TITLE
Recommendation to authorize City Manager, or designee, to execute contract amendments with Anthem Blue Cross, the City’s third party administrator for the Preferred Provider Organization (PPO) and the Health Maintenance Organization (HMO) group health plans, and Medicare Supplement plan; UnitedHealthcare Medicare Advantage PPO Plan; Scan Health Plan for the Medicare Advantage Plan; and Vision Service Plan (VSP) for the vision plan; CVS Caremark as the Prescription Benefit Manager (PBM) for the Prescription Drug Plan for the PPO and HMO plans; Delta Dental for the fee-for-service dental plan (DPPO) and Delta Dental USA (HMO plan); The Standard Insurance Company for employer-paid life insurance, voluntary life insurance, and short- and long-term disability insurance; Union Mutual Life Insurance Company (UNUM), through Larry Lambert & Associates Insurance Services, for long-term care insurance; and, any subsequent amendments necessary to maintain current benefit levels and remain in compliance with state and federal laws on all plans, at the discretion of the City Manager. (Citywide)
DISCUSSION
The Human Resources Department (HR) administers the City’s employee benefits healthcare program, including group health plans for HMO, PPO, dental, vision, life insurance, long- and short-term disability, long-term care, and flexible spending plans (health and dependent care). The program covers approximately 4,400 active employees, 2,000 retirees, and 7,800 dependents. In accordance with the Memoranda of Understanding (MOU) between the City and its employee organizations, the Health Insurance Advisory Committee (HIAC), which is comprised of representatives from each of the employee associations, annually reviews the status of the plan costs and makes recommendations to the City Manager on plan changes, benefit levels, and addition and deletion of plans.
HR staff, in conjunction with the HIAC and Alliant Insurance Services (Alliant), the City’s benefits consultant, have had a series of meetings from January 2019 through August 2019 to review and evaluate various plan design options, review plan utilization data, trends, legislative impacts, and meet with plan providers to finalize recommendations for the 2020 Employee Benefit Program (Attachment A). In addition, Alliant conducts an actuarial analysis of the proposed benefit plan costs and negotiates with each provider on behalf of the City to obtain the most advantageous rates. Alliant presented the results of their actuarial analysis and negotiation efforts to the HIAC at the end of July. The favorable renewal results for the 2020 Plan Year include benefits plan changes that will provide added value and contribute towards the City’s efforts to mitigate cost increases and improve employee satisfaction with the City’s benefits package.
SERVICE PROVIDER CONTRACT RENEWAL AND RATES
Annually, the City Manager, with input from the HIAC, reviews and makes recommendations on benefit provider contract renewals and associated rate changes for the following plan year. Notably, for the fourth year in a row, the City’s PPO and HMO health plan renewals came in lower than industry standard trend and our carriers’ book of business trend. The favorable renewals resulted from persistent negotiations efforts made by Alliant, our benefit consultants, and the City’s improved plan performance, despite the re-implementation of the Affordable Care Act (ACA) Health Insurer fees scheduled for 2020.
Additionally, in 2017, the City strategically carved-out pharmacy benefits from the Anthem HMO plans and contracted directly with CVS Caremark. This was done from not only a cost containment perspective, but to align formularies, co-pays, and access to additional CVS services for enrolled employees and their dependents across all Anthem Blue Cross plans (HMO and PPO). This year, Alliant on behalf of the City, completed the 2020-2023 CVS contract negotiations to ensure the City receives best in class pricing and contract terms. These contractual savings achieved through negotiations and having a direct contract with CVS mitigated the City’s HMO and PPO medical plans increases for Plan Year 2020. The overall impact of the renewals for the Anthem PPO and HMO plans resulted in a rate pass for Plan Year 2020; therefore, the employee-contribution rates will not change for employees in Plan Year 2020. The rates for the Dental HMO (DeltaCare USA), Dental PPO (Delta Dental DPO), and Vision coverage (Vision Service Plan (VSP)) also remain unchanged for Plan Year 2020.
HR and HIAC recommend that the City Council approve the proposed 2020 benefits package as outlined. A detail of 2020 proposed rates by tier and employee and employer contribution is provided in Attachment B. It is also recommended that the City Council approve the proposed 2020 rates (Attachment C) for the retiree Medicare health plans, which include:
• A slight reduction of the UHC Medicare PPO Advantage Plan rates;
• A rate pass for the SCAN Medicare Advantage Plan; and,
• A slight 1.5 percent increase of the Anthem Medicare Supplement Plan rates.
Further, City Council approval is requested to authorize the City Manager to execute contract amendments with various employee benefit providers for the 2020 employee benefits plan and incorporate the recommendations from the HIAC.
The following chart summarizes the City’s benefit contracts, applicable industry trend, and final renewal impact for Plan Year 2020:
|
2020 Plan Renewals |
|
Plan |
Industry Trend |
City Final Renewal |
|
Anthem Blue Cross PPO |
7.3% |
1.5% increase |
|
Anthem Blue Cross HMO (fully-insured medical only) |
6.6% |
2.3% increase, plus 2.7% ACA insurer fee |
|
Anthem Blue Cross HMO (self-funded pharmacy only) |
7.5% |
-29.48% decrease |
|
United HealthCare - fully-insured (fully-insured Medicare Advantage) |
4% |
-0.49% decrease includes 7% ACA fee |
|
SCAN Health (fully-insured Medicare Advantage) |
4% |
0% increase |
|
Delta Dental DPPO |
3.8% |
0% increase |
|
DeltaCare USA DHMO |
3.6% |
0% increase |
|
Vision Service Plan (VSP) Vision |
3.0% |
0% increase |
|
The Standard |
Varies by Claim Experience |
Basic Life/AD&D: 0% increase |
|
|
|
Voluntary Life: 0% increase |
|
|
|
Short-term Disability: 0% increase |
|
|
|
Long-term Disability: 0% increase |
RECOMMENDED PLAN
The HIAC and HR staff considered various plan design options to improve the employee benefit plan and cause minimal health plan cost increases. The HIAC unanimously voted to adopt the employee benefit plan changes summarized on Attachment D, which is submitted to the City Council for approval.
This matter was reviewed by Principal Deputy City Attorney Gary J. Anderson on August 22, 2019 and by Budget Analysis Officer Julissa José-Murray on August 27, 2019.
TIMING CONSIDERATIONS
HR is planning to utilize the month of September to communicate open enrollment changes to employees, who will update their health plan options online. Therefore, City Council action is requested on September 10, 2019, for adequate open enrollment planning. Communication pieces explaining the new provisions will be distributed during the Open Enrollment period.
FISCAL IMPACT
There is sufficient appropriation for the City’s cost of the health benefit plans in the Proposed Fiscal Year 2020 (FY 20) budget in the Employee Benefits Fund Group in the Citywide Activities Department. The renewal rates are cost effective to the City in comparison with industry trend. Any potential ongoing impact to the budget will be evaluated based on actual experience and will be incorporated into the budget as part of the annual budget process. This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
BODY
[Enter Body Here]
Respectfully Submitted,
ALEJANDRINA BASQUEZ
Director of HUMAN RESOURCES
APPROVED:
PATRICK H. WEST
CITY MANAGER