Agenda - Council - 05/27/2003 - Laserfiche WebLink

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Motion carried. Voting Yes: Chairperson Cook, Councilmembers Kurak, and Pearson. Voting No: None. Case//2: Consider Appointment of CBIZ as Agent of Record for Health Insurance Service and Terminate Agent of Record Relationship with TC Field for Health Insurance Interim Human Resources Manager Reed stated that the City has purchased health insurance benefits fi'om PEEP since 1996. In 2001, 2002 and 2003, the City experienced a 10%, 20% and 29% rate increase, respectively. The reasons for these significant increases in health insurance premiums include the following: · low employee participation rates · limited plan design options through PEIP · employees' medical claims have exceeded premiums Due to service issues and steadily increasing premiums the City has been atte~npting to explore viable options outside of PEIP for several years. Fortunately, over the last several years the City has'put a number of things in place to ensure that beginning in 2004, the City might have a more cost effective and responsive benefits plan. Now is the time to begin actively moving toward that end. In 2002, 48% (or 24) of the City's eligible employees participated in the-City's health plan. Health Partners, Medica and Blue Cross Blue Shield require a 50% participation rate and declined to offer the City a quote due to low participation rates. In 2003, approximately 60% (or 33) of the City's 55 eligible employees are participating in the City's health plan. This significant increase in participation is due to new hires and plan changes by employees. Twenty- two employees receive $290 per monthin lieu of electing health coverage through the City. The increase in plan participation makes it more likely that the City will receive competitive quotes from carriers other than PEIP. In addition to low participation rates, the City has been very limited by plan design options offered through PEEP. The City can exercise significant control over premiums through plan design. For plan year 2003, PEEP offered the City several plan design options, however, they provided only very limited reductions in premiums (2%-6%). Other carriers often offer a wider variety of plan design options that are both less expensive and more responsive to employees' needs. For example, an employee with one dependent may pay a lower premium than an employee with two dependents. 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 will pay approximately $200,000 in premiums. Staff has been advised by Seabury & Smith (third party administrator for PEEP) 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. 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 Personnel Committee/May 13, 2003 Page 3 of 10 -33-