To approve an expenditure for Stop Loss Insurance for the calendar year 2022 in the estimated amount of $2,332,517 from Hays Companies for Human Resources; and authorizing the City Manager to execute all necessary documents. Approved

In December 2020, the City awarded a one (1) year contract for Stop Loss Insurance, through Aetna, to Hays, the benefits broker of record in the estimated amount of $2 million annually.  Stop loss is bid out on an annual basis.

The Human Resources staff has held stop loss coverage for its health plan for at least 11 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 in light of the passage of the Affordable Care Act in 2010 which removed coverage for pre-existing conditions as well as any caps on lifetime maximum.

Stop loss insurance provides a vital safety net for the total risk the City could incur for health care expenses of the City's self-insured health plan. 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.

Hays was awarded contract 2017-0019-AC which authorized them to act as the City of Plano benefits broker. As such, Hays received quotes from Aetna, Granular, Partners RE, Gerber Life and HM Life for the City of Plano. After the evaluation, it was determined the best value was to award to Hays Companies using Aetna.  The contract will be in the estimated amount of $2,332,517. This is an estimated increase of 17.1% which is based on the large number of claimants in 2021 that exceeded the Stop Loss threshold of $250,000. The city will receive a reduction in the fee Aetna charges the City for using its medical healthcare network.

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 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 Fund and 115 Trust Fund. This item approves a contract for Stop Loss coverage to provide insurance for catastrophic claims, in the total estimated amount of $2,332,517 ($1,749,388 in FY 2021-22 and $583,129 in FY 2022-23) and will be funded via regular employee, retiree, and City contributions to the City's Health Claims Fund and 115 Trust Fund.

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