HomeMy WebLinkAbout2006-26326 Reso
RESOLUTION NO. 2006-26326
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE
CITY MANAGER AND AUTHORIZING THE ADMINISTRATION TO ENTER
INTO NEGOTIATIONS WITH THE FOLLOWING FIRMS, ALL PURSUANT TO
REQUEST FOR PROPOSALS NO. 19-05/16 FOR THE CITY'S HEALTH
(MEDICAL) AND DENTAL INSURANCE PLANS: 1) FOR MEDICAL,
AUTHORIZING THE ADMINISTRATION TO ENTER INTO NEGOTIOATIONS
WITH THE TOP-RANKED FIRM OF HUMANA AND, IF NOT SUCCESSFUL,
AUTHORIZING THE ADMINISTRATION TO NEGOTIATE WITH THE SECOND-
RANKED FIRM OF CIGNA; AND 2) FOR DENTAL, AUTHORIZING THE
RENEWAL OF THE GROUPS DENTAL PLAN WITH COMPBENEFITS;
FURTHER AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE
AGREEMENTS WITH THE SUCCESSFUL FIRMS UPON COMPLETION OF
NEGOTIATIONS, WITH AN ANNUAL ANTICIPATED PREMIUM, FOR GROUP
MEDICAL, OF $16,000,000, AND, FOR DENTAL, OF $2,000,000.
WHEREAS, in 2002 the City implemented the Group Insurance Task Force
assigned to make recommendations to conform the City's benefit plans to industry
standards (Le., providing more healthcare options, increase percentage of plan
premiums paid by the City, and continue to support dependent coverage); and
WHEREAS, as a result of these recommendations, the City has restructured its
health care plans, and has been able to hold health care cost increases to between 6%
and 8% over the past four years, compared to a premium increase of 27.6% for the 2002
plan year; and
WHEREAS, the City is pleased that it has been able to implement many of the
recommendations of the Task Force; and
WHEREAS, the City will continue to move forward with the recommendations of
the Group Insurance Task Force, while working to control escalating costs, reviewing our
programs and making changes in the best interest of the employees, retirees and the
City; and
WHEREAS, the Administration recognizes the importance of providing
affordable, quality health and dental insurance to all employees and retirees of the City
of Miami Beach; and
WHEREAS, the City's current health and dental insurance coverage plans expire
on December 31, 2006; and
WHEREAS, in order to continue providing this important benefit, the City worked
with Arthur J. Gallagher & Co. (Gallagher), the City's broker of record, in drafting a
Request for Proposals (RFP) for health and dental insurance coverage; and
WHEREAS, on April 14, 2006, Gallagher issued Group Employee Benefits RFP
No. 19-05/06; and
WHEREAS, in response to the health insurance section of the RPF, the
following eight (8) vendors responded to five (5) different lines of medical coverage as
follows:
. Humana;
. CIGNA Health Care;
. Blue Cross Blue Shield of Florida (self-insured plan only);
. United HealthCare - disqualified, no coverage for retirees;
. Aetna Healthcare - disqualified, did not meet plan designs;
. Vista Healthplan - disqualified, did not meet plan design;
. NHP - disqualified, did not meet plan designs;
. AVMED - disqualified, did not meet plan designs; and
WHEREAS, there were three (3) resulting responsive proposals received for
medical insurance that were qualified and considered:
. Humana (the City's current provider);
. Blue Cross Blue Shield of Florida;
. CIGNA Healthcare (CIGNA); and
WHEREAS, Humana's initial proposal provided an annual premium of
$16,014,368, which represents an annual premium increase of $1,813.699 (12.8%) from
the City's current rates; and
WHEREAS, Humana's initial proposal included the City's current plan designs,
with some additional enhancements and no changes in coverage; and
WHEREAS, after further discussions between Gallagher and Humana,
Humana's "best and final" proposal is as follows:
. Humana's current plan designs for the City with an annual premium of
$15,267.119, which represents a $1,066,449 (7.5%) increase for the 2007 plan
year, or a reduction of $747,250 (5.3%) from its original proposal;
. Full administration of the Consolidated Omnibus Budget Reconciliation Act
(COBRA) valued at $46,500 - plan enhancement;
. Monthly wellness events in four different locations throughout the City valued at
$78,000 - plan enhancement;
. Detailed annual dependent audits, to ensure coverage to only those eligible
dependents - plan enhancement;
. City access to online. enrollment and eligibility administration - plan
enhancement;
· A customer service representative dedicated to the City of Miami Beach with only
one additional local client (University of Miami) valued at $25,000 - plan
enhancement;
· On-site (twice monthly) employee service meetings - plan enhancement;
. A premium increase cap for the 2008 plan year (second year of contract) based
on the City's claims experience in the 2007 plan year; if the City's claims
experience in 2007 is the same as it was in 2006, the 2008 plan year premium
increase would be capped at 7.5%;
. Humana's South Florida primary care provider network for Miami-Dade, Broward
and Palm Beach counties includes approximately 3,539 physicians;
· Access through Humana's nationwide PPO Choice network providing City
retirees throughout the country, and in particular in Central and North Florida
where the City has a high population of retirees, access to network providers and
facilities - plan enhancement; and
WHEREAS, the 7.5% annual premium increase proposed by Humana compares
favorably to the nationwide healthcare market average, which reflects projections of 12 -
15% increases for next year; and
WHEREAS, CIGNA's initial proposal provided an annual premium of
$15,250,942, which represents an annual premium increase of $1,050.273 (7.4%); and
WHEREAS, this included CIGNA's standard plan designs, providing less plan
coverage than the City's current plans, which creates a negative benefit impact to
employees; and
WHEREAS, after discussions between Gallagher and CIGNA, CIGNA's "best
and final" proposal is as follows:
. CIGNA's standard plan design with an annual premium of $14,896,501 which
represents a $695,832 (4.9%) increase for the 2007 plan year;
. A premium increase cap for the 2008 plan year based on the City's claims
experience in the 2007 plan year; if the City's claims experience in 2007 is the
same as it was in 2006, the 2008 plan year premium increase would be capped
at 7.4%;
. CIGNA's South Florida primary care provider network for Miami-Dade, Broward
and Palm Beach counties includes approximately 2,256 physicians,
(approximately 36% less than Humana);
. No nationwide network provider access, in particular in Central and North Florida
where the City has a high population of retirees; and
WHEREAS, Blue Cross Blue Shield of Florida only responded with a self-
insured plan, which included a rate increase of 46% above the City's current rate; and
WHEREAS, in its evaluation, Gallagher created a model to evaluate the value of
coverage proposed under each of the Humana and CIGNA plans; and
WHEREAS, in this model, the covered procedures under each option are
assigned a value, with the current Humana plan used as the base (valued at $1); and
WHEREAS, this $1 value did not include the plan enhancement in Humana's
best and final proposal; and
WHEREAS, as a result of the modeling, the current Humana plans equaled
$15,267,119, and the CIGNA proposed plans equaled $14,879.227; and
WHEREAS, this created a value for the CIGNA plans of $0.978; and
WHEREAS, as this value is less than the $1 baseline provided by the current
Humana plan, CIGNA's proposed plan is a reduction in benefits, which is reflected in its
proposed lower annual premium costs; and
WHEREAS, a change in plan providers would create a financial impact other
than just a change in premiums; and
WHEREAS, the costs associated with the process of having employees migrate
from the Humana plan to the CIGNA plan include:
. General educational meetings for all benefit-eligible employees and retirees;
. Individual employee and retiree enrollment meetings;
. Transition meetings with the new provider and meetings with the incumbent to
guarantee employee information is shared properly;
. Enrollment materials;
. Employee dissatisfaction in the event the new provider's plan did not exactly
mirror the current provider's plan;
. Employee dissatisfaction with the possible change in physicians and facilities
should current physicians and facilities not in the new provider's network; and
WHEREAS, the estimated cost to the City (excluding the intangible costs related
to employee dissatisfaction) for this conversion is approximately $315,500; and
WHEREAS, in addition, pursuant to the CWA and AFSCME collective
bargaining agreements, if the City materially reduces the scope and level of benefit in
the base insurance plans, the City would be obligated to impact bargain any changes to
the existing benefit; and
WHEREAS, this would be the case if the City chose to award the plan to
CIGNA, based on CIGNA's best and final proposal; and
WHEREAS, for the dental coverage portion of the RFP, the following fifteen (15)
vendors responded to three (3) different lines of coverage:
. Comp Benefits;
. Delta Dental;
. CIGNA;
. Fortis Benefit Insurance Company - disqualified, did not meet plan designs;
. Guardian Life - disqualified, did not meet plan designs;
. MetLife - disqualified, did not meet plan designs;
. FHA-TPA - disqualified, did not meet plan designs;
. Wausau Benefits - disqualified, did not meet plan designs;
. KMG America - disqualified, did not meet plan designs;
. Ameritas Group - disqualified, did not meet plan designs;
. Florida Combined Life - disqualified, did not meet plan designs;
. Starmark - disqualified, did not meet plan designs;
. Dental Decisions - disqualified, did not meet plan designs;
. CBSA - disqualified, did not meet plan designs;
. Safeguard - disqualified, missed the RFP due date; and
WHEREAS, out of the fifteen (15) proposals received for dental plans, there
were three (3) responsive proposals that were qualified and considered:
. Comp Benefits (the City's current provider);
. Delta Dental;
. CIGNA; and
WHEREAS, Comp Benefits' proposal included the City's current Dental
Maintenance Organization (DMO) and Indemnity plans, and a replacement Preferred
Provider Organization (PPO) plan; and
WHEREAS, this proposal reflected a 0% rate increase for the DMO and the
Indemnity plan; the replacement PPO will provide:
. An increase in orthodontic benefit of $1,000;
. An increase in the annual maximum of $500;
. A change in the payment of out-of-network from a percentage of a schedule
benefit to a percentage of usual and prevailing;
. An increase in annual premium of 3%; and
WHEREAS, all three plans (DMO, PPO, and Indemnity plans) were provided
with a two year rate guarantee, and
WHEREAS, the Delta Dental proposal included plan designs similar to the City's
plans, with an 8.6% increase; and
WHEREAS, CIGNA's proposal included plan designs similar to the City's plans,
with a 16.2% increase; and
WHEREAS, the City's Group Insurance Board (Board) was asked to the make a
recommendation to the City Manager on the renewal of the City's health and dental
plans; and
WHEREAS, the Board met on June 27, 2006, and reviewed Humana and
CIGNA's original proposals, and met again on July 24, 2006, to review Humana and
CIGNA's "best and final" proposals; and
WHEREAS, the Board agreed that the coverages provided through Humana,
specifically the nationwide PPO network access for retirees and the savings involved
with not changing providers, far exceeds the difference in annual premiums of $370,617
between Humana and CIGNA (Humana's increase of $1,066,449 less CIGNA's increase
of $695,832); and
WHEREAS, the Board also addressed the costs associated with the process of
having employees migrate from the Humana plan to the CIGNA plan, as discussed
above; and
WHEREAS, taking into consideration the conversion cost of approximately
$315,500, the cost difference in annual premiums between Humana and CIGNA would
be further reduced to approximately $55,117; and
WHEREAS, the final recommendation of the Board was to award to Humana;
and
WHEREAS, if contract negotiations with Humana are unsuccessful, the Board
recommended the City enter into contract negotiations with the second-ranked firm of
CIGNA; and
WHEREAS, the Board also recommended the renewal of dental coverage with
the current provider, Comp Benefits; and
WHEREAS, Gallagher has thoroughly evaluated and ranked the incumbent
carriers, and recommends Humana and Comp Benefits, as its first selection to provide
medical and dental coverage to the employees of the City of Miami Beach; and
WHEREAS, the City Manager recommends accepting the recommendations of
Gallagher and the City's Group Insurance Board.
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 City Manager, pursuant to the
Request for Proposals No. 19-05/16 for the City's Health (Medical) and Dental Insurance
Plans, and authorize the Administration to enter into negotiations with: 1) For medical,
the top-ranked firm of Humana, and the second-ranked firm of CIGNA, if negotiations
with Humana are not successful, and further authorize the Mayor and City Clerk to
execute contract(s) with the primary or secondary firm upon completion of successful
negotiations for Group Medical Plan coverage, with an annual anticipated premium of
$16,000,000; and 2) For dental, renewing the Group Dental Plan with Comp Benefits, for
an annual anticipated premium of $2,000,000.
PASSED and ADOPTED this 6th day of S te ber
, 2006.
rJ:
;r P~ftP\
CITY CLERK
Robert Parcher
APPROVED AS TO
FORM & LANGUAGE
~cu~
~
COMMISSION ITEM SUMMARY
Condensed Title:
A resolution authorizing the Administration to enter into negotiations for a Group Medical Plan with the top-
ranked firm of Humana (Primary) and the second-ranked firm of CIGNA (Secondary) and further authorize the
Mayor and City Clerk to execute contract(s) with the Primary or Secondary firm upon successful negotiations,
and renewal of the current Group Dental Plan with Comp Benefits.
Ke Intended Outcome Su orted:
Ensure expenditure trends are sustainable over the long term; Attract and maintain a quality workforce.
Issue:
I Shall the City execute contracts for Group Medical and Dental Plans?
Item Summa IRecommendation:
Arthur J. Gallagher & Co., the City's broker of record for group employee health benefits, has thoroughly
evaluated and ranked the incumbent carrier and recommends Humana and Comp Benefits, as their first
selection to provide medical and dental coverage to the employees and retirees of the City of Miami Beach.
The Administration recommends accepting the recommendations of Gallagher and the Group Insurance Board
of the proposals received for medical coverage as a result of this RFP, with the top-ranked firm of Humana
(Primary) and the second-ranked firm of CIGNA (Secondary); and to authorize the Administration to enter into
contract negotiations and if successful, execute a contract with the top-ranked firm of Humana, and if
unsuccessful, authorize negotiations with the second-ranked firm of CIGNA. Further authorize the
Administration to enter into contract negotiations and if successful, execute a contract with Comp Benefits for
the renewal of the DMO and Indemni dental lans and the re lacement of the PPO dental Ian.
Advisorv Board Recommendation:
The Group Insurance Board met on June 27,2006 and reviewed Humana's and CIGNA's original proposals and
met again on July 24, 2006 to review the revised Humana and CIGNA proposals. The final recommendation of
the Group Insurance Board (Board) was to award to Humana. The Board agreed that the coverages provided
through the Humana contract, specifically the nationwide PPO network access for retirees and the savings
involved with not changing providers, far exceeds the difference in annual premiums of $370,617 between
Humana and CIGNA (Humana's increase of $1 ,066,449 less CIGNA's increase of $695,832).
The Insurance Board also discussed the costs associated with the process of having employees migrate from
the Humana plan to the CIGNA plan. This includes the time and effort in coordinating educational meetings for
all employees as well as the time and value of that time for employees to attend these general meetings, in
addition to having all employees attend individual meetings to enroll. The City's estimated cost of this
conversion is approximately $315,500. This would lessen the cost difference in annual premiums between
Humana and CIGNA to approximately $55,117.
If contract negotiations with Humana are unsuccessful, the Board recommended the City enter into contract
negotiations with the second-ranked firm CIGNA. The Board also recommended the renewal of dental
coverage of the DMO and Indemnity plan and the replacement of the PPO dental plan with the current provider,
CompBenefits.
Financial Information:
OBPI
Financial Impact Summary:
Various Department Accounts
for Medical Insurance
Various Department Accounts
for Dental Insurance
Source of
Funds:
Ci Clerk's Office Le islative Trackin
Mayra Diaz Buttacavoli, Director of Human Resources and Risk Management
City Manager
m
.....
MIAMI BEACH
AGENDA ITEM
DATE
R7R
9~-O~
m
MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor David Dermer and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager f p--~
OATE: September 6, 2006 (I
SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING THE
ADMINISTRATION TO ENTER INTO CONTRACT NEGOTIATIONS FOR
A GROUP MEDICAL PLAN WITH THE TOP-RANKED FIRM OF
HUMANA, (PRIMARY) AND THE SECOND-RANKED FIRM OF CIGNA
(SECONDARY); AND FURTHER AUTHORIZE THE MAYOR AND CITY
CLERK TO EXECUTE CONTRACT(S) WITH THE PRIMARY OR
SECONDARY FIRM UPON COMPLETION OF SUCCESSFUL
NEGOTIATIONS FORA PREMIUM OF $16,000,000; AND RENEWAL OF
THE GROUP DENTAL PLAN WITH COMPBENEFITS, FOR A PREMIUM
OF $2,000,000; AS PROPOSED BY ARTHUR J. GALLAGHER AND CO.,
THE CITY'S BROKER OF RECORD.
ADMINISTRATION RECOMMENDATION
Adopt the Resolution.
BACKGROUND
In 2002 the City implemented the Group Insurance Task Force assigned to make
recommendations to conform the City's benefit plans to industry standards; i.e.,
providing more healthcare options, increase percentage of plan premium paid by
the City and continue to support dependent coverage. As a result of these
recommendations, the City has restructured its healthcare plans and has been able
to hold healthcare cost increases to between 6% and 8% over the past four years
compared to a premium increase of 27.6% for the 2002 plan year.
The City is pleased that it has been able to implement many of the
recommendations of the Task Force. We will continue to move forward with the
recommendations while working to control escalating costs, reviewing our programs
and making changes in the best interest of the employees, retirees and the City.
Employees and retirees in South Florida, other than those covered by the Police
and Fire Health Trusts, are provided their choice of five (5) medical plan options
with the incumbent medical plan provider, Humana and three (3) dental plan options
with the incumbent dental plan provider, Comp Benefits as listed below. Retirees
residing outside of the South Florida area participate in the Point of Service plan
only.
City Commission Memorandum
September 6, 2006
Insurance Awards
Page 2 of 8
. Two Health Maintenance Organizations (HMO) options - the Premium HMO
and Standard HMO.
. Two Preferred Provider Organizations (PPO) options - the Premium PPO
and Standard PPO.
. One Point of Service (POS) option.
. One Dental Maintenance Organization (DMO) option - the CS 150.
· One Dental Preferred Provider Organization (PPO) option - the SLV-80
Insurance Plan.
. One Dental Indemnity option - the Elite Choice 400.
The table below outlines the number of participants in each of the five medical plans
broken out by coverage levels (active vs. pre-65 and post-65 retirees).
urren an a IClpa Ion
Coverage Level Premium Standard Premium Standard POS Total All
HMO HMO PPO PPO Plans
Single Active 241 241 43 41 18 584
Emplovee
Family Active 259 128 26 17 24 454
Employee
Single Retiree - 110 4 76 9 9 208
No Medicare
Family Retiree - 62 3 32 3 4 104
No Medicare
Medicare - Single 169 8 9 186
Over 65
Medicare -
1 over 65 - 24 5 4 33
1 under 65
Medicare - 58 5 7 70
2 over 65
Family - 2 2 4
1 over 65
Family - 4 3 7
2 over 65
Total 672 376 434 88 80 1,650
C t PI P rf. f
Medicare Single = Medicare is the primary provider, the City plan pays secondary
Medicare 1 over 65, 1 under 65 = Medicare is the primary provider for one participant, the City is
the primary provider for one participant
Medicare 2 over 65 = Medicare is the primary provider for both participants
Family 1 over 65 = Medicare is the primary provider for one participant, the City is the primary
provider for 2 or more dependents, including the spouse
Family 2 over 65 = Medicare is the primary provider for two participants, the City is the primary
provider for 1 or more dependents
The following reflects the average annual premium paid by participants, by
coverage level, and the claims costs for the most recent fiscal year.
City Commission Memorandum
September 6,2006
Insurance Awards
Page 3 of 8
Active Participants Retiree Participants
Number of 1,068 582
Participants
Percentage of 63% 37%
Participants
Average Annual
Premium (per $7,499 $10,639
participant)
Percent of Total
Annual Average 56.4% 43.6%
Premium
FY'05 Actual Claims $5,421,422 $5,172,610
FY'05 Percentage of 51% 49%
Claims
As reflected in these tables, while retiree participation represents only 37% of total
plan participants, they represent 49% of the total plan claim costs. Current
increases in plan premiums correlate directly to the disproportionate ratio of retiree
participants to retiree claims.
ANAL YSIS
The Administration recognizes the importance of providing affordable, quality health
and dental insurance to all employees and retirees of the City of Miami Beach. The
City's current health and dental insurance coverage plans expire on December 31,
2006. In order to continue providing this important benefit, the City worked with
Arthur J. Gallagher & Co. (Gallagher), the City's broker of record, to draft an RFP for
health and dental insurance coverage.
On April 14, 2006, Gallagher issued Group Employee Benefits RFP No. 19-05/06. It
was determined by the City Attorney's Office that by having Gallagher issue the
RFP, Gallagher is allowed to contact various plan vendors to request more detailed
responses to the RFP, and in addition, to freely negotiate premiums with those
vendors who do respond, as the Cone of Silence does not apply to Gallagher. This
provides the City with better and enhanced rates at the time of the City's
consideration for each proposal.
HEALTH INSURANCE
In response to the health insurance section of the RPF, the following eight (8)
vendors responded to five (5) different lines of Medical coverage:
. Humana
. CIGNA Health Care
. Blue Cross Blue Shield of Florida (self-insured plan only)
· United HealthCare - disqualified, no coverage for retirees
· Aetna Healthcare - disqualified, did not meet plan designs
· Vista Healthplan - disqualified, did not meet plan design
· NHP - disqualified, did not meet plan designs
· AVMED - disqualified, did not meet plan designs
City Commission Memorandum
September 6, 2006
Insurance Awards
Page 4 of 8
There were three (3) proposals received for medical insurance that were qualified
and considered. These include: Humana (the City's current provider), Blue Cross
Blue Shield of Florida, and CIGNA Healthcare (CIGNA).
Below is a breakdown of each of the proposals that were considered:
Humana
Humana's initial RFP response provided an annual premium of $16,014,368 which
represents an annual premium increase of $1,813.699 (12.8%) from the City's
current rates. Humana's initial response included the City's current plan designs
with some additional enhancements and no changes in coverage.
After negotiations between Gallagher and Humana, Humana's revised proposal
included the following:
· Humana's current plan designs for the City with an annual premium of
$15,267.119, which represents a $1,066,449 (7.5%) increase for the 2007
plan year, or a reduction of $747,250 (5.3%) from their original proposal;
· Full administration of the Consolidated Omnibus Budget Reconciliation Act
(COBRA) valued at $46,500 - plan enhancement;
· Monthly wellness events in four different locations throughout the City valued
at $78,000 - plan enhancement;
· Detailed annual dependent audits, to ensure coverage to only those eligible
dependents - plan enhancement;
· City access to online enrollment and eligibility administration - plan
enhancement;
· A customer service representative dedicated to the City of Miami Beach with
only one additional local client (University of Miami) valued at $25,000 - plan
enhancement;
· On-site (twice monthly) employee service meetings - plan enhancement;
· A premium increase cap for the 2008 plan year (second year of contract)
based on the City's claims experience in the 2007 plan year. If the City's
claims experience in 2007 is the same as it was in 2006, the 2008 plan year
premium increase would be capped at 7.5%;
· Humana's South Florida primary care provider network for Miami-Dade,
Broward and Palm Beach counties includes approximately 3,539 physicians;
· Access through Humana's nationwide PPO Choice network providing City
retirees throughout the country, and in particular in Central and North Florida
where the City has a high population of retirees, access to network providers
and facilities - plan enhancement.
The 7.5% annual premium increase proposed by Humana compares favorably to
the nationwide healthcare market average which reflects projections of 12 - 15%
increases for next year. The attached chart (Attachment A) reflects a comparison of
the coverage and employee out-of-pocket expenses.
City Commission Memorandum
September 6, 2006
Insurance Awards
Page 5 of 8
CIGNA
CIGNA's initial RFP response provided an annual premium of $15,250,942 which
represents an annual premium increase of $1,050.273 (7.4%). This included
CIGNA's standard plan designs providing less plan coverage than the City's current
plans, which creates a negative benefit impact to employees.
After negotiations between Gallagher and CIGNA, CIGNA's revised proposal
included the following:
. CIGNA's standard plan design with an annual premium of$14,896,501 which
represents a $695,832 (4.9%) increase for the 2007 plan year;
. A premium increase cap for the 2008 plan year based on the City's claims
experience in the 2007 plan year. If the City's claims experience in 2007 is
the same as it was in 2006, the 2008 plan year premium increase would be
capped at 7.4%;
· CIGNA's South Florida primary care provider network for Miami-Dade,
Broward and Palm Beach counties includes approximately 2,256 physicians,
(approximately 36% less than Humana); and
· No nationwide network provider access, in particular in Central and North
Florida where the City has a high population of retirees.
Blue Cross Blue Shield of Florida
Blue Cross Blue Shield of Florida only responded with a self-insured plan which
included a rate increase of 46% above the City's current rate.
Evaluation of Health Insurance Plans
In their evaluation, Gallagher created a model to evaluate the value of coverage
proposed under each ofthe Humana and CIGNA plans. In this model, the covered
procedures under each option are assigned a value, with the current Humana plan
used as the base (valued at $1). This $1 value did not include the plan
enhancement in Humana's revised proposal discussed above. As a result of the
modeling, the current Humana plans equaled $15,267,119 and the CIGNA
proposed plans equaled $14,879.227. This created a value for the CIGNA plans of
$0.978. As this value is less than the $1 baseline provided by the current Humana
plan, the CIGNA plan is a reduction in benefits, which is reflected in their proposed
lower annual premium costs.
A change in plan providers would create a financial impact other than just a change
in premiums. The costs associated with the process of having employees migrate
from the Humana plan to the CIGNA plan includes:
· General educational meetings for all benefit-eligible employees and retirees;
· Individual employee and retiree enrollment meetings;
· Transition meetings with the new provider and meetings with the incumbent
to guarantee employee information is shared properly;
. Enrollment materials;
City Commission Memorandum
September 6, 2006
Insurance Awards
Page 6 of 8
. Employee dissatisfaction in the event the new provider's plan did not exactly
mirror the current provider's plan; and
. Employee dissatisfaction with the possible change in physicians and facilities
should current physicians and facilities not in the new provider's network.
The estimated cost to the City, excluding the intangible costs related to employee
dissatisfaction, for this conversion is approximately $315,500.
In addition, pursuant to the CWA and AFSCME collective bargaining agreements, if
the City materially reduces the scope and level of benefit in the base insurance
plans, the City would be obligated to impact bargain any changes to the existing
benefit. This would be the case if the City chose to award the plan to CIGNA based
on CIGNA's revised proposal.
DENTAL INSURANCE
For the Dental coverage, the following fifteen (15) vendors responded to three (3)
different lines of coverage:
. Comp Benefits
. Delta Dental
. CIGNA
. Fortis Benefit Insurance Company - disqualified, did not meet plan designs
. Guardian Life - disqualified, did not meet plan designs
. MetLife - disqualified, did not meet plan designs
. FHA- TPA - disqualified, did not meet plan designs
. Wausau Benefits - disqualified, did not meet plan designs
. KMG America"':' disqualified, did not meet plan designs
. Ameritas Group - disqualified, did not meet plan designs
. Florida Combined Life - disqualified, did not meet plan designs
. Starmark - disqualified, did not meet plan designs
. Dental Decisions - disqualified, did not meet plan designs
. CBSA - disqualified, did not meet plan designs
. Safeguard - disqualified, missed the RFP due date
Out of the fifteen (15) proposals received for dental plans, there were three (3) that
were qualified and considered. These include the following: Comp Benefits (the
City's current provider), Delta Dental and CIGNA.
The following is a breakdown of each of the dental plan proposals:
Comp Benefits
Comp Benefits' proposal included the City's current Dental Maintenance
Organization (DMO) and Indemnity plans, and a replacement Preferred Provider
Organization (PPO) plan. This proposal reflected a 0% rate increase for the DMO
and the Indemnity plan. The replacement PPO will provide:
City Commission Memorandum
September 6,2006
Insurance Awards
Page 7 of 8
· An increase in orthodontic benefit of $1 ,000;
. An increase in the annual maximum of $500;
· A change in the payment of out-of-network from a percentage of a schedule
benefit to a percentage of usual and prevailing;
. An increase in annual premium of 3%; and
· All three plans (DMO, PPO, and Indemnity plans) were provided with a two
year rate guarantee.
Delta Dental
The Delta Dental proposal included plan designs similar to the City's plans with an
8.6% increase.
CIGNA
CIGNA's proposal included plan designs similar to the City's plans with a 16.2%
increase.
The attached chart (Attachment B) reflects a comparison of the coverage and
employee out-of-pocket expenses.
GROUP INSURANCE BOARD
In order to make a recommendation on the renewal of the City's health and dental
insurance contracts, the City Manager appointed the following employees to serve
on the City's Group Insurance Board:
· Richard McKinnon - Fire Department (Ocean Rescue); CW A Union
President (represented by Phyllis Shamis, CW A Secretary/Treasurer at July
24, 2006 meeting)
· Prince Pearse - Public Works Department (Sanitation); AFSCME Union
President
· Willie Sanders - Public Works Department (Water); GSA Union President
· Jose Cruz - Office of Budget and Performance Improvement; Budget Officer
· Georgie Echert - Finance Department; Assistant Director
· Sue Radig - Human Resources and Risk Management Department; Benefits
Administrator
· Jim Sutter - Office of Budget and Performance Improvement; Internal
Auditor
The Group Insurance Board met on June 27,2006 and reviewed Humana's and
CIGNA's original proposals and met again on July 24, 2006 to review the revised
Humana and CIGNA proposals. The Group Insurance Board (Board) agreed that
the coverages provided through the Humana contract, specifically the nationwide
PPO network access for retirees and the savings involved with not changing
providers, far exceeds the difference in annual premiums of $370,617 between
Humana and CIGNA (Humana's increase of $1 ,066,449 less CIGNA's increase of
$695,832.
City Commission Memorandum
September 6,2006
Insurance Awards
Page 8 of 8
The Insurance Board also addressed the costs associated with the process of
having employees migrate from the Humana plan to the CIGNA plan, as discussed
above. Taking into consideration the conversion cost of approximately $315,500,
the cost difference in annual premiums between Humana and CIGNA would be
further reduced to approximately $55,117.
The final recommendation of the Board was to award to Humana.
If contract negotiations with Humana are unsuccessful, the Board recommended the
City enter into contract negotiations with the second-ranked firm CIGNA. The Board
also recommended the renewal of dental coverage ofthe DMO and Indemnity plan
and the replacement of the PPO dental plan with the current provider,
CompBenefits.
SUMMARY/RECOMMENDATION
Arthur J. Gallagher & Co., the City's broker of record for group employee health
benefits, has thoroughly evaluated and ranked the incumbent carrier and
recommends Humana and Comp Benefits, as their first selection to provide medical
and dental coverage to the employees of the City of Miami Beach (Attachment C).
The Administration recommends accepting the recommendations of Gallagher and
the City's Group Insurance Board, to negotiate a Group Medical Plan with Humana
and if successful, execute a contract. If negotiations with Humana are
unsuccessful, the Administration recommends the authorization to negotiate with
the second ranked firm, CIGNA and execute a contract if successful. The cost of
this contract is anticipated to be no more than $16,000,000 based on the existing
participants and their plan selections. However, minor variations in this amount
could occur based on changes in that participant population.
The Administration also recommends the authorization to enter into contract
negotiations with Comp Benefits, and if successful, execute a contract for the
renewal of the DMO and Indemnity dental plans and the replacement of the PPO
dental plan. The cost of this contract is anticipated to be no more than $2,000,000
based on the existing participants and their plan selections. However, minor
variations in this amount could occur based on changes in that participant
population.
JMG:RI:MDB:SR
ATTACHMENT A
Medical Plan Designs Comparisons
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ATTACHMENT C
Gallagher Recommendation
G
Gallagher Benefit Services, fne.
A Subsidiary of Arthur J. Gallagher & Co,
July 3, 2006
Ms. Mayra Buttacavoli, Director of Human Resources and Risk Management
City of Miami Beach
1000 Convention Center Drive
Miami Beach, Florida 33139
Re: Group Medical and l}ental RFP Process and Evaluation
Dear Mayra,
On behalf of the City of Miami Beach, Gallagher Benefit Services, Inc. prepared a
request for proposal for the City's medical and dental coverages. The request included
duplication of existing benefits and alternative schedules of benefits with the objective of
reducing the City's and employees overall costs. Exhibit #1 will illustrate the selected
respondents for both coverage lines and the funding vehicles offered.
After reviewing both the financial analysis and the benefit comparisons. we recommend
renewing both product lines with the incumbent carriers, Humana and CompBenefits.
Reasons arc as follows:
Medical
]) Although I-Iumana did not offer the lowest overall cost, the difference does not
wan'ant the expense of employee re-education, re-enrollment and general
disruption. In addition, Humana has added several administrative enhancements
to assist in areas such as dedicated customer service support, expanded wellness
benefit coverage, as well as on-site support for the Human Resources Department.
2) 2008 renewal pre-negotiated based on City's incurred loss ratio.
Dental
1) Lowest overall cost with benefit enhancements to the PPO plan.
2) Plan costs guaranteed for t\\'o years.
Should you have any questions, please contact me at 561-998-6733. Again, we appreciate
the opportunity to work with you and the City of Miami Beach.
i
./
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,___"/"'-\/~jt...,,;;/ Y /'
Richard G. Schell,;'
Area Vice Presi~nt
.JI!.'
One Boca Place ,C
2255 Glades Road, SUite 400 E
Boca RalOn, FL 33431
561.9956706
Fax 5619956708
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