excellent provider discounts resulting in an overall competitive health benefit program. Stop -loss
increases may prompt review of alternative providers for future plan years.
RECOMMENDED ACTION:
Authorize City Manager to execute Agreement to Provide Administrative Services for a Self- Funded
Health Benefit Plan and Individual and Aggregate Stop -loss with BlueCross BlueShield of Kansas.
RESOLUTION NUMBER 13 -6964
A RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE AN
AGREEMENT WITH BLUECROSS BLUESHIELD OF KANSAS TO PROVIDE
ADMINISTRATIVE SERVICES FOR A SELF - FUNDED HEALTH BENEFIT PLAN AND
INDIVIDUAL AND AGGREGATE STOP -LOSS.
BE IT RESOLVED by the Governing Body of the City of Salina, Kansas:
Section 1. That the City Manager is hereby authorized to execute an agreement with B1ueCross
B1ueShield to provide administrative services for a self - funded health benefit plan and individual and
aggregate stop -loss, subject to the terms and conditions of the agreement.
Section 2. That the City Clerk is hereby directed to file the original agreement and retain
according to the City of Salina Records Management Policy.
Section 3. That this resolution shall be in full force and effect from and after its adoption.
Adopted by the Board of Commissioners and signed by the Mayor this 7`h day of January, 2013.
Norman M. Jennings, Mayor
(SEAL)
ATTEST:
Lieu Ann Elsey, CMC, City Clerk
B1ueCross
iii BlueShield QV. of Kansas
ASO - Summary of Charges
Group Name: City of Salina EXCEPTION Group #: 96214
Effective Period: 2/l/2013-1/31/2014 1 " Current Benefits "
1. Benefit Summary Blue Choice - Comp Major Medical $2501$500 deductible ($1,0001$2,000 coins A 80120),
Accidents Subject to Ded. And Coins., Unlimited Lifetime Max., Dependents to 26, OB
Benefits available to all Females, Phvsical Medicine, Mental Health Parity, Unlimited PDN,
$10 eve exam copav
2. Monthly Expected Claims — Incurred Basis Elm E/Deps
A) Health 260.97 814.23
2A. Annualized Expected Claims` $4,289,110.56
2B. Aggregate Attachment Point @ 120 %' $5,146,932.67
* IN6a/Aggregate Attachment Print wiff be based on first months enrollment
3. Monthly Billed Charges
A) General Operating Expense
3.19 8.80
B) Aggregate Stop -Loss @ 120%
1.68 5.24
C) Individual Stop -Loss @ $150,000
21.14 65.96
26.01 80.00
3A. Annualized Billed Charges'
$422,230.08
4. Weekly Charge for Claims Processing
4.13%
5. Total Monthly Liability at Expected
$297.76 $927.86
5A. Annualized Liability at Expected*
$4,888,480.91
6. Total Monthly Liability at 120%
$352.11 $1,097.43
6A. Annual Liability at 120%'
$5,781,731.07
'Based On Contract Counts of
Health: 184 Emp - 380 E/Deps
*** NCR GRANDPAMERED GROUP: VEY ***
Signed by:
B1ueCross Classified: Corporate
BlueShield An independent Lkeneee of the
Blue Cioee and Blue Shield
of Kansas An Independent licensee of tlMAkLJcQoss and Blue Shield Association.
Date Signed:
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Operating Expense / Stop -Loss Rates
Group Name: City of Salina EXCEPTION Group #: 96214
Effective Period: 21112013 - 1/3112014
MONTHLY RATES
General Operating Expense
Elm E/De s
Blue Cross & Blue Shield 3.19 8.80
$3.19 $8.80
FINANCIAL CODE: 005
Type Benefit 096/496
Type Benefit 096/496
Individual S -L fi) $150,000
Aggregate S -L (c� 120%
Emp E/De s
Elm E/Deps
Blue Cross & Blue Shield 21.14 65.96
1.68 5.24
$21.14 $65.96
$1.68 $5.24
BlueCross
BlueShield
of Kansas
Classified: Corporate
An Independent Lianaee otlhe
Blue Crone and Blue Shield
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