Agenda - Council - 05/13/2003 - Laserfiche WebLink

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-276- Medical Claims Typically, 85% of premiums are designated to cover claims and 15% of premiums are designated to cover administrative costs (trend, administration, stop loss insurance, taxes and reserves). In 2002, Ramsey's claims represented 115% of premiums. In 2003, the City xvill pay approximately $200,000 in premiums. Staff has been advised by Seabury & Smith (third party administrator for PEIP) that for 2004, employers can expect a minimum increase of 15%-18% in health insurance premiums if claims are good. If claims are higher than desirable, there may be an additional 5%-10% increase in premiums. Moving forward In December 2003 the City's contract with PEIP will expire. This, combined with the factors previously indicated, provides an optimal time for the City to develop a framework for evaluating benefits and shaping a more responsive and cost effective benefits plan. To assist in this undertaking, staff is recommending that the City Council appoint CBIZ Benefits and Insurance Services, Inc. as the City's agent of record for health insurance and related benefits. As the City's agent of record CBIZ would be responsible for assisting with the overall review and management of benefits plans. In Minnesota, 2% of premiums are designated as compensation for administration of the benefits plan. Currently, that 2% (approx. $4,000) is being paid to Seabury & Smith, third party administrator for PEIP. In addition, the City is currently paying 2% of premiums to TC Field for agent of record services. Services provided by TC Field include: assistance with ongoing benefit management; annual review, cost analysis and plan design recommendations; administrative handling of plan changes; and annual renewal evaluation and recommendation. Recent communications with CBIZ and TC Field indicate that services provided by CBIZ are more comprehensive and more responsive to the City's needs than those offered by TC Field for the same cost. In terms of service, the change would mean one-stop shopping for assistance with the City's benefits plans. In terms of cost, this switch would mean that the 2% of premiums designated for administration of the benefits plan would be paid to CBIZ instead of to TC Field. If the City ultimately decides to switch from PEIP to another carrier, the City would realize a savings of approximately $4,000 because one company (CBIZ) would be paid to assist with management of the benefits plan instead of two (Seabury & Smith and TC Field). If staff's recommendation to appoint CBIZ as the City's agent of record for health insurance is accepted, two percent of premiums would be paid to CBIZ beginning January 2004. However, CBIZ would begin working immediately to audit the City's current benefits plan, develop a long-range strategic plan, assist with labor/management communications, develop bid specifications and conduct a bid analysis. G:\Administration~HumanResources\Benefils~2003 Benefits\memo to council re benefits 05-13-03.doc