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HomeMy WebLinkAboutM-78-019839 CITY OF MIAMI. FLotzrcA iNts.R-OF 'tCC MEMORANbUM Ta: d. R. Grassie City Manager E, Gunderson Finance Director e TE. sl;s3Jc:c. March 9, 1978 Group Health Insurance FILE Pt:rL vie act.t; Gulf Life Insurance Company t "C.t_'7' s J1t:c Copy of Letter The undated letter from Manuel Amor to Mayor Ferre received by the City Commission March 9, 1978 was covered in all respects in my letter of March 3, 1978, copy of which is attached. All correspondence had been responded to either by letter or meetings, which meetings did not require written response. These meetings were held with Mr. Emer- son, the regional group manager with Gulf Life Insurance Company prior to the appearance of Manuel Amor, agent of Gulf Life who would appear to be an employee of Mr. Emerson. June 13, 1977 Mr. Jim Duncan of Cor-Ben Consultants Inc. was provided with experience information and specification requirements with which to provide a proposal with reference to self -funding group health. August 25, 1977 I wrote to Mr. Duncan providing him with an update and another full set of specifications, again inviting proposal to be received in time for consideration prior to the expiration of the September 30, 1977 contract year. September 2, 1977 Received acknowledgement from Jim Duncan indicating proposal would be presented within the time frame requested. September 20, 1977 Meeting held in my office with Jim Duncan, who brought Mr. John J. Emerson, regional group manager of Gulf Life Insurance Company and a written proposal for administration through Gulf Life. In attendance with me was Marshall Litvak. Merits of the proposal were discussed and the deficiencies of the proposal were pointed out to Mr. Emerson. September 27, 1977 Meeting held in my office with Jim Duncan, John J. Emerson and Marshall Litvak, at which time we received the written proposal which was a final and revised presentation of Gulf Life. Additional questions with reference to the basis of some of the proposed cost were raised. October 26, 1977 Letter received from John J. Emerson, which was in response to the questions raised in the September 27, 1977 meeting and which required no response as it was additional support of the proposal. -1- 78-198 J. R. Gtassie City Manager Re: Group health Insurance Jahuary_lb, l918 Letter from John J, Emerson attempting to clarify verbal communications with his representatives, Prior to written response being provided, Mr. Amor appeared in my office, at which time I advised hint of the status of their proposal as compared to others received, He was referred to Marshall Litvak and had subsequent meetings with him, at which time he was advised in a completely open manner of the various proposals With their merits and deficiencies and with the merits and deficiencies of the proposal of Gulf Life, February 3, 1978 Letter from Manuel Amor responding to the several meetings, which letter was responded to in a meeting between Marshall LitVak and Mr, Amor and therefore did not require a written response, March 3, 1978 Advised by Bob Homan that your office had received contact with reference to Mr, Amor's contention that he had not been given the courtesy of a response and therefore a written response was made on March 3, 1978 stating our position with reference to the proposal, Proposal Procedure A self -funded administrative claims program for group health and life was explored with The Equitable in November 1975. A proposal was received from them in Janu- ary 1976 which substantiated that the Federal Pension Reform Act, Section 514, effective January 1, 1975, made this concept possible. The necessary state legis- lation to allow self -funding by municipalities was not effective until January 1, 1977. Early in 1977 the options available and the feasibility of a self -funding program were again studied with contacts being made to major group health suppliers to arrive at the programs available and the feasibility of implementation by the City of Miami. In June of 1977 all group health suppliers who responded were offered the oppor- tunity to present proposals and they were supplied, upon request, with claims experience and copies of our group health program. In August of 1977 updates of experience, including the then available claims experience through June 30, 1977, were forwarded to the companies who had expressed interest in submitting proposals. The companies were: Cor-Ben Consultants (subsequently submitted the proposal for Gulf Life) Blue Cross -Blue Shield The Equitable Life Assurance Society McGee and Company Prudential Life Insurance Company Florida Administrators in conjunction with Lincoln National Insurance Company -2- r c= R, Grassie City Manager Re: Group Health insurance Also contacted were the qualified health maintenance organizations with reference to their possible implementations into the Citys group health consideration, These companies were: AV-Med Health Plan American Health Plan In that the concept is new, the companies that expressed interest indicated they would prefer making individual proposals of their method of administration. As of this date, the companies that indicated the desire to provide this service, proposals have been received from: The Equitable Life Assurance Society Gulf Life Insurance Company McGee and Company Florida Administrators Prudential Life Insurance Company Although they expressed interest and obtained all specifications to prepare a proposal, the following companies have indicated that they are still not able to offer a definite program: Blue Cross -Blue Shield Metropolitan Life Insurance Company Evaluation of the proposals presented to you at the meeting of the Self -Insurance Trust Fund on September 13, 1977 were finalized by the proposal presented to you in the memorandum of March 3, 1978 which accompanied the Resolution Agenda, Item 9, for the Commission Meeting March 9, 1978. -3- d, R. Grassie City Manager E, Gunderson Finance Director :iil' Cir '•!'.�`11, FL01210A INTER -OFFICE MEMORANDUM March 3, 1978 Group Health Insurance FILE. t":" "r-`.c5.s Administrative Claims Service by The Equitable Life Assurance :. ,,:.$tiRrs: Society of the United States Outline of the terms and conditions of the Administrative Claims Service agreement with the City of Miami: All terms, conditions, benefits and administrative services remain the same as in the original Equitable Group Policy No. 19696H and as described in the Group Insurance Plan Booklet, published February 1, 1975. The administration of benefits of the Plan continues, as indicated above, with only the following exceptions: 1. The Group Health Benefit Program will be self -funded, 2. Equitable will no longer hold the reserves. The City will maintain its own reserves and pay only for actual claims, plus a 4.5% administrative cost. 3. Design and printing of Plan documents will be the responsibility of the City of Miami. 4, The Equitable will provide the City of Miami with weekly listings and copies of all payments made, and with monthly recap of all claims experience by benefit. However, the Equitable will not provide a review of claims experience or underwriting advice. Charges for the Administrative Claims Service are as follows: 4.5% of claims paid limited to a maximum charge of $3.46 per enrolled employee per month with the monthly enrollment averaged on an annual basis. Exclusive of the Administrative Claims Service for the health benefit rates, the life insurance under Policy No. 19696 will be 90G per thousand to be effective April 1, 1978. This represents a reduction of 14G from the previous rate. Under Policy No. 19696D for Accidental Death and Dismemberment benefits, the rate shall continue at 11G per thousand. Upon implementation of the Administrative Claims Service agreement, $750,000 of the existing reserves will be transmitted to the City of Miami and the balance of the reserves will be calculated and transmitted before July 31, 1978. Dividend for the period ending September 30, 1977 shall be transmitted to the City of Miami prior to April 1, 1978 with the dividend calculated for the period October 1, 1977 through March 31, 1978 to be transmitted before July 31, 1978. if, 0� J�f;- „:` .,,tilt/ . 1' 0 f 1 .yytt,,��I.. ''�+"'� a }1 t1 a ` t`?I?i - 11114` ? 4 . : 1'a . r ' ..\fCaftOt Ofc,ce of eh@ DIRECTOR OF FINANCE v o Box 33oi08 COCONUT GROVV STATION MIAfvl 1, FLORIDA 33133 March 6, 1978 Mr, Dennis J. J. McGee McGee and Company Security Trust Building Miami, Florida 33131 Dear Mr. McGee: igAtilmk hf I ottelktel NuN,C. P►L ►ov iNCE Ot �iCtf S Ati-N of #at uNiito $riTi9 .&ND CANAOA We wish to take this opportunity to thank you for your f proposal with reference to the City of Miami's Health and Life Plan. The information supplied to us, as well as the personal meetings, were most beneficial to us. We wish to advise that the proposal of The Equitable to pro- vide administrative claims service for self -funding a health benefit program is being recommended to the City Commission because of the considerations of competitive rate, satis- faction with claims service currently being provided and, most important, the agreement to transfer to the City of Miami the existing reserves. When the City of Miami's Life and Health Program is due for renewal, we hope that you will express a desire to submit a proposal at that time. Thank you for your past courtesy. Sincerely, -LL t c 1.4.1- . E. Gunderson irector of Finance • tfu L f tauut, twist ' t 41.1 March 3, 1978 Mrs Manuel Amor, Agent Gulf Life insurance Company P. O. Box 417, Riverside Station Miami, F1 33135 bear Mr. Amor: 4 " .. Office of Risk Management W. O, fox 1307O5 Miami, i`iotida 33133 (305)579-6058 We are in receipt of your letter of February 3, 1978 and, as was explained to you on your several visits, both with me and with Marshall Litvak, our Risk Manager, the proposal originally made by Gulf Life Insurance Company and subsequently amended with the proposal on January 10, 1978, proposed an administrative claim service fee of 6% of claims paid during the first year and 41% of claims paid in subsequent years. There was also a request for a $300,000 initial deposit from which to pay claims. The life rate quoted was 93C per thousand and the accidental death and dismemberment 11C per thousand. As stated in your letter of February 3rd, the "Gulf Life's pro- posed costs are very similar" to those submitted through other proposals. As we explained to you, this proposal is similar but actually slightly higher than the cost proposed by our present carrier, The Equitable. In addition to the fact that the rates proposed by Gulf Life In- surance Company are higher than those of the proposal of our present carrier, the City, by changing carriers at this time, would lose the availability of the return of reserves. There- fore, consideration of a change to your company at this time would not be financially feasible. All things being equal, consideration would certainly be given to a Florida based company and, considering the tax advantage of a Florida based company, it would be assumed that your quotation should actually be lower than that of a non domiciled company. -1- OP Mr, Manuel AMor, Agent March 3, 1978 Gulf tife Insurance Company tf all rate considerations were equal, the eMperience of claims processing must be given great consideration and the offer of your company to establish a local office for the benefit of the City of Miami, although a worthy consideration, does not offset the advance tage of an established local claims office that has proven its ability to provide efficient service. When the City of Miami's coverage again comes up for renewal, we certainly hope that your company will submit its proposal for consideration. We thank you for your proposalsat this time even though we find that they are not to the economic advantage of the City for consideration of implementation. Sincerely, E. Gunderson 'rector of Finance cc: John J. Emerson, Gulf Life Insurance Company Jim Duncan, Cor-Ben Consultants, Inc. a Joseph R Grassie City Manager CI re of MIAMI. FLORIDA 1NTER-V1-FtCF. M; t•1C; ANDUM rno•a: . F. Gunderson, Director Department of Finance • 1 • I February 23, 1918 Funding Group Health Insurance For the fiscal year ending September 30, 1977, the City of Miami paid to The Equitable Life Assurance Society of the United States for group life and health insurance a total of $4,923,093,07, of which $2,836,989.02 is employee contributions and $2,085,195.05 contribution by the City of Miami. In lieu of the aforementioned program and costs, alternative approaches to the City's health program were investigated. The alternatives considered were: 1. Continue with existing insurance coverage. 2. Administrative claim service under self-insurance program. 3. Self -insured - Self- administered, Proposals were solicited and received with reference to the alternatives and, after evaluation of the proposals received from the various insurance companies and consultants, it is conservatively estimated that premiums savings between $300,000 to $500,000 would be accomplished by converting the group health from premium basis to a self -funding premium by the City of Miami. The savings proposed has been estimated to be as high as $800,000 but it is felt that the $300,000 to $500,000 is a realistic conser- vative estimate. The self -funding of the group health benefit by purchasing administrative claims service would not result in any change in procedure or payment of group health benefits to the employee and would result in the savings through the reduction of administrative cost on the policy, as well as eliminating the profit factor of the insurance company and increasing the earnings on our reserves by 3%. The proposals for the administrative claims service have ranged from as low as $2.50 per employee per month to as high as 7% of the claims paid or benefits provided. The current group policy with The Equitable is effective to its renewal date of September 30, 1978. In that The Equitable is among the companies offering administrative claims service, they have agreed to replace their current con- tract with a new contract continuing the group life coverage, eliminating the group health coverage and providing administrative claims service in exactly the same manner as currently provided with a new annual contract proposed for April 1, 1978 through March 31, 1979. The proposed service charge for administrative claims service, as well as the adjusted life and accidental death and dismemberment benefit rates, are com- petitive with all proposals received. The maximum difference between the low- est proposal for administrative claims service and that which could be charged by the Equitable, based upon claims paid and the number of employees covered, would be less than $50,000. -1- Joseph R. Grassie Re Funding Group Health Insurance City Manager Upon termination of the group health plan, The Equitable would be responsible for the payment of all claims originating prior to the date of termination. The acceptance of this responsibility, the basis for the creation of reserVes, absolves the City of any further liability if the payment of claims should exceed the reserves and conversely, excludes the City from the return of any resulting unused reserves. With this consideration, the conversion to self- funding of group health bene= fits and administrative claims service by The Equitable would result in a trans- fer of the health reserves by The Equitable to the City which is estimated will be between $950,000 to $1,000,000 as of April 1, 1978. It is estimated that the incurred claims which would be payable from these reserves would be in the area of $600,000. The difference of the excess reserves would therefore be retained by the City and obviously would far exceed any cost differential of any of the proposed claims services. In addition, it would provide a substantial savings to the City of Miami in the current year, as well as that which is estimated will result in the self -funding in future years. Approval of the conversion to self -funding with The Equitable is necessary by March 2, 1978 to allow the implementation of the necessary procedures for the conversion to be effective April 1, 1978. i