2008-26818 ResoRESOLUTION NO. 2008-26818
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF
THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE
RECOMMENDATION OF THE FINANCE AND CITYWIDE
PROJECTS COMMITTEE TO FURTHER EXPLORE ASELF-
INSURED GROUP HEALTH PLAN; AND AUTHORIZING THE
CITY ADMINISTRATION TO TAKE SUCH ACTION(S) AS
NECESSARY TO IMPLEMENT SAID PLAN SUBJECT TO, AND
IN ACCORDANCE WITH, APPLICABLE FLORIDA LAW
INCLUDING, WITHOUT LIMITATION, SECTION 112.08,
FLORIDA STATUTES, ET.SEQ.
WHEREAS, the City currently provides full-time employees and retirees the
opportunity to purchase group health care coverage (medical and dental) through afully-
insured group health plan; and
WHEREAS, in afully-insured group health plan, the employer pays the health
care plan and does not incur any risk nor does it retain any premium payment overages;
and
WHEREAS, in aself-funded group health plan, the employer assumes all liability
for employee healthcare costs, funding participant claim payment, and paying all fixed
costs associated with the plan's operation, including provider and network access, and
retains any dollars not required to pay the plan's claim and administrative costs; and
WHEREAS, by implementing aself-insured group health plan, the City would
have the ability to take charge of healthcare costs, reduce carrier expenses and profit,
receive cash flow advantages, and be able to design health programs for retirees over
age 65 and part-time employees; and
WHEREAS, as protection, the City would also purchase "stop loss" coverage
providing reinsurance of the City's liability for those cases in which the cost of care
exceeds a set annual amount; and
WHEREAS, the City benefits by switching to aself-insured group health plan,
including greater flexibility in plan design encouraging cost effective medical care, Health
and Wellness events targeted to the precise needs of the City's employees,
enhancements to plan design, co-payment and premium structure, affordable coverage
for the City's part-time employees, and more efficient, effective and responsive customer
service for plan participants; and
WHEREAS, based upon actuarial determination over the past seven (7) years,
beginning with Fiscal Year (FY) 00/01 through FY 06/07, the current fully-insured group
health carrier has retained a total surplus in premium payments of over $4.5 million,
which, as aself-funded group health plan, the City would have been able to utilize to
reduce cost and enhance benefits; and
WHEREAS, the City would have to commit to aself-funding program for a
period of at least three (3) to five (5) years to realize the full potential of self-funding its
group health care plan; and
WHEREAS, at the April 21, 2008 Finance and Citywide Projects Committee
meeting, a discussion took place regarding the City's current group health plan and the
option of exploring the opportunity of providing employees and retirees with aself-
insured group health care plan; and
WHEREAS, the Committee passed a motion recommending that this matter be
referred to the City Commission for consideration; and
WHEREAS, the Administration presented this information to the City
Commission during its May 14, 2008 Meeting; and
WHEREAS, after discussion the City Commission voted unanimously to accept
the recommendation of the Finance and Citywide Projects Committee and to explore
changing the funding of the City's group health plan from afully-insured plan to a self-
insured .plan.
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 recommendation of the Finance and Citywide Projects
Committee to further explore aself-insured group health plan; and authorizing the City
Administration to take such action(s) as necessary to implement said plan subject to,
and in accordance with, applicable Florida law including, without limitation, Section
112.08, Florida Statutes et.seq.
PASSED and ADOPTED this 14th day of May , 2008.
MA OR
Mattie Bower Herrera
TEST:
ITY CLERK
Robert Parcher APPROVED AS TO
FORM $ LANGUAGE
~ FOR EXECUTION
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COMMISSION ITEM SUMMARY
Condensed Title:
A RESOLUTION ACCEPTING THE RECOMMENDATION OF THE FINANCE AND CITYWIDE
PROJECTS COMMITTEE, AND AUTHORIZING THE CITY MANAGER TO TAKE SUCH ACTIONS, AS
HE DEEMS NECESSARY AND AS LEGALLY REQUIRED, TOIMPLEMENT ASELF-INSURED GROUP
HEALTH PLAN.
Intenaea outcome ~u
~ Attract and maintain a quality workforce. ~
Supporting Data (Surveys, Environmental Scan, etc)
I. 2007 Employee Satisfaction Survey
• 68.8% of employee surveyed participate in medical benefits and 69.6% in dental benefits.
• 63.5% of employee surveyed ranked medical benefits as the most important benefit the City could
offer and 27.47% ranked dental benefits as the most important.
II. 2007 Internal Support Functions Survey
• Overall satisfaction of benefits administration was rated 75.6% as excellent or good combined
III. 2008 Environmental Scan
• Motivated and Skilled Workforce retention/turnover rates = 13.86% for 2007 vs. 10.7% for 2006
Issue:
Should the City consider the implementation of aself-insured group health insurance program for all
benefit eligible employees, both active and retired?
Item Summa /Recommendation:
City Code provides for employee health care coverage with the cost of such coverage shared between the
employee and the City. In addition, the collective bargaining agreements ofASFCME, CWA, and the GSA
all require the City to provide group health coverage to their members.
Currently the City provides employees and retirees afully-insured group heath plan. Afully-insured group
health plan affords the City the opportunity to provide group health care coverage without any assumption
of risk. The City purchases an "off-the-shelf' plan for a set monthly cost understanding that coverage
cannot be changed or customized to the groups varying needs as years go by. Monthly premium dollars
are paid to the carrier without any City controls on the plan. The carrier builds gains (profits) into its
premium costs to guarantee both plan solvency and a return to the plan's investors.
Through aself-insured group health plan, the City then would assume both the plan's risk and its reward.
A monthly administration fee would be paid to the carrier or third party administrator providing the Citywith
a provider network, claims adjudication, and plan administration. Excess premium amounts (carrier profits
under afully-insured plan) would be retained by the City and used to build the City's plan reserves, which
can be utilized to enhance future benefits, mitigate risk and restructure premium for the City.
The Administration recommends further exploration of, and authorizing the City Administration to enter into
and execute any and all necessary agreements to implement, aself-insured croup health plan.
Havisory ~soara rcecommenaaiion:
Recommended by the Budget Advisory Committee on March 18, 2008 and the Finance and Citywide
Projects Committee on April 21, 2008.
Financial Information:
Source of Amount Account
Funds: 1
2
3
OBPI Total
Financial Impact Summary:
Cit Clerk's Office Le islative Trackin
Ramiro Inguanzo
Si n-Offs:
Department Director Assistant City Manager City Manager
Ramiro Inguanzo
,AGENDA\2008\May 14\Regular\Implement Self-Insured Grp Hlth summary.doc ~
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m MIAMIBEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Matti Herrera Bower and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: May 14, 2008
SUBJECT: A RESOLUTION ACCEPTING THE RECOMMENDATION OF THE FINANCE
AND CITYWIDE PROJECTS COMMITTEE, AND AUTHORIZING THE CITY
MANAGER TO TAKE SUCH ACTIONS, AS HE DEEMS NECESSARY AND AS
LEGALLY REQUIRED, TO IMPLEMENT ASELF-INSURED GROUP HEALTH
PLAN.
ISSUE
Should the City consider the implementation of aself-insured group health insurance
program for all benefit eligible employees, both active and retired?
BACKGROUND
At the April 21, 2008 Finance and Citywide Project Committee meeting, a discussion took
place regarding the City's current group health plan and the option of exploring the
opportunity of providing employees and retirees with aself-insured group health care plan.
The Finance and Citywide Project Committee passed a motion recommending this item be
referred to the City Commission for consideration.
City Code Chapter 78, Article II, Sections 78 through 81 provide for employee health care
coverage with the cost of such coverage shared between the employee and the City. In
addition, the collective bargaining agreements of the American Federation of State, County
and Municipal Employees (ASFCME), the Communication Workers of America (CWA), and
the Government Supervisors Association (GSA) all require the City to provide group health
coverage to their members. Providing group health coverage to employees enables the City
to attract and maintain a quality workforce, one of the key intended outcomes of the City's
Strategic Plan.
Currently the City provides its active, full-time employees and retirees the opportunity to
purchase group health care coverage (medical and dental). The City's group health plan
excludes coverage for members of the Fraternal Order of Police (FOP) and the International
Association of Fire Fighters (IAFF), as both have their own health trusts and do not
participate in the City's Group Health Insurance Plan. (However, FOP members are eligible
to participate in the City's dental plan, as their health trust does not provide for dental
coverage.) Both the City and the employee/retiree contribute to the cost of this coverage, at
different rates, based on the plan elected.
City Commission Memorandum
May 14, 2008
Self-Insured Group Health Insurance Plan for Employees and Retirees of the City
of Miami Beach
Page 2 of 7
The following is the City's and the Employees' current premium cost share:
Plan Coverage
City Pays Employee
Level Pa s
POS Employee Only 50% 50%
Family
Premium PPO Employee Only 50% 50%
Famil
Employee Only 75% 25%
Standard PPO
Family 60% 40%
Premium HMO Employee Only 50% 50%
Famil
Employee Only 75% 25%
Standard HMO
Family 60% 40%
Retirees hired prior to March 18, 2006 share equally in the group health cost with the City
paying 50% and the retiree paying 50% of the cost of coverage. However, due to the
changes in the City's pension system in March 2006, those employees hired after March 18,
2006 will be provided a stipend of $10 a month for each year of service toward their group
health costs. For the City dental plan offerings, the premium costs are shared equally
(50%/50%) for both active employees and retirees.
In 2001, the City recognized that, along with other public and private employers, it was
experiencing significant increases in the cost of health insurance. At that time, the Group
Health Insurance Task Force was established by the City Commission with the objective of
developing comprehensive solutions addressing the City's growing challenges in the area of
group health insurance. The Group Health Insurance Task Force, comprised of both
employees and residents, was asked to review the City's benefit levels, plan designs, costs,
and coverage, to make recommendations regarding the City's group health care options
consistent with industry standards, and to help reduce the City's spiraling health care costs.
Many of the recommendations made by this Task Force (Attachment A) have been
implemented, and have provided the City with some relief in annual premium cost increases.
Some of the recommendations that have been implemented include:
• Conforming the City's benefits plans to industry standards.
• Increase the City share for the standard benefit plans to encourage employee
enrollment (these plans were introduced in 2004).
• Continue City support and premium contribution for dependent group health
coverage.
• Change the City contribution for Retiree Group Health to coverage based on years of
service.
• Pursue the use of Medicare HMOs and Supplemental Policies for retirees.
However, over the past five years, even with the adoption of these cost saving measures,
the City has continued to incur annual premium increases from as low as 3.94% in 2005 to
as high as 27.87% in 2002 (Attachment B). As part of the City's renewal negotiations with
Humana for the 2007 plan year, contract provisions were made capping the City's annual
premium increase based on the loss ratios (a formula used by insurers to relate loss
expenses to income -the sum of incurred claims and projected expenses divided by earned
premiums) for the City's five health care plans. The City's loss ratio for the 2007 plan year
City Commission Memorandum
May 14, 2008
Self-Insured Group Health Insurance Plan for Employees and Retirees of the City
of Miami Beach
Page 3 of 7
was at 88%. Under the terms of the City's contractual rate caps, the premium increase for
the group health plan was 12.3% for the current plan year, which runs from January 1
through December 31, 2008.
ANALYSIS
One recommendation of the Group Health Insurance Task Force not implemented was for
the City to examine the option of self-insurance. This recommendation was based on the
favorable experience of the FOP and IAFF Health Trusts. The IAFF Health Trust began a
self-funded plan on October 1, 1986 and the FOP Health Trust began aself-funded plan on
January 1, 1991.
Currently the City provides employees and retirees afully-insured group health plan. A fully-
insured group health plan affords the City the opportunity to provide group health care
coverage without any assumption of risk or reward. The City purchases an "off-the-shelf'
plan for a set monthly cost, understanding that coverage cannot be changed or customized
to the group's varying needs as years go by. Monthly premium dollars are paid to the carrier
without any City controls on the plan, without any information flowing back to the City on
incurred claims, or without any guarantee that the plan is providing high quality cost effective
benefits to its employees. The carrier builds gains (profits) into its premium costs to
guarantee both plan solvency and a return to the plan's investors. The City's only risk is the
steady increase in premium based solely on the group's claim performance for the previous
year- a good claim year results in a minimal premium increase for the next plan year; a bad
claim year results in a significant premium increase for the next plan year, allowing the
carrier to recoup their losses from the previous year, and earn profit for the new plan year.
Should the City implement aself-insured group health plan, the City would assume both the
plan's risk and its reward. A monthly administration fee would be paid to the carrier or third
party administrator (TPA), providing the City with a provider network, claims adjudication,
and plan administration, which minimizes the carrier's profit. The City would be provided
access to employee claim information (without any identifying employee information) to help
customize plan benefit design and health and wellness events. In addition, the incurred
claims information would be utilized by the City's benefits consultant to make the annual
actuarial determination of plan premium costs. Excess premium amounts (carrier profits
under afully-insured plan) would be retained by the City and used to build the City's plan
reserves, which can be utilized to enhance future benefits, mitigate risk and restructure
premium for the City and employees. In years when the City may incur claims costs greater
than the assumed risk, plan reserves would be available to mitigate the cost impact to the
City and its employees. It is important to note that plan reserves can only be used on health
care components, and cannot be used for other purposes.
The Group Health Insurance Task Force recommendations were finalized in Juty 2002. The
next plan year started on October 1, 2002, with open enrollment occurring in the summer of
2002 for the 2003 plan year. With such limited time, the City wasn't able to fully explore
changing to aself-insured plan for that plan year. However, since 2003, the City, through its
consultant, has been able to negotiate favorable fully-insured rates with Humana. Between
the 2004 plan year and the 2007 plan year, rate increases were held to a range of 3.94% in
2005 to 8.94% in 2006, as indicated in the chart below and in Attachment B.
City Commission Memorandum
May 14, 2008
Self-Insured Group Health Insurance Plan for Employees and Retirees of the City
of Miami Beach
Page 4 of 7
Plan Year Initial Pro osed Rate Actual Rate Increase
2002 + 20.81 % + 20.81
2003 + 32.06% + 27.78%
2004 + 12.00% + 8.00%
2005 + 11.10% + 3.94%
2006 + 14.14% + 8.94%
2007 + 12.81 % + 7.50%
2008 + 18.20% + 12.30%
To help mitigate these increases, several cost saving avenues were explored, including the
issuance of a Request for Proposal (RFP), to investigate what opportunities for lower
premium costs might be available from other carriers, as well as to examine the possibility of
aself-insured group health plan. In 2005 and 2007, Group Health Insurance RFPs were
issued requesting proposals for both fully-insured and self-insured group health plans based
on the City's current group health plan designs. Unfortunately, those plans responding to
the RFP either (a) provided a proposal based on aself-insured plan only; (b) provided plan
options that did not match the City's health care plans or (c) provided no reduction or an
increase in the premium rates quoted by the City's current health care plan vendor.
The 2005 RFP provided afully-insured renewal with a cost proposal of approximately $16
million and aself-insured renewal with a maximum exposure of approximately $18.8 million
(based on actuarial calculations) for the 2006 plan year. The approximately $2.8 million cost
difference of aself-insured group health plan proved self-insurance was not a viable option
at that time, as the liability to the City was significantly greater than continuing the fully-
insured group health plan.
However, the 2007 RFP provided a significant reduction in the cost gap between the fully-
insured renewal with a cost proposal of approximately $16.94 million and the self-insured
renewal with a maximum exposure of approximately $16.88 million (based on actuarial
calculations), or a savings to the City of approximately $60,000 for the 2007 plan year. This
savings does not represent the additional costs built into the plan by the carrier for their
facilities, claim reserves, required state premium taxes, and any unknown profits. However,
these results were received in August 2007, making it impossible for the City to implement a
self-insurance program in time for the 2008 plan year. These results indicated that the
timing was right to explore the feasibility of aself-funded group health insurance plan. The
City's group health consultants (Gallagher Benefits Service) has advised the City that there
is sufficient time to implement aself-funded program for the plan year beginning January 1,
2009, if the decision is made by summer 2008.
FISCAL IMPACT
Should the City move forward with implementing aself-funded program, the initial funding for
the plan, used to fund claim and administration payments, would be funded via the City's
Risk Pool, and perhaps supplemented by monies transferred from another source, such as
the Undesignated Fund Balance, if additional plan reserves are needed. Monthly premiums
collected (both the employee and the City premium payments) would be held in a trust to
help offset the plan's administration charges, including the premium costs for stop-toss
coverage and claims. Any remaining funds must remain in the trust, and could only be used
on future health care program costs. These reserves could be used to help offset
catastrophic claims costs in case of under-funding, as well as enhance wellness initiatives
and the benefits provided to participants. The City's benefit consultant has provided an
City Commission Memorandum
May 14, 2008
Self-Insured Group Health Insurance Plan for Employees and Retirees of the City
of Miami Beach
Page 5 of 7
illustrative analysis of the cost savings that may have been afforded to the City if a self-
insured healthcare plan had been implemented in fiscal year 2001/2002 (Attachment C).
Based on estimated plan costs, claims and premium payment, at the end of fiscal year
2006/2007, payments to the plan minus costs paid out would reflect a surplus of nearly $5
million - or the estimated profit earned by the current fully insured healthcare vendor,
Humana. This surplus would have to have been retained by the City under aself-insured
plan in the plan trust, for use on future health care program costs.
By implementing aself-insured group health plan, the City would have the ability to take
charge of healthcare costs, reduce carrier expenses and profit, receive cash flow
advantages (including interest on plan reserves and all prescription rebates), and would be
able to design health programs for retirees over age 65 and part-time employees. The City
would still need to contract with a group health plan carrier for provider networks access and
claim administration; however, the funding for all incurred health care expenses would come
directly from the City. All plan administration fees charged by the carrier, inclusive of a
network access fee, claim processing fees, consultant fees and program (Health and
Wellness Program, Employee Assistance Program (EAP), COBRA administration, etc.) fees
would be paid by the City as well. The City could experience savings through reduced costs
for claims administration, overhead and profit currently paid to the carrier. In addition, plan
participants would be afforded the advantage of faster claims processing and the City would
benefit with more efficient and prompt reporting of plan costs, including the cost of claims.
Under the City's current fully-insured health plan model, the City does not incur any of the
risk of providing group health coverage, nor does it receive any reward. The City's
consultant has recommended that should the City make the decision to change its group
health plan funding mechanism from its current full-insured model to aself-insured model of
the 2009 plan year, the current plan designs (Attachment D), re-insurance (stop-loss) and
rate structure, including the best negotiated renewal rates with Humana, would be used.
Proceeding in this manner for the initial year would permit the City to mitigate the risk of an
under-funded plan, and would help the City build funding reserves.
As protection, the City would also need to purchase "stop loss" coverage. Stop loss
coverage provides reinsurance of the City's liability for those cases in which the cost of care
exceeds a set annual amount. The current stop loss coverage purchased annually by the
incumbent medical plan carrier is $175,000 per participant. Stop loss coverage protects the
plan's funding, as once the plan participant reaches their annual "stop loss" cap, the plan's
liability ends. All future health care costs incurred by the participant would be paid by the
reinsurance carrier for the remainder of the plan year. The plan's liability for that particular
participant would begin again with the new plan year.
For instance, in 2007, under the City's current fully-insured medical plans, no more than a
total of 5 participants met Humana's annual $175,000 stop-loss coverage level, limiting the
claims exposure of these 5 participants to $875,000. For these participants, Humana's claim
liability ended once this claim maximum was reached, with all future claims liability for the
remaining calendar year being the responsibility of the stop-loss carrier. In 2008, there have
been no participants that have reached the $175,000 stop-loss coverage level.
Overall, it is unlikely the City's total claims experience would significantly exceed Humana's
experience based on the City's total claims experience for all participants from a low of $7.5
million in 2001 to a high of $13.6 million in 2007.
City Commission Memorandum
May 14, 2008
Self-Insured Group Health Insurance Plan for Employees and Retirees of the City
of Miami Beach
Page 6 of 7
The City's current claims loss ratio is 91 %, indicating aself-insured rate increase for the
2009 plan year of 18%. The 2009 Financial Analysis Summary complied by the City's
consultant (Attachment E) indicates a total premium payment to Humana of $18.5 million.
Should the City change the group health plan to self-insured, it is actuarially projected that
the 2009 annual claims costs could cost a projected minimum of $15.7 million to a maximum
of $20.5 million in claim costs to the City. In other words, when compared to the estimated
$18.5 million fully-insured premium to Humana for 2009, the City could realize a $2.8 million
savings or a $2.0 million loss for the City in group health coverage. This loss or gain is
based on claims costs for the last ten months of the 2007 plan year and the first two months
of the 2008 plan year (the most current claims data available at this time). It is too early to
determine if the plan's current loss ratio is a conclusive trend for the 2008 plan year. To
realize the full potential of aself-insured group health plan, the City would need to commit to
the program for a period of at least three (3) to five (5) years.
It is important to note, the future plan costs provided in this memo are based on actuarial
projections. These actuarial projections are based on current claims information provided to
the City's consultant by Humana for the rolling calendar period March 1, 2007 through
February 29, 2008 and are wholly impacted by participant usage. There is no guarantee in
future years the plan will have a significantly good claims year in which the plan incurs a low
claim cost; or a significantly bad claims year in which the plan incurs a substantial claim cost.
CONCLUSION
There are several benefits the City may derive by switching to aself-insured group health
plan, including:
• Greater flexibility in plan design to encourage cost effective medical care;
• Health and Wellness events targeted to the precise needs of the City's
employees;
• Enhancements to plan design, co-payment and premium structure;
• Affordable coverage for the City's part-time employees;
• More efficient, effective and responsive customer service for plan participants.
Of course, there are also risks. The greatest risk to the City is under-estimating (and
therefore under-funding) the participant claims. As earlier discussed, the City would have to
commit to aself-funding program for a period of at least three (3) to five (5) years to realize
the full potential of self-funding its group health care plan.
This information was presented to the Budget Advisory Committee (BAC) at their March 18,
2008 meeting (Attachment F). The same information was shared with the AFSCME, CWA
and GSA union presidents and other union executive board members at a meeting on April
7, 2008, and the Finance and Citywide Project Committee at their April 21, 2008 meeting.
As a result, the BAC and the Finance and Citywide Project Committee each unanimously
recommended the City consider changing its funding mechanism for group health care
coverage from its current fully insured plan to aself-insured plan.
Based on the recommendations of the Group Health Insurance Task Force from 2002, the
City's Budget Advisory Committee on March 18, 2008 and the Finance and Citywide Project
Committee on April 21, 2008, the Administration feels it is the appropriate time to implement
a Self-Insured Group Health Insurance Plan for the employees and retirees of the City of
Miami Beach.
City Commission Memorandum
May 14, 2008
Self-Insured Group Health Insurance Plan for Employees and Retirees of the City
of Miami Beach
Page 7 of 7
However, the Administration will continue to monitor the group health plan performance;
retaining the option to renew the current fully-insured group health plan for the 2009 plan
year should the anticipated risk to the City become grossly disproportionate to the reward,
based on what participant usage from March 2008 on demonstrates.
JMG/RI/KT/SR
T:IAGENDA\2008UAay 14\Regular\Implement Self-Insured Grp Hlth memo.doc
Attachment A
Letter To Commission No. 267-2002
Sent on November 20, 2002 regarding the
Implementation of the
Group Health Insurance Task Force's
Recommendations
CITY OF MIAMI BEACH
Office of the City Manager
Letter to Commission No. 267-2002
To: Mayor David Dermer and Date: November 20, 2002
Members of the City Commission
From: Jorge M. Gonzalez (signed)
City Manager
Subject: IMPLEMENTATION OF THE GROUP HEALTH INSURANCE TASK
FORCE'S RECOMMENDATIONS
In July of this year I met with members of the Group Health Insurance Task Force to review
their final report and findings. This information was presented to you at the Commission
meeting of July 31, 2002.
Attached is a report from Administration that addresses, in detail, each of the Task Force's
recommendations.
The City appreciates the excellent work done by the Task Force and will continue to act on
these ideas and recommendations within the financial guidelines of the City's budget.
ADMINISTRATION REPORT AND ACTIONS
INTRODUCTION
This report lists the recommendations from the Group Insurance Task Force and
addresses each of these in the form of history/prior action, issues that may effect the
recommendation, and the City's action and/or possible solutions.
The City recognized that, along with other public and private employers, it was
experiencing significant increases in the cost of health insurance. These are a direct result
of the increased cost of medical treatment and prescriptions, shrinking insurance markets
and the failure of managed care. The Task Force was created with the objective of
developing comprehensive solutions that address the City's continuing and growing
challenges in the area of group insurance. The Task Force were asked to review the
benefit levels, plan design, cost, coverage and measure the impact adopted changes might
have tot he affected employee and retiree groups.
The City's history alone, as it relates to health insurance, indicates some of the reasons
that we are experiencing these significant cost increases. For example, when Police and
Fire established their own individual health insurance trusts, these groups did not take their
retirees with them into the new plans. Subsequently, their retirees remain in the City's
insurable group. Both F.O.P. and I.A.F.F. agreed to participate on the Task Force but
refused to address the health insurance premium amount paid by the Cityto theirTrusts. In
addition, the City has found a lack of participation on the part of most of the unions to
actively participate in jointly managing the insurance program in a manner that will make
the plans more cost effective for both the employees and the City.
This year, the City offered two new plans that offered employees a means of accepting
further responsibility for their own health care while the City assumed an increase premium
amount (65% for employee coverage vs. 50%). Both C.W.A. and A.F.S.C.M.E. refused to
offer these plans to their respective groups.
Implementing these two new programs are the forward looking steps the City must be
taking in orderto begin the process of controlling the skyrocketing cost of health care. It is
imperative that we proactively address these issues with the unions during the negotiation
process and look for positive interaction between the City and the unions.
Following are the recommendations that the Task Force made, along with the City's action
plan.
TASK FORCE RECOMMENDATION #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 ofindustry-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.
History/Prior Actions:
a. The City has utilized Humana with the current plans (HMO, POS, and PPO) since 1988
with no change in benefit/contribution level.
Issues:
b. Union contracts require that any change to benefit/contribution be bargained.
c. Requires Commission approval.
Administration Action/Possible Solution:
a. Current Year: Two plans in addition to the current plans (HMO & PPO) are being
offered that provide coverage with higher co-pays and deductible, and with a lower
premium. The new plans conform to general industry levels and will help the City move
toward becoming comparable to other public employers. (Two Unions -C.W.A. and
A.F.S.C.M.E. -declined the new plan offerings this year, preferring to negotiate the
benefit. Police and Fire have their own Trusts and therefore also did not participate).
This resulted in only members of the G.S.A. bargaining unit, as well as Unclassified and
Others, participating in the new offerings. This represents only 30% of the active
workforce. Of those participating, 70 active employees made changes to the new
plans. In addition, current retirees were also allowed to participate in the new offerings
and 28 elected to make a change.
b. Future Plan: The Administration will examine additional plans (Indemnity/Aggressive
HMO/PPO) that will provide additional cost sharing by members resulting in lower
premiums. In February 2003, the Administration, through the RFP process, will
continue to approach all markets (both insured and self-insured) in order to obtain the
best overall benefit for both employees/retirees and the City. The RFP will include
request for proposals for medical (both fully funded and self-insured), separate medical
coverage for active and Medicare eligible retirees, dental, life, supplemental Medicare
plans, and voluntary benefits, including flexible spending accounts. This expanded
scope may provide a lower premium on health insurance to the City.
TASK FORCE RECOMMENDATION #2
If an employee who has declined City coverage desires to enter the City's plan, 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.
Issues:
a. None. This process is already in place.
Administration Action/Solutions:
a. No Administration action required.
TASK FORCE RECOMMENDATION #3
The City contribution for coverage of active employees should be 80-100% of the individual
employees 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 plan 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.
History/Prior Actions:
a. The City of Miami Beach amended the City's Related Special Act, Section 27:City's
Health Plan for City Officers and Employees as a result of a Ballot Question on the
November 6, 2001 Special Election. The Ballot Question changed the City's
contribution to the health plan for City Officers and Employees from one-half of benefit
costs to a specific benefit to be established by Ordinance.
Issues:
a. A contribution change from 50% (one-half) to 80-100% of the cost of premium
represents a significant expense which cannot be absorbed in the 2003 budget.
b. Should the City move toward having its contribution for each employee "equal", a long
term transition plan would be needed to avoid dislocation and economic hardship for
employees, retirees and the City.
c. Union contracts require that any change to benefit/contribution be bargained.
Administration Action/Possible Solutions:
a. The Mayor and Commission by Ordinance, amended Chapter 78 entitled "Personnel" to
allow the contribution to the Health plan for City Officers and Employees to be
determined by the amount of funds available each year and approved as part of the
annual City Budget. The Ordinance will provide the City with more flexibility to
implement needed changes.
b. On October 1, 2002 the City began to contribute 65% of the employees cost for
individual coverage forthe additional plans (new HMO and PPO) being offered effective
October 1, 2002. The new plan benefits and cost sharing increases are consistent with
recommendations of the Task Force.
c. Contributions will be reviewed by the Administration on an annual basis as part of the
budget process and changed if appropriate.
d. In addition, the City is working on identifying a "standard" plan on which to base
contribution levels.
TASK FORCE RECOMMENDATION #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.
History/Prior Action:
a. Since the establishment of the "Employees' Benefit Plan" the City has provided
contribution for dependent coverage.
Issues:
a. The cost associated with contribution to dependent coverage represents a si nific
expense to the City. g ant
b. Continued contribution by the City for dependent coverage is a benefit to em
members of the plan and will help the City to remain competitive with other emp oloerse
c. Union contracts require that any change to benefit/contribution be bargained. y
Administration Action/Possible Solution:
a. The Administration concurs with the Task Force and will continue to su ort
contribution for dependent coverage at this time. pp
TASK FORCE RECOMMENDATION #5
The City should move from a 2-tier dependent premium structure to a 4-tier rem'
structure. The tiers are defined as follows: 1 Individual, () p ium
Individual + children: and (4) Full family coverage. Consideration shlould be spouse; (3)
tier premium structure as well. given to a 3-
*See Response after Question #6
TASK FORCE RECOMMENDATION #6
The city contribution to dependent coverage should be a function of the followi
consideration: ng
a. If the City makes a higher percentage contribution to individual covers e, it is
appropriate to make a lower percentage contribution to dependents g
b. Affordability by the employees, with consideration given to the current 50% contribute
to dependent coverage on
c. Affordability by the City relative to increase in contribution it may be making to individual
coverage
d. Practices of competitive public employers.
History/Prior Actions•
a. Since the establishment of the "Employees' Benefit Plan' the Cit
process has requested plans with optional tier structures. Y through the RFP
Issues:
a. Employees pay the same amount for dependent coverage regardless of the numberof
dependents. Higher utilization of a plan results in higher premium. Employees with
one dependent are bearing the increase in the cost of employees with more than one
dependent (higher utilization). It appears that the premium cost fora 2-tier structure is
not equitable among members.
b. Changing from a 2-tier structure to a multiple tier structure will cause a shift in remi
cost and will affect certain groups. For example, to change to a 3-tier structure under
the HMO plan, the initial projected renewal would have been a 36% increase in
family rate for the October 2002 plan year. Changing to the 3-tier would have given the
employee plus one a 10% increase in premium, but the 3~d tier (employee plus 2 or
more) would result in a disproportionate increase of approximately 56%.
c. Union contracts require that any change to benefit/contribution be bargained.
Administration Action/Possible Solution:
a. It is the desire of the Administration that the Employees' Benefit Plan be equitable to all
employees. To meet this challenge, the plans must first be comparable to current
industry standards and mirror other public employers. The success of implementing
changes discussed above directly affect the ability to change from a 2-tier structure to a
multiple tier structure, while retaining affordability for all employees. The
Administration will continue to assess the feasibility of changing from a 2-tier to a
multiple tier structure.
TASK FORCE RECOMMENDATION #7
The Task Force recognized 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 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.
History/Prior Action:
a. Florida Statute 112.0801 provides that any state agency, county, municipality offer to its
retirees and their eligible dependents the same health and hospitalization insurance
coverage as is offered to active employees at a premium cost of no more than the
premium cost applicable to active employees. While the statute does not mandate that
the public entity contribute to the cost of insurance, the City of Miami Beach pays one-
half the premium for both single and dependent coverage. The eligibility and
contribution apply to any pension plan of the City (General, Unclassified, 401 a).
Retiree status exists as long as the individual receives a pension benefit.
b. Pursuant to Chapter 78-31 the definition of a "member" is any regular employee of the
city participating in the plan.
c. Pursuant to Chapter 78-31(1) the definition of "regular employee" includes any member
of the city commission, officer, department head, regular employees in the legal
department employed on a full-time basis, servant or agent of the city regularly
receiving compensation from the city for personal services and employees retired for
service or disability under any city pension system-(active employee and retirees are
treated the same).
d. Pursuant to Chapter 78-31(2) retirees must be vested and receiving a pension benefit
to be eligible.
Issues;
a. City must maintain compliance with Florida Statute 112.0801
b. Can the City change the contribution percentages provided for current retirees; for
employees that are active now and anticipating a 50% City contribution; for those
employees vested in their pension plan (vesting is immediate for those employees in
the 401(a); and for employees hired henceforth? What are the legal or contractual
issues with changing the contribution for each of these groups?
c. Do changes in contribution have to be bargained as to effect on yet-to-retire
employees?
d. The City offers many different pension plans based on employee classification and
personal selection. Should we strive for consistency as it relates to retirement benefit
eligibility?
e. Should the benefit contribution percent be based on years of service?
Administration Action/Possible Solution:
a. The Administration has referred questions to the City Attorney's Office to determine
what changes, if any, can be made to the City's contribution for current retirees, vested
individual, active employees and future new hires (state law, federal law, contractual
issues).
b. Assuming changes are allowed, the Administration will look at closing the gap between
the retirement provisions of the City's Pension program and the City's 401(a) retirement
plan to make them similar. It is anticipated that this is another area that must be
negotiated.
c. The City will include in the next RFP for health insurance requests for Medicare
supplemental plans and Medicare HMO plans.
d. Changes in this element may be better addressed when potential amendments to the
various pension system are considered - as they directly correlate.
TASK FORCE RECOMMENDATION #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.
History/Prior Action:
a. The City obtains all insurance through utilization of the RFP process. The City always
includes self-insurance as an acceptable option, however all proposals to date have not been cost
effective. In response to the last RFP issued, the following estimated costs were provided for Self-
Funded plans:
Vendor Estimated Annual Cost
Humana $10,661,800
CIGNA $11,456,487
Benesight TPA (Benesight Excess) $11,785,516
Benesight TPA (Lincoln Excess) $11,755,352
By way of comparison, the Humana fully insured projected amount at the comparable time was
$9,169,1 O5, almost $1.5 million less. These costs were provided to our broker, Arthur J. Gallagher
& Co. in October 2001 as a result of the RFP and are not reflective of current costs.
Administration Action/Possible Solutions:
The City will continue to look at creative options to pursue the possibility of using self-funding
versus, or in tandem with, fully funded plans.
CONCLUSION
The City appreciates the work of the Task Force and will continually and proactively move to review
and implement changes that are cost effective for the both the City and our employees. The City
began to make some of the requested, and necessary, changes this year and will continue with the
RFP for health insurance and with the unions as the next negotiating sessions begin. Health care is an
area of concern to management and employees and the City recognizes its responsibility to provide
comprehensive and affordable alternatives.
JMG\MDB\TCA\PH
Attachment B
City of Miami Beach
Group Health Insurance Medical Plan
Rate History
City of Miami Beach Rate History
Renewal Year % Increase
10/ 1 /01-9/3 0/02 +20.81
10/1/02-9/30/03 +27.87%
10/ 1 /03 -9/3 0/04 + 8.00%
10/ 1 /04-12/31 /OS * + 3.94%
1 / 1 /06-12/31 /06 + 8.94%
1/1/07-12/31/07 + 7.50%
1/1/08-12/31/08 +12.30%
* Rates extended 90 days to accommodate change to
calendar year renewal
Attachment C
Illustrative Seven Year Self-Fund Calculations
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Attachment D
2008 Humana Medical Plan and
2008 CompBenefits Dental Plan Summaries
LA7L1'pp+FT'E~gAE~~./~{~g~FppBygLgg ~~qygF~°~8~~i B J
1. m.iABi P'&~i62 ~wR€~
MAXIMUM LIFETIME BENEFIT
ANNUAL DEDUCTIBLE INDIVIDUAL (D)
ANNUAL DEDUCTIBLE FAMILY (D)
ANNUAL MAXIMUM CO-PAYMENTS INDIVIDUAL
ANNUAL MAXIMUM CO-PAYMENTS FAMILY
MAXIMUM ANNUAL OUT OF POCKET INDIVIDUAL
MAXIMUM ANNUAL OUT OF POCKET FAMILY
PHYSICIAN OFFICE VISIT
WELLCARE VISITS -ANNUAL EXAM
ADULT
CHILD HEALTH
OB/GYN
SPECIALIST OFFICE VISIT
INFERTILITY SERVICES/TREATMENT PLANS
PHYSICAL THERAPY
SPEECH
OCCUPATIONAL
ALLERGY TESTING J4 TREATMENT
OUTPATIENT SURGERY (HOSPITAUSURGFRY CTR)
X-RAY/LAB OUTPATIENT (PHYSICIAN'S OFFICE)
EMERGENCY ROOM/HOSPITAL
ILLNESS
ACCIDENTS
AMBULANCE
INPATIEM HOSPTFAL (PER ADMISSION(
HOME HEALTH CARE
DURABLE MEDICAL EQUIP.
MATERNITY
PHYSICIAN
HOSPITAL
IN-PATIENT MENTAL/NERVOUS
OUT-PATIENT MENTAUNERYOUS
IN-PATIENT SUBSTANCE ABUSE
OUT-PATIENT SUBSTANCE ABUSE
PRESCRIPTION DRUGS
GENERIC
BRAND
NON-PREFERRCD
PRESCRIPTION CARD
PRESCRIPTION MAIL ORDER
GENERIC
BRAND
NON-FORMUWRV
YOUR ANNUAL PREMIUM
EMPLOYEE
FAMILY
--
- HUMANA PPb
HUMANA HMO I HUMANA POS • '
UNLIMITED UNLIMITED I $2.000,000 $2,000,000 I $2,000.000 $2,000,000 $5,000:000 $5,000,000
$1
500 I 5400 $200 $200 $250 $250
, ~ 5800 $600 $600 $750 $750
$3,000 I
$1,500 ' •
• $3,000 I
• $0 $2,500 i SI,000 $1,000 $2,000 $4,000
$0 $5,000 53,000 $3,000 54,000 $8 000
$5 COPAV I
$15 CGPAY $5 CGPAY (D} THEN 70% ~
$10 CGPAY (D) THEN 80°a $ l5 CGPAY ID) TNFN 70 %
I A
$S COPAV $IS CGPAY $S GOPAY ID)THEN 70%1MAX 57001 I $IO COPAY1° (D)TH EN 80`a° $15 CGPAY (D~THEN 70%
$5 CGPAY $15 CGPAY I $5 CGPAY 70°`° (b) WAIVED I $10 COPAV 80'% 100%" 70%
$5 CGPAY $ I S CGPAY I $5 CGPAY DED, THEN 704 I $10 COPAV (D( THEN BO% 100°6^ 70'-6
$25 CGPAY $5 CGPAY (D) THEN 70% $10 CGPAY (D) THEN BO% $IS CGPAY D) THEN 70%
$0/50%' $0/50%' I (D( THEN 70`,6 I
NO CGPAY $15 CGPAY I NO CGPAY (DJ THEN 70% I (D) THEN 80°0 (D) THEN 60°b (D) THEN 80% (D) THEN 60'/
NO CGPAY $15 CGPAY I NO CGPAY (D( THEN 70'i° i (D THEN 809° (D THEN 609a (DJ THEN 80% ID) THEN 60%
NO CGPAY $IS CGPAY NO CGPAY (D) THEN 70% I (D) THEN 80% (D( THEN 60 ~ (D( THEN BO% (D( THEN 60
$5 CGPAY $15 CGPAY $5 COPAV (D) THEN 70% $3 COPAV (D( THEN 70% 100% (U) THEN 70%
a
NO CGPAY 100% Of ALLOWANCE I NO CGPAY (D) THEN 70% I $106 THEN 90% $500 THEN 70% a
(DJ THEN 80°6 (D) THEN 60
' $5 CGPAY $15 CGPAY I NO CGPAY (D) THEN 70% I (DJ THEN 80% (DI THEN 60 % $15 CGPAY (D) THEN 70%
$25 CGPAY $50 CGPAY II $50 fwaveo m nona-reol (D) THEN 70% I $25 THEN 90 % $25 THEN 709° $SO THEN 80%^ (D( THEN 60°ia
WAIVED IF ADMITTED WAIVED IF ADMITTED I $50 (wniveo IF nomn?eo) (b) THEN 70 % I $25 THEN 9096 $25 THEN 70°~0 $50 THEN 80°n (D( THEN 60%
NO CGPAY 100% OF ALLOWANCE I NO CGPAY (D) THEN 70% I (D) THEN BO°-o (D) THEN 60°,~ (Dj THEN 809a (D( THEN 60°io I
$100 CGPAY $100/DAY IFlRSr 5 env;; $100 (Pea n~mis51oN1 (D( THEN 70% iESOa7noM.i $100 THEN 90% $500 THEN 70% (D THEN BO% (DJ THEN 60°0
~
$5 CGPAY
$15 CGPAY PER VISIT
NO COPAYe
(D) THEN 70`.6
(D) THEN 60%s
I
(D) THEN 60'x`
(DJ THEN 80%"
(D) THEN 60%s
NO CGPAY I
100'6 OF ALLOWANCE ~, NO GOPAY (D( THEN 70% I (D) THEN 80 % (DI THEN 60°'e (D) THEN BO'% (D) THEN 60"ii•
i
$5 COPAV $15/$25' $5 CGPAY (D) THEN 70% I 510 CGPAY (D( THEN 80'% $15 CGPAY (D)THEN 70`,i
5100 PER ADMISSION $100/DAY IFla t 5 onus; $100 PER ADMISSION (D THEN 70°% IES ,r+ i I $ I ~ THEN 90% $500 THEN 70°-0 $250 THEN BO % 5250 THEN 6090
$100 PER ADMISSION' $100/DAY )Flaw s onvsl` I $100 PER ADMISSION' (D( THEN i09° Ibsao/ oral I 80;<+525/$50" 80%+$50/$7S' 80°6' 60%'
$5 CGPAY' $15 CGPAY PER VI51T' I $5 CGPAY` (D) THEN 70 % I $20 THEN 80%` $35 THEN 80°a` $20 THEN 100°x°° 60".b
$100 PER ADMISSION $100/DAV IFIR51 e onus I $l OD/ADMISSION (aeTOp (D( THEN 70'6 issaa7noM .i BO%° b0%' 80°6" 6d/"
$35 CGPAY PER VISIT' $35 COPAV PER VISIT' $35 CGPAY PER VISIT' (D) THEN 70% 80'6' 60°:.' 80'5"' 60°6"
'
$5 CGPAY'` $10 COPAV°
' $10 CGPAY` $14 CGPAY' ~ $10 CGPAY $14 COPAV $10 CGPAY CGPAY+70"p
$5 COPAV' $25 CGPAY° I $10 CGPAY° $14 CGPAY' I $10 CGPAY $ i 4 CGPAY $25 CGPAY COPAV+70 %
• $45 CGPAY" $45 COFAY
YES YES i
i YES YE$ I YES VES YES YES
$ I S CGPAY' $30 CGPAY' ~ .$30 CGPAY` $42 CGPAY' I $30 CGPAY $42 CGPAY $30 CGPAY CGPAY+70'S
$ 15 COPAV' $75 CGPAY' $3C COFAY" $42 CGPAY' $30 CGPAY $42 CGPAY $75 CGPAY CGPAY+70's
• $13.5 CGPAY' $ 135 CGPAY
I
52,913.12 $1,066.56 $?,246.24 I $5.E52.16 $2,09 442
$7,721.12 $4,229.76 $8055.12 1 $14,358.00 $8,18 328
DIAGNOSTIC AND PREVENTATIVE SERVICES ROUTINE X~RAYS, ROUTINE
CLEANINGS, TOPICAL FLUORIDE PTO AGE 16(, LOCAL ANESTHESIA, ORAL E%AM
EVERY b MONTHS, PROPHYLAXIS EVERY 6 MONTHS, SEALANTS, FLUORIDE
BASIC SERVICES RESTORATIVE (AMALGAM, SYNTHETIC OR COMPOSITE
FILLINGS(, RESTORATIVE DENTAL WORK, X-RAYS ORAL SURGERY
MAJOR SERVICES PERIDONTICS ~ TREATMENT OF DISEASES OF THE GUMS,
CROWNS, INLAYS, ONtAYS, PROSTHETICS -BRIDGES AND DEMURES /BRIDGE
AND DENTURE REPAIR, ENDODONTICS (ROOT CANALS)
ORTHODONTICS CHILDREN UP 70 AGE 19
YOUR ANNUAL PREMIUM (EMPLOYEE/EMPLOYEEai/FAMILY)
$0 FOR ROUTINE X-RAYS, CLEANINGS, TOPICAL I IN-NETWORK: 100% TO USUAL/CUSTOMARY FEE I 100°6 TO THE USUAL AND CUSTOMARY CHANGE
FLUORIDE (TO AGE 16), LOCAL ANESTHESIA, ETC- I OUT-0F-NEM/ORK: 80'a TO USUAL /CUSTOMARY FEE I
I I
NO CHARGE FOR ROUTINE X-RAYS ROUTINE I I
IN-NETWORK: 80% TO USUAL/CUSTOMARY FEE I 80°i, TO THE USUAL AND CUSTOMARY CHARGE ,
CLEANINGS TOPICAL FLUORIDE (TO AGE I b) I OUT-OF-NETWORK: 60?6 TO USUAL /CUSTOMARY FEE I
LOCAL ANESTHESIA AND MORE ~ I
SEE SCHEDULE OF BENEFITS FOR COPAV AMOUNT II IN-NETWORK OR OUT OF-NETWORK I 80 % TO THE USUAL AND CUSTOMARY CHARGE
I
50% TO USUAL AND CUSTOMARY FEE ,
SEE SCHEDULE OF BENEFITS FOR CGPAY AMOUNT I INN ETWORK OR OUT OF-NETWORK 50% TO I 80°~o TO THE USUAL AND CUSTOMARY CHARGE
I USUAL AND CUSTOMARY FEE, $500 ANNUAL
I
MAX, $2,000 LIFETIME MAX
$62. I6 / 1 15 92 / 110.72 I
I I
$143.04 / 276.00 / 422.86 $222.96 / 430.08 / 659 04
-_. __ -__ ____. __- - -_~
(D) = Deductible ' 30 days per mlendor year maz '9Qday wpply "Days I-15, 80°b oher $25 per day; "Days 1-15, 80°a oher $50 per day; "Deductible then 70%, 60°6 oher
' No ~o first $6,000, 50`6 of ° 20 Visits mlendor "40 visits ear max Days 1631, 80% aker $50 per day Days 16-31, 80°b offer $75 per day $250 deductible.
. pay rot per your max per y
reosonablo costs after ' 44 visit r Gfatime max ' 9Qd I 3x`s C "$2,000 lifefime max s $20 aapay, then 100'.-e not to wceed ^ Porcenr of allowance
s pe aY s~PPY °P°Y $35 per visit. 44 viYrts IlFetime max.
' $15 copay primary/$25 copay 1O $200 Maz ° 80°6 deductible waived, nor ro exceed
specie Isr ' 30-doy wpply max $35 per visit. 44 visits flfetime max.
tachen
2~0 financial Analysis Summa
City of Miami Beach
2009 Financial Analysis Summary
Humana
$ 15,679,500
current cost, full insured
Humana Renewal $ 18,521,709
I increase)
+18% renew
a
_
_
Difference + $ 2,842,209
Self Insured Expected Claims $ 15,770,104
os
t
estimated
claims c __
_
_
_ Fixed Costs $ 1,616,351
_ Total Ex ected Plan Cost $ 17,386,455
Difference
135
254
- $ 1
(from the full insured renewal ,
,
Self Insured Maximum Claims $ 18,924,125
claims cost estimated _
Fixed Costs $ 1,616,351 _ _
Maximum Total Plan Costs $ 20,540,476
Difference
767
018
~' $ 2
(from the full insured renewal) ,
,
IMPORTANT: This analysis is for illustrative purposes only, and is not a guarantee of
future expenses, claims costs, managed care savings, etc. There are many variables that
can affect future health care costs including utilization patterns, catastrophic claims,
changes in plan design, health care trend increases, etc. This analysis does not amend,
extend, or alter the coverage provided by the actual insurance policies and contracts.
Please see your policy or contact us for specific information or further details in this
regard.
Attachment F
Presentation to the
Budget Advisory Committee
on March 18, 2008 and the
AFSCME, CWA and GSA Union Presidents
on April 7, 2008
Why Provide Health Coverage?
~~
• Required by the City Code Chapter 78, Article II,
Sections 78-81
• Requirement of the CWA, AFSCME and GSA
collective bargaining agreements
• Helps City attract and maintain its quality workforce
1
group Health Task Force
• Established by City Commission and Finance and Citywide Projects
Committee March 2001
• Was created because:
• City struggling with how to best provide group health coverage
• Rising costs and lower levels of available benefits challenged the City's
traditional methods of procuring group health coverage
• No satisfaction with prior RFP processes or the results
• Need to conform benefit plans to industry standards
group Health Task Force
Among recommendations of the 2001 Group Heath Task Force
..Oilivft~"~ OC`~CUI illaiiS Iii ii1QUSti'y S:~ailii8~u5
v' Increase City share for "standard benefit plans" to encourage employee
enrollment
~ Continue City support and premium contribution for dependent group heath
coverage
- Change 2 tier premium structure to 3 or 4 tier structure
- 2 tier structure not equitable among plan members, penalizes single
parents
- More premium for more dependents
~ Retiree group health
J Change City contributions to coverage based on years of service
~ Fixed Stipend effective 03/08/2006
- Aggressively pursue use of Medicare HMOs and Supplemental Policies
- Aggressively examine the option of self-funding based on favorable
experience of the FOP and IAFF Trusts (IAFF Trust began self funded plan
10/0111986, FOP Trust began self funded plan 01/01!1991)
Denotes recommendation has been adopted/implemented
- Denotes recommendation has not been adopted/implemented
2
Vhat is Self-Funding?
Employer assumes all liability for employee healthcare costs
• Employer actually funds claim payment
• Employer acts like the insurer and pays all fixed costs associated
with the plan operation
• Provider fees
• Network access fees
• ID Card printing
• Check fees
hat is Self-Funding?
To mitigate the exposure to loss, the employer may purchase
Stop Loss Insurance
• Stops plan costs (losses) at a predetermined level for each
individual participant or for the group as a whole
• Plan is funded to the level of risk that is determined by the
employer to be financially tolerable
• Insures the employer's claim costs do not exceed a
predetermined level, set annually
3
• Stop Loss Premiums
• Incurred But Not Reported Claim Reserves
• Equal to a percentage of total claims paid for the prior
months
• Miscellaneous Costs
• Plan Documents
• Check and EOB printing
• I.D. Card printing and distribution
What is Self-Funding?
• Cash Savings
• Traditional carrier profit remains with employer to offset future plan costs and
benefit enhancements
• Prescription rebates can be used to offset claims cost
• Flexibility in Plan Benefits
• Plans can be designed to meet the employer's needs, not the needs of the
insurance carrier
• Take Charge of Benefit Costs
• Improved claim reporting
• Wellness program can be customized to address employee health issues and high
claim cost areas
• Provide Efficient Claim Service & Administration
• Improved Employee Relations
• City has more control over plan
4
li ~l ~,,,,,~,1~~
~,
hat is Self-Funding? ~~ `~ ~~~°
Savings are incurred because the insurance company is:
• Relegated to the role of plan administrator (Employer pays a monthly fee for
service)
• No longer concerned in covering the losses incurred by the payment of
claims in excess of premiums collected
• Not worried that losses will exceed earnings guaranteed to share holders
A Fully Insured Plan vs. A Self Funded Plan
_,
State Premium Taxes NO State Premium Taxes
1% to 2% of premium cost 1 °I to 2% of premium cost
Rate Stabilization or Contingency NO Rate Stabilization or Contingency
Reserves Reserves
Insurance Carrier Expenses NO Insurance Carrier Expenses
-Field Office Expenses -Field Office Expenses
-Home Office Expenses -Home Office Expenses
Conversion Costs NO Conversion Costs
Pooling Charges NO Pooling Charges
Margin/Insurance Carrier Profits Margin/Insurance Carrier Profits
Claims and Administration Cost Claims and Administration Cost
Incurred but not reported claim reserves Incurred but not reported claim reserves
Consultant Fees Consultant Fees
5