HomeMy WebLinkAbout10-07-2002 (Insurance Update)INSURANCE UPDATE
October 7, 2002
Rob Waiz
City Council
I. EXECUTIVE SUMMARY
II. NETWORK DISCOUNTS SAVE MONEY
III. THREE YEAR CLAIMS REPORT
IV. SPECIFIC AND AGGREGATE STOP LOSS COVERAGE
V. ANNUAL FIXED COSTS
I. EXECUTIVE SUMMARY
Network discounts are extremely important when you are choosing a
self-funded plan. Some may only consider fixed costs when choosing a
plan, but fixed costs are only part of the equation. When choosing a plan,
you must weigh each variable such as; network discounts, network size,
network providers, plan benefits, specific stop loss, aggregate stop loss,
and fixed costs. This wasn't done when the City switched carriers.
Changing carriers has been a major expense to the City that should
have never happened.
II. NETWORK DISCOUNTS SAVE MONEY
On April 1, 2001, the City switched from Humana to Sagamore. The
City saved approximately $87,000 in fixed costs. But when you consider
self-funding insurance you cannot only look at fixed costs, but you have
to consider the discounts that the PPO network can provide.
April 15, 2002, Mr. Cooper attended the Board of Works meeting and
discussed the difference in discounts between Sagamore and Humana-
approximately 2% (see attached minutes).
June 14, 2002, Mr. Cooper met with the Mayor, Clerk Treasurer
Peggy Wilder and Council Member Rob Waiz. The meeting was held for
discussion of health insurance. During that meeting Mr. Cooper said that
the Sagamore discount was around 22% and he wasn't aware of the
amount of Humana's discount.
June 17, 2002, Diane Swank of the Culpepper Group appeared
before the City Council to discuss additional health insurance funding.
At that meeting Council Member Waiz said that he had called Humana
conceming their discounts and he was told that they run approximately
50%. Waiz said that the savings on the discounts between Humana and
Sagamore would have saved the City money despite the savings
Sagamore had on the fixed cost.
Newspaper articles were in the Evening News and Courier Journal.
Mr. Cooper said that Waiz had been misinformed by an aggressive sales
agent who doesn't understand how insurance should be provided to a city
and that Waiz received bad information on the network discount that
Humana provides.
Mr. Cooper stated on April 15, 2002 at the Board of Works meeting
that the difference between Sagamore's discount and Humana's discount
was only 2°/3. On June 14, 2002 Mr. Cooper said that Sagamore's
discount was approximately 22%. Based upon these two statements by
Mr. Cooper you would assume that Humana's discount would be around
24%.
On July 16, 2002 Waiz spoke with two Humana agents concerning
the insurance quote for the City and Humana's network for creating
discounts. Waiz received a pamphlet that is given to insurance agents to
help explain to their clients how important discounts are while being self-
funded (see attached pamphlet). The pamphlet stated the average
Humana network discount in the Louisville area was 51%.
The actual network discount that the City received with Humana during
the policy period of 4/1/00-3/31/01 was 52.2%
Compare Network Discounts
Network Humana Sagamore
Policy Period 4/01/00-3/31/01 4/01/01-3/31/02
Allowed Charge $2,535,691 $2,292,780
Other Insurance/
Deductible $ 58,102 $ 33,017
Discount Amount $1,103,932 $ 550,942
Payment $1,373,657 $1,708,821'
The City saved $87,000 in fixed costs by switching to a new carrier
but as the illustration shows above, fixed costs are only a small part of
the equation. The City had more claims during 4/00-3/01 but paid out
less money due to deeper discounts that Humana can provide.
*Does not include Humana's run out claims.
MINUTES OF THE BOARD OF PUBLICWORKS AND SAFETY
OF THE CITY OFJEFFERSONViLLE' INDIANA
APRIL 15, 2002
Mayor Galligan called the meeting to order at 9:30 A.M., and on call of the
roi1, those present were City Engineer Bob Miller and Councilperson Rob
Waiz.
Present were: Planning and Zoning Director Jana Ecker, Animal Shelter
Director Cindy Keller, Wastewater Treatment Director Tim Crawford,
Vehicle Maintenance Director Mike Drury, Parks Director Rick Elliott,
Police Chief Mike Pavey, Street Commissioner Marvin Grant, Safety
Director Danny Rodden, Fire Chief Mike Smith, Redevelopment Director
David Duggins, Assistant to Mayor Dustin White, Information Technology
Director Rich Davis, Engineering Coordinator Brian Dixon, and Clerk
Barbara Hollis.
City Engineer Miller made the motion to approve the payroll is presented,
seconded by Councilperson Waiz, and carried unanimously.
HEALTH INSURANCE RENEWAl,
Mr. Culpepper Cooper, Agent of Record, appeared before the Board
explaining the health insurance contract renewal. Mr. Cooper reviewed the
packet of information he distributed, explaining the only decision left was
the stop-loss cap, which he recommends be set at $100,000. Councilperson
Waiz stated he feels more confident keeping the stop-loss cap at $75,000.
· Discussion continued with the amount of the discount given questioned.
Agent Cooper explained the difference between Humana and Sagamore is
only 2%. Agent Cooper said the health insurance fund has been
underfunded for the last 3 to 4 years, an additional appropriation will be
necessary this year. Following all discussion, Councilperson Waiz made the
motion to renew with a stop-loss cap of $75,000, seconded by Mayor
Galligan, passing on a vote of 2-1. City Engineer Miller voted nay.
Our discounts create savings in major cities
In the major cities indicated on the map, Humana's networks create discounts that
average up to 20 percentage points greater than other rental networks can offer. In fact,
if you have clients who are currently using the leading national rental net~vork in these
cities, they may improve their network discounts by switching to Humana. They'll take
advantage of the discounts we offer and, in most cases, they'll experience minimal
network disruption since the majority of providers participating in competing rental
networks are also part o£Humana's network.
Having providers throughout the country also means that Humana gives your clients
choice and the convenience of staying in-network when they need care, even if they
travel or live in other states.
Compare the rental netxvork discounts your clients receive now to the average discounts
Humana offers in the cities listed below.
Houston
San Antonio
Tampa
Louisville
Milwaukee
Administered by Humana Insurance Company and Employers Health Insurance Company.
GN-21071-NA 2001 Humana Inc. 9/01
what rental networks can't
San ~
:orpus Christi,TX
Tampa, FI
Jacksonville, FL
rlando, FL
i South Florida, FL
Humana's national
PPO network
Humana's local PPO
networks
Humana Self-Funded Solutions generally provides the deepest discounts
where our national network and our local PPO networks overlap.
Paid by Benefit Area
4/1/2001 - 3/31/2002
Category
Inpatient Hospital
Surgery
Diagnostic/Lab
Physician
Other
All PO((Prescriptions)
Psych/Sub Abuse
Outpatient Hospital
Physical/Occupational Therapy
Total
Average Monthly Headcount
2001/02
$498 611.83
148 264.16
106 308.07
143 420.10
225 355.87
231 138.60
33,245.39
306,292.57
16,184.68
% of Total
29.18%
8.68%
6.22%
8.39%
13.19%
13.53%
1.95%
17.92%
0.95%
$1,708,821.27 100.00%
250
.Cost/Part/Mo.
$166.20
49.42
35.44
47.81
75.12
77.05
11.08
102.10
5.39
$569.61
Paid Claims Analysis
4/1/2001 - 3/31/2002
Padicipant ~ Claims Charges MMDeduct MMOOP
Employees 1752 $1,204,212 $3,596.54 $10,987.91
Spouses 1435 746,785.03 2,474.23 8,427.27
Dependents 1184 341,783.52 1,396.78 6,134.15
Total 4,371 $2,292,780.55 $7,467.55 $25,549.33
Paid
$921,760.79
530,830.43
256,230.05
$1,708,821.27
Prepared for the City of Crown Point by Stewart C. Miller & Co., Inc.
I11
m
III. THREE YEAR CLAIMS REPORT
The last three policy periods shows that claims paid had increased
each year. But the policy period 4/00-3/01 had the highest allowed
claims. This illustration once again shows the importance of network
discounts.
Policy Period
Humana Humana Sagamore*
4/99-3/00 4/00-3/01 4/01-3/02
Allowed
Charge $1,417,652 $2,535,691 $2,483,290
Payment $ 690,062 $1,373,657 $1,823,878
The payment amount does not include stop loss reimbursements.
*Includes Humana's run out claims. Allowed claims $190,510. Payment $115,057.
IV. SPECIFIC AND AGGREGATE STOP LOSS COVERAGE
There are two types of attachment points, specific (individual) and
aggregate. The specific stop loss is set at the beginning of the policy
period. The aggregate attachment point is also set at the beginning of the
policy period but it is subject to enrollment. When an insured meets their
specific stop loss or when the group reaches the attachment point the City
will be reimbursed for any additional claims by the stop loss insurance
carrier.
Policy Period
Specific
Stop Loss
Employee
Family
Aggregate**
Humana Humana Sagamore Sagamore
4/99-3/00 4/00-3/01 4/01-3/02 4/02-3/03
$25,000 $45,000 $75,000 $75,000*
$191.63 $182.56 $263.63 $332.65
$536.57 $511.15 $738.13 $931.37
Attachment Point$1,239,014 $1,180,325 $1,704,460 $2,150,685
The illustration shows that in 4/99-3/00 Humana reduced the City's
attachment point. But that policy period ended Up being the worst year
the City had for claims.
*Agent of Record suggested to increase the specific stop loss to $100,000.
**The aggregate attachment point was based upon 88 singles and 161 family's enrolled for each year.
V. ANNUAL FIXED COSTS
Annual fixed costs consist of specific stop loss premium, aggregate
premium and administrative fees. The fixed cost is based upon employee
or family plan and the monthly enrollment.
Humana Humana Sagamore Sagamore
Policy Period 4/99-3/00 4/00-3/01 4/01-3/02 4/02-3/03
Specific
Stop Loss $25,000 $45,000 $75,000 $75,000
Employee $55.91 $50.41 $41.43 $46.10
Family $110.97 $90.90 $70.22 $81.80
Annual
Fixed Costs* $273,435 $228,852 $183,290'* $206,719
The annual fixed costs have decreased over the years due to the
reduction of the specific stop loss premium. The only year that it has
increased is this current policy period.
*The annual fixed costs was based upon 88 single's and 161 family's enrolled for each year.
**Includes $3875.00 for document preparation and installation fee.