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HomeMy WebLinkAboutRes.2931.11-02-2015BILL NO. 15-203 RESOLUTION NO. 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 -"/11 DAY OF j\JUj))a'f2015. ATTEST: vil Gayle, . Conrad, City Clerk arry E. R dicier, Mayor CBIZ Benefits & Insurance Services Kansas City M September 28, 2015 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, 2016 Dear Lori: The health insurance plan for the employees of the City of Cape Girardeau is due to renew effective January 1, 2016. The following information is related to that renewal. Plan History, After two years of reduced fixed costs(2010 and 2011), the City's claims increased dramatically in 2012. Effective with the plan renewal for January 1, 2013, there were increases in all phases (administration, stop loss premium and claim maximums) of the plan. There were also increases in employee contributions, and two plan design changes. Effective with the 2014 renewal, there were slight increases in fixed expenses, but no increase in maximum claims obligation. The slight increases were well within the City's budget, and staff elected not to increase employee dependent premium costs. Effective with the 2015 plan renewals, there were several changes to plan offerings. The City elected to add "narrow" network options that provide financial incentives to employees if they chose that option. The changes were as follows: 1) Renewed the current plan designs and the current "Broad" network effective January 1, 2015. 2) Add an additional PPO and LISA plan option with the same benefits as current, but utilizing the narrow network. 3) If an employee chooses to remain in the broad network, there will continue to be no cost for single coverage. If they have dependent coverage, there will be an approximate 2% increase to their premium cost. 4) If an employee chooses to be covered by the PPO or HSA plan under the narrow network for single coverage, they will receive a "credit" of $28 per month for the PPO, or $25 per month for the HSA. They can choose how they wish to receive this credit (deposit pre-tax to their flexible spending account, pre-tax to their HSA, or receive in cash, after taxes). If they have dependent coverage, they will have a lower monthly premium forthat coverage. CBIZ Benefits & Insurance Services Kansas City 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. Current Financial Position The last 12 months of claims have again increased. For 8/1/14-7/31/15, paid claims were $2,688,680, while for 8/1/13 to 7/31/14, paid claims were $2,168,802, an increase of 24%. For the past 12 months, there were $149,617 over your stop loss point of $150,000, while last year's number was $54,267. These numbers are a bit deceiving as your total members in this timeframe increased by 4%, and after removing claims over stop loss, your per member, per month claim number increased by only 3%. For the past year, you had 8 claims over $50,000, with 5 over $100,000, and one over $200,000(your largest claim at $299,617). For the previous year, your largest claim was over $200,000 ($204,267); you had four claims over $100,000, and seven claims over $50,000. While your paid claim numbers have increased, the plan is still performing well vs. your plan maximums. For the current plan year, from January through September 22nd, 2015, your maximum liability was $2,565,904 and actual paid claims were $1,829,148, or 71% of your maximum, Your plan's maximum is set at 115% of expected paid claims, so your plan is currently running at 82% of expected paid claims. (Last year at this time, the plan was at 58% of maximum, and 68% of expected paid) It bears mentioning here that while claims have increased over the past rolling 12 months, the plan continues to incur claims well below expected levels. Renewal Rating Anthem has provided a renewal calculation for the 2016 plan year. The calculation uses the last three years of claims history. The renewal calculation did originally show some increases to several components of the plan. However, after negotiations, we were able to secure the following actions: 2 f CBIZ Benefits & Insurance Services i Kansas City 1) Although the calculation called for a slight increase to your claim maximums, Anthem has agreed to no increase on this component of your plan (your claims maximum is about 87% of your total cost). 2) Specific Stop Loss premium will increase by 12.4%, or $7.06 Per Employee Per Month (PEPM) on a composite basis, depending on the plan. This is an approximate increase of $36,359 for next year. Anthem had originally requested a 15.9% increase. This component was increased by 18% last year. 3) There will be no increase to the Aggregate Stop Loss premium. 4) Administrative Fees are increasing by 2.5%, or $1.04 PEPM on a composite basis for the HSA plan, and $0.93 PEPM on the PPO plan, This is an approximate increase of $4,946 for next year. There was an increase of .8% last year, and no increase the previous year. 5) Overall maximum obligation of the plan will increase by approximately 1.1% for the PPO plan and 1.2% for the HSA plan. In addition, Anthem has requested an increase in your Terminal Liability rates of 1.2%. This was increased by 5.9% last year. This would only impact the City if you were to terminate your plan with Anthem. Affordable Care Act Mandated Benefit You may remember that, effective on January I, 2014, all out of pocket expenses paid by members (with the exception of prescription drugs copays) began to accumulate toward the out of pocket limit. On January 1, 2015, prescription drug copays also began to accumulate toward the out of pocket limit. There must also be a change made in the out of pocket maximum on the IISA plan. Currently, there is a maximum out of pocket limit of $5,000 individual and $10,000 family. Due to the ACA, beginning in 2016, non -embedded HSA plans can have no higher of a maximum than $3,425 for the individual and $6,850 for the family. Anthem had originally wanted to increase the plan maximum by .5%, however, we were able to negotiate no increase to the maximum to make this rather rich change. Affordable Care Act Taxes Effective on January I, 2016, the City will continue to be responsible for two of the three taxes imposed by the Affordable Care Act; the Patient Centered Outcomes Research Fee (PCOR) and the Reinsurer Fee, The PCOR Fee will increase from $2.00 to $2.08 per member per year For 2016. The Reinsurer Fee will decrease from $3.67 to $2.25 per member per month. Based on your current plan membership, the total cost of these two applicable taxes is approximately $18,582 for 2016. Potential Stop Loss Level Change and Potential Plan Design Change We did present an option to City Management of both an increase in your stop loss level as well as a potential three tier plan design. We did also discuss reviewing other plan providers in the Cape Girardeau area. 3 CBIZ Benefits & i Insurance Services p Kansas City i While we did discuss these options, it was determined that the changes in network provisions enacted last year had been in place for such a short time that we should allow more time to determine the impact and success of these options. We also discussed the probability of reviewing the market in 2016 for plan providers and provisions that may be implemented effective with the January 1, 2017 plan year. Rate Impact Based on the slight increase in plan costs, it was determined that the City would like to increase funding levels by 2% to be effective with the January 1, 2016 plan year. This level, which is far below market at i this time, should allow the plan to still function at appropriate levels and continue to provide a superior I plan of benefits to City employees and their dependents. i Conclusion f While this is a slight increase over last year, we are pleased that the City will able to keep your overall ? costs very close to previous years. Thank you for your continued confidence and support. Sincerely, f David J. Johnson, CEBS Senior Benefits Consultant /am cc: Scott Meyer, City of Cape Girardeau John Richbourg, City of Cape Girardeau 4 City of Cape Girardeau 2016 Health Insurance Rates — ACTIVE EMPLOYEES Effective January 1, 2016 Monthly Premium Rate Costs PPO Rates Employee Only Employee & Spouse Employee & Child(ren) Employee & Family $554.84 $401.42 $301.04 $702.50 PPO Rates — Narrow Network (New Option in 2015) Employee Only Employee & Spouse Employee & Child(ren) Employee & Family $526.88* $344.92 $251.56 $631.38 HSA Rates t Employee Only Employee & Spouse Employee & Child(ren) Employee & Family $504.80 $364.06 $273.06 $637.14 HSA Rates — Narrow Network' (New Option in 2015) Employee Only Employee & Spouse Employee & Child(ren) Employee & Family $480.40** $313.84 $229.04 $573.90 Dental Rates Employee Only Employee & Spouse Employee & Child(ren) Employee & Family $29.08 $18.06 $15.48 $33.04 Cost of "Employee Only" plan paid by the C'it}. All other dependent premiums paid bN employee. * PPO Narrow Network " litnployee Only" will receive an additional $28 per month gross pay on their paycheck. **HSA Narrow Network "Employee Only" will receive an additional $25 per month gross pay on their paycheck. 'An additional $50 per month is contributed to employee's Health Savings Account. City of Cape Girardeau 2016 Health Insurance Rates — COBRA Effective January 1, 2016 Monthly Premium Rate Costs* PPO COBRA Rates Employee Only Employee & Spouse Employee & Children Employee & Family $565.94 $975.39 $873.00 $1,282.49 PPO COBRA Rates — Narrow Network (New Option in 2015) Employee Only Employee & Spouse Employee & Children Employee & Family $537.42 $889.24 $794.01 $1,181.43 HSA COBRA Rates Employee Only Employee & Spouse Employee & Children Employee & Family $514.90 $886.24 $793.42 $1,164.78 HSA COBRA Rates — Narrow Network (New Option in 2015) Employee Only Employee & Spouse Emplovee & Children Employee & Family $490.01 $810.12 $723.63 $1.075.39 Dental COBRA Rates Employee Add Spouse Add Children Add Family $29.66 $48.08 $45.46 $63.36 *The responsible part) pays all premium costs. All monthly costs are based on applicable premium rate plus 2% administrative fees.