The Human Resources staff has held stop loss coverage for its health plan for at least 20 years to protect the plan against the liability of any large claim.  The City’s stop loss coverage provides protection for any individual claim that exceeds $250,000.  This is particularly important coverage considering the passage of the Affordable Care Act in 2010 which required coverage for pre-existing conditions and removed any caps on lifetime maximum.

Stop loss carriers will only quote one year of coverage at a time because of the volatility of healthcare costs and change in membership of the health plan.  Carriers are provided the City’s claims experience through October and provide quotes based upon current information.

Stop loss carriers that reviewed the proposal were Aetna, Berkley, Evolution Risk Partners, HM Life, Medical Risk Managers, One80, Pace Underwriters, Skyward, SL Management Partners, Sun Life, Tokio Marine HCC, and Voya.  After the evaluation, it was determined the best value was to award to Aetna.  The contract will be in the estimated amount of $5,138,784. This is an estimated increase of 26% which was an anticipated increase due to the large number of claimants in 2025 that exceeded the stop loss threshold of $250,000.

If the City does not award this contract, the City would have risk exposure for claims that exceed $250,000.  When the Affordable Care Act (ACA) was enacted in 2010, the law eliminated the ability for a plan to have a lifetime maximum on the amount of a medical claim.  In years prior to the ACA, health plans could have a maximum benefit that it would pay towards a claim (typically $1 million) and the member would be responsible for paying any amount over that limit.  While the ACA’s change positively affected the member from financial bankruptcy in the event of a large catastrophic claim, this removal of the limit, vastly increased the risk to the health plans in the U.S. and added a larger cost employers have spent subsequently on stop loss coverage as the potential claim exposure has gone from $1 million to any dollar amount.

Funding for this item is available in the Health Claims and Other Post-Employment Benefits Trust Funds.  This item approves a contract for Stop Loss coverage to provide insurance for catastrophic claims, in the total estimated amount of $5,138,784 ($3,854,088 in FY 2025-26 and $1,284,696 in FY 2026-27) and will be funded from contributions through the aforementioned funds. Contributions are made by employees, retirees and the City.

Approval of this agenda item will support the City's Strategic Plan Critical Success Factor of being an Excellent, Innovative, and Accountable City Government.