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Home My WebLink AboutIR 7510 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7510 µ,,p i 14,o To the Mayor and Members of the City Council Page 1 of 2 1k IfOPP February 12 , 1991 J 00'.X0 Subject: GROUP HEALTH INSURANCE BIDDING PROCESS The purpose of this report is to inform the Council of the staff's plan to so- licit bids on the active/retired program for the 1991-1992 budget year and to share with the City Council the results of the enrollment Process for active and retired employees and their dependents, provide an estimate of anticipated claims and contributions based on the selected options, and to provide actual first quarter claims experience for the active employee program based on the two-tier plan. Information about the active employee plan is outlined in At- tachment A and information about the retired employee plan is described in At- tachment B. Current Contract On August 14, 1990, the City of Fort Worth approved a professional services agreement with Sanus Texas Health Plan, Inc. to administer the City's self-funded group health insurance program for active employees and their eligible dependents. The term of this contract was from October 1, 1990 through September 31, 1991. On November 11, 1990, the City approved a professional services agreement with the same provider to provide these services for its self-funded group health insurance plan for its retired employees and their eligible dependents for the term January 1, 1991 through September 30, 1991. Both the active and retired plans have a high/low option feature and have identical benefits. Because of the significant cost impact of the health insurance program on the City's budget planning and the required time to enroll and educate employees and their dependents on the benefits aspects of the selected plan, the City Council Insurance Committee, the City's consultant for health insurance, Asset Protec- tion Agency, Inc. , and City staff have begun preliminary planning for the pro- gram to be implemented October 1, 1991. We will seek a one year contract with subsequent annual optional renewals. Timetable for a Bidding Process The planning currently anticipates that we will solicit competitive bids accord- ing to the timetable outlined below. In order to allow sufficient time for the incorporation of these bids into the City's budget deliberations and to effect a smooth transition of administration if the selected low bidder is other than the current administrator, the schedule for such an event would be: February 18th-22nd - Have a Pre-Bid Conference March 1st - Release Request for Proposal April lst - Proposals due April 15th - Complete Financial Analysis/Report on Bids May 15th - Finalists to make presentations June lst - Decision made for October lst October 1 - Implementation -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ` . INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7510 Page 2 of 2 foj?t To the Mayor and Members of the City Council Pebruary 12 , 1991 Subject: HEALTH INSURANCE BIDDING PROCESS Provider Interest Due to the cost issue, managed care is the direction our program must maintain. Again, our recent cost experience has indicated a thirteen percent (13%) annual cost increase for claims paid through the network and twenty percent (20%) for non-network claims. Our desire to remain firmly committed to managed care has resulted in the interest of numerous Fort Worth providers, and it is anticipated that we can expect several providers to respond to the bid solicitation. Current Sanus/Ntw 1(�rk Life—Services. The current administrative services are very comprehensive and our desire would be to maintain as high a level as is cost-effective. The bidding will ask for a duplication of current services so as to compare alternatives, The basics of this current service are as follows: Two Employees in City Offices Acting as Support Staff In-depth Case Management (Potential Large Claims) Quality Assurance (Provider Monitoring) Claim Examination and Processing Eligibility Maintenance Network Development Claim Reports - Detailed Underwriting Support Actuarial Support Flexible and Reactive to City Needs Consultation on Plan Design to Enhance Cost-Containment Obie_q_t1Lv_e_s of_t_4e BU Process • Look at a managed care approach with cost effective providers helping the City manage claim expenses through their Network. • Try to maintain the high level of service, even though as costs are identi- fied, ten percent (10%) go towards administrative services and ninety percent (90%) are claim costs. This is important, as it is our employees/retirees and their dependents who create the claim costs we are trying to manage. The key is directing them to the most cost effective provider who can offer the full complement of services. Please let me know if you desire additional information. OP", Sincerely, ILA David Ivory City Manager ATTACHMENT & ACTIVE EMPLOYEE ENROLLMENT, ESTIMATED AND ACTUAL CLAIMS INFORMATION Active Enrollment in Hioh/ an High Plan 698 Employee Only 193 Employe* and Spouse 152 Employee and Children Employee and Family 1,437 Lon Plan 1,886 Employee Only 327 Employee and Spouse 484 Employee and Children __!U Employee and Family 3,600 28.5% of employees enrolled in High Plan. 71.5# of employees enrolled in Low Plan, Annualized, these enrollment numbers represent the following estimated claims exposure: High Lon Total Claims Estimate $ 4,273,813 $ 8,258,495 $12,532,308 Contributions $ 1,743,440 $ 2,165,856 $ 3,909,296 Net City Cost $ 2,530,373 $ 6,092,639 $ 8,623,012 Administrative $ 2,509,204 TOTAL EST, CITY EXPOSURE $1I'I22,216 TOTAL BUDGETED $1I,408,440 Prior to this open enrollment and our initial projections for budgetary pur- poses, we assumed all employees signed oD for the High option. Actual enroll- ment saw a majority signing up for the Low option, which reduces the City's max- imum exposure, but also resulted in lower employee contributions as reflected in the above figures. A ' ' _� _� st - ___-_uv__e%n ---____-- e__� The City of Fort Worth's active employees have just completed tour months of participation in the two-tiered benefit plan, or the High/Low options. The available claims experience (only three months) has shown almost 90% of our claims dollar exposure coming under the managed care (network) option. This is o higher percentage than was initially projected and allows for significant cost-containment as the managed care annual coat increase tzeod is thirteen per- cent (I3%) and non-managed (out-of-network) is twenty percent (20%) in our claims oosts. These are current trends as projected by Sauoo for the City of Fort Worth's experience and appear to be consistent with the marketplace assump- tions. r To the extent that we are successful in offering quality, cost-effective medical services to our covered members through the network, we can better manage our cost increases. While it is too early to formally project any renewal assump- tions, should our experience continue to emphasize treatment in a managed envi- ronment, our renewals will be more favorable than if treatment were not . . . ATTACHMENT B r RETIRED EMPLOYEE ENROLLMENT AND ESTIMATED CLAIMS INFORMATION Retiree Enrollment QDeu enrollment for retired employees was scheduled to close 12/I4/90. To date, no enrollment information has been received for approximately 250 retirees. These individuals are being contacted and are being allowed to enroll in the plan option of their choice (with collection of any additional contributions ceguiced) ' High Plan 397 Retiree Only 331 Retiree and Spouse 3 Retiree and Children 30 Retiree and Family 38 Surviving Spouse 0 Surviving Child __6 Surviving Family 805 Low Plan 467 Retiree Only 2I5 Retiree and Spouse 3 Retiree and children 24 Retiree and Family 42 Surviving Spouse I Surviving Child _4 Surviving Family 756* m Includes approximately 250 retirees from whom on enrollment information has been received. 5I'6% of retirees currently enrolled in High Plan' 48,4% of retirees currently enrolled in Low Plan. Annualized, these enrollment numbers represent the following estimated claims exposure through the nine-month SANU3 contract plus three months under Aetna; High Low Total Claims Estimate $1,830,865 S 1,221,I53 $ 3,052,0I8 Contributions $ 731,697 305,77I $ 1,037,468 Net City Cost $ 1,099,I68 915,381 $ 2,014,550 Administrative $ 554,814 Plus: Aetna /lst Qtr. ) $ 1,471,745 Less: Contributions (lst) $ 203,978 Net City cost (1st Qtr. ) $ 1,267,767 Plus: part 8 implementation delay $ 188,000 u�w^ TOTAL EGT, CITY EXPOSURE $ 3,937,I31 TOTAL BUDGETED $ 3,891,306 . ° Three post-enrollment meetings, open to all retirees with insurance, are being held March 9 to afford retirees the opportunity to learn more about their health ' benefits and to ask questions. Retiree Actual Claims The two-tier DIao for retirees went into effect on January l , 199I and very lit- tle claim information is available to date. We will continue to monitor and will furnish a report when the enrollment process is complete and claims infor- mation begins to be reported. �