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CITY COUNCIL AGENDA MEMO |
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| | | | | | | | | MEETING DATE: | 12/19/2023 | | DEPARTMENT: | HR | | DIRECTOR: | LaShon Ross, Deputy City Manager | | AGENDA ITEM: | To approve expenditure for Stop Loss Insurance for calendar year 2024. | | RECOMMENDED ACTION: | Approval of Expenditure |
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| | | | | | | | ITEM SUMMARY To approve an expenditure for Stop Loss Insurance for the calendar year 2024 in the estimated amount of $3,283,537 for Human Resources; and authorizing the City Manager to execute all necessary documents. Approved |
| | | | | | | | PREVIOUS ACTION/PRESENTATION In December 2022, the City awarded a one (1) year contract to Hays Companies, Inc., the benefits broker of record, through Aetna, in the estimated amount of $2.7 million annually. Stop Loss is bid out on an annual basis. For Fiscal Year 2022-2023, stop loss reimbursements exceeded premiums by approximately $1.7 million. |
| | | | | | | | BACKGROUND The Human Resources staff has held Stop Loss coverage for its Health Plan for at least 13 years to protect the Health Plan against the liability of a single, large claim exceeding $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 coverage maximums.
Stop Loss carriers will only quote one year of coverage at a time because of the volatility of healthcare costs and potential changes in membership within Health Plans. Carriers were provided the City’s claims experience and subsequently provided quotes based upon current utilization data.
Stop Loss carriers that reviewed the City of Plano’s proposal were Aetna, HM Life, Accurisk, Crum & Forster, Granular, Zurich, QBE, Sun Life, Wellpoint, Voya, and Tokio Marine. After the evaluation, it was determined the best value was to award to Hays Companies, Inc. using Aetna. Hays Companies, Inc. was awarded contract 2017-0019-AC which authorized them to act as the City of Plano’s broker. The contract will be in the estimated amount of $3,283,537, based upon a per-subscriber-per-month rate of $111.78 and a specific deductible of $250,000 from Hays Companies, Inc. This is an estimated increase of 21.6% which was an anticipated increase due to the thirteen claimants that exceeded the Stop Loss threshold of $250,000 in 2023. On behalf of these thirteen participants, $6,398,009 was paid for claims and $3,312,116 was received in Stop Loss reimbursements.
If the City does not award this contract, the City will have risk exposure for individual claims that exceed $250,000. When the Affordable Care Act was enacted in 2010, the law eliminated the ability for a Health 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 individuals from financial bankruptcy in the event of a large catastrophic claim, removal of the limit vastly increased the risk to Health Plans in the U.S. Stop Loss coverage adds a measure of protection for employers as they strive to balance the cost of this benefit alongside escalating healthcare costs. |
| | | | | | | | FINANCIAL SUMMARY/STRATEGIC GOALS 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 $3,283,537 ($2,462,653 in FY 2023-24 and $820,884 in FY 2024-25) 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. |
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