Memorandum                                      

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager Diane Stoddard, Assistant City Manager
FROM:	Lori Carnahan, Human Resources Manager Michelle Spreer, Benefits Specialist On Behalf of the Benefits Committee
CC:	Cynthia Wagner, Assistant City Manager Jonathan Douglass, Assistant to the City Manager
Date:	August 5, 2010
RE:	Voluntary  Benefits for City Employees

Executive Summary

Hays Companies (Hays) and United Benefit Systems (UBS) conducted an RFP for the City’s voluntary employee benefits program, currently insured by Conseco.  There is no record of the last time this employee-paid program had been reviewed through a competitive RFP process.

Voluntary benefits are products that are available for employees to purchase through payroll deduction if they choose to do so.  Other than some administrative time, they are no cost to the city and in some cases provide employer tax savings.  Accident, Critical Illness, Short-Term Disability, Universal Life and Supplemental Vision are typical voluntary benefit products. Long Term Care is less typical but has been requested by employees.

Objectives of this exercise were to find a vendor partner that would provide a higher level of service to the city and our employees, to ascertain the competitiveness of current offerings and to broaden plan offerings to enhance the benefits employees may choose to pay for through payroll deduction.

Program Summary

The City currently offers a voluntary accident plan and a cancer policy.  There is limited participation in the program (18 participants).  Providing a voluntary program with updated benefits and additional voluntary products will generate the following returns for the City.

· Increase employee satisfaction with benefit plan offering (both core and voluntary).

o Choices through expanded program options and tailored/custom elections.

o Benefits are richer and less expensive than products available individually.

o Employees have voiced a desire to Human Resources for enhanced voluntary product selections.

· Relieve financial pressure on medical plan wellness incentives. The program selected offers a wellness incentive for those purchasing their products without city investment.

· Reduce FICA expenses.  The Supplemental Vision and Accident policies can be offered on a pre-tax basis.

· Fills gaps in group coverage without adding direct costs to the City.

Vendor Selection

The RFP was distributed to eighteen (18) potential vendors. There were fifteen (15) vendors responding.  Our current vendor was invited to and did respond to the RFP. There were several different coverage offerings requested: Cancer Insurance, Critical Illness, Intensive care, other supplemental health, accidental injury and disability income, long term care, permanent life-universal or whole, short term disability or others. Each coverage offering was evaluated based on the company’s financial strength as measured by A.M. Best, their operational capability, and policy benefits.  The benefit offering evaluation factored in coverage level vs. cost.  Operational capability looked at claims and customer service, web access, and eligibility processing among other factors.  Not all vendors offer all desired coverages.  Further consideration was given to the benefits of a single source solution vs. choosing “best in class” for each coverage.

The Benefits Committee reviewed the selection procedure and discussed the top three respondents presented with Hays and UBS.  The top selection was invited for an on-site interview with the committee.  References were checked and commissions were reviewed by the Human Resources Division.

American General was the top vendor selected for this program for the following reasons:

• They are an A-rated carrier
• They are the only single-source solution
• They are competitive across all lines
• They offer greater enrollment marketing support
• References indicated they were responsive to both employees upon enrollment and payment of claims when they became due.  The government agency references all had a long term relationship with American General.

Enrollment and Communication

The Human Resources Division is anticipating rolling out the new carrier to all employees during late August and the whole month of September.  This will be done by presenting the new benefit program in group and/or staff meetings.  Individual meetings will then be made available to employees during their work day to meet with a representative and review specific needs.  Hays, UBS and American General will assist with employee education and enrollment support.  American General will work with those currently enrolled with Conseco to either move to American General or to continue with Conseco in a self-pay format.

Recommendation

The Human Resources Division and the Benefits Committee is recommending that American General Life replace Conseco Insurance Company as the voluntary benefit carrier for the City upon City Commission approval.  Hays subcontracting with UBS will serve as the designated Broker for the program and will receive commissions as outlined in the RFP.  American General will make the following voluntary products available to employees through payroll deduction:

• Accident
• Critical Illness
• Short-Term Disability
• Universal Life
• Supplemental Vision
• Long Term Care

The Human Resources Division requests approval of the selection of American General Life as City’s voluntary employee benefit vendor and authorize City Manager to enter into contract negotiations with American General Life through Hays and USB.

Attachments: American General Sample Program Materials