Agenda No. 5.
CITY COUNCIL MEMORANDUM
| City Council Meeting: | August 20, 2024 |
| Department: | Human Resources |
| Subject: | Resolution 24-R-97 - Authorizing the City Manager to enter into agreements with Cigna Healthcare, Delta Dental, Community Eye Care, The Hartford, Symetra and Deer Oaks for insurance coverage and employee assistance program services (S. Gonzalez/J. Kurz) |
BACKGROUND
The City has had Blue Cross Blue Shield (BCBS) medical insurance since 2019. Due to large claims and current trends in the healthcare market, BCBS annual premium increases have become unsustainable. City staff, in conjunction with our benefits broker, determined it was an opportune time to issue an RFP for all lines of health insurance to ensure we are providing the best value to our current employees, retirees, and ultimately, the taxpayers. The City released a Request for Proposals (RFP) for all lines of insurance, including medical, dental, vision, disability, life, accident, critical illness, hospital indemnity and employee assistance program services. We had a great response with a total of 55 proposals across all lines of coverage. Minimally, all proposals submitted match current plan coverage (co-pays, coinsurance, deductibles etc.), and in some cases, actually offered enhanced benefits at a reduced rate.
After initial evaluation and review of all proposals, the most competitive vendors for each line of coverage were invited to submit Best and Final Offers (BAFO). After BAFOs were received, carrier interviews were conducted.
Staff recommendations are summarized below.
By partnering with Cigna Healthcare, the City can:
1. Realize a $681,462 reduction in annual premiums (-11%).
2. Guarantee a 9.5% rate cap for plan year 2026.
By partnering with Delta Dental, the City can:
1. Realize a $26,217 reduction in annual premiums (-9%)
2. Lock in rates for a period of two years, with a guaranteed 6.5% rate cap on year 3
3. Provide an enhanced benefit plan with additional coverage and services
4. Use a $3,000 communications/technology allowance for costs associated with switching carriers.
By partnering with Community Eye Care, the City can:
1. Realize a $9,664 reduction in annual premiums (-20%)
2. Lock in rates for a period of five years
3. Provide an enhanced benefit plan (members with 20/20 can use frame allowance for sunglasses or safety glasses)
4. Use a $1,500 implementation credit for costs associated with switching carriers.
By partnering with The Hartford, the City can:
1. Realize a $25,897 reduction in annual premiums for long-term disability (-30%) and a $5,850 reduction in basic life premiums, for a total savings of $31,747
2. Lock in rates for disability and basic life insurance for a period of three years.
3. Provide an enhanced benefit plan (increased guaranteed issue amounts)
By partnering with Symetra, the City can:
1. Provide lower employee rates for accident, critical illness and hospital indemnity
2. Lock in rates for a period of three years
By partnering with Deer Oaks, the City can:
1. Continue to provide a comprehensive employee assistance program (EAP)
2. Lock in rates for a period of two years
As previously mentioned, City staff will be reviewing and analyzing current insurance plan designs in FY 24-25 in an effort to develop a long-term (sustainable) strategy for managing rising healthcare costs.
After initial evaluation and review of all proposals, the most competitive vendors for each line of coverage were invited to submit Best and Final Offers (BAFO). After BAFOs were received, carrier interviews were conducted.
Staff recommendations are summarized below.
| Current Vendor | Proposed Vendor | |
| Medical | BCBS | Cigna Healthcare |
| Dental | Unum | Delta Dental |
| Vision | Unum | Community Eye Care |
| Disability / Life | Unum | The Hartford |
| Accident / Critical Illness / Hospital Indemnity |
Allstate | Symetra |
| Employee Assistance Program | Alliance Workforce Partners | Deer Oaks |
By partnering with Cigna Healthcare, the City can:
1. Realize a $681,462 reduction in annual premiums (-11%).
2. Guarantee a 9.5% rate cap for plan year 2026.
By partnering with Delta Dental, the City can:
1. Realize a $26,217 reduction in annual premiums (-9%)
2. Lock in rates for a period of two years, with a guaranteed 6.5% rate cap on year 3
3. Provide an enhanced benefit plan with additional coverage and services
4. Use a $3,000 communications/technology allowance for costs associated with switching carriers.
By partnering with Community Eye Care, the City can:
1. Realize a $9,664 reduction in annual premiums (-20%)
2. Lock in rates for a period of five years
3. Provide an enhanced benefit plan (members with 20/20 can use frame allowance for sunglasses or safety glasses)
4. Use a $1,500 implementation credit for costs associated with switching carriers.
By partnering with The Hartford, the City can:
1. Realize a $25,897 reduction in annual premiums for long-term disability (-30%) and a $5,850 reduction in basic life premiums, for a total savings of $31,747
2. Lock in rates for disability and basic life insurance for a period of three years.
3. Provide an enhanced benefit plan (increased guaranteed issue amounts)
By partnering with Symetra, the City can:
1. Provide lower employee rates for accident, critical illness and hospital indemnity
2. Lock in rates for a period of three years
By partnering with Deer Oaks, the City can:
1. Continue to provide a comprehensive employee assistance program (EAP)
2. Lock in rates for a period of two years
As previously mentioned, City staff will be reviewing and analyzing current insurance plan designs in FY 24-25 in an effort to develop a long-term (sustainable) strategy for managing rising healthcare costs.
GOAL
Enter into agreements with Cigna Healthcare, Delta Dental, Community Eye Care, The Hartford, Symetra and Deer Oaks for insurance coverage and employee assistance program services for plan year 2025.
COMMUNITY BENEFIT
Through this RFP process, the City was able to maintain our current level of benefits while realizing substantial cost savings. This demonstrates staff's commitment to exercising fiscal stewardship and ensuring that we are providing the best value to our current employees, retirees, and ultimately, the taxpayers. Additionally, offering competitive and affordable benefits is an integral part of the City's total compensation strategy to more effectively recruit and retain top talent.
SUMMARY OF RECOMMENDED ACTION
Approve Resolution 24-R-97 for 2025 employee health insurance benefits.
FISCAL IMPACT
By switching insurance carriers as proposed, the City will realize approximately $750,000 in annual premium savings. These savings will be absorbed by the City and employee insurance costs will remain the same. It is important to note that the City has maintained employee insurance costs for the last six years by absorbing 100% of the premium increases, never passing on any cost to employees.
| Current Costs | Proposed Costs | Difference | |
| Medical | $5,984,026.00 | $5,302,564.00 | -$681,462.00 |
| Dental | $283,818.00 | $257,601.00 | -$26,217.00 |
| Vision | $49,504.00 | $39,840.00 | -$9,664.00 |
| Disability / Life | - | - | -$31,747.00 |
| Accident / Critical Illness / Hospital Indemnity |
- | - | $0.00 |
| Employee Assistance Program | - | - | $0.00 |
| Total Savings | -$749,090.00 |
RECOMMENDATION
Approve Resolution 24-R-97 for 2025 employee health insurance benefits.