8.6 Health Insurance Renewal Agr
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION
DATE
1/22/2007
TIME
4:00 P.M.
AGENDA SECTION
NO:
8
ORIGINATING DEPARTMENT: APPROVED FOR
AGENDA:
HUMAN RESOURCES
ITEM
NO.
Page 1
6
BY: Natalie Fischer
BY:
ITEM:
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:
In 1997, the City of Salina health insurance program switched from a fully insured program to a
partially self-funded program. 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, 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 individual stop-loss coverage is set
at $75,000 on anyone 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. Not included in these
agreements are prescription and dental coverage, provided by Caremark and Delta Dental,
respectively. No plan changes were made for this plan year, 2/1/07-1/31/08.
FISCAL NOTE:
The estimated cost for both administrative services and stop-loss coverage provided by BCBSKS is
$461,001 for the 2007-08 benefit plan year based on current contract counts and expected claims,
which includes an increase of 8.43% of the City of Salina's expected claims. According to Buck
Consultants, the national trends for PPO health insurance increases are 10.9-12.7%. Funds needed
for health insurance related expenses, including the services provided by BCBSKS, are budgeted in
the Employee Benefit Fund. This fund is sustained by monthly "premiums" from employer, employee,
and sub-groups. This year's budget allocated a 5.7% increase in claims.
RECOMMENDED ACTION:
Authorize City Manager to execute Agreement to Provide Administrative Services for a Self-Funded
Health Benefit Plan and Individual and Stop-loss with BlueCross BlueShield of Kansas.
ASO . Summary of Charges
Group Name:
City of Salina
Group #: 96214
Effective Period:
2/1/2007 - 1/31/2008
** Current Benefits **
1. Benefit Summary
Blue Choice Comprehensive Major Medical $250/500 Deductible ($1,000/2,000
Coins. @ 8O/20), Accidents Subject to Ded. And Coins., $2 Million Lifetime Maximum,
Dependents to 23,30 Days Inpatient Nervous and Mental, Outpatient Psych, Bio
Based Nervous and Mental (HB 2033) included, HMS, Unlimited Physical Medicine,
OB Benefit Available to All Females, $10 eye exam copay
2. Monthly Expected Claims -- Incurred Basis Emp E1Deos MER
A} Health 219.42 574.88 142.63
$219.42 $574.88 $142.63
2A. Annualized Expected Claims* $3,187,530.12
2B. Aggregate Attachment Point @ 120%* $3,825,036.14
. Initial Aggregate Attachment Point will be based on first month's enrollment
3. Monthly Billed Charges
A} General OperaUng Expense 4.17 11.32 2.42
B} Aggregate Stop-Loss @ 120% 1.30 3.40 0.85
C} Individual Stop-Loss @ $75,000 26.16 68.52 0.12
$31.63 $83.24 $3.39
3A. Annualized Billed Charges* $461,001.00
4. Weekly Charge for Claims Processing 4.28%
5. Total Monthly Liability at Expected $260.44 $682.73 $152.12
SA. Annualized Liability at Expected* $3,784,957.41
6. Total Monthly Liability at 120% $306.21 $802.62 $181.87
6A. Annual Liability at 120% * $4,449,748.69
"Based On Contract Counts of
Health & Rx: 196 Emp - 387 E1Deps - 1 MER
Signed by:
Date Signed:
BlueCross
BlueShield
of Kansas
Classified: Corporate
An Independent Licensee of the
Blue Cross and Blue Shield
Assoclation
Actuarial Research
1 0/23/2006