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2009-27137 ResoRESOLUTION NO. 2009-27137 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING THE CITY TO ENTER INTO AN AGREEMENT WITH METROPOLITAN LIFE INSURANCE COMPANY FOR THE ADMINISTRATION OF THE CITY'S GROUP DENTAL PLAN FOR A THREE YEAR PERIOD, COMMENCING ON JANUARY1, 2010, AND ENDING ON DECEMBER 31, 2013, FOR A NOT TO EXCEED FEE OF $175,000 ANNUALLY, FOR THE FIRST AND SECOND YEARS, PURSUANT TO THE REQUEST FOR PROPOSALS ISSUED BY GALLAGHER BENEFITS SERVICES, THE CITY'S CONSULTANT OF RECORD WHEREAS, the City's agreement for the self-funded group dental plan administrator and fully-insured dental health maintenance organization (DHMO) expires on December 31, 2009; and WHEREAS, in order to continue group dental benefits to the City's employees and retirees, the Administration worked with Gallagher Benefit Services (Gallagher), the City's consultant of record, to issue a Request for Proposals (RFP) for the administration of the group dental plan; and WHEREAS, the administrative fee submitted by Metropolitan Life Insurance (MetLife) for the City's self-funded group dental plan, although not the lowest, is the same as the City's incumbent plan and, therefore, does not increase the City's costs for this coverage; and WHEREAS, the premium submitted for the fully-insured Dental Health Maintenance Organization (DHMO) was provided by MetLife, providing a sixteen percent (16%) reduction from the current DHMO premium; and WHEREAS, the benefits provided by the MetLife DHMO provide an enhanced benefit program to the City's employees, retirees and their dependents; and WHEREAS, after evaluating the respondents, Gallagher recommends the administration of the City's self-insured group dental plan and the fully-insured DHMO plan be awarded to MetLife, based on the value of the benefit provided and the cost; and WHEREAS, the City's Group Insurance Board (Board) was asked to the make a recommendation to the City Manager on the selection of the administrator for the City's group dental plans; and WHEREAS, the Board recommends the administration of the City's self-insured group dental plan and the fully-insured DHMO plan a be awarded to MetLife based on the value of the benefit provided and the cost; and WHEREAS, the City Manager has reviewed the recommendations of the Board and Gallagher and recommends accepting the recommendation of both Board and Gallagher, awarding the administration of the City's self-insured group dental plan and the fully-insured DHMO to MetLife. 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 authorize the City administration to enter into an agreement with Metropolitan Life Insurance Company for the administration of the City's Group Dental Plan for a three year period, commencing on January 1, 2010, and ending on December 31, 2013, for a not to exceed fee of $175,000 annually, for a the first and second years, pursuant to the Request for Proposals issued by Gallagher Benefits Services, the City's consultant of record. PASSED and ADOPTED this 15th day of July , 2009. MAY R Mattie Herrera Bower ATTEST: C TY CLERK Robert Parcher APPROVED AS TO FORM & LANGUAGE FOR EX~UTION Attorney T:WGENDA\2009Uu1y 15\Regular\Dental Benefit Resolution.doc COMMISSION ITEM SUMMARY Condensed Title: A Resolution authorizing the City to enter into an agreement with Metropolitan Life Insurance Company for the administration of the City's Group Dental Plan. Intended Outcome • Attract and maintain a quality workforce. • Ensure ex enditure trends are sustainable over the Ion term. Supporting Data (Surveys, Environmental Scan, etc.): I. 2007 Employee Satisfaction Survey • 69.6% of employees surveyed participate in dental benefits. 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 turnover rates = 13.86% for 2007 vs. 10.7% for 2006. Issue: Should the City enter into a three (3) year agreement with Metropolitan Life Insurance Company (MetLife) for the administration of the City's Group Dental Plan? item 5ummarv~Kecommendation: The City Code of Ordinances provides for employee dental care coverage with the cost of such coverage shared between the employee and the City. In addition, the collective bargaining agreements of AFSCME, CWA, GSA and FOP all require the City to provide group dental coverage to their members. On January 1, 2009, with one (1) year left on the City's current group dental contract, the City moved from afully-insured plan to aself-insured plan. The current administrative service contract with Humana CompBenefits expires on December 31, 2009 for all plans except the DHMO, which is only available as afully-insured plan. Gallagher Benefits Services issued RFP No. 10-2589 requesting proposals for the administration of the City's group dental plan. As a result of this RFP, Gallagher Benefits Services and the City's Group Insurance Board has recommended the City's current administrative agreement with Humana CompBenefits not be reviewed at the end of the contract period and that the City enter into an agreement with MetLife for the administration of the City's self-insured dental plan and fully-insured Dental Health Maintenance Organization effective January 1, 2010. Adviso Board Recommendation: The Group Insurance Board recommends this action. Financial Information: Source of Amount Account Funds: 1 $97,000 565-1794-000397 Full Insured Premiums for Active Em to ees 2 $21,000 565-1794-000303 Administrative fees for Active Em to ees 3 $38,000 565-1794-000372 Full Insured Premiums for Retirees 4 $19,000 565-1794-000304 ' Administrative fees for Active Em to ees OBPI Total $175,000 Financial Impact Summary: The proposed plan management fees submitted by MetLife are equal to the monthly plan management fees paid by the City for the current self-funded dental plan, therefore the City's contributions will remain the same as the current fiscal year. However, the proposed fully-insured premium for the Dental Health Maintenance Organization by MetLife is 16% lower than the fully-insured premium of the City's current Dental Health Maintenance Organization resulting in an annual cost savings to the City of approximately $21,000. Cit Glerk's Office Le islative Trackin Sue Radig, Human Resources Administrator I Si n-Offs: Department Director Assistant City Manager.. City Manager Ramiro Inguanzo, Human Resources Director I~~ ~ Y t ~ ~ ~,~~ ~ A{aEtiIDA ITEM ~ DATE ~-I S 9' 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: July 15, 2009 SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING THE CITY TO ENTER INTO AN AGREEMENT WITH METROPOLITAN LIFE INSURANCE COMPANY FOR THE ADMINISTRATION OF THE CITY'S GROUP DENTAL PLAN FOR A THREE YEAR PERIOD, WITH A NOT TO EXCEED FEE OF $175,000 ANNUALLY FOR THE FIRST AND SECOND YEARS, PURSUANT TO THE REQUEST FOR PROPOSALS ISSUED BY GALLAGHER BENEFITS SERVICES, THE CITY'S CONSULTANT OF RECORD. ADMINISTRATION RECOMMENDATION Adopt the Resolution. BACKGROUND/ANALYSIS Chapter 78, Article II, Sections 78 through 8 of the City Code of Ordinances provide for employee group health coverage, including group dental 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 (AFSCME), the Communication Workers of America (CWA), the Government Supervisors Association (GSA) and the Fraternal Order of Police (FOP) require the City to provide group dental coverage to their members. The City's group dental plan excludes coverage for members of the International Association of Fire Fighters (IAFF) as they are provided group dental coverage through their own dental trust and do not participate in the City's group dental plan. Providing group dental coverage to employees is just one of the benefits that 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 dental care coverage. Both the City and the employee/retiree contribute to the cost of this coverage, at different rates, based on the plan elected by the participant. Retirees hired prior to March 18, 2006 share equally in the group dental cost with the City paying 50% and the retiree paying 50% of the cost of coverage. However, due to the changes in the Cites 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 and dental costs as retirees. This change in 2006 results in long-term savings to the City. In 2001, the City recognized that, along with other public and private employers, it was experiencing significant increases in the cost of dental insurance. At that time the City Manager formed the Group Health Insurance Task Force with the objective of developing comprehensive solutions addressing the City's growing challenges in the area of group health insurance including group dental 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 dental care options consistent with industry standards, and to help reduce the City's dental care costs. July 15, 2009 City Commission Meeting Selection of a Group Dental Insurance Administrator Page 2 of 5 Many of the recommendations made by this Task Force 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. • Continue City support and premium contribution for dependent group dental coverage. • Change the City contribution for Retiree Group Dental to coverage based on years of service. In June 2008, the City Commission passed a resolution toimplement aself-insured group health plan which included group dental coverage. The City previously provided employee group dental coverage through afully-insured group dental plan. Afully-insured group dental plan afforded the City the opportunity to provide group dental care coverage without any assumption of risk or reward. The City purchased an "off-the-shelf' plan for a set monthly cost, understanding that coverage could not be changed or customized to the group's varying needs. Monthly premium dollars were 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 built gains (profits) into its premium costs to guarantee both plan solvency and a return to the plan's investors. The City's only risk was the steady increase in premium based solely on the group's claim performance for the previous year - a good claim year resulted in a minimal premium increase for the next plan year and a bad claim year resulted 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. By moving to aself-insured group dental plan, the City now assumes both the plan's risk and its reward. A monthly administration fee is paid to the plan administrator or third party administrator (TPA), providing the City with a provider network, claims adjudication and plan administration, minimizing the carrier's profit. The City is provided access to employee claim information (without any identifying employee information) to help customize plan benefit design. In addition, the incurred claims information can 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) are 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 dental care components, and cannot be used for other purposes. The TPA provides the City with the day-to-day administration of the dental plan benefits, access provider networks and provider discounts, claims processing, detailed claim and plan utilization reporting, and wellness programs. In addition, the plan administrator guarantees compliance with state and federal mandates, including the Consolidated Omnibus Budget Reconciliation Act (COBRA) and Health Insurance Portability and Accountability Act (HIPAA). The City's administrative agreement for its self-funded group dental plan administrator and fully- insured dental health maintenance organization (DHMO) expires on December 31, 2009. In order to continue providing the self-funded group dental benefit and fully-insured DHMO to the City's employees and retirees, the Administration worked with Gallagher Benefit Services (Gallagher), the City's consultant of record, to issue a Request for Proposals (RFP) for the administration of the group dental plan. The City will continue to provide afully-insured DHMO plan as plan carriers do not provide employers the opportunity to self-fund this type of plan in which the providers are contracted to the carrier and paid aper-diem for the care of plan participants assigned to them. July 15, 2009 City Commission Meeting Selection of a Group Dental Insurance Administrator Page 3 of 5 On May 8, 2009, Gallagher issued Group Employee Benefits RFP No. 10-2589 on behalf of the City. In response to this RFP, the following twelve (12) vendors responded: • Aetna Healthcare • Ameritas Group • Assurant Employee Benefits • CIGNA Dental • Delta Dental • Florida Combined Life • Humana CompBenefits • Metropolitan Life Insurance (MetLife) • Securian • Guardian Life • United Healthcare • The Standard The following five (5) vendors were disqualified: • Ameritas Group -response did not include a quote for a DHMO plan • Assurant Employee Benefits - response only included a quote for a DHMO plan • Guardian Life -completed response was received past the submission deadline • Securian -did not include coverage for a number of the procedure codes covered under the City's current dental plan • The Standard -indicated their desire to respond, however no proposal was ever received The following seven (7) vendors were qualified: • Aetna Healthcare • CIGNA Dental • Delta Dental • Florida Combined Life • Humana CompBenefits, the incumbent group dental plan carrier • MetLife • United Healthcare Each of the qualified respondents provided their "best and final' monthly administrative fee for the City Preferred Provider Organization (PPO) dental plan. This PPO plan provides employees, retirees and enrolled family members the opportunity to receive dental care from a list of licensed in-network providers who supply their services at a contractual discount to the plan, or the enrolled participant may choose to receive services from any licensed dental provider not contracted with the plan nor providing a discount for their services. The following fee is the proposed charge by each vendor per enrolled employee and retiree as well as the rate guarantee term: PPO Plan Administrator Monthly Fee Per Em to ee/Retiree Rate Guarantee Aetna Healthcare $3.13 Three 3 ears CIGNA Dental $3.18 One 1 ear Delta Dental $3.16 Three 3 ears Florida Combined Life $3.50 Two 2 ears Humana Com Benefits $3.50 Three 3 ears MetLife $3.50 Three 3 ears United Healthcare $3.79 Three 3 ears July 15, 2009 City Commission Meeting Selection of a Group Dental insurance Administrator Page 4 of 5 Each plan was able to administer the City's current dental plan providing continued coverage at current benefits levels for the PPO plan. However, the PPO proposal from MetLife provided an expanded network PPO network and included an increase of providers in the South Florida area, including a number of additional providers throughout the City of Miami Beach. However, the administrative fee requested by MetLife, although not the lowest, is the same as the City's current plan, and therefore, does not increase the City's costs for this coverage from the current yearly rate. All of the qualified respondents also submitted fully-insured Dental Health Maintenance Organization (DHMO) plans. A DHMO plan works similar to a Medical HMO plan. Participants in the plan choose a Primary Care Dentist who manages all their dental care needs, making referrals to dental specialists when necessary. These Primary Care Dentists are contracted to the carrier and paid aper-diem for the care of plan participants assigned to them. Participants in the DHMO plan are provided routine annual dental care such as cleanings and x-rays, at no cost and pay a copay for services such as fillings, root canals, caps and crowns, etc. Copays under the plan can range from a few dollars to 50% of the cost of the service. Participants in this plan do not receive reimbursement for care received from dentists who are not part of the plan. In their response to the RFP, Gallagher received fully-insured premium rates for the DHMO Plan from as low as 16% lower to as high as 54.6% higher than the City's current carrier. The following fee is the proposed monthly premium from each vendor per enrolled employee and retiree as well as the rate guarantee term: DHMO Level of Monthly Premium percentage of Rate Plan Administrator Coverage per Employee/Retiree Overall Premium Guarantee Chan e Employee $11.78 Aetna Healthcare Employee + 1 $22.99 +31.6% One (1) Famil $37.73 year Employee $16.02 CIGNA Dental Employee + 1 $29.89 +54.6% Two (2) Famil $38.89 years Employee $12.44 Delta Dental Employee + 1 $23.20 +20.1 % Two (2) Famil $30.20 years Florida Combined Employee $13.14 Two (2) Life Employee + 1 $22.60 +27.4% Famil $33.50 y ears Humana Employee $12.96 Th 3) CompBenefits Employee + 1 $24.18 +25.1 % ears y Famil $31.46 Employee $10.35 MetLife Employee + 1 $18.12 -16% Two (2) Famil $28.48 years Employee $12.15 United Healthcare Employee + 1 $21.22 +19.1 % Two (2) Famil $31.51 years The lowest DHMO rate received was from MetLife whose bid provided an overall premium rate reduction of 16% from the current carrier. In addition to a lower premium rate, the MetLife plan also provides an increase in the benefits, including coverage for composite fillings, a benefit that has been requested by participants in the DHMO plan for several years. The MetLife DHMO network includes an increase of providers in the South Florida area, including a number of additional providers through out the City of Miami Beach. July 15, 2009 City Commission Meeting Selection of a Group Dental insurance Administrator Page 5 of 5 In making their recommendation for both the PPO and Dental Health Maintenance Organization plans to the City (Attachment A), Gallagher reviewed each proposal for claims administration and network access. The RFP requested both a duplication of the existing plan benefits and alternative benefit schedules designed to reduce plan costs. After thorough review, Gallagher has recommended the City move the administration of the PPO dental plan and fully-insured DHMO plan to MetLife based on the following supporting factors: MetLife provided the lowest DHMO cost, with an overall premium reduction of 16% from the current rates and a PPO administration fee that is cost neutral to the City, while providing an improved benefit program MetLife has a larger provider network for both the DHMO and PPO plans including more general dentists, Periodontists, Endodonitists, and Orthodontists MetLife provided a two (2) year rate guarantee for the DHMO and a three (3) year rate guarantee for the PPO administration fees The City's Group Insurance Board was convened to review and to the make a recommendation to the City Manager on the selection of the City's group dental administrator for the fully-insured DHMO and self-insured PPO dental plans. The Group Insurance Board included: • Jose Cruz, Budget Officer, Office of Budget and Performance Improvement • Georgie Echert, Assistant Director, Finance Department • John Gresham, Union Representative, Government Supervisors Association (GSA) • Cliff Leonard, Risk Manager, Human Resources Department • Richard McKinnon, President, Communication Workers of America (CWA) • Sue Radig, HR Administrator I Employee Benefits, Human Resources Department • Perman Terry, President, American Federation of State, County, and Municipal Employees (AFSCME) The Group Insurance Board met on July 7, 2009 and reviewed the "best and final" proposals. The final recommendation of the Group Insurance Board was to award the administration of the City's fully-insured DHMO and self-insured PPO dental plans to MetLife based on the improvements in the benefits and the overall cost savings provided in the DHMO plan and the neutral costs of the PPO plan. FINANCIAL IMPACT The proposed DHMOfutly-insured premium submitted by MetLife is 16% lower than the fully-insured premium of the City's current DHMO plan. Based on the DHMO current enrollment of employees and retirees, the City's approximate annual premium cost for the current DHMO plan is $134,000. Under the proposed MetLife DHMO plan, the City's annual premium would be approximately $113,000 resulting in an estimated savings in annual premium cost to the City of approximately $21,000. The monthly administration fee of $3.50 per employee for the MetLife PPO plan is equal to the current monthly administration fee the City pays resulting in neither a cost savings nor a cost increase. Overall, the savings to the City from the current year for the administration of the City's dental plans is expected to be approximately $21,000. CONCLUSION Based on the recommendation of Gallagher Benefits Services and the Group Insurance Board, as well as improvements in the benefits provided and a reduction in the overall cost of the benefits to the City, the Administration recommends awarding the administration of the City's self-insured group dental plan and the fully-insured DHMO plan to MetLife. Attachment A Gallagher Benefits Services Letter of Recommendation ""~~ Gallagher Benefit Services, Inc. -- -- June 30, 2009 A Subsidiary of Arthur J. Gallagher & Co. Ramiro Inguanzo, Human Resources Director City of Miami Beach 1700 Convention Center Drive Miami Beach, Florida 33139 Re: Employee Benefits Recommendations Dear Mr. Inguanzo, At the City of Miami Beach's request, we released Request for Proposals (RFP's) for all City employee benefits including Medical, Dental, Life, Accidental Death and Dismemberment, Voluntary and Dependent Life, Statutory Accidental Death and Dismemberment, Employee Assistance Program, Vision, Short and Long Term Disability. A vendor list has been provided illustrating what carriers were supplied the RFP's and those that responded by product (See exhibit A). Recommendations will be discussed briefly below. Medical proposals were requested for claims administration and network access. We requested both duplication of existing benefits and alternate benefit schedules. Responses were received from the incumbent carrier Humana, AvMed, Cigna Healthcare, Aetna United and Blue Cross & Blue Shield of Florida. We recommend renewal with Humana based on the following: 1) Humana offered the lowest administrative fee's to the City including a reduction of current costs 2) Retaining Humana will cause no disruption to member provider relations 3) Physician and hospital reimbursement analysis revealed Humana's strong South Florida discounts Life and Accidental Death and Dismemberment Request for Proposal resulted in thirteen responses including the incumbent carrier, Standard. Short listing and continued negotiations results in the recommendation of Hartford Life for the Basic Life and AD&D, Dependent Life, Retiree Life and Voluntary Life. Reasons are as follows: 1) Lowest Basic Life, AD&D and Retiree cost to City and employees 2) Thirty six month rate guarantee Statutory Accidental Death and Dismemberment Benefit Request for Proposal resulted in two responses, the incumbent Hartford Life and Ace USA. We recommend renewal with Hartford. 1) Hartford offered lowest cost including a 25% reduction in current annual premium 2) No change to current benefits 3) Three year rate guarantee One Boca Place 2255 Glades Road, Suite 400 E Boca Raton, FL 33431 561.995.6706 Fax 561.995.6708 www.ajg.com "®` Currently Dental coverage (Indemnity/PPO and DMO) are purchased by the City on a fully insured basis for the DMO and self insured for the Indemnity and PPO. In addition to the incumbent response from Comp Benefits, eight addition proposals were received. We recommend awarding MetLife the fully insured DMO plan and self funding the Indemnity/PPO dental coverage. Factors supporting this recommendation are as follows: DMO 1) MetLife offered lowest DMO cost (16% reduction annually) while improving benefits to members 2) Large network of general dentists, Periodontists, Endodontic and Orthodontists. 3) Two year rate guarantee. Indemnity/PPO 1) Lowest annual administrative fee's 2) Improved benefits to participating members 3) Thirty six month rate guarantee The Employee Assistance Program is currently provided by Ceridian. Six additional proposals were received and reviewed for cost, benefits provided and Medical Plan integration opportunities resulting from the recent Federal Benefits Law changes impacting Mental Health Parity. Humana is the recommended vendor for the following reasons: 1) Improved benefits via increased face to face visits 2) Low cost relative to benefits provided 3) Medical plan savings opportunity as a result of common vendor coordination The Vision benefits Request for Proposal resulted in eight responses. Similar to the Dental benefits, both fully insured and self insured proposals were received. We are again recommending this benefit be self funded based on the low claims risk and trend predictability. EyeMed is the recommended vendor based upon: 1) Lowest administrative services fee 2) Comprehensive exam and hardware benefits 3) Large tri-county provider network Short and Long Term Disability Benefits RFP's responses were evaluated by vendors offering both coverage's. For continuity of coverage and a seamless transition from short term to long term disability, the objective is to provide continuity of coverage and a seamless transition from short to long term disability with no disruption due to differences in disability definition, medical evaluation and benefits offered. Unum is the recommended carrier. 1) Minimal participation requirement and no termination feature 2) Low overall cost 3) Family Medical Leave Act administration for all employees 4) Twenty four month rate guarantee for Long Term Disability and FMLA Administration f ~®~$ ~~F- We appreciate the opportunity to work with the City and staff and would be happy to answer any questions you may have. Sincerely, Richard G. Schell Area Vice Preside