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HomeMy WebLinkAboutRes.2722.11-05-2012BILL NO. 12-160 RESOLUTION NO. Gl ?CQQ A RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT WITH ANTHEM BLUE CROSS FOR EMPLOYEE HEALTH INSURANCE SERVICES, IN THE CITY OF CAPE GIRARDEAU, MISSOURI BE IT RESOLVED BY THE COUNCIL OF THE CITY OF CAPE GIRARDEAU, MISSOURI, AS FOLLOWS: ARTICLE 1. The City Manager, for and on behalf of the City of Cape Girardeau, Missouri, is hereby authorized to execute a Contract with Anthem Blue Cross for employee health insurance services, in the City of Cape Girardeau. Said Contract shall contain the terms set out in the proposal from Anthem Blue Cross. A copy of the proposal information is attached hereto and made a part hereof. /� PASSED AND ADOPTED THIS � DAY OF / 40/�4 Ier-, 20 14R_. Harry E. kedil6er, Mayor Current Financial Position The City's claims have increased dramatically over the last two years. The last 12 months of paid claims (9/1/11-8/31/12) were $2,717,081, vs. $2,133,203 for 9/1/10- 8/31/11, an increase of 27%. While it is difficult to determine the exact driving force behind the increase, we do know that claims experience for a group of your size is cyclical, and you have had several very favorable years prior to this time. Also, your large claims have increased substantially. For the rating period used last year, you had 8 claims above $50,000, with five over $100,000. This year, for the same time frame, you have had 15 claims over $50,000, with 4 over $100,000 (the highest is $197,614 so far). Through the end of August 2012, your maximum liability was $2,011,967 and your actual paid claims were $1,664,503 or 83% of your maximum. As you know, your plan maximum is set at 115% of expected paid claims. Based on this number, your claims are running at about 95% of expected paid. (Last year at this time you were at 91% of expected paid and 80% of maximum). Renewal Ratine Anthem has provided a renewal calculation for the 2013 plan year. The calculation uses the last three years of claims history. Based on this calculation, the plans' overall obligation would increase by about 13%. By component, for the PPO plan, Anthem has requested the following: 1) Aggregate stop loss costs would increase by 5%, or $.30 per employee per month (PEPM) on a composite basis. 2) Specific stop loss costs would increase by 15%, or $5.10 Per Employee Per Month (PEPM) on a composite basis. 3) Administration would increase by 2.4%, or $0.86 PEPM on a composite basis. 4) Maximum claims would increase by 13.6%, or $76.75 PEPM. 5) Overall obligation would increase by about 13% or $83.02 PEPM. (Because the HSA plan has lower premium, the individual dollar values are slightly lower while the percentages are approximately the same.) In addition, Anthem has requested an increase in your Terminal Liability rates of 5%, or $3.40 PEPM. This would only impact the City if you were to terminate your medical plan with Anthem. It is important to note that Anthem had originally requested an increase in your individual stop loss of 18.3% and an increase in your aggregate claims level of 16.3%. These negotiated reductions resulted in a savings of over $400,000 annually. Plan Desien Chanties As requested, we would suggest making the following two plan changes: 1) PPO Plan: Change current office visit copays from $30 for primary care/$50 specialist to $30/$60. 2) Health Savings Account Plan: Add prescription drug copays (after deductible is satisfied) of $10/$35/$50/25%. These changes would take place effective January 1, 2013 and would reduce the suggested increase on the PPO by .5% and 1% on the HSA plan. CRIZ Benefits R Insura;lce Services. Inc. CBIZ October 29, 2012 Ms. Lori Meyer Human Resources and Risk Manager City of Cape Girardeau, Missouri 401 Independence Street P.O. Box 617 Cape Girardeau, MO 63702 Re: Medical Plan Renewal Effective January 1, 2013 Dear Lori: CBIZ Benefits & Insurance Services, Inc. 11440 Tomahawk Creek Parkway Leawood, KS 66211-9966 ■ www.cbizkc.com Tel: (913)234-1000 • Fax: (913) 234-1100 The health insurance plan for the employees of the City of Cape Girardeau is due to renew effective January 1, 2013. The following information is related to that renewal. Plan History CBIZ has formally reviewed the market for alternatives twice in the last six years — once in 2007 and once in 2009. Both times Anthem was clearly the best option versus the market. Effective January 1, 2011, both fixed costs and plan maximums decreased at renewal. This resulted from both Anthem agreeing to lower their administrative fee and the City increasing the individual stop loss point from $125,000 to $150,000. Although claims increased by 21 % in 2011, overall plan obligations increased by 5.5% effective January 1, 2012. Plan Financials As you know, the City's medical plan is a fully insured plan. It is "unfunded", meaning that the City holds its own reserves to pay for incurred but not recorded (IBNR) claims if the plan is cancelled. Also, the City pays for claims as they are processed by Anthem. Thus, if claims are lower than projected, the City keeps these funds. The current contract, which has been in place many years (prior to CBIZ's relationship with the City) does have a deficit carry -forward provision. In other words, if the plan's expenses outweigh the claim liability limits in place, the City is responsible for this deficit, but does not have to pay for this immediately. It is an eventual obligation, either in lower claim years, or at cancellation. Thus, if the City terminates the plan to move to another vendor, they will be responsible for the run off claims, (claims that have been incurred but not yet paid) as well as any accumulated deficit. The contract does limit the deficit carry forward to 10% of the cumulative maximum claims liability for that year. In the past, the City has been on both sides of this situation. You have carried a deficit in the past; as claims improved, that deficit was paid off and positive balances were accumulated. CBIZ Benefits & Insurance Services, Irc CBIZ Conclusion The City's claim levels have increased dramatically over the last 2 years. An increase in both stop loss costs and maximum claim levels are well justified. As described above, the overall obligation is increasing by 13%. This is a very positive renewal, given your claims experience. As always, we appreciate our relationship with the City of Cape Girardeau and value you as a client. Thank you for your continued confidence and support. Sincerely, David J. Johnson, CEBS Senior Benefits Consultant /cgo cc: Heather Brooks, City of Cape Girardeau John Richbourg, City of Cape Girardeau CRR Benefits & irismance Serviczs. r....