HomeMy WebLinkAboutIR 8604 INFORMAL REPORT TO CITY COUNCIL MEMBERS NO- 8604
Tit To the Mayor and Members of the City Council Date: June 8, 2004
Page I of 4
SUBJECT: Report on the Request For Proposals (RFP) Process for a Third
Party Administrator for the City's Self-Funded Group Medical Benefit Plan
Purpose
The purpose of this report is to provide an update on the results of the Request for Proposals
(RFP) process for selecting an administrator for the City's Group Medical Benefit Plan.
Background:
United Healthcare Insurance Company (UHC) has been the medical benefit administrator for the
City of Fort Worth's group medical coverage for employees, retirees, and eligible dependents
since October 1, 2001. The contract with UHC expires December 31, 2004.
In January 2004, an Ad Hoc Selection Committee was formed with the Human Resources
Director, Karen Marshall, as chair and other members including John Kerr-Police Officers'
0 Association, Don Westmoreland-Firefighters' Association, Sally McCoy-Librarians' Association,
r Dinah Horton-Public Events, Ann Bracey-Retiree, Barbara Smith-Association for City
Employees, and Jimmy Young-Medicare Eligible Retiree. This Committee was active in both
the preparation of the Request for Proposals (RFP) and the analysis of the proposals submitted.
On February 6, 2004, an RFP was issued requiring interested vendors to submit proposals by
March 4, 2004. The RFP was designed to solicit proposals on 1) Third Party Administrative
Services (TPA) for a self funded plan, 2) Fully Insured PPO, HMO, and POS options, 3)
Pharmacy Benefit Management Programs (PBM)which require a separate prescription program
from the medical plan and 4) Medicare Supplement program for Retirees Eligible for Medicare.
Thirty one (31) vendors submitted proposals.
The Committee considered several factors in evaluating proposals including price
competitiveness, ability of the organization to administer plans with various plan designs,
evaluation of provider network, qualifications of the staff and the organization, customer
satisfaction/complaint record and MWBE participation.
Committee's Conclusions
After reviewing the RFP's and the various proposed alternatives to a self-funded medical plan,
the committee recommended continuing with the self-funded strategy and hiring a third-party
administrator for claims administration. The committee eliminated fully insured HMO proposals
because the HMO plans would result in $20 million of additional unbudgeted costs. In
continuing with the self-funded strategy:
Page 1 of 4
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
°
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8604
Date: June 8, 2004
PAM?* To the Mayor and Members of the City Council
Page 2 of 4
SUBJECT: Report on the Request For Proposals (RFP) Process for a Third
Party Administrator for the City's Self-Funded Group Medical Benefit Plan
• The City is consistent with the practice of other cities to which it normally compares its
total compensation.
• The City retains control of funds until they are needed to pay claims or administrative
expenses. Under most fully insured plans, the insurance company would hold funds in its
reserve accounts. If there were better than expected claims experience, as there has
been the past couple of years, there would be excess funds in the insurance company's
reserves. This might result in greater profits for the insurance company or discounted
premiums in future years. Under a self-funded plan, the benefit of good experience is
immediately available and the City may choose to use the reserves to enhance plan
designs or lower overall plan costs.
• The City retains the right of benefit design and final interpretation of plan provisions. As a
self-funded plan, the City's medical plan can be better designed to fit the needs and
desires of plan members. However, to keep the plan actuarially sound, the City must
evaluate the risk related to each possible plan design, before finalizing the plan design.
• The City has ownership of claims data. This enables the City to better manage the health
plan and wellness program,
The committee eliminated fully insured Medicare Supplement Plans because of the committee's
preference for the City to design and administer a customized supplement plan based on the
needs of the Medicare eligibile retirees.
The finalists for the medical plan administration were Aetna, United Health Care and Benefit
Planners. The finalists for pharmacy benefit management were United Health Care/Medco,
Aetna, Systemed/Texas Business Group on Health, and Benefit Plan ners/Express Scripts.
Aetna Life Insurance Company (Aetna) received the highest rating from the committee for
medical plan administration and second highest for pharmacy benefit managment
administration. The committee preferred Aetna because of its broad provider network that
would result in little disruption (changes in current member's doctors and hospitals). Aetna also
emphasized enhanced customer service, case management and use of technology to assist
physicians in providing better care at a lower cost. Aetna has committed to maintaining a
designated customer service team for the City of Fort Worth and provides a walk-in customer
service center in Arlington. Aetna will guarantee performance standards for the plan based on
experience specific to the City of Fort Worth.
The committee recommended that one provider administer all aspects of the plan (medical,
pharmacy benefit and Medicare Supplement) and not to carve out any components due to the
Page 2 of 4
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
.
INFORMAL REPORT TO CITY COUNCIL MEMBERS NO- 8604
Date: June 8, 2004
To the Mayor and Members of the City Council Page 3 of 4
SUBJECT: Report on the Request For Proposals (RFP) Process for a Third
Party Administrator for the City's Self-Funded Group Medical Benefit Plan
negligible amount of savings and increased administrative requirements. Aetna was selected to
administer both the medical and pharmacy program.
The associated cost and fees for Aetna's plan administration (medical and re-insurance) is as
A. Administration of benefits
$ 32.50 per subscriber per month for active employees and Non-Medicare eligible
retirees, for the period of January 1, 2005 through December 31, 2005.
$ 22.27 per subscriber per month for Medicare eligible retirees, for the period of
January 1, 2005 through December 31, 2005.
B. Stop-loss Insurance
Although the City has assumed some risk in self-funding the medical plan, it has limited
its liability by purchasing stop loss coverage. The City is purchasing two types of stop-
loss coverage; specific stop-loss and aggregate stop-loss,
• Specific stop loss insurance will make the City of Fort Worth not liable for claims
above $350,000 paid on any plan member during 2005. The cost of this coverage
is $18.35 per month for each active employee and for each Non-Medicare eligible
• Aggregate stop loss insurance will make the City of Fort Worth not liable for any
claims of all plan members after the claims paid has exceeded 125% of expected
claims. The cost for this re-insurance is $1.10 per employee and retiree per
C. COBRA Administration
• Monthly Processing for COBRA continuants - $11 per enrollment
• Qualifying Event Notice - $12 per notice
Page 3 of 4
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
_
INFORMAL REPORT TO CITY COUNCIL MEMBERS NO- 8604
Date: June 8, 2004
To the Mayor and Members of the City Council
TE
Page 4 of 4
SUBJECT: Report on the Request For Proposals (RFP) Process for a Third
1873 Party Administrator for the City's Self-Funded Group Medical Benefit Plan
A summary of the cost for administrative expenses, specific stop loss and aggregate stop loss is
provided below:
Proposed Proposed
Rates Costs
Admin Expenses
Jan.-Dec. 2005
Active & non-Medicare Retirees $32.50 $2,358,720
Medicare $22.27 $302,086
Specific Stop Loss $18.35 $1,341,204
Aggregate $1.10 $ 95,383
Total $4,097,394
The aforementioned costs are based on anticipated enrollment of 4,923 employees, 1,125 non-
Medicare eligible retirees and 1,178 Medicare eligible retirees. Overall, the expected fixed
administrative costs for Aetna are within the requested budget for FY 04-05.
Recommendation
An M&C will be presented to the Council on June 15, 2004, recommending awarding the
contract for the administration of the City's Self-Funded Group Medical Benefit Plan and for the
purchase of specific and aggregate stop loss insurance to Aetna Life Insurance Company
effective January 1, 2005 through December 31, 2005, with three one-year options for renewal.
It is anticipated that the Health Benefit Advisory Committee will make a recommendation to the
City Manager on premium contribution rates, plan design, and a Medicare supplement plan by
July 2004.
*a . Jac-
e4City anager
Page 4 of 4
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
~
CFW Benefits
Memo
To: Mike Lowry, Purchasing Supervisor
From: Karen Marshall,"Human Resources Director and Ad Hoc Selection Committee Chairperson
CC: Bob Molloy, Benefit Administrator; Robert Combs, Purchasing Director; Mark Washington,
Assistant Director Human Resources
Date: 8/3/2004
Re: Health Plan RFP Vendor Selection
Attached you will find the scores of the Health Plan Vendor proposals from RFP 04'0025. The
proposals were analyzed and scored by members of an Ad Hoc Selection Committee made up of
members from the Hna|U) Benefit Advisory, Employee Relations and Retiree Benefit Committees with
assistance from the Plan's consultant.
��� Exhibit A, displays the average scores for the Medical Plan Administrator finalists. The exhibit
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details the criterion used and the average score given by the Ad Hoc Selection Committee for
each vendor. The final column shows o total cf the scores from each criterion category. The
sonnns are based on the proposal submitted and the vendor presentations made to the
comm itteeon April 23,2UO4.
Exhibit A-1, shows the average score received by each vendor in each criterion category for all
PPO proposals submitted. The scores were based on the ork)inal proposals submitted and
were used in collaboration with reference checks to select the companies asked book an
finalists.
Exhibit 8, demonstrates the average sonno in each criterion for the Pharmacy proposals
submitted by the finalists. Systemedwas the only stand alone Pharmacy Benefit Manager
selected asafinalist. The other finalists'pharmacy programs were submitted in connection with
their overall medical plan proposal. These scores were prepared following the vendor
presentations onApril 23,2004.
Exhibit B-1, has the initial average criterion scores for all Pharmacy proposals. This includes
stand alone Pharmacy Benefit Managers and Pharmacy programs in connection with an overall
Medical Plan Proposal. The scores were made prior hm any presentations.
Exhibit C,displays the average scores for Medicare Supplement Plan proposals received.
The committee decided not to carve out components of the Medical Plan but chose to mUmw one
provider to administer all aspects of the plan (medical, pharmacy and Medicare supplement).
Therefore spreadsheet A shows the selection ofAetna as the chosen administrator for the medical,
pharmacy and Medicare Supplement programs.
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