Memorandum

City of Lawrence

Human Resources Division/City Manager’s Office

 

TO:

Diane Stoddard, Interim City Manager

FROM:

Lori S. Carnahan, Human Resources Manager

Michelle Spreer, Benefits Specialist

CC:

Casey Toomay, Assistant City Manager

DATE:

October 14, 2015

RE:

Stop-Loss Insurance 2016

 

The Human Resources division requests approval to proceed with contract negotiations for 2016 stop-loss coverage for the Employee Healthcare Plan with a new vendor, Sun Life Financial and the-Hays Coop1 (Sun Life Hays Coop). We request the following action be placed on the October 20th City Commission agenda.

 

Authorize the City Manager to execute the necessary agreements with Sun Life Financial and the Hays Coop to provide stop-loss coverage at the current levels for the City’s Employee Healthcare Plan for 2016 in the amount of $944,471 and Cigna for interface fees in the amount of $15,426, as recommended.

 

Stop-loss coverage is insurance that protects employers who self-fund their healthcare plans against catastrophic losses.  The stop-loss carrier becomes liable for losses in excess of specified limits. Specific coverage insures the City for claims over a certain threshold relating to any one individual.  Currently the city’s specific limit is set at $125,000. Aggregate coverage insures the City over a certain threshold related to all claims incurred. 

 

Hays Companies, the City’s benefits consultants, sent out a Request For Proposal (RFP) on behalf of the City. Eight companies responded.  The incumbent Voya and Sun Life Hays Coop were the most favorable quotes.  Both were given final items the City wished to have addressed before making a recommendation.  Sun Life Hays Coop ultimately provided the most financially favorable quote with the fewest restrictions. Their rate quote is valid through October 31, 2015.

 

The Human Resources division budgeted for a 25% increase to stop loss premiums for 2016.  The recommended renewal is well below budgeted parameters for both premium and maximum claim liability. Sun Life Hays Coop’s quote is 7% less than what we are currently paying for a total savings of $76,800. We recommend approval to purchase stop-loss coverage at the current levels for the City of Lawrence Healthcare Plan for 2016 from Sun Life Hays Coop for a cost of $944,471 and pay an interface fee to Cigna of $15,426.

 

Sun Life Hays Coop currently has 15 employer groups participating. The average number of employees in each group is 500. The premiums that each employer pays help to build the coop. If total stop loss claims paid by Sun Life within the coop are less than the premiums paid by the employers, participating employers have a chance to receive a refund of a portion of the premiums they paid that year. The individual refunds for an employer would depend on the amount of premium the employer paid.

 

Sun Life Financial insures the coop incase the coop has more stop loss claims expense than what is brought in by employer premiums. Therefore, risk to employers participating in the coop is limited to the annual premium.  

 

Other vendor contracts that are on auto renewal each year between RFP’s include ASI (Flexible Spending), Optum Health (COBRA administration), New Directions Behavior Health (EAP services), Cigna, Delta Dental and MedTrak. The city will continue the contract with each vendor for 2016.

 

Attachment: Hays Companies Stop Loss Marketing Comparison of top two respondents.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.     Hays Companies worked with Sun Life to create a Stop-loss Cooperative that provides Hays clients with a unique and differentiated solution.  Hays Companies provides Sun Life high level, de-identified chronic disease scoring from data analytics to enable Sun Life to more accurately predict large claim activity.  Based upon this information Sun Life’s underwriters will determine if a group is eligible or not for the Coop.  Acceptance into the Coop provides volume based discounts, a no laser contract, a 40% rate cap at renewal and the eligibility for a reimbursement of premiums, (Experience Rated Refunds or ERR) based on the performance of the Coop.  Sun Life Financial is a leading stop loss insurance carrier, is rated A+ by A.M. Best and has been in business since 1865.