HomeMy WebLinkAboutR-78-0294RFC/rb
3/3/78
RESOLUTION NO. 0 ._
A RESOLUTION AUTHORIZING THE CITY MANAGER
TO ENTER INTO AN AGREEMENT WITH THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES,
TO PROVIDE ADMINISTRATIVE CLAIM SERVICE FOR
GROUP HEALTH INSURANCE FOR THE PERIOD FROM
AP RI L 1, 1978 THROUGH MARCH 31, 1979, FOR TIIE
PURPOSE OF ADMINISTERING THE SELF -FUNDED CITY
OF MIAMI EMPLOYEES' HEALTH AND ACCIDENT SELF-
INSURANCE PROGRAM; SUBJECT TO THE APPROVAL
BY THE CITY COMMISSION, PRIOR TO EXECUTION OF
THE WRITTEN CONTRACT REFLECTING THE AFORESAID
AGREEMENT.
WHEREAS, it is conservatively estimated that the
savings of $300,000 to $500,000 would be accomplished by
converting the group health portion of the group life and
health insurance package from a purchased premium basis to
a self -funding health and accident benefit program by the City
of Miami; and
WHEREAS, proposals were solicited from various
insurance companies and consultants to provide the adminis-
trative claims service
for the City of Miami's self -funding
health and accident benefit
WHEREAS, The
the United States, the
group life
"DOCUMENT INDEX
ITEM N
Equitable Life Assurance Soc ety
present carrier of the City of Miami's
program; and
and health insurance was among the companies offer-
ff
administrative claim service; and
WHEREAS, The Equitable Life Assurance Society of the
United States has agreed to replace its current contract with
a new contract continuing group life coverage and continuing
accidental death and dismemberment coverage, eliminating the
group health coverage and providing administrative claim ser-
vice in exactly the same manner as currently provided under
Group Policy No. 196961-1 with a new annual contract from April 1,
1978 through March 31, 1979; and
WHEREAS, the conversion to self -funding of group health
benefits and administrative claim service by The Equitable Life
Assurance Society
of the United States would result in a transfer
CITY COMMISSION
MEETING OF
APR 271978
rnc* -
4
of the health insurance reserves from The Equitable Life
Assurance Society of the United States to the City of Miami
in an estimated amount of $950,000 to $1,000,000 as of
April 1, 1978; and
WIIEREAS, the incurred claims would be payable from
these reserves which would provide a substantial saving to the
City of Miami in this current year; and
WIIEREAS, self -funding of group health benefit coverage
will provide savings in future years; and
WHEREAS, approval by the Department of Insurance of
the State of Florida of the actuarial soundness of the proposed
self -funding plan for the aforesaid City of Miami Employees'
Health and Accident Self -Insurance Program shall be a condition
precedent to final execution and ratification;
NOW, THEREFORE, BE I.T RESOLVED BY THE CO;IMISSION OF
THE CITY OF MIAMI, FLORIDA:
Section 1. The City Manager is hereby authorized
to enter into an agreement with The Equitable Life Assurance
LU r •�
may. Society of the United States, to provide administrative claim
aH.
""� -- •.:�� service for group health insurance for the period from April 1,
` 1978 through March 31, 1979 for the purpose of administering
f
_ ClC.)the self -funded City of Miami Employees' Health and Accident
� ,:) 1•:-. Self -Insurance Program; subject to the approval by the City Com-
V 0
mission prior to execution of the written contract reflecting the
aforesaid agreement.
PASSED AND ADOPTED this 27 day of April
ATT
RALIi G. ONGIE, CITY CLERK
Maurice A. Ferre
, 1978.
MAURICE A. FERRE, M A Y 0 R
PREPARED AND APPROVED BY; APPROVED AS TO FORM AND CORRECTNESS;
'OBERT F, C .A1'U< GEORGE F, KNOX, JR.
ASSISTANT CITY ATTORNEY CITY'ATTORNEY
1
J, R. Grassi°
City !Manager
�.�E. Gunderson
Finance Director
March
Proposals for ACS
Following is an analysis of the proposals for administrative claims service received
from the Equitable Life Assurance Society and what was referred to as the two companies
that expressed an interest, Gulf Life Insurance Company and McGee and Company. Each
company has been fully advised and provided with the same information since June of 1977.
The proposal from McGee and Company presumed that the City of :Miami intended to and
could legally provide group life and accidental death and dismemberment, as well as
group health and accident benefits. Because of the lac}; of documentary support for the
contention by McGee and Company that lifo coverage could legally be provided, and the
opinions of the other companies involved, as well as our Law Department indicating
doubt as to the legality of the City's self -insuring life coverage, the request for
proposals to provide administrative claims service have been confined to group health
and accident benefits.
Loral. Additional
Administrative Claims Claims staff Life -ADD Deposit
Company Colt Rate Office Requir•:d Rate Requirement.
Equitable
No Lift? .90 per :•t
(Maximum $3.46 per en- ADD .11 per :•t
rolled employee per
month with monthly enrollment
Gulf Life 67, 1st Year
McGee a Co.
,averaged en monthly basis)
No (Will Establish Experience
(Minimum : 18i3OOC)) (Office at our Request) gated (Eligible
4.5' 2nd Year Renewal for Dividend)
(:Minimum $171,400) ' l Life .93 per
11C�i� • j ���� M ADM) .11 per M
���� t ul ly Pooped
DQC� 1V (No Dividend
FLL(Wq» Eligibility)
O Lifer . 84 per t•t
AMU) .11 per :M
:gone
S300, 000
7 % Yes Yes Not Quoted Monthly Install-
ment: of 1/1.2 of
Estimated "annual
Cost (4Eromi-
rlately $410,000
per month)
, ti
Proposals for ACS
9.
March 31, 1978
In addition, Marshall Litvak and I met with union representatives and presented
the proposed program: After an extensive presentation of information; everyone
was assured that no change in benefits was going to occur: We also assured them
that no funding changes would occur without their knowledge and participation:
JEG:ML: j r
"SUPPORTIVE
1 f t. '»
1
r•
j
J. R. Grassie
City Manager
1 A ;. -t 4
Yi E, Gunderson
'Finance Director
March 9# 1978
Group health Insurance
Gulf Life Insurance Company
Copy of Letter
The undated letter from Manuel Amor to Mayor Ferre received by the City Commission
March 9, 1078 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 :•lr. 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 :•lr. Duncan providing him with an update aI?d
another full :;et 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 he presented within the time frame requested.
September 20, 1077 Meeting held in my office with Jim Duncan, who brought
Mr. John J. Emerson, regional Troup 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 wore 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 rained in the September 27, 1977 mooting and which required
no response as it was additional :support of the proposal.
-1-
"SUPPORTIVE
DOCUMENTS
FOLLOW"
•
J. R. Grassi° Re: Group Health Insurance
City Manager
Also contacted were the qualifier) health maintenance organizations with
reference to their possible implementations into the City's group health
consideration. These companies Were:
AV-Med Health Plan
American Hoalth Flan
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 osal.s presented to you at the meeting of the Self -Insurance
Trust Fund on September 13, 1977 „ore finalized by the proposal presont€d to you
in the memorandum of ;:arch 3, 197S which accompanied the Resolution Agenda,
Item 9, for the Commission Meeting March 9, 197 .
"SUPPORTIVE
DOCUMENTS
FOLLOW"
J. R. Grassie
City Manager
Lt•l•�- ..�.,t.d
E. Gunderson
L°Finance Director
March 9, 1978
Group Health Insurance
Gulf Life Insurance Company
Copy of Letter
The undated letter from Manuel Amor to Mayor Ferro received by the City Commission
March 9, 1978 was covered in all respects in my letter of March 3, 197S, 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-Fen 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 Lull sot 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
;•lr. 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 Lit.vak. 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 tlio September 27, 1977 meeting and which required
no response as it was additional support of the proposal.
"SUPPORTIVE
DOCUMENTS
FOLLOW"
_i_
J. R. 0rassie Pet ':;roue Health Insurance
City Manager
January 1978 Letter from John J. Emerson attempt:1nC; to clarify
Verbal communications with his ri. presentat1Ves. Prior to written response
being provided, Mr. Amor appeared in m.' office, It which time I advised him
of the status of their proposal as compared to others received. He was
referred to Marshall Litvdk .and h..td subsequent meetings with him, at which
tl;no ho was advised in a completely open manner o:: the various proposals
with their merits and deficiencie'.., and with the merits and deficiencies of
the proposal of Gu1t Life.
February 3( 1978 Letter from Manuel Amor responding to the several
inC:!.-till.JS which letter was responded to LIl a meeting .)C.t.-'t:-t-27 Marshall LltVa.:
and Nr. Amor and therefore .ii:i not ::':quirt) a written response.
March 3( 197Advised by Bob Homan that your office had received contact
with reference to :•ir. Amor's contention that he had not been given the
courtesy of a response and therefore a written response was Inade on
March 3, 1973 stating our position with reference to the proposal.
Proposal Procc'!.:ure
A self -funded administrative claims I)ro:;ram for t)uo health and life .:as explored
with The Equitable. in November 1975. Aproposal ..as received from them in .. anu-
ar 1. (i which substantiated that the Federal Pension : t?forrn Act, Section 51.4,
,_1 octi:e January 1, 1)75, made this concopt possible. .h.' necessary state lt.. _is-
lation to allow self -funding t _ 111. __.....was not effective Until , 1nuary 1,
1977.
Early in 1 : , , the o, ticns aviilable ,-ind the feasibility of a solf-fundind , :od am
were attain studied i.:d with ::ontaets beind '1.1:.. to major o e p health suppliers t:
:Y_1:? at the ±:7dr1^:available and the feasibility o:implementation .,y f tCity
y
of Miami.
In Jun.. of 1.)77 all .group health suppliers who responded were offered the oppor-
tunity to present proposals and they '..._'re supplied, upon request, with claims
experience ,lnd copies of otlr jL'OUt: health , rodr.am.
In iiudust of 1.:! i updates of experience, including the then available claims
experience� '�� were . "expressed
ta1Y�)Ut�}1 June (?� l.. � ( '_CCt forwarded to L',t, 'C�:�t. :1n1CtS who had
interest in submit.tind proposals. 'i'hc companies were:
Co -Ben t:o::.;ul.t.aat.s (subsequently submitted the
proposal for Cult: Life)
i.s1n Blue .... }t'l•}
The :1:t,lhle l..i:t: Assurance :;rci.:ty
Prudential Life Insurance '._`:m':an'•
Her lda Administrators in . :i:t i -.n::t ,,;I` with Lincoln
::at: ii1 Ins Litt inc . t:ompa'
J. R. Grassi°
City Manager
Re: Group Health Insurance
Also contacted were the qualified health maintenane'
reference to their possible implementations into the City's group health
consideration. These companies were:
AV -reed Health Plan
American Health Plan
organizations with
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 pr' stinted to you at the meeting of the Self -Insurance
Trust Fund on September 13, 1977 .:ire finalized by the proposal presented to you
in the memorandum of Maroh 3, 197E which accompanied the ResolutioIl Agenda,
Item 9, for the Commission Meeting March 9, 197:3.
"SUPPORTIVE
DOCUMENTS
FO LLOW"
J. R. Grassie
City Manager
J j E. Gunderson
'Finance Director
March 3, 1978
;;: u;; i[e.alth Insurance
Administrative Claims 8ervice
by The Equitable Life Assurance
Society of the United Sates
Outline of the terms and Conditions of the Administrative Claims 8ervl.i.'e
agreement with the City of Miami:
All terms, conditions, benefits and administrative services remain the same
as in the original Equitable Grout; Policy iC';' No. 19;,'a' ii and as described in the
Group Insurance Plan Booklet, t.ublishe:i Pebruary 1, 175.
The administration ct benefits of the . 1...n continues, as indicated above, with
only the folle.:in(l o::. _pt:i<.11:,.
1. The Group :1oa1th Benefit Program .:ill be :'lf-.'.1:1ie;1.
Equitable '.,i11 no lien i•zn: hold the r_.•.'r'.+ s.
, onlyu:11
_;1.:}ins , ;Iu:; (1 4. ,.
3. ii•.' S1.•.11l and .
1. ...
•1
will 1?t; the
4. The ..quitaPle Cl t'• ?: Miami with
weekly 1i.._1:.,: Oi.1 . :>: all payments made,._ln'.i
with monthly rc') o: :i1 ,.'1.i..2.xrori,?nco by Joe1t:
.ICwev 1, the :,ui . 1- .i11 not provide a review Cf"SuppoRT��E
claim; .a. , r _.,1 ; +2 lil'le'rL:t i t l il'1 i.i i c . '.
Charges for the r1,:^.11n1: "r.itl' :1.}1i.11; s -vi,:e: An, .i:, t+>1 t•1'.�: DOCUMENTS
1 4.5 . of claims paid limited to ,} maximum charget't 1i) ,FLLOV"
enrolled +'tioloyee per ^}l);:'..11 with the monthly enrollment
averaged en an annual basis.
h.:cl.us111e of the :Uiministrat'1. 1 ,finis . 'r'.'1 t.,.- the he',,ilt"li bt'21,ttit rates, t,le'
11 t"C_' insurance under i'C)l i •• wi i 1 Pe )t - er thousand t :7 be ef feet i'.
April 1, 1 .i7; . 'i'hi., represent , reduction n of 1. .' from the 1)X .'iL _t: ..1t...
Under Policy ..•7, 1'';,'t'r `;' .. •'1..tllt:,il i' .1L.'} 2 .:1'iae•itl:'•'1"lai'I1t l::•'Ilt'21t , t]lit
rate: shall continue ti. .1 t • ier
t• •)I1 is i...al.•21t.it.1• 1. .e. 1".lt.1. ,;..il:... . }-.,'t? .},�1e.t-I21,?n2-, 'i, .',' t)•.
t li,, ' .:1 •. •1 .:i .:l .1 t'2...1i..'i:ll t.. t.. t. (7 :1., �• it; 'i1�i:�1 ..tn•. .. . ..11.", Il... .
11 .il_,.1..It_e' . ,-itl.1 t.r 1o::111.. _,'.I l'• t)I ..i', �1 , 1'' .. 2 ....
I eriod .• .:i1+t'r , 1. , • ..hal 1 ...,...^1 .lt'
,
OFf.c cf t!•?!
DIRECTOR CP PI!4ANCE
Eitu n anti, I..„.t ..p.
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,.„...1
""4 ti
foiiit 0, 711 ..• 'r 4 'it(
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:ttr,,4,•,...,'. i ...‘,,....-.,.., t i
4 ok.I ‘• '''' I • "" '''',="4446 • . .
!ill &,.4141•40143iSetat
1.1 Cu.,- , -I i • ' .14.4*, .11ILI
O LIOX 330708
COCONut GROVE STATION
MIAN11 rt.OniDA 33133
March 6, 1073
Mr. Dennis J. J. McGee
McGee and CoMpany
Security Trust Building
Miami, Florida 33131
Dear Mr. McGee:
atya, c r. • :Etts
A SS A. r, • t
1.141 r S , • '1(4 1.40
We wish to take this opportunity to thank you for your
proposal with reference to the City of Miami's Health and
Life Plan. The information sucolied to us, a well as the
personal meetings, were most beneficial to us.
We wish to advise that tho proposal of Tho Equitable to pro -
Vide administrative olaims sorv12e for 2;011- EunLi.inT 3 health
benefit proram is bein,j reccm:-.11 to the City Commission
because of the consi:.ierations of competitive rate, satis-
faction with claims service currently bein,:,; provided and,
most important, the ayreement 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 hoc that you will express a desire to submit a
proposal at that time.
Thank you for your past courtesy.
Sincerely,
• i
‘77 .
Dir..:C tor of FinalL:o
"SUPPORTIVE
DOCUMENTS
FOLLOW"
i f tt t ttt ;.„
gy
March 3, 1978
Mr. Manuel Amor, Agent
Gulf Life Insurance Company
P. O. Box 417, Riverside Station
Miami, Fl 33135
Dear Mr. Amor:
I .p i'•
...
Office of Risk Management
P. O, Box 330708
Miami, Florida 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 93� per thousand and the accidental
death and dismemberment 11' 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 th
carrier, They Equitable.
cost ptoposed by our present
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-
C7
rn
v7 rn
N. Manuel Amor, Agent March 3, 1978
Gulf Life Insurance company
If all rate considerations were eqcal, the experience of claims
processing mUst he given groat consij,eration 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 advan-
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 prcposalsat this time eVen
though we find that they are not to the economic advantage of the
City for consideration of imolementation,
Sincerely,
(Y/
ti E. Gunderson
irector of Finance
cc: John J. Emerson, C;ulf Life Insurance Company
jiuncan, Cor-En ConEnlItan, Inc.
-2-
Joseph R. Grassie
City .Manager
J. E. Gunderson, Director
Department of Finance
•
�t,i�IU i t!)
•
February 23, 1978
Funding Croup 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 $2,336,989.02 is
employee contributions and ;2,035,195.05 contribution by the City of Miami.
In lieu of the aforementioned program and costs, alternative approaches to
the Citv'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 $300,0 )0 to S^) ,000 would be accomplished by
converting the group health from premium basic; to a self -funding premium by
the City of Miami. The savings proposed has been estimated t0 be as high as
$S00, 000 but it is felt that the .. 30'.), .)2) to $500, 000 is a 1 calistio conser-
vative estimate.
The self-fundingv 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, 1S well as eliminating-Ti
the profit factor of the insurance company and increasing the earnings on out
C
reserves by 3 The proposals :or the administrative claims service have r ,,,,:
-13
ranged from as low as : 2. 50 per employee per month to as high as 7"; of the
i
claims paid or benefits provided.. •
S O
The current group policy with The 1 quitable is effective to its renewal dat rn'
of September 30, 197 . In that The Equitable is among the companies offering::
administrative J_ �
adlninistrative claims :service, they have agreed to replace their current con- �/��.`1 C
tract with a new contract continuing the group life coverage, eliminating the V% m
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, 1973 through March 31, 1979.
The proposed service charge for administrative claims service, as well as the
adjusted life drier accidental death and dismemberment benefit rates, arc? com-
petitive with all proposals received. The :n.:cximum difference between the low-
est proposal for administrative clangs service and that which could be charged
nv the Equitable, 1)l:;ctl upon claims paid and the number of employees covered,
'.•:Jul.: be less than : a'.), nno.
-1-
1
•
Joseph Re 6rassi(
City Manager
Pe: Funding :1,-()up lie:11t1 Insurance
Upon termination of the group health plan, '7ho Eguit,blo would he responsible
for the payment of all claims originating pr., to the .late of terMinatien,
The acceptance of this responsibility, tho bais for the creation of reSeries,
absolves the City of any further liability if the payment of claimS shouLl
exceed the reserves ana, convorsely, excluios tho City from the neturn of any
resulting unused reserves,
With this consideration, the conversion to self-fuhding of group hoalth bone-.
fits and administrative claims service by The i2*.ultab1e would result in a trans-
fer of the health reserves by The Equitable to tho City which is estimated will
be between ..950,'.-)00 to ':.;1,000'J as of April 1, 197. It is ostimated that the
incurred claims which would be payable from these reserves would be in the area
of $600,0I30, The difforonoo of the excess reserves would therefore bo retained
by the City and obviously would far exceed any cost differential of any of the
proposed claims Stl'f7i0S, In addition, it would provide a substantial savincps
to the City of Miami in the current yoar, as well as that which is estimatod
will result in the self-funaing in future years.
Approval of the conversion to self -funding with The Equitable is necessary hy
March 2, 173 to allow the implementation of the necessary i':-cceaus for the
conversion to be effective April 1, 19.7*-i.
te: 3, lt. Grassie
City Manager
t-►toM=
I'17 O MfAMI, FL-3i tbA
INfir+l44t!'ICE MtMORAN1 UM
.E. Gun erson, Director
Oepa.rt7rtent of Finance
bAtt.
sun.itcr
rotrtOtNCt9
ENCL05UNtt.
November 7, 1977 �Lt
Group insurance Proposal..
•
Icy copy of this memorandum, I am providing Commissioner Plummer with
the analysis of the proposal from McGee & Company which purported that
would save the City $800, 000 on our Group Insurance Program.
At the Self -Insurance Trustee meeting on October 12, 1977 we did not have
the final disbursements of our group.insurance for the fiscal year ending
September 30, 1977, which is� Lf.,?-0� This amount includes both
employee cost and City cost.
.q � 3,093.07
The proposal made by McGee & Company Self Funded Health and Welfare Plan
to self -insure both Life and Health, which reflected an $800, 000 savings, is
with the assumption that Equitable will pay all claims incurred prior to termina-
tion date. The proposed estimate of contribution necessary to be made on a
deferred payment monthly into a Trust Account is based upon a three-year con-
tract with the annual contribution estimated by McGee & Company as follows:
Paid Claims
Reserve
Administrative
Stop Loss
Miscellaneous
Total Contributions
$3, 596, 285, 00
627, 885. 00
328,546.00
93,870.00
46, 935. 00
$4, 69 3, 521. 00
76.65
13. 4T
;o
7.05
2.0%
1.05
100. 0%
As can be seen by the above, McGee & Company would not provide a savings of
$800, 000 but_w.ould-ine-rease-otrr tiiintral-prerni 7 by-Rpproximately--$-37O-,--O4 O -- x
In addition, administrative costs would increase in the second and third year in
dollars because the 7177r, rafr. is based upon 7,1, of the total contributions which
will be approximately oepc - third greater than the hilt is l year due to the run out
of claims paid by Equitable in the first year, as well as the inflat;e•n increase in
the second and third year.
This proposal presumes that we have the legal authority to self insure Life,
which is questionable under Florida Statute 112. 08. If indeed, as discussed, it
may not be financially feasible and legal to self fund the Life portion, the pro-
posal by McGee t: Company would be increased for the cost of the portion of
Life coverage, which would be approximately $800, 000,
cc.: commi:.;:,ioner .T. L. Plummer, .Tr,