SUBJECT/RECOMMENDATION:
Title
Authorize the funding of city medical insurance and a contract between the City and Cigna Healthcare for administrative services under a partial self-insured funding arrangement for the period of January 1, 2015 to December 31, 2015 at a total cost not-to-exceed $16.8 million, to be funded through city budgeted funds, payroll deduction of employee premiums, and reserves from the City's Central Insurance Fund. (consent)
Body
SUMMARY:
For plan year 2015, the City's Agent of Record the Gehring Group provided an actuarially supported renewal based on the City's claims trending and projected an increase of 10.9% in funding of the plan would be necessary to meet the claims and administrative cost obligations of the plan while maintaining the plan design in effect for 2014. Cigna has implemented a new physician network referred to as Local Plus which recognizes a sub-group of physicians within their network that are achieving optimal outcomes in patient care and cost saving. Based on a review of the City's 2013 claims for service, Cigna has estimated the City could realize savings of between 4% - 8% if such claims had been administered through the Local Plus network.
The proposed renewal would adopt two new Cigna Local Plus Network plan options maintaining the current City PHA and Base Plan schedules of benefits, with a requirement that participants complete a Personal Health Assessment through the City's Employee Health Center and also complete the Cigna online Health Assessment tool in order to be enrolled in the PHA plan. The proposed renewal would also incorporate mental health/substance abuse coverage under the medical plan with Cigna, as the City's EAP provider MHNet has indicated it will no longer offer MH/SA coverage on a fully-insured basis. In addition to the medical insurance renewal, as an incentive for each employee who completes the Health Assessment requirements the City would share 50% of any budgeted surplus to fund an individual Health Reimbursement Account in an amount between $100-$500 dependent on a pre-determined schedule based on the amount of savings realized.
The City's Benefits Committee voted unanimously to recommend to City Council that the proposed plan design, rates, Health Assessment requirements, and wellness incentives be adopted and that Cigna be retained as administrator of the City's account for 2015. Staff concurs with the Benefits Committee recommendations.
The cost of implementing this plan option would result in an increase to the City's contribution of an estimated $892,000, or 7.4% for calendar 2015 versus the prior year. The total estimated calendar year 2015 cost would be approximately $16.66 million ($13.02 million City share, $3.64 million employee/retiree/cobra share).
For fiscal year 2015, the City has budgeted $12,813,900 for approximately 1,498 full time positions for the City's share of medical insurance coverage. The City's estimated share of actual expenses for fiscal year 2015 per this recommendation is estimated at $12,832,200. The difference of $18,300 would be funded by the reduction in the cost for the mental health/substance abuse coverage as a result of folding the coverage under the Cigna medical plan rather than MHNet, which is expected to save the City approximately $75,000 annually.
This recommendation also maintains the current funding strategy for City contributions to health care premiums representing 100% of the cost for Employee Only, 75% of the cost for Employee plus One, and 68% of the cost for Employee plus Family coverage.
APPROPRIATION CODE AND AMOUNT:
590-07000-545600-000-medical