2002-24944 Reso
RESOLUTION NO. 2002-24944
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF
THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE
RANKING OF THE PROPOSALS RECEIVED FOR GROUP
MEDICAL BENEFITS PURSUANT TO THE REQUEST FOR
PROPOSALS ISSUED AUGUST 29, 2001, BY ARTHUR J.
GALLAGHER AND CO., THE CITY'S BROKER, AND
AUTHORIZING THE ADMINISTRATION TO ENTER INTO
NEGOTIATIONS WITH HUMANA, THE CITY'S CURRENT GROUP
MEDICAL PROVIDER, FOR RENEWAL OF THE GROUP MEDICAL
PROGRAM AND, IF SUCCESSFUL, AUTHORIZING THE MAYOR
AND CITY CLERK TO EXECUTE AN AGREEMENT FOR AN
ESTIMATED ANNUAL PREMIUM NOT TO EXCEED $13,000,000.
WHEREAS, on August 29, 2001 a request for proposals for group medical benefits was
issued by Arthur J. Gallagher & Co, the City's broker, with thirteen (13) vendors responding; and
WHEREAS, the City's Group Insurance Board began meeting on November 15,2001, to
review and discuss the received group medical plan proposals, and recommended that the City renew
its contract with Humana, the City's current group medical provider, with a combined renewal
increase of27.78%; and
WHEREAS, the City Manger has reviewed the recommendations of the Group Insurance
Board, and concurs with the Board's recommendation.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby accept the ranking of the proposals received for group medical benefits pursuant
to the Request for Proposals issued August 29,2001, by Arthur J. Gallagher and Co., the City's
broker, and authorize the Administration to enter into negotiations with Humana, the City's current
group medical provider, for renewal of the group medical program and, if successful, authorize the
Mayor and City Clerk to execute an agreement for an estimated annual premium not to exceed
$13,000,000.
PASSED AND ADOPTED this
31st
day of July
,2002
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APPROVED />S TO
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Attachment A
e.
Gallagher Benefit Services, Inc.
A Subsidiary of Arthur J. Gallagher & Co.
June 24, 2002
Mr. Jorge M. Gonzalez, City Manager
City of Miami Beach
1700 Convention Center Drive
Miami Beach, Florida 33139
Re: Medical & Dental Renewals
Dear Mr. Gonzalez,
Arthur J. Gallagher, acting as Broker of Record for the City of Miami Beach released a
medical RFP on August 29,2001. Proposals were due back on or before September 28,
2001. The RFP requested medical proposals for PPO HMO and POS type coverage's
similar to those coverage's currently being offered by the incumbent carrier, Humana. .
The RFP included background as to the City's current coverages and demographics
including descriptions of the active, pre-Medicare retirees and post Medicare retirees and
all current plan designs. Proposals were also requested on both a fully insured and self
funded basis to insure a complete market review.
Subsequent to the issuance of the medical RFP, at the City's request, an addendum to the
RFP was issued on October 4,2001 requesting proposals for dental coverage. A listing of
the nineteen vendors solicited for both coverages is as follows:
Medical & Dental: Aetna USHealthcare Lincoln Re
A vMed Sun Life
Blue Cross/Blue Shield United Healthcare
CIGNA ASI
HIP Health Plan of Florida Benesight
Humana Covenant Administrators
Florida Health Administrators
Dental Only:
ADP/CompBenefits
Ameritas
Delta Dental
Guardian Life
Paragon Dental Services
Protective Life (Denticare)
Attachment A will provide a complete listing of vendors solictated and a brief description
of how the carriers responded.
The Group Insurance Board consisting of the following persons met initially on
November 15,2001 to review and discuss the proposals:
j
One Boca Place
2255 Glades Road, Suite 400 E
Boca Raton, FL 33431
561,995.6706
Fax 561,995.6708
www.ajg.com
.ii.
..
Mary Greenwood, Labor Relations
T.C. Adderly, Human Resources
Buddy Dresner, Retiree
Richard McKinnon, CW A President
Andrew Terpak, Fleet Management
Lewis Peoples, ASFCME
Robin Garber, GSA
Cliff Leonard, Risk Management
The Medical and Dental evaluation process included the following criteria:
I) Cost - Rates including overall cost and rate guarantees
2) Benefits Provided - Plans offered including copays, out-of-pocket, reimbursement
levels and any coverage limitations
3) Qualificiltions - Client references, A.M. Best Ratings competency of assigned
team, Customer Service and experience with employers of similar size
4) Technical- Response to RFP including requirements, completion of required
forms and any additional data requested.
5) References - Review of current client satisfaction levels
6) Network Capability - Size of network including adequate coverage for all
employees, availability of providers and their satisfaction levels as providers.
The detailed financial comparison (Attachment B) has been summarized in the following
exhibit:
Vendor Estimated Annual Cost Comments
Humana $7,589,802 Inforce
Humana (Proposed) $9,169,105 Fully Insured Renewal
Humana (Option I) $8,804,795 Fully Insured
Humana $10,661,800 Self Funded
CIGNA $11,456,487 Self Insured
Benesight TP A $11,785,516 Self Funded Benesight Excess
Benesight TP A $11,755,352 Self Funded Lincoln Excess
The insurance committee began discussions regarding the RFP responses on November
15,2001. That and subsequent meetings produced the following conclusions:
The RFP process produced only one fully insured proposal offered by the incumbent
carrier Humana. All other proposals were submitted on a self-insured basis. It was
determined this low response was due to several factors. First, the City's current 50%
contribution levels produced carrier concerns relative to adverse selection. The young
healthy new hires would not take the insurance due to cost. Secondly, retirees account
..
for approximately 50% of the employee population and represent the highest loss ratio
within the three identified groups. Also, it would indicate Humana renewal rates were
competitive with the current healthcare marketplace. Humana's proposed renewal
increase of27.78% was lower than all other alternate proposals received.
After reviewing both the financial analysis and the benefit comparisons for all
submissions, we concurred with the evaluation committee that Humana provided the best
overall proposal utilizing the predetermined evaluation criteria.
In addition, we recommend the City offer additional plans to the currently covered
employees. The offering of optional plans with higher out-of-pocket costs, will provide
the City with more control of plan costs and the employees will have more choice and
financial control over how their healthcare is delivered.
Proposals were received for Dental benefits from the incumbent ADP/CompBenefits,
Paragon Dental, Delta Dental and CIGNA. All vendors provided DMO and Indemnity
proposals attempting to match existing benefits and offering alternate benefit levels
producing cost scenarios. See attachments C, D and E for detailed benefit, cost and
provider analysis. CIGNA was eliminated from the evaluation process due to
significantly high-proposed costs. Using similar evaluation criteria to that of the medical
review, it was determined ADP/CompBenefits, Delta Dental and Paragon Dental would
be invited to meet with the evaluation committee to discuss their proposals in detail.
These meetings resulted in ADP/CompBenefits being ranked fIrst and Delta Dental
ranked second. While Delta provided benefit-enhanced alternatives, current and future
costs concerns of both dental and medical played a part in the decision. With that in
mind, Gallagher agreed with the committee's findings for the following reasons:
I) ADP/CompBenefits reduced current benefit costs 14%. Richer benefits were
provided as an alternative at additional cost, which can be negioated.
2) ADP/CompBenefits provided the lowest cost plan when comparing current
benefit levels
3) Network providers meet current needs and the addition of additional local
providers can be negotiated.
The committee evaluation scoring is also included as attachment F.
Should you have any questions or wish to discuss any of the areas mentioned, please
don't hesitate to contact me at 561-995-6706.
.
CITY OF MIAMI BEACH
Office of the City Manager
Letter to Commission No. /79- ;;)OOe.-
m
To:
Mayor David Dermer and
Members of the City Commission
Date: July 24, 2002
From:
Jorge M. Gonzalez ~. ~ '
City Manager . r"" 0
RECOMMENDAT N OF THE GROUP HEALTH INSURANCE TASK
FORCE
Subject:
The purpose of this LTC is to update the Mayor and Commission on the recommendation
of the City's Group Health Insurance Task Force.
By the way of background, the City has struggled for some time with the issue of how best
to provide Group Health Insurance to its employees, Rising costs with lower levels of
benefits has challenged the traditional methods of procuring health care services for the
City of Miami Beach. In recent years, the City has been through a few separate processes
to procure Group Health Insurance, but has not been satisfied with the outcomes.
In response to this important issue, the Finance and Citywide Projects Committee, at the
request of Commissioner Simon Cruz, recommended that a Citizen/Staff Task Force be
formed to examine the issue, On April 18, 2001, the City Commission with the
recommendation of the Finance and Citywide Projects Committee approved the
appointment of the Group Health Insurance Task Force. Attached is the charter for the
Task Force.
On June 18, 2002, the Task Force members (after attending many meetings and
contributing numerous hours) through the leadership of Bruce Davidson and Tim
Hemstreet developed a comprehensive analysis of the City's group insurance program
which included a Problem Statement, Primary Causes and Primary Solutions, The final
report (copy attached) included the following solutions:
Conform benefits plans to current general industry levels - higher co-pays, Rx plans,
out of pocket maximums.
The City contribution for coverage for active employees should be increased to 80-
100% of the individual "standard benefit plan".
Continue to support dependant coverage, but move from a 2-tier to a 4-tier structure
(Individual, Individual + spouse, Individual + children, full family) and consider 3-tier
as well.
The Fire Department Task Force members also recommended that the City
aggressively examine pursuing self-insurance.
Attachment "B" .
On July 19, 2002, I met with the members of the Task Force for a comprehensive review
and discussion of the final recommendation, It should be noted that the report of the Task
Force confirms much of what the Administration feels needs to be addressed with the
current City group insurance. Both the Administration and the Task Force recognize that
the current condition of the City group health plan evolved over a long period of time and
that the implementation of changes that will result in a better plan will require much effort
and long term commitment by all involved,
Overall, I am pleased with the final product provided by the Task Force and feel that many
of the Administration's current actions are consistent with recommendations. I am presently
looking at group medical renewal options that in addition to maintaining the current benefit
level offer optional plans that are comparable to general industry levels (this is consistent
with the recommendations of the Task Force regarding conforming plans to current general
industry levels). I will be asking the Mayor and Commission to approve these additional
benefits on the July 31, 2002 agenda, Additionally. I am reviewing various group medical
plan models with Arthur J, Gallagher & Co. (the City's broker) regarding both tier structure
and contribution. If it is determined changes to tier structure and contribution are in order,
I will be asking the Mayor and Commission to approve during the next few months,
JMG/RI/MDB/MG/~
Attachment( s)
REPORT OF THE TASK FORCE ON HEALTH INSURANCE
June 18, 2002
Problem:
Employee out of pocket premium cost is high, negatively affecting
recruitment, retention and health plan participation.
We observe that approximately half of the City's money is spent on active
employees and their dependents, about 25% is spent on non-Medicare
eligible retirees and their dependents, and about 25% is spent on
Medicare eligible retirees and their dependents. Data is not available to
assess the exact nature of the non-Medicare eligible employees.
However, we believe that a larger proportion of the City's contribution
should be spent on active employees and their dependents,
Primary Causes:
1. The plans' benefit structures - non-tiered Rx, low co-pays, low co-
insurance percentages, low deductibles and out of pocket limits - are
richer than normal health insurance industry product offerings and public
employer practices. This is a significant cause of the cost problem.
2, Our plans are not structured to provide incentives to use them cost
effectively. We do not have a "quality basic plan" that encourages cost
effective utilization. These observations are substantiated by, among
other observations, a higher than expected out of network utilization in
the PPO and HMO.
3. We do not have a low cost "basic plan."
4. We are not effectively using the availability of "Medicare HMO's" and,
perhaps, "Medicare Supplemental policies" to reduce cost to both the City
and the retirees while potentially increasing benefits.
5, The combination of the following factors~
a) the former City Charter requirement of 50/50 cost sharing, plus
the rising cost of health insurance;
b) the State requirement that retirees be offered the same health
care plans and premium costs as are offered to active
employees(the employer subsidy of premium costs for retirees
may differ from its subsidy of active employees);
1
Report of the Task Force on Health Insurance
c) the State requirement that non-Medicare-eligible retiree health
costs be included in the risk pool for determining the common
premium costs for active and retired employees; and
d) the City extension of the 50/50 cost sharing to eligible retirees
and the absence of a modification for length of service
results in a relatively better value for the early retirees than for the active
employees. This value discrepancy, plus the City's early retirement
policies, has resulted in a risk pool comprised of an increasingly large
percentage of early retirees, This has driven the health plan average cost
higher, resulting in a poor and declining value for the active employees.
The high average cost of the risk pool plus increases in health care costs
have made the employees' 50% cost sharing increasingly unaffordable
and currently the absolute number of active employees participating in the
plans is decreasing. Without intervention, this trend will continue. We
need to structure the plans to recognize "full career" retirees even if they
retire at a relatively early age.
6. There is no requirement for participation in the City's plan or in any other
plan as a prerequisite to the City's contribution to retiree health benefits
or eligibility to enter the plans after having previously declined to do so.
This allows employees and dependents t6 go without coverage until they
have a health problem, and then enter the plan without penalty,
7. 50-50 cost sharing is patently regressive,
8. The City's 50/50 subsidy regardless of plan type (HMO, POS or PPO), and
participation (single, spouse, or family) and a liberally constructed PPO
have encouraged high utilizers into the PPO where the absence of
managed care techniques allows relatively higher health costs. Thus, the
high utilizers probably cost more than if they were in the HMO, costing the
entire health insurance plan more, This is a contributing but not a major
cause of the cost problem. The high utilizers will carry their maladies
with them to the HMO and drive up the average cost there, although
probably not to the extent that occurs in the PPO.
9. Task Force Members who are in Humana's PPO are experiencing
significant administrative hassle. However, we cannot expect to be able
to attract another credible insurer without significant changes to the Plan
design as outlined below.
2
Report of the Task Force on Health Insurance
Primary Solutions:
1. Conform benefit plans - co-pays, Rx plans, co-insurance percentages,
deductibles, out of pocket maximums - to current general industry levels,
thereby reducing the overall cost of the Plans to the employees and the
City, The examples of industry-accepted benefit plans provided by
Gallagher should be used as a gUide by the City, but subject to required
bargaining processes, good employee relations practices, and
considerations of affordability by both the City and employees. The use of
a separate Prescription Benefit Management Contractor should be
considered.
2, If an employee who has declined City coverage desires to enter the City's
plans, or if a retiree who has not had City coverage desires to enter the
City's plan upon retirement, the City should impose a 12-month pre-
existing condition restriction on coverage unless the person desiring
coverage can provide evidence of previous certifiable coverage. This
policy should be implemented as soon as possible.
3. The City contribution for coverage of active employees should be 80-
100% of the individual employee cost for the "standard benefit plan"-
which should be consistent with the benefit plan most used by employees
of those employers considered to be competing with the City for
employees (not necessarily the lowest cost plan offered by the City).
The City should move toward having its contribution to individual
coverage be the same amount for each employee regardless of plan
chosen (e.g" HMO or PPO). However, recognizing the significant cost
differences in the plans currently offered and the dislocation that may be
caused by a sudden change in policy, a transition plan may be advisable.
Whether a transition plan is necessary should depend upon the variation
in cost of a new offering of plans provided by the current or a new
insurer.
4. Contribution for Dependents, The Task Force recognizes the trend in the
private sector, not followed in the public sector, for not contributing to
dependent coverage, The Task Force believes that the City, as a public
employer, should continue to support dependent coverage to remain
competitive with other public employers and to remain consistent with its
past commitments to its employees.
5. The City should move from a 2-tier dependent premium structure to a 4-
tier premium structure. The tiers are defined as follows: (1) Individual;
(2) Individual + spouse; (3) Individual + children: and (4) Full family
coverage. Consideration should be given to a 3-tier premium structure as
well.
3
Report of the Task Force on Health Insurance
6, The City contribution to dependent coverage should be a function of the
following considerations:
i. If the City makes a higher percentage contribution to individual
coverage, it is appropriate to make a lower percentage
contribution to dependents
ii. Affordability by the employees, with consideration given to the
current 50% contribution to dependent coverage
iii. Affordability by the City relative to increases in contribution it
may be making to individual coverage
iv. Practices of competitive public employers
7. The Task Force recognizes that the prevailing South Florida public
employer practice is to not contribute to retiree health benefits. The Task
Force did not have a consensus about whether the City should make a
contribution to retiree health benefits. However, the Task Force
recommends:
a, The City should assess whether it wishes to continue its 50%
contribution level (or some other contribution), but any contribution
should be based upon years of service. The Task Force believes
that employees should serve at least 10 years before being entitled
to the maximum City contribution (if any) to retiree health benefits.
b. The 401(a) definition of retirement eligibility should not be applied
to health benefit retiree health plan eligibility as it is now. The
current policy is clearly inappropriate and should be changed as
soon as possible. Retiree health plan eligibility should be based
upon years of service.
c. The City should aggressively pursue use of "Medicare HMO's" and
"Medicare Supplemental Policies" to provide coverage for its
Medicare eligible retirees. Attention should be focused upon a
viable Rx benefit. These products may provide the opportunity to
increase coverage for retirees who chose them at lower cost to
those retirees and the City. City contribution policy for retirees
should be examined in the light of these "win-win" opportunities.
8. Based upon favorable experience with their plan, the Fire Department
Task Force Members recommend that the City aggressively examine the
option of self-insurance with a stop-loss.
4
-',
Miami Beach Group Health Insurance Task Force
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,. - ':Oiir.1:arcli-2; 260j~ Comniissioner Simon' Cruz'wrote~a-memomidum to CitY' .
Manager Jorge M. Gonzalez asking that the establishment of a Citizen/Staff Task Force
on Group Health Insurance be referred to the Finance and Citywide Projects Comniittee.
The matter was referred to the Finance and Citywide Projects Committee by the City
Commission at their March 14,2001 meeting. The Finance and Citywide Projects
Committee met on March 20, 2001, and approved the establishment of a Citizen/Staif
Task Force on Group Health Insurance. The Finance and Citywide Projects Comniittee
recommended their approval in a report to the City Commission on April 18, 2001.
This document serves as the initial Charter for this Task Force.
Purpose:
Work Product:
Scope of Work:
Autboritv:
The purpose of the Task Force is to develop a comprehensive
solution that addresses the City's continuing and growing
challenges in the area of group health insurance. This includes the
examination of benefit levels, plan design, cost, coverage, and a
measure of the impact to any adopted changes to the affected
employee and retiree groups.
The Task Force is expected to develop a series of written, viable
alternatives for the design of the City's Group Health Insurance
Program(s) for consideration by the City Manager and the City
Commission. Included with each alternative should be an
explanation of the design, cost, impact to employees and retirees,
advantages, and disadvantages. The Task Force should make and
justify their recommendation of the best available solution.
Recommendations may be split into short-term and long-term
objectives.
The Task Force is limited to an examination of how Group Health
Insurance is provided and to making recommendations for
improving the provision of Group Health Insurance to all City
employees and retirees at a reasonable cost. The Task Force
should take the perspective that the end goal is intended to be in
the best interest of the City - albeit, providing full attention to the
benefits derived from a workforce that is receiving quality health
insurance. The Task Force should be mindful of the Scope of
Work and make every effort to maintain a focus on this important
and complex issue.
The Task Force has the authority to collect information needed to
examine the Scope of Work. City Staff members should make a
concerted effort to attend Task Force meetings and to complete
follow-up and related work between meetings as this is a priority
of the City. Department Directors are requested to provide
employees who are Task Force members a reasonable amount of
1
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I
Miami Beach Group Health Insurance Task Force
.
'.
. .
______.h ._...
... --....-....
Le2al Mandates:
Members:
'.-iimcand latitude to Tedirect their-effortS-towardS-the completion of
the Scope of Work.
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The Task Force is an advisory body and does not have the ability
to make binding decisions.
The Task Force must consider and incorporate the legal obligations
contained within the State Statutes, City Charter, City Code,
Collective Bargaining Agreements, Group Insurance Board
regulations, and any other legally binding authority that affects the
City's Group Health Insurance program(s). Alternatives may be
developed and considered for the modification of some or all of the
respective sources of legal requirements, but processes, including
timelines and an estimate of viability should accompany such
alternatives. Task Force representatives from the City's Risk
Management Division will make available copies of the various
legal obligations and will provide the City's interpretation of the
obligations.
The recommended composition of the Task Force is as follows:
Clifton Leonard, Risk Manager
Mary Greenwood, Labor Relations
Tim Hemstreet, Special Assistant to City Manager
Manager/Professional Operating Department
Manager/Professional Operating Department
FOP Representative
IAFF Representative
GSAF Representative
CWA Representative
AFSME Representative
Jerry (Dee Dee) Weithom, Budget Advisory Committee
Marc Jacobson, Budget Advisory Committee
Bruce Davidson, Budget Advisory Committee
Buddy Dresner, Group Insurance Board (Retiree)
Roberto Sanchez, Health Care Consultant
Phyllis Miller, Citizen
The membership of the Task Force represents a cross section of
employees and residents. Although each member could be
construed to represent a particular constituency, it is expected that
each member will act in the best interest of the City. Members are
also charged with keeping their individual constituencies up-to-
date with the activities of the Task Force and are encouraged to
pass on the perspectives of those they represent.
2
<
. .
Miami Beach Group Health Insurance Task Force
Currently, all General Employees, classified and unclassified, are
covered by one of the three Humana plans unless they waive health
insurance altogether.
Since October I, 1986, approximately 200 employees (all members
of the fire fighters bargaining unit and some unclassified fire
management employees), have had medical insurance coverage
provided by the Florida Fire Fighters Health Insurance Trust Plan.
Since January 1, 1991, approximately 300 employees (all members
of the police officers bargaining unit and some unclassified police
management employees) have had medical insurance coverage
provided by the Miami Beach Fraternal Order of Police Health
Trust. In both situations, the health insurance construct is pursuant
to the respective collective bargaining agreement. The City pays
to the respective health trust 90% of its per employee or family
PPO payment.
The City has experienced considerable increases with its Group
Health Insurance rates over the past few years. In response to this
situation, the City has gone out for Bid and for RFP in an effort to
procure more competitive rates for Group Health Insurance. The
City has been unsuccessful in securing a Group Health Insurance
provider that is able to meet the City's needs and cost containment
goals. As a result, the City hired a Broker to assist with plan
design and other activities to identify the best Group Health
Insurance alternatives.
Duration:
The Task Force is expected to conclude its work within six months
of its inception.
4
CITY OF MIAMI BEACH
COMMISSION ITEM SUMMARY
m
Condensed Title:
Medical insurance renewal for 2002/03 plan year.
Issue:
Should the City renew the contract with Humana for employee/retiree health insurance coverage?
Item Summary/Recommendation:
The City Administration recommends that the current fully insured medical plan with Humana be renewed
with an overall increase in premium of28%, This combined renewal increase was significantly lower than
any programs offered on a self-insured basis, Humana was the only responder to the RFP that offered a
fully insured program. In addition to the rate increase, their renewal offered alternative HMO and PPO
plans with lower premiums that provide higher co-payments, higher deductibles and 3-tier prescription drug
benefits. These plan design changes and the City's increase in percentage contribution towards the
employee premium will move the City in a direction that provides both the employees and the City with
more cost-effective programs. The Administration is requesting renewal of the Humana contract for an
amount not to exceed $6,500,000,
Advisory Board Recommendation:
The Group Insurance Board recommends renewing the medical insurance with Humana. The Health
Insurance Task Force recommends additional plans that offer higher co-payments at a lower premium
cost for both the City and the employees,
Financial Information:
Source of Amount Account Approved
~ 1 6,500,000.00
2
3
4
Finance Dept. Total 6,500,000,00
City Clerk's Office Legislative Tracking:
I Mary Greenwood
Sign-Ofts:
Department Director
istant City Manager
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City Manager
F:\HUMA\$aII\COMM-SUMMARY\summ-medical-rfp7...Q2,doc
AGENDA ITEM
DATE
!?7D
7-31-0.2...
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
www.cLmiami-beach.fl.us
To:
COMMISSION MEMORANDUM
Mayor David Dermer and
Members of the City Commission
Date: July 31, 2002
Jorge M, GOnZalez~ ~
City Manager .- U
A RESOLUTIO OF THE MA VOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, ACCEPTING THE RANKING OF THE
PROPOSALS RECEIVED FOR GROUP MEDICAL BENEFITS PURSUANT
TO THE REQUEST FOR PROPOSALS ISSUED AUGUST 29, 2001, BY
ARTHUR J. GALLAGHER AND CO., THE CITY'S BROKER, AND
AUTHORIZING THE ADMINISTRATION TO ENTER INTO NEGOTIATIONS
WITH HUMANA, THE CITY'S CURRENT GROUP MEDICAL PROVIDER,
FOR RENEWAL OF THE GROUP MEDICAL PROGRAM AND, IF
SUCCESSFUL, AUTHORIZING THE MAYOR AND CITY CLERK TO
EXECUTE AN AGREEMENT FOR AN ESTIMATED ANNUAL PREMIUM
NOT TO EXCEED $13,000,000.
ADMINISTRATION RECOMMENDATION:
From:
Subject:
Adopt the Resolution,
ANALYSIS:
As a result of the medical RFP issued by Arthur J, Gallagher & Co, on August 29, 2001,
thirteen (13) vendors were solicited (Gallagher & Co.'s summary letter Attachment A), The
Group Insurance Board, acting as the Evaluation Committee, is comprised of
representatives from management, general staff, unions and retirees, met initially on
November 15, 2001 to review and discuss the proposals and to determine evaluation
criteria, The criteria consisted of Cost, Benefits Provided, Qualifications, Technical,
References and Network Capability.
This and subsequent meetings produced only one fully insured proposal for medical
insurance which was offered by our current carrier, Humana. The other proposals were on
a self-insured basis, Arthur J. Gallagher & Co. determined this low response was due to
several factors, First, the City's current 50% contribution levels produced carrier concerns
relative to adverse selection of plans HMO vs. POS vs, PPO. The young healthy new hires
would not take the insurance due to costs. Secondly, retirees account for approximately
50% of the insured group and represent the highest loss ratio within the group.
The combined renewal rate for our current plans (HMO, POS and PPO) will result in a 28%
overall increase to both the City and the employee with an estimated annual premium not
to exceed $13,000,000 which amounts to an estimated $3,000,000 increase in premium
over current premium costs.
In May 2001, the City established the Citizen/Staff Group Health Insurance Task Force that
was to work with staff and Arthur J, Gallagher & Co, to review and make recommendations
concerning the following: to determine health needs; review current trends to look at health
needs; and work to bring employee groups back together under a unified health trust.
The Group Health Insurance Task Force made its final recommendations on June 18,
2002. (See Attachment B, LTC, No. 179-2002), Arthur J, Gallagher & Co. concurred with
the recommendation of the Group Health Insurance Task Force that the City offer
additional plans to the ones currently being offered, Our consultant's report states: "The
offering of optional plans with higher out-of-pocket costs, will provide the City with more
control of plan costs and the employees will have more choice and financial control over
how their healthcare is delivered,"
The Administration would like to thank the Group Insurance Task Force for its dedicated
and detailed work. We recognize the difficulty of the project they were given and
appreciate their efforts and the recommendations made.
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In November 2001 referendum, the citizens of Miami Beach voted to provide the City
Commission with the authority to change the City's contribution percentage from one-half
(50%) of the benefits cost to a specific benefit to be established by Ordinance. The
Administration is continuing to look at various contribution percentages as one means of
providing employees with more cost-effective options,
The City has been working closely with Humana in order to develop programs that offer our
employees more flexibility in determining their health care needs. This year we are offering
two additional plans, a new HMO and a new PPO. These plans provide comprehensive
coverage, with higher co-payments, deductibles and 3-tiered prescription benefits, at a
lower premium, In addition, the City is increasing the percentage it contributes to the
employee's portion of these new plans from 50% to 65%, Employees will have the option
of staying with the current HMO/PPO plan under the new rates or enrolling in the new
HMO/PPO plan with a higher City contribution towards the premium, The chart below
indicates how these plans will be priced for the employee.
EMPLOYEE MONTHLY RATES FOR MEDICAL INSURANCE
CURRENT PLAN CURRENT PLAN NEW PLAN
CURRENT RATES NEW RATES (10-1-02) NEW RATE (10-1-02)
(EMP 50%; DEP 50%) (EMP 50010; DEP 50%) (EMP 35%; DEP 60%)
HMO (City contrib. 50% / 50%) (City contrib. 50% /50%) (City contrib. 65% /40%)
EMPLOYEE $119,64 $155,53 $100,57
FAMILY $296.53 $385.49 $355.48
POS
EMPLOYEE $144,33 $199.89 NOT OFFERED
FAMILY $358.11 $495.98 NOT OFFERED
PPO
EMPLOYEE $253,38 $316,73 $196.55
FAMILY $621.67 $777.08 $686,30
Arthur J, Gallagher & Co, concurs with the Group Insurance Board that Humana provided
the best overall proposal. The Administration recommends renewal of the contract with
Humana, with the new HMO and PPO plan. The City recognizes that this is the beginning
of an ongoing process for controlling health insurance costs and will require ongoing
review,
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