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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.