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HomeMy Public PortalAbout10.20.2015 City Council Special Meeting PacketMEDIIVA SPECIAL MEETING AGENDA MEDINA CITY COUNCIL Tuesday, October 20, 2015 6:00 P.M. Medina City Hall 2052 County Road 24 I. Call to Order II. Benefits Discussion III. Adjourn Posted 10/16/2015 MEMORANDUM TO: Medina City Council FROM: Scott Johnson, City Administrator DATE OF REPORT: October 14, 2015 DATE OF MEETING: October 20, 2015 SUBJECT: October 20, 2015 Work Session — 6:00 PM Work Session 6:00 PM Benefits Discussion (small group plans vs self -funding) Yvonne Johnson, Area Vice President, Employee Benefits for Gallagher Benefit Services, Inc. will be at the Work Session to present information on the benefit options for 2016 and 2017. The City of Medina currently belongs to the LOGIS group for benefits. Yvonne Johnson heads the LOGIS group and will be able to discuss future options. Attached is her presentation for the Oct. 20th meeting. 10/16/2015 OArthur J. Gallagher & Co. BUSINESS WITHOUT BARRIERS'. City of Medina and LOGIS OCTOBER 20, 2015 Ah11�H J. GALLAGHER S. CO. I BUSINESS WITHOUT BARRIERS^ Agenda • LOGIS • 2016 Renewal • Cadillac Tax • What's Happening in 2017 — Self -Insuring and Other Options • Penalties for Early Withdrawal • 2016/2017 Planning 02015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J. GALLAGHER E. CO. BUSINESS WITHOUT BARRIERS. s 1 10/16/2015 <L\ ›, 6 1 ii__. ..• LOCAL GOVERNMEN`i INFORMATION SYSTEMi ..15 GALLAGHER BENEFIT SERVICES. INC. Who and What is LOGIS Headquartered in Golden Valley, Local Government Information Systems (LOGIS) is a Joint Powers, intergovernmental consortium of Minnesota local government units. The mission of LOGIS is to "Facilitate leading -edge, effective and adaptable public sector technology solutions through the sharin, of ideas, risks, and resources in a member -driven consortium." The LOGIS consortium is controlled by its members. LOGIS' Board of Directors is composed of one representative from each agency. All funding decisions are controlled by the members through an annual budget, an annual work plan, and by action of an Executive Committee, acting as officers of the Board. This committee meets quarterly and establishes operating policies, sets service charges, and approves expenditures. LOGIS was founded in 1972 by seven cities — Golden Valley, Crystal, Eden Prairie, Edina, St. Louis Park, Coon Rapids and Brooklyn Center — that were looking to pool resources and save taxpayer dollars. LOGIS currently has 73 member organizations and serves more than 1.2 million residents all over Minnesota. 52015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR,5 GALLAGHER 5 CO. 1 BUSINESS WITHOUT BARRIERS'. 2 10/16/2015 Who and What is LOGIS In addition to LOGIS' information systems and services, LOGIS also provides medical and life insurance to its members. Current membership in the medical plan is 40 member groups with over 4,000 employees and a total of over 8,100 participants. Through an extensive RFP process and evaluation, Blue Cross and Blue Shield was chosen as the insurance carrier for 2012 through 2016 for LOGIS Health Care Group members. . 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J_ GALLAGHER & CO. I BUSINESS W RHOUT BARRIER: Gallagher Service to LOGIS Members • Medical and life insurance consulting services Open enrollment communications — Employee intranet site — Employee manual • ACA Compliance newsletters, bulletins, webinars and consulting • General compliance • GASB Valuations • Wellness consulting • HR support 222015 GALLAGHER°SHEEN SERVICES. INC. ARTHUR.1 GALLAGHER S CO. BUSINESS WITHOUT BARRIER$"^ 3 10/16/2015 _ K., GALLAGHER BENEFIT SERVICES_ INC. ARTHURJ GALLAGHER 8,CO I BUSINESS un 2016 Renewal Health Plan Renewal • For the 2016 renewal, the LOGIS group will receive a 13 month rate increase of 10.2% (I_ month rate cap of 11.5%). The needed increase for the group was 16% based on claims. • The needed increase is down from 21.7% for the 2015 plan year. (35.3% for 2014 plan year) • Rates will not need to be increased for Healthcare Reform and State Mandates • The graph below represents the change in premium year over year from 2008 — 2015. 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% Premium changes year over year 2009 2010 2011 2013 2014 2015* - Actual change based on enrollment ( Negotiated change to premium —!—Increase needed based on experience *2015 actual change based on enrollment - is estimated from April 2015 enrollment for 13 months. ® 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J. GALLAGHER 5 CO. BUSINESS WITHOUT BARRIERS," 4 10/16/2015 2016 Renewal Health Plan Renewal • Small groups (2 — 49) will no longer be allowed to remain in the LOGIS fully insured pool as of 1/1/16 • Remedy for one year "fix" — renew the pool as of 12/1/15 • Rate increases will be delayed until 1/1/16 • Deductible and out of pocket maximums will roll 1/1/16 • Employee/Employer plan changes will be effective 1/1/16 • Will be "invisible" to employees • Employers will receive contracts showing 12/1 effective date and rates shown "as filed" . 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J_ GALLAGHER A CO. I BUSINESS W RHOUT BARRIER: ARTHUR J. GALLAGHER S CO. 1 BUSINESS WITHOUT BARRIER, 5 10/16/2015 "Cadillac" Tax — 2018 COBRA Rate or Premium >_ $10,200 for individual or $27,500 for family = 40% of plan value that exceeds threshold Special Provisions • High risk professions • Early retirees • Age & Gender ARTHUR J. GALLAGHER s COUSINESS WITHOUT BARRIERS 6 Cadillac Tax Assumptions • In addition to premium, plan costs to be part of the Cadillac Tax include: — Health Flexible Spending Accounts (FSA) contributions, — Employer/employee pre-tax contributions to the HRA and/or HSA ARTHUR J. GALLAGHER E. CO. BUSINESS WITHOUT BARRIER,' 6 10/16/2015 What does this mean for You • Avoiding the Cadillac Tax: — Adjust rate structure • Raise or lower certain tiers to reduce tax — Improving overall health of employees • Better health means lower premium increases — Modify benefit plan design • Less rich plan designs — Forecast impact to prepare • Impact to City budget — May reduce City's ability to fund needed employee contribution increases due to excise tax liability ARTHUR J. GALLAGHER S CO. I BUSINESS Sr WHAT'S HAPPENING IN 2017 ® 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J. GALLAGHER 5 CO. BUSINESS WITHOUT BARRIERS," 7 10/16/2015 What's Happening in 2017 Why Now • Small groups under 50 lives currently under guarantee issue contract only through 2015 — 12/1 renewal for 2016 • Groups less than 50 will be categorized as "small group" effective in 2016 — PACE Act repealed expansion of small group market from 50 to 100 — Minnesota may change definition back to 100 lives when in session in 2016 for 2017 • If LOGIS stays fully insured, groups with less than 50 lives (or 100 if MN expands small group definition) will be forced to leave the pool for the small group market or other options effective 1/1/17 • Potential for savings from taxes if pool self -insures A 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J_ GALLAGHER A CO. I BUSINESS W RHOUT BARRIER: Types of Insuring Pure Administrative Services Only (ASO) are only for the largest of employers. Fully -Insured Retrospective Experience Rated Minimum Premium Plans Partial Self - Funded with Stop Loss Increasing Employer Risk and Potential Savings A 2015 GALLAGHER BENEFIT SERVICES. INC. Pure ASO ARTHUR J. GALLAGHER S. CO. I BUSINESS WITHOUT BARRIER, 8 10/16/2015 Self- Insured Overview Why consider self -insuring medical benefits? Lilly Insured Vs. Self -Insured Carrier Defined 2.0% (on all premiums) 1.0% 2.5% Same (paid by Carrier) T 5 GALLAGHER BENEFIT SERVICES INS Plan Designs Customizable State Premium Taxes 2.0% (only on stop -loss premiums) HMO/Income Taxes None ACA Premium Taxes None PCORI/Transitional Reinsurance Fees Same (paid directly) Principles of Self -Insuring A self -insured plan is one in which the employer or joint powers entity, assumes the financial risk for providing health care benefits to its employees. • In practical terms, self -insured employers pay for claims out- of-pocket as they are presented instead of paying a pre- determined premium to an insurance carrier for a fully insured plan. • The pool would assume risk exposure while individual member groups would be charged a premium. • The new self -insured pool would necessitate a new JPA ®2015 GALLAGHER BENEFIT SERVICES. INC. ART.!, GALLAGHER B CO. I BUSINESS WITHOUT BARRT 9 10/16/2015 Stop -Loss Insurance Insuring the larger less predictable claims. • Specific Stop -Loss: Protection based on an individual member's claims incurred during the plan year. • Aggregate Stop -Loss: Protection based on the entire memberships' claims incurred during the plan year. • Expected Claims: Total claims under any specific stop -loss reimbursement. • Attachment Point (Maximum Claims) • Typically, 110%-125% of expected claims, i.e., the maximum amount above expected claims the Plan Sponsor is at risk/liable. L LLAGHER BENEFIT SERVICES. INC. ARTHUR J_ GALLAGHER 5 CO. I OPTIONS AVAILABLE WITHIN THE POOL C 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J. GALLAGHER 5 CO. I BUSINESS WITHOUT BARRIER, 10 10/16/2015 '.OGIS Funding Options Option 1 — Self -insure whole pool — Each group would either opt in or find other stand alone coverage • Gallagher would assist with individual group quotes both in large and small group markets for those opting out • Option 2 — Fully Insure the pool with large groups only (50+) — Groups with less than 50 lives would not be eligible • Gallagher would assist with individual group quotes in the small group market A LLAGHER BENEFIT SERVICES. INC. ARTHUR.1_ GALLAGHER 5 CO. I BUSINESS W RHOUT BARRIER: > > Self • A —Insured 2017 "Buy In" costs LOGIS Group Reserve Estimate as of 12/31/2017 Lug, Gtoup Small Group Total toms Gc. 2017 Projected Chums 535,315,168 $9,121,267 $44,436,435 B Prolecred Lives 39,516 10,068 49,584 [ l3vaageMonthly Clams $2,942,931 $760,106 $3`010.36 D Recommended Minimum B3NR 53,859,581 $996,860 $4,856,441 E Reserve Expressed in Months of Clams 1.31 I 1.31 1.31 F Reserve Expressed m Days of CI.. 40 4o 4o G Additional Reserve I nad4nR. tee ar est F7 ptem oua — 53,997401 51,036,492 $5,033,892 H Total Estimated Reserve $7,856,982 52,033352 $9,890,333 ' Reserve Expressed in Months of Claims 267 268 2.67 Reserve Expressed. in Days at -Claims 81 82 81 .: Additional Buy-rn Amount $971,810 $246,965 $1,218,775 L Additional Buv-in Amount PEPM $24.59 $24.53 $24.58 tt Total Estimated Reserve. $8,828,792 $2,280.317 $11,109,109 N Reserve Expressed in Months of Claims 3 3 3 O Reserve Expressed im Days of Claims 92 92 92 'ILe above BueduyM 02015 anaB s assumes LOGIS ma>, Lc :elf ItuaLLSLL.L ca . • tGot' Iota uarising CMSpmjecaL Fatly Lammed peemium enev. Amu: 20rE1 cme>Ina be Based oa 8C85 seuruat eae,,:adani. GA AAA). LijliriawatErerpLyeA.alp ova s,.,ase., srOra, eK,.,,.: Ler LB> Leamited ARE Asap. eC Dee atroEELswrtr: ac a,,F.;M1an:aeSd.rrt .a.LA LnSaw. ,. amempair dd.Aeinget:rme drag*. &ua ... r,., mrar, Be . �. L.A. aELL., . ar•Ad .rr, P.:aa;:. w...,.LM w.�aaru fiem.Yr GALLAGHER SERUM SERVICES .III.. i!Em.'ma or,SBR BAFRO %a3u,�,i BU SINESE WITH CC T BARRIE,- 11 10/16/2015 Self -Insured 2017 Experience banding options LOGIS Group Renewal Rate Banding Formula: Option 1 Average Increase Plus/Minos 5.0°/0 5% Loss Ratio Bands 1% Renew-a1 Adjimm2enr Steps ewuea2 Banding LOG19 Net Group 24 Month Lora Ratio FomSNa Overall Entity Adjustment Adjustment Adjustment 64.5°° ul Latt 5 05 73Y• = °e 6465a. <= 69.i°5 4 ©°° 73% 53et 59.611 e 74 Po -3 Oa. 73% 43te f= 79.5°° _05° 73% 535e -10° 7371s 63% S-1- Ks. 94.6% MO% 73% <= 99.6°b 1 0°, 73% s3% 49.75o 1= 104.65'o 20°0 73% 9.Y% 104.7% <= 109.6°s 10° a 7.3% 10.3% 109.7% <= 1146% 40% 73% 113°: 1147% m mote 50% 73% 1_ 3° a saeae ue-/-s.Pt oft. aveoarasa Rma Ras• adn:®mt m 1°'. ineemeas >nsmew n. adNsvntm Is -:.- 5'.. of Rene gt LOGIS ore 12 aMmment a for Morose pucposr. oar sad does no[ seat. tit rm.. LOG15 Overall . Loss Ratio -5.0% 89.6° 5.0% 84.6% Zeta Band 94.6% LJJI '3 GALLAGHER BENEFIT SERVICES INC LOGIS Group Renewal Rate Banding Formula: Option 2 Average Increase Plus/Minus 2.5./0 5 % Loss Bono Bands 0.5% Renewal Adjustment Steps Eandu S Bantling LOGI5 Net Group 21 Month lose Ratio Fomuda Overall Entity Adjustmom Adjustment Adjusaamt MM•M� MMIN=M® MEIZMUMME MION MMONIMMMMI= M=UE® MMMM® MGEM=MM MDMMEI 64.6% <= 60.5% 69.6% 74.5% 94 7% = 99A°a 99.7°b _ 104.6° o 104.7% <= 109,6°5 109.7% c= 114655 114.7% Or more IMEISIIMIEMMMUM e Em It are *A 60te ends waoll lass Lee > Eat• a0j6a6dmt m 0.5, AMMO. > Mamma we aajasmenrn+/_ 15%at mote = LOGES ovum➢ adhm®ent is Om Mamma./ pespeses may sad doe= eel sa LOGIS Overall Lose Ratio -5.0% 89.6% 5.0% 846% Zeus Band 946°/t . senewal Self -Insured 2017. a„ .C.11r1< Py� Ur pi... 4.1.18.cohlm...Cd t�..� Its SI1G15 Coons E, Gr.y.. atlr Pmlba lm..l _.ar.L2015 �.n..viada.11.M w� ..aloi. .a...":� 11.0e ,�... 1 e....� .P. IP. 4Pa Gm- el emMa COX 01h [er, Co* Ca vt Onne 15 ll 4P. OPi OP. 1P. OP, Coal OM nP. Cu •!P 14 1V° nM UM O3a Geal l®see a 135 ea5% rM OM 00. Ca.•111•1001 IW b atom 61% el es nM OM OM aM Cirri lt•••eam g13n ]0Y 1.06 • 1, P P, oP: Gm et Lame. err aura u me. 00% Des OP. Cat al Oder CaR la e Ca.daehLY Car ma.rea.h 4tt4t4 , 4cNkmeaPed Gt. elk <a ae nt u 1110. Res me uSa 5541. gams ret. ✓ M PO, ✓ P. VP't rP, 00e. OP. OP. Ian 0 P'. 0a. 0P. OP. OP. asn OP: Car•17s11En CV ofWmea AA. re. rPh a Pr OP. 0 PI ▪ 06. Mesa GAL Remo. 01 Pf ItlP. rm. rm. OP. OW. 0P. Nm.a Coeur Nadas.. CtlieC®.m :.1 0516. EP, OP. OP. 0,1 o Vadue. tie.eAe S.mar Leb®.[ewn 5aah L.m 5muxem Pe, Owe Ihu L.en Peh])mn W 4•. nt P. SIM 114.0. rP. MP. d 0a5 5P. e. P. 0P'. CoeNoe Fee lasere lore men Dan OP. Oath MA Dux Kin 0ax .• eeamslrlt•4�nanlutlps 1i hMe.rYai[L lM a/x /rimemmeimmen• ®2015 GALLAGHER RENEW SERVICES. INC. ARTHUR J. GALLAGHER S CO. BUSINESS WITHOUT BARRIER,' 12 10/16/2015 OTHER OPTIONS OUTSIDE OF THE POOL 201 GALLAGHER BENEFIT SERVICES_ INC. ARTHURJ GALLAGHER CO BUSINESS un Fully Insured Options Small Group (2 — 49) • Fully insured small group market — Rates not available until October — Age rated — Different plan options — Must provide pediatric dental ®2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J. GALLAGHER E. CO. BUSINESS WITHOUT BARRIERS," 13 10/16/2015 gAlf — Insured Options Small Group (2 — 49) • Self -insure using new carrier options developed for small group market — Options vary by carrier — Lower risk plan design — Carriers take on more of the specific and aggregate stop loss rise — Minimum risk plans — Rates based on maximum liability — If group does not incur maximum liability, a % of the surplus is returned after year end ® 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J_ GALLAGHER & CO. I BUSINESS W RHOUT BARRI, Penalties For Early Withdrawal From LOGIS An entity that is a current Member of the LOGIS Group Insurance Program may not withdraw from the program for the succeeding year unless (1) it provides notice of withdrawal prior to June 15 of the current year or (2) the Member requests leave for a late withdrawal and LOGIS's Executive Committee grants the leave after concluding, based on objective evidence, that the Member's withdrawal financially benefit the other LOGIS members as a group. Any other withdrawal will be considered an "Unauthorized Withdrawal", with the withdrawing Member being referred to as a "Defaultinb Member". A Defaulting Member will be obligated to pay to the LOGIS Group Insurance Program (1) liquidated damages of $500 multiplied by each individual insured through the Defaulting Member under the LOGIS Group Insurance Program as of June 15 prior to the Unauthorized Withdrawal and (2) the member shall continue to be responsible for all of its prorated share of any unpaid obligations. In addition, liquidated damages are due and payable within thirty days of an Unauthorized Withdrawal. ® 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J. GALLAGHER & CO. I BUSINESS WITHOUT BARRIERS's 14 10/16/2015 t 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHURJ GALLAGHER CO I BUSINESS un Key Planning Priorities Timeline — Self-insured/Fully insured • Will need groups nonbinding intent to participate in self-insurin, by end of January 2016 • RFP(s) will be released March 2016 • Spring of 2016 next opportunity for State to expand definition o small group • Groups have to make a final decision by June 15, 2016 — Stay in LOGIS if self -insured or, — Leave if LOGIS fully insured • If the group leaves LOGIS, Gallagher will assist in selecting best option for the City for 2017 and beyond — If small group market, rates unavailable until Oct. ® 2015 GALLAGHER BENEFIT SERVICES. INC. ARTHUR J. GALLAGHER 5 CO. I BUSINESS WITHOUT BARRIERS°. 15 10/16/2015 Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its aBiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc.. a non -investment fimt and wholly (mated subsidiary of Arthur J. Gallagher & Co., is a licensed insurance agency that does business in California as "Gallagher Benefit Services of California Insurance Services' and in Massachusetts as "Gallagher Benefit Insurance Services;' Securities and Investment Advisory Services may be offered by GBS Retirement Services. Inc. and executed through NFP Securities, Inc_ Member FINRA/SIPC. Investment advisory services end corresponding named fiduciary services may also be offered through Gallagher Fiduciary Advisors, LLC, a Registered Investment Adviser. Gallagher Fiduciary Advisors. LLC is a single -member, limited -liability company. with Gallagher Benefit Services, Inc. as its single member. Not all individuals of Gallagher and none of Callagher Fiduciary Advisors, LLC individuals are registered to offer securities or investment advisory services through NEP Securities. Inc. NFP Securities, Inc. is not affiliated with Arthur J. Gallagher & Co.. Gallagher Benefit Services. Inc. or Gallagher Fiduciary Advisors. LLC Neither Arthur J. Gallagher & Co., NFP Securities. Inc.. or their affiliates provide accounting, legal, or tax advice. ARTHUR J. GALLAGHER A GO. I BUSINESS WITHOUT BARRI, 16