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

 

Fiscal Year

Deductible In/Out Net

Out-of-Pocket

Dr./Specialist Co-pays

Emergency Room

Pre/Route Exams

Rx Mail Order

2002-2003

$250/$500

(80%/60%)

$1000/$2000

2 F Members

Dr. $20.00

Specialist $35.00

$25.00

(80%)

$200

Gen/Brand 6/25 Mail Order

2003-2004

SAME

SAME

SAME

$50.00

($80%)

$400

SAME

2004-2005

SAME

SAME

SAME

SAME

SAME

SAME

2005-2006

Increase to $500/$750

Increase to $3000

SAME

SAME

SAME

Gen/Grand Same Mail Order (90 days)

 

Benefit comparison

 

UISD

LISD

WEBB County

City of Laredo

UISD Pays:  $247.60/Mo.

LISD Pays:  $225.00 Mo.

Webb Pays: $329.72 Mo.

City Pays:  Monthly EE $211.37/EF $409.60 Police and Fire $211.37/ EF $434.43

High Plan – OV

$25; Rx: $5/$20/$35 Deb. $200/$600; (80%) EE $25; EC $ 194.66; ES $298.73; EF $496.45; Dual FP $248.85

State Plan – OV

$15; Rx: $5/$10/$35; Ded. $100/$300 (90%)

EE $402.64; EC $1,107.45; ES $1,415.42; EF $2,019.03; Dual Family Plan $1,771.43

Low Plan – OV $25; RX: $10/$20; Ded. $500; (70%/50%) EE $24.49; EC$ 216.39; EF $510,20

High Plan – OV

$25; Rx: $10/$20; Ded. $ 500 (80%/60%) EE $47.59; ES $293.36; EC $242.43; EF $553.55

 

State Plan – OV

$10; RX; $10/$20; No Ded.; (90%/70%); EE $222.61; ES $626.65; EC $541.95; EF $1,053.47

Plan OV $25 RX $7/$25

Ded. $500

(90% Coverage 10% Employee) EE - $21.67

ES - $195.00

EC - $119.17

Ecldn $130.00

EF - $238.33

Plan – (Proposed)

OV $20/$25

RX: $7/$30

Ded.  $500/%750

(80%/60%)

$3,000 out of pocket

Employee only $0.00

EF Reg $272.70

EF P & F

$245.38

(10% increase)

 

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

 

Company

Network

Charge

Allowable

Discount

Allowable

Discount

Rank

TML

Current

$1,632,164

$993,686

39.1%

-

-

-

Blue Cross

Blue Cross

$1,632,164

$993,686

39.1%

$495,021

69.7%

1

Mercy Health

Mercy

$1,632,164

$993,686

39.1%

$741,857

54.5%

2

Benefit Planners

Benefit

$1,632,164

$993,686

39.1%

$745,561

54.3%

3

TML – Renewal

TML

$1,632,164

$993,686

39.1%

$758,914

53.5%

4

Mutual of Omaha

M o Omaha

$1,632,164

$993,686

39.1%

$920,308

43.6%

5

Entrust

Health Smart

$1,632,164

$993,686

39.1%

$1,064,868

34.8%

6

 

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.

 

Company

Agent

Year 1

Year 2

Year 3

Total

 

 

 

Factor       Amount

Factor     Amount

Factor     Amount

TML IEBP Current

Direct

$607,019

-

-

-

TML IEBP

Direct

$619,429

  1.2%       $626,862

5.0%    $ 658,205

1,904,496          1

Blue Cross Blue S.

Robert Laurel

$775,256

12.4%       $871,388

4.5%     $910,600

2,557,244          2

Benefit Planners

Robert Laurel

$849,733

  1.2%       $859,930

1.0%     $868,529

2,578,192          3

Mutual of Omaha

Robert Laurel

$802,171

18.7%       $952,177

7.2%   $1,020,734

2,775,082          4

Mercy Health Plan

Direct

$866,614

14.0%       $987,940

Not Available

                          5

 

City of Laredo

Summary of Self-funded Proposals

For Best & Final Offer – First Year Cost – No HRA

Sorted by Fixed Cost

 

Company

 

Admin.    Stop Loss  Run-Off    Run-Off           Total     

Expected Claims

Total

TML  Current

D

$607,019        $1,139,989                              $1,747,008    

$12,204,524

$13,951,532

TML IEBP

D

$619,429        $1,139,708                              $1,759,137    

$13,521,919    

$15,281,056    

Blue Cross

RL

$849,733        $  916,304             $102,000   $1,868,037 

$11,560,333

$13,428,370

Benefit Plnner

RL

$775,256        $1,101,568            $102,000   $1,978,825

$13,116,291

$15,095,116

Mutual

RL

$802,171        $1,174,252            $102,000   $2,078,423

$14,190,264

$16,268,687

Mercy

D

$866,614        $1,209,257            $102,000   $2,177,871

$12,727,265

$14,905,135

 

 

 

 

 

City of Laredo

Self-Funded Plan

Best Final Offer – No HRA

 

Administrative Services

 

Year 1

Year 2

Administrator

TML

TML

Benefit Planners

PPO Network

PHCS Statewide

PHCS Statewide

& HHQ Outside TX: PHCS

Utilization Review Firm

TML

TML

BP Health Management

Prescription Drug Firm

Caremark Retail

Caremark Retail

Innoviant

Agent

Direct

Direct

Robert Laurel

Stop Loss Insurance

 

 

 

Insurance Company

ING/ReliaStar

ING/ReliaStar

ING/ReliaStar

Managing Underwriter

Direct

Direct

Direct

Placement Agent

American Stop Loss

American Stop Loss

American Stop Loss

Specific Deductible

$100,000

$100,000

$100,000

Specific Contract Basis

63/12

63/12

63/12

Aggregate Contract Basis

63/12

63/12

63/12

Run in Limit – Specific

0

0

0

                      - Aggregate

0

0

0

Waive Actively at Work

Yes

Yes

Yes

Retiree Coverage (Yes/No)

Yes

Yes

Yes

Additional Information Needed

Signed disclosure

Signed disclosure

Signed disclosure

Annual cost                     Units

Rate                 Annual

Rate                 Annual

Rate                        Annual

Administration Fees

 

 

 

Medical – EE/RET          2,337

$12.75            $357,561

$12.75            $357,561

$11.75                 $329,517

Disease Management      2,337

$  1.50            $ 42,066

$  1.50            $ 42,066

$  2.90                 $  81,328

COBRA/HIPPAA           2,337

$  0.50            $ 14,022

$  1.00            $ 28,044

$  1.10                 $  30,848

Retiree Billing                    210

$  1.00            $   2,520

$  1.00            $   2,520

$  4.00                 $  10,080

FSA Fee                               96

$  5.00            $   5,760

$  3.60            $   4,147

$  4.50                 $   5,184

Agent Fee                        2,337

None

None

$ 3.50                  $ 98,154

Stop Loss Fee                  2,337

None

None

$0.50                   $ 14,022

PPO Fee                          2,337

$ 3.85             $107,969

$3.85              $107,969

$4.50                   $126,198

Rx Fee       30,000 Rx or 2,337

No Admin Fee

No Admin Fee

Included

U/R Fee                           2,337

$ 2.75             $77,121

$ 2.75             $ 77,121

$ 2.85                  $79,925

Set Up Fee

None

None

Included

Other                               2,337

 

 

 

Run In Administration    2,337

 

 

                            $102,000

Total Administration

                      $607,019

                      $619,429

                            $877,256

Stop Loss

 

 

 

Specific – EE                   2,337

$ 39.68      $  1,112,786

$39.68         $1,112,786

$   38.35         $ 1,075,487

Specific  - Dep.               1,181

Incl.

Incl.

Incl.

Aggregate                        2,337

$  0.97       $       27,203

$ 0.96

$     0.93         $      26,081

Total Stop Loss

                  $  1,139,708

                    $1,139,708

                       $  1,101,568

Total Fixed Cost

                  $  1,747,008

                    $1,759,137

                       $  1,978,825

Aggregate De.        – EE 2,337

$5433.99   $15,255,656

$602.71       $16,92,399

$584.63          $16,395,364

Aggregate De.  Dep        1,181

 

 

 

Total Aggregate Deductible