To approve an expenditure for Stop Loss Insurance for the calendar year 2025 in the estimated amount of $4,094,604, based upon a per subscriber per month rate of $139.50 and a specific deductible of $250,000 from Brown and Brown for Human Resources; and authorizing the City Manager to execute all necessary documents. Approved

In December 2023, the City awarded a one (1) year contract to Brown and Brown, the benefits broker of record, through Aetna in the estimated amount of $3.2 million annually.  Stop loss is bid out on an annual basis.  On a fiscal year basis, stop loss reimbursements exceeded premiums by approximately $2.9 million.

The Human Resources staff has held stop loss coverage for its health plan for at least 14 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 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, Berkshire Hathaway, Crum & Forster, Granular, HM Insurance Group, Medical Risk Managers, QBE, Sun Life, Symetra, Tokio Marine HCC, and Voya.  After the evaluation, it was determined the best value was to award to Brown and Brown using Aetna.  Brown and Brown was awarded contract 2017-0019-AC which authorized them to act as the City of Plano broker.  The contract will be in the estimated amount of $4,094,604. This is an estimated increase of 24% which was an anticipated increase due to the large number of claimants in 2024 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 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 $4,094,604 ($3,070,953 in FY 2024-25 and $1,023,651 in FY 2025-26) 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.