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City of Laredo City’s Self-Funded Health Plan Workshop M2005-W-04 1110 Houston Street Laredo, Texas 78040 August 25, 2005 5:30 p.m.
I. Call to Order.
With a quorum present, Mayor Elizabeth G. Flores called the meeting to order.
II. Roll Call
In attendance:
Elizabeth G. Flores, Mayor Alfredo Agredano, Council Member, District I Hector Garcia, Council Member, District II John C. Galo, Council Member, District III Johnny Amaya, Council Member, District IV Johnny Rendon, Council Member, District V Gene Belmares, Council Member, District VI Jose A. Valdez, Jr., Mayor Pro Tem, District VII Gustavo Guevara, Jr., City Secretary Larry Dovalina, City Manager Cynthia Collazo, Deputy City Manager Jaime Flores, City Attorney
Motion to excuse Cm. Ramirez.
Moved: Cm. Agredano Second: Cm. Amaya For: 7 Against: 0 Abstain: 0
III. Pledge of Allegiance.
Mayor Elizabeth G. Flores led in the Pledge of Allegiance.
IV. Presentation of the City of Laredo’s current partially Self-funded Health Plan, as compared to a Fully Insured health Plan by Mr. Ken Wethe, City’s benefit consultant.
Larry Dovalina, City Manager, said that staff has had several meetings with the Health and Benefits Committee where they have discussed very serious insurance issues. He added that the Committee has tried to be as reasonable as possible to the taxpayers and be cognizant of what is affordable to the employees. He acknowledged that the City of Laredo offers benefits that other entities do not offer. He added that the City has worked very diligently on the rising cost of insurance and noted that the problem is not unique to Laredo. The City of Laredo is at a point where some very tough decisions must be made which will affect the employees and the people around them.
Mr. Wethe, Benefit Consultants, gave the following presentation:
Exhibit A Definition:
Self funded:
A self funded, or self insured plan, is one in which the employer assumed partial financial risk for providing health care benefits to its employees.
Rather than obtaining medical coverage from an insurance carrier, the employer elects to fund the risk up to a certain level where a Reinsurance or Stop Loss Insurance carrier is brought in.
The Stop Loss is designed to limit the employer’s loss to a specified amount, to insure that large, or unanticipated claims, do not upset the financial integrity of a self funded plan.
Self Funded vs. Fully Insured
With self-funding, the employer holds the cash needed to fund benefits, instead of sending the fully conventional premium to the insurance company, only a small fraction of the conventional premium is sent to the reinsurance carrier.
The employer purchases re-insurance for protection, holds the remainder of the claim funds, invests them, segregates them if desired, or uses them for general business purposes until they are needed for the funding of claims.
The employer retains and keeps the funds when claims do no materialize, hence making a profit.
Advantages of Self Funding:
· Flexibility in the benefit plan design. · Portability from one carrier to another. · Cost Savings (If you have a good expected claims year, that is the best scenario. But even if you don’t there is a maximum liability in place.) · That is, money not spent for claims can be re-invested in our health plan. · These savings may also be used to enhance existing benefits or to add new ones. · Not subject to Fully Insured Carrier’s profit margin. · Not subject to Fully Insured Carrier’s premium tax factor. · Not subject to state mandated benefits. · Lower operational costs.
City of Laredo/Partially Self-Funded
History:
Prudential (1987 – 1989) Hartford (1989) TML – Third Party administrator (not an insurance company) City of Laredo is “partially self-funded” because we have Stop Loss (after $100,000 insurance company starts paying.)
What does our current Third Party Administrator do for the City of Laredo?
· Go out for bids on City’s behalf (no additional consultants fees). · Negotiate better rates. · Provide Employee Educational Training. · Non-Profit (do not work based on commissions). · Compliance (Make sure we are in compliance with the law.) · Retiree billing. · Continuation of Coverage (C.O.C.) administration. · Claim and prescription processing and payment for regular employees and retirees.
If the City of Laredo leaves partial self-funding:
· All outstanding claims will have to be processed and paid at an additional cost. · There may not be continuity of coverage for employees. · There may not be flexibility to adjust benefits. · On any “good year” we may not be able to give upgrades to existing benefits (dental, vision, short-term disability, etc.) nor offer new benefits. · We may have to pay commissions.
More points regarding City of Laredo partially self funding experience:
· No major employee complaints. · Cutomer service satisfaction. · All Index Cities (Brownsville, El Paso, Mc Allen, San Antonio, Corpus Christi, and Harlingen) are self-funded, except for Harlingen.
What is our Third Party Administrator doing to lower costs?
· Mail order. · Plan modifications/administration. · Disease Management. · Negotiation with hospitals, physicians and/or networks.
Example: LISD
Fully Insured Monthly cost High Low Employee only $272.59 249.68 Employee/Family $778.55 735.20
EE 2471 X $272.59 X 12 = $8,082,839 EF 1220 X $505.96 X 12 = $7,407,254
Total (High Plan) $15,490,093
EE 2471 X $249.68 X 12 = 7,403,511 EF 1220 X $485.52 X 12 = 7,108,013
Total (Low Plan) $14,511,524
Self Funded Fully Insured (L) $11,362,092 (L) $14,511,524 (H) $11,362,092 (H) $15,490,093
Med. Claims $ $7,704,803 Presc Claims $ $1,328,707 ADMIN $ $ 864,672 Stop Loss $ $1,463,910
$ 11,362,092
Life, AD & D, PAI $297,205 $1,669,545 Supplemental $260,951 Dental $507,078 Employee H & W $604,311
$1,669,545
Other $658,645 $658,645
Total $13,690,282 (L) $16,839,714 (H) $17,818,283
History of Rate Increases
Fiscal Year Fire/Police Regular EE % Increase
2002-2003 $93.28 $103.78 20% $77.82 $86.48 2003-2004 $98.05 $108.97 5% $93.38 $103.78 2004-2005 $102.95 $114.42 5% $98.05 $108.97 2005-2006 $113.25 $125.86 10% $102.95 $114.42 (Proposed)
Schedule of Benefits
Benefit comparison
Proposed Employee Health Benefits Plan
Increase Medical contribution rate by 10% Increase Deductible from $250 to $500 Increase out of pocket from $1,000 to $3,000 Increase Mail order for Brand name prescription from $20 to $30 Implement the core benefit medical plan with a reimbursement/savings account
Exhibit B City of Laredo Self-Funded Health Plans For Best & Final Grading August 18, 2005 Combined Participants: A thru G
Cost
Fixed Max Mercy M of O BC BP TML First year 15 3 6 12 9 15 Three years 15 3 6 12 9 15 Networks 10 8 2 10 6 4 Expected 10 8 2 10 8 6
Total 50 22 16 44 32 40
Technical
Enrollment 15 7 10 10 12 15 Admin. 10 6 7 7 9 10 Technology 10 6 8 7 10 9 Clients 8 2 5 7 7 8 Stop Loss 7 3 7 6 5 5 Total 50 24 37 37 43 47
Total 100 46 53 81 75 87
Comments:
1. Company Names are as follows:
Mercy – Mercy Health Plans M of O – Mutual of Omaha BC – Blue Cross and Blue Shield BP – Benefits Planners TML – Texas Municipal League IEBP
2. Cost points formula is the following:
Rank Points
100% 2 80% 3 60% 4 40% 5 20% City of Laredo Self-Funded Health Plans For Best & Final Grading August 18, 2005 Combined Participants: A thru G
Cost
Fixed Max Mercy M of O BC BP TML First year 22.5 4.5 9.0 18.0 13.5 22.5 Three years 22.5 4.5 9.0 18.0 13.5 22.5 Networks 15.0 12.0 3.0 15.0 9.0 6.0 Expected 15.0 12.0 3.0 15.0 12.0 9.0
Total 75.0 33.0 24.0 66.0 48.0 60.0
Technical
Enrollment 7.5 3.5 5.0 5.0 6.0 7.5 Admin. 5.0 3.0 3.5 3.5 4.5 5.0 Technology 5.0 3.0 4.0 3.5 5.0 4.5 Clients 4.0 1.0 3.5 3.5 3.5 4.0 Stop Loss 3.5 1.5 3.5 3.0 2.5 2.5 Total 50 24 37 37 43 47
Total 100 45.0 43.5 84.5 69.5 83.5
Comments:
1. Company Names are as follows:
Mercy – Mercy Health Plans M of O – Mutual of Omaha BC – Blue Cross and Blue Shield BP – Benefits Planners TML – Texas Municipal League IEBP
2. Cost points formula is the following:
Rank Points
100% 2 80% 3 60% 4 40% 5 20%
City of Laredo Summary of Self-funded Proposals Provider Discounts – Repriced Claims Review Date: ; August 24, 2005
Comments:
1. Representative sample of claims for providers with the largest benefit payments for the nine month period ended 06/30/2005 were selected for repricing. A total of 117 claims were selected for repricing with gross charges of $1,632,164.
2. Each claim was then repriced in accordance with the provider’s contract with the PPO network resulting in allowable amount.
City of Laredo Summary of Self-funded Proposals For Best & Final Offer – First Year Cost – No HRA Sorted by Fixed Cost
City of Laredo Self-Funded Plan Best Final Offer – No HRA
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