SUBJECT/RECOMMENDATION:
Title
Authorize funding and approve purchase order to Evernorth Behavioral Health (Evernorth) and contract to Cigna Healthcare (Cigna) for the employee assistance program and city medical insurance (under a self-insured funding arrangement) for the period January 1, 2023 through December 31, 2023, for a total not-to-exceed amount of $26,155,000 ($55,000 for Evernorth and $26.1 million for Cigna) pursuant to Request for Proposals (RFP) 26-22, Medical Insurance and Employee Assistance Program, to be funded by city budgeted funds, payroll deductions of employees and retiree premiums; and authorize the appropriate officials to execute same. (consent)
Body
SUMMARY:
To ensure the City is receiving the best pricing and available services for employees, family members and retirees, the City elected to solicit Request for Proposal 26-22, Medical Insurance and Employee Assistance Programs. A selection committee consisting of representatives from the Clearwater Police, Finance and Human Resources departments carefully reviewed each submittal from five companies. Evernorth Behavioral Health was the top-ranked company to provide employee assistance program services, and Cigna was the top-ranked company to administer the City’s self-insured medical insurance plan. Highlights of Cigna’s proposal included a reduction in administrative fees, no increase to reinsurance premiums (where market averages about 11%-15% currently), higher estimated provider discounts, credits toward Employee Health Center costs, and discretionary funds for wellness and other incentives.
Historically, the City’s health care costs have escalated due to increased inflation in health care costs which is reflected in the City’s claims experience. Medical inflation has exceeded 7% nationally, with Florida costs typically 3% - 4% higher. Renewal projections for calendar year 2023 indicate a 13.1% increase in plan expenses is expected, primarily due to inflation and delayed care. Staff is recommending the overall funding increase of 13.1% to ensure projected plan expenses are covered. Staff recommend that the City offset the increase to employee contributions, such that those with dependent care coverage experience only a 6.5% increase in costs. Limiting the employee contribution increase to 6.5% increases the employer cost by approximately $147,000, from 13.0% to 14.0%. The Benefits Committee supported this recommendation.
Included in the medical premiums for the 2023 plan year is the continuation of the Motivate Me incentive program through Cigna. Under this program, employees can receive incentives (up to $200 per year) when participating in various preventative healthcare activities such as annual wellness screenings, more advanced screenings such as colonoscopies and mammograms, and chronic health condition coaching. These rewards are directly tied to cost drivers on the City’s medical plan and are an essential part of controlling increases over the long term. All incentive costs are included in the medical plan funding. To date, total incentive payouts are approximately $30,800.
The City’s fiscal 2023 budget for the employer share of health insurance costs is $22,467,012 which includes $20,735,112 across all operations for health plan costs, and $1,731,900 budgeted for the Employee Health Center.
APPROPRIATION CODE AND AMOUNT: Funds are available in cost codes 5907590-530300 (contractual services), 5907590-545602 (major medical claims), and 5907590-545601 (insurance premiums-EAP).