06-18 Resolution No. 06-18
RESOLUTION
ACCEPTING THE PROPOSAL OF BLUE CROSS BLUE SHIELD OF ILLINOIS
FOR THE CITY OF ELGIN'S HMO AND PPO MEDICAL INSURANCE PROGRAM
AND AUTHORIZING THE EXECUTION OF DOCUMENTS RELATED THERETO
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,ILLINOIS,that
the City of Elgin hereby accepts the proposal of Blue Cross Blue Shield of Illinois for the City of
Elgin's HMO and PPO medical insurance program for the period of March 1, 2006 through
February 28, 2007.
BE IT FURTHER RESOLVED that Olufemi Folarin, City Manager, be and is hereby
authorized and directed to execute all documents necessary and incident to such proposal of
Blue Cross Blue Shield of Illinois for the City of Elgin's HMO and PPO medical insurance program.
s/Ed Schock
Ed Schock, Mayor
Presented: February 8, 2006
Adopted: February 8, 2006
Vote: Yeas: 6 Nays: 0
Attest:
s/Dolonna Mecum
Dolonna Mecum, City Clerk
G (k, ,,,
EMPLOYEE BENEFITS COMMERC IALINSURA1NCE
REVIEW AND RECOMMENDATION
Global Benefits Inc.(GBI)is pleased to provide the City of Elgin with a formal recommendation regarding the
Medical,Life and AD&D benefits renewal for March 1,2006 through February 28,2007.
The 2006-2007 renewal process has posed the opportunity for the City of Elgin to reduce cost and at the same
time increase benefit levels. City of Elgin originally budgeted for a 7%increase for the health insurance and at
this time the most expensive offer on the table is from the incumbent carrier, UniCare,with a 2%decrease from
current. GBI will provide the City of Elgin with the pros and cons of each of the offers from UniCare,Blue Cross
Blue Shield of IL(BCBS)and United Health Care(UHC).
UniCare
UniCare is the incumbent carrier for the PPO and HMO. The HMO has been with UniCare for the past six years.
The PPO was added to UniCare last year for the 2005/2006 renewal. At that time two significant cultural and
benefit changes affected City of Elgin employees. The first was a plan design benefit change that went from no
differential in benefit level from in network and out of network services to a differential in these services.The
second was an employee contribution of 7.5%. This was the inaugural year of these changes and we believe any
carrier awarded the PPO business last year would have experienced some level of employee dissatisfaction.
UniCare has reduced their renewal offer to a 2%decrease(-$132,422)to demonstrate their desire for a long-term
partnership with City of Elgin.
Renewing with UniCare would not require enrollment and would be seamless to the employees and retirees.
Furthermore,the City of Elgin members would not have to update the deductibles and out of pocket expenses as
UniCare has all of the current data.
Blue Cross Blue Shield of IL
BCBS has a successful history with City of Elgin employees and retirees having been the HMO carrier for 8 years
prior to UniCare. BCBS was a PPO finalist for the 2005-2006 plan-year. BCBS offer represents a 3%(-190,383)
savings from current. In addition,BCBS has superior name recognition compared to the other carries. Therefore,
a BCBS plan will be a perceptually more attractive carrier to the City of Elgin employees and retirees. BCBS has
earned this reputation in the marketplace based on the deepest provider discounts,timely payment at the provider
level and quality customer service.
The BCBS offer also includes some enhanced benefit offerings including:
1. Doctor office visit co pay on the HMO and PPO is$15 and$20 respectively. Currently,the co
pays are$15 primary doctors/$25 specialists and$20 primary doctors/$30 specialists.
2. All diagnostic professional services will be paid at 100%in network and 60%out of network.
Currently,professional diagnostic services are paid at 80%after deductible in network and 60%
out of network after deductible.
3. Out of state dependents on the HMO would have the ability to access PCPs in their respective
local areas. With UniCare and UHC,dependents on the HMO would need to travel back to IL to
visit PCPs.
To move forward with BCBS the City of Elgin employees and retirees would go through an enrollment process.
This process is streamlined by electronically enrolling employees and retirees via a spreadsheet. The HMO
participants would identify a primary care physician that would be included in the electronic feed. Additionally,
1580 S Milwaukee Ave I Libertyville, IL 60048 I 847.837.3037 I 847.837.3038(f)
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EMPLOYEE BENEFITS C'OMMER( IAL INS1'RANCE
we would update BCBS with the deductible and out of pocket expense already incurred so the employees and
retirees will get credit under the new PPO plan.
In the HMO there would be roughly 10%primary-care disruption(25 members)in a move to BCBS. The
disrupted members would have to pick a new primary care doctor.
United Health Care
United Health Care is the current carrier for the local school district U46 which provides some level of familiarity
with the City of Elgin. UHC's offer represents a 6%(374,269)savings from current. UHC's HMO is much
different than the current HMO arrangement which consists of choosing a Primary Care Physician(PCP)and
receiving referrals to utilize a specialist. UHC's HMO is the same network as the PPO. UHC's HMO allows
members to utilize any PCP and any specialist without requiring a physician referral.
UHC's offer also includes some enhanced benefit offerings including:
1. Doctor office visit co pay on the HMO and PPO is$15 and$20 respectively. Currently,the co
pays are$15 primary doctors/$25 specialists and$20 primary doctors/$30 specialists.
2. All diagnostic professional services will be paid at 100%in network and 60%out of network.
Currently,professional diagnostic services are paid at 80%after deductible in network and 60%
out of network after deductible.
3. PPO RX co pay on tier three medications is$35. Currently,PPO tier three medications are$40.
UHC does not have a contract with Advocate Health Care. Roughly 5%of PPO claims were incurred in an
Advocate facility during the 2005-2006 plan-year. We are not able to measure the HMO as UniCare does not
track this information. This issue primarily relates to hospital facilities as many physicians that admit to Advocate
hospitals will have admitting rights to other facilities.
To move forward with UHC the City of Elgin employees and retirees would go through an enrollment process.
This process is streamlined by electronically enrolling employees and retirees via a spreadsheet. UHC does not
require HMO participants to choose a PCP which makes this process more efficient. Additionally,we would
update UHC with the deductible and out of pocket expense already incurred so the employees and retirees will get
credit under the new PPO plan.
The HMO network disruption is roughly 10%(25 members)in a move to UHC. The disrupted members would
have to utilize a new doctor.
Life and AD&D
All of the above medical rates include a bundled product discount. The bundled product discount was negotiated
by GBI as another route to achieve financial savings. The current carrier for Life and AD&D is Jefferson Pilot.
The current rate is .21 cents per$1,000 which equates to an annual cost of$77,984.55. City of Elgin is in the
middle of a two year rate guarantee which will renew March 1,2007. UniCare has agreed to match the current
Life cost and guarantee an additional year to renew on March 1,2008. UniCare then would provide a 1%
discount on the health insurance rates(already included in the medical rates presented above).
BCBS has agreed to lower the City of Elgin's life rate to.20 per$1,000 which equates to an annual cost of
$74,271.00 including a two year rate guarantee renewing on March 1,2008. This represents an additional annual
savings of$3,713.55. BCBS then would provide a 1%discount on the health insurance rates(already included in
the medical rates presented above).
1580 S Milwaukee Ave I Libertyville, IL 60048 j 847.837.3037 I 847.837.3038(I)
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EMPLOYEE BENEFITS COMMERCIAL INS1.RAKE
UHC has agreed to lower the City of Elgin's life rate to .20 per$1,000 which equates to an annual cost of
$74,271.00 including a two year rate guarantee renewing on March 1,2008. This represents an additional annual
savings of$3,713.55. UHC then would provide a$5 per employee per month discount on the health insurance
rates(already included in the medical rates presented above).
Global Recommendation
Global would almost always recommend that an employer remain with the incumbent medical carrier in the
second year of engagement. This is even truer when a rate decrease is offered at renewal. The reason for this
stance is to maintain a level of consistency for employees and employers and so our clients develop a positive
reputation in the marketplace. There are two major reasons we would recommend a second year change: I)
Renewal offer is unacceptable and inconsistent with the marketplace; and 2)The customer/member service from
the current carrier was so poor that it devalues the overall perception of the City's benefits package to
unacceptable levels.
Reviewing the advantages and disadvantages of all three carriers,factoring the level of member service received
in the 2005-2006 plan year,considering the financial,service and benefit goals set forth by the City and finally
contemplating previous experience with each of the finalist carriers,Global recommends the City of Elgin procure
medical,group life and AD&D benefits from Blue Cross Blue Shield of Illinois.
GBI makes this recommendation based on the financial savings,benefit enhancements,real and perceived value
in the Blue Cross brand and their record for stable renewals stemming from their market leading provider
discounts. This formula is the basis to a beneficial and long-term relationship.
Choosing BCBS over UniCare is based upon the premium cost savings,coverage enhancements and the potential
for improved customer/member service.
Recommending BCBS over United HealthCare is based upon their better track-record in customer/member
service,the value of their brand equity with City employees,their lower customer turnover ratio and a higher level
of confidence in their pricing. Though UHC presents even greater savings than BCBS,we feel the potential for a
substantial second-year renewal increase is greater with UHC.
UniCare was assigned the unenviable task of by being the new carrier in a year with sweeping benefit and cultural
changes which at least partially contributed to employee dissatisfaction. Based on the employee backlash from
last year,we believe City employees and retirees will be far more sensitive to any customer service issues with
UHC given their common and expressed interest in Blue Cross. Therefore,we believe a move to UHC has a
greater potential for an abbreviated carrier relationship.
1580 S Milwaukee Ave Libertyville, IL 60048 847.837.3037 847.837.3038(1)
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I\t6'LUl'1! I3t.\i 1 114 t tt!Rt Ltil I\til Kart i
Employee Benefits Renewal
2006—2007
LIFE AND AD&D
Jefferson Pilot UniCare BCBS UHC
Rate Guarantee 1 year 2 years 2 years 2 years
Life $0.170 $0.170 $0.160 $0.160
AD&D $0.040 $0.040 $0.040 $0.040
Total $0.210 $0.210 $0.200 _ $0.200
Volume $30,946,250
Monthly Prem $6,498.71 $6,498.71 $6,189.25 $6,189.25
Annual Prem $77,984.55 $77,984.55 $74,271.00 $74,271.00
$ Difference N/A $0.00 -$3,713.55 -$3,713.55
% Difference N/A 0.0% -5.0% -5.0%
1580 S Milwaukee Ave I Libertyville, IL 60048 I 847.837.3037 I 847.837.3038(f)
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'""""-` 006 2007
MARKETING OVERVIEW
PPO PPO Hl1(O PPO PPO HMO HMO Combined
DEDUCM3LE OUT OF POCKET Network Network RATES TOTAL RATES TOTAL TOTAL TOTAL PERCENTAGE
In Out of In Out of Rx Dr.Office Rx Dr.Office EE EE+l Family Enrollment Single E+C Family Enron llment MONTHLY ANNUAL &DOLLAR
CARRIERS Network Network Network Network Copay Copay Copay Copay 172 168 182 522 62 46 128 236 MEDICAL MEDICAL DIFFERENCE
-
Unicare 0.0%
Current $200 $1,000 80%-$750 60%-$1,500 $101$201$40 $20/$30 $15/$25/$50 $15/$25 $388.96 $809.65 $1,15953 413,758 252.58 53352 764.06 138,002 $551,760 6.621.114 $0
Quotes below assume Lite and AD&D and Medical will be bundled
Unicare
-2.0%
$200 $1.000 80%•$750 60%-$1,500 $101$201$40 $20/$30 $151$251$50 $151$25 $381.18 $793.36 $1.135.36 $405,483 $247.53 $522.85 $748.78 $135.242 $540.724 $6,488.692 •$132.422
Blue Cross Blue Shield -2,9%
$200 $1,000 80%•$750 60%-$1,500 $101$201$40 $20 $15/$25/$50 $15 $371.84 $790,94 $1,134.86 $403,379 $239.73 $511.88 $735.20 $132,515 $535,894 $6,430,731 -$190,383
United HealthCare -5,7%
$200 $1.000 80%•$750 60%•$1.500 $10/$20/$35 $20 $151$251$50 $15 $364.51 $764.17 $1,096.55 $390,648 $234.95 $501.85 $720.86 $129.922 $520,570 $6,246.846 -$374,269
1580 S.1liIwaukee Ave I Libertyville,II.60048 I 847.837.3037 I 847.837.3038(1)
/ OF
<0 6-1.c., � City of Elgin
Agenda Item No.
L E
February 3, 2006 G
II
p
TO Mayor and Members of the City Council N {y
FROM Olufemi Folarin, City Manager
FINANCIALLY STABLE St MACE GOVERNMENT
EFF FK.IFiJT SERVICE S,
AND DUALITY INFRA STRUCTURE
Gail Cohen, Purchasing and H an Resources Director
SUBJECT: Group Health Insurance Program
PURPOSE
The purpose of this memorandum is to provide the Mayor and members of City Council with
renewal information and recommendations for the City's Group Health Insurance.
RECOMMENDATION
It is recommended that the City Council approve the proposed one-year, fully paid HMO and
PPO plans from Blue Cross Blue Shield of Illinois. Additionally, it is recommended that the
►. City Council approve entering into a two year contract with Blue Cross Blue Shield of Illinois
for life insurance and accidental death and dismemberment insurance.
BACKGROUND
Last year the City changed from a self insured PPO (Preferred Provider Organization) plan
administered by Group Administrators and an HMO (Health Maintenance Organization)
provided by Unicare Health Plan to a fully insured PPO and HMO both provided by Unicare.
Last year was also the first year that employees contributed to the cost of premiums.
The Unicare plan will expire on February 28, 2006. Requests for proposals were prepared for
distribution to the market by the City's insurance broker, Global Benefits, Inc. Quotes received
by Unicare, Blue Cross Blue Shield (BCBS), and United Health Care (UHC) revealed that the
City and its employees would save in premiums and out-of-pocket expenses by continuing in a
fully insured, rather than self insured plan. (Under a conventional fully insured plan, the
insurance company pays for claims and the City pays a premium).
The proposals were reviewed and discussed by an employee group including Human Resources,
Fiscal Services, Police union representatives, Fire union representatives and SEIU/Clerical
Technical union representatives.
Blue Cross Blue Shield proposed premiums that are 2.9% less than we are currently paying.
#0°4' Unicare, who wishes to retain our business, proposed premiums that are 2% lower than we are
currently paying. Finally, United Health Care, whose clients include U-46 School District,
proposed premiums that are 5.7% lower than we are currently paying.
• ,
Health Insurance Plans
101'. February 3, 2006
Page 2
Several factors need to be considered in deciding with which company the City should select. It
is ill-advised to change insurance companies, be it health or liability, with great frequency, as it
gives the appearance that the City is unwilling to enter into a long term relationship with a firm
and the firms, therefore, will be leery of entering into a relationship with the City. Premium
price is an important consideration, especially since employees pay a portion thereof. The
indirect costs, inconvenience, disruption and other transition problems when changing carriers
need to be measured. The program plans, and how well they address the needs of our
employees, are important factors, as is the level of customer service. Our broker, Global
Benefits, took all these factors into consideration before making the recommendation that we
enter into a contract with BCBS. Global Benefit's recommendation is attached hereto. The pros
and cons of each offer, and how they compare to each other, are summarized below:
Unicare—The City has had the Unicare HMO for the past six years, which would indicate a high
level of satisfaction. Unicare has been the HMO and PPO provider for the past year; a year in
which employees faced a new program plan (in and out of network providers and services) and
were required to contribute to the premium cost for the first time. Many of the perceived
problems or shortcomings with Unicare stemmed from a lack of employee and retiree
understanding of the plan. Unicare tried to address problems with more informational meetings
and a representative on site every other week. Unfortunately, these efforts, while well received,
were not sufficient to overcome the negative experiences some participants had at the outset of
the plan year. Unicare has lowered their premium prices two percent and are the highest priced
option by $57,961 (compared to BCBS) and $241,847 (compared to UHC). Renewing with
UniCare would not require enrollment and would be seamless to the employees and retirees.
Furthermore, the City of Elgin members would not have to update the deductibles and out of
pocket expenses as UniCare has all of the current data.
Blue Cross Blue Shield -
BCBS has a successful history with City of Elgin employees and retirees having been the HMO
carrier for 8 years prior to UniCare. BCBS offer represents a 2.9% (-190,383)premium decrease
from current. BCBS has superior name recognition compared to the other carriers. According to
our consultant, BCBS has the deepest provider discounts, and a reputation for timely payment at
the provider level and quality customer service.
The BCBS offer also includes some enhanced benefit offerings including:
1. Doctor office visit co pay on the HMO and PPO is $15 and $20 respectively. Currently,
the co pays are $15 primary doctors/$25 specialists and $20 primary doctors/$30
specialists.
2. All diagnostic professional services will be paid at 100% in network and 60% out of
network. Currently, professional diagnostic services are paid at 80% after deductible in
network and 60% out of network after deductible.
Health Insurance Plans
e""' February 3, 2006
Page 3
3. Out of state dependents on the HMO would have the ability to access Primary Care
Physicians in their respective local areas. With UniCare and UHC, dependents on the
HMO would need to travel back to Illinois to receive non-emergency medical services.
To move forward with BCBS the City of Elgin employees and retirees would go through an
enrollment process. This process is streamlined by electronically enrolling employees and
retirees via a spreadsheet. The HMO participants would need to identify a primary care
physician promptly. In the HMO there would be roughly 10% primary-care disruption (25
members) in a move to BCBS. The disrupted members would have to pick a new primary care
doctor. Additionally, BCBS would receive the deductible and out of pocket expenses already
incurred so the employees and retirees will get credit under the new PPO plan.
United Health Care - United Health Care is the current carrier for the local school district U46
which provides some level of familiarity with the City of Elgin. UHC's offer represents a 5.7%
($374,269) savings from current. UHC's HMO is much different than the current HMO
arrangement which consists of choosing a Primary Care Physician (PCP) and receiving referrals
to utilize a specialist. UHC's HMO is the same network as the PPO. UHC's HMO allows
members to utilize any PCP and any specialist without requiring a physician referral. However,
HMO members who go out of network are required to pay the entire cost of services. Therefore,
OR' HMO members (except in emergencies) must return to the network area to receive medical
services, which can be an inconvenience for college students and others who are away for an
extended period.
UHC's offer also includes some enhanced benefit offerings including:
1. Doctor office visit co pay on the HMO and PPO is $15 and $20 respectively. Currently,
the co pays are $15 primary doctors/$25 specialists and $20 primary doctors/$30
specialists.
2. All diagnostic professional services will be paid at 100% in network and 60% out of
network. Currently, professional diagnostic services are paid at 80% after deductible in
network and 60% out of network after deductible.
3. PPO RX co pay on tier three medications is $35. Currently, PPO tier three medications
are $40.
UHC does not have a contract with Advocate Health Care. Roughly 5% of PPO claims were
incurred in an Advocate facility during the 2005-2006 plan year. HMO usage is not tracked by
UniCare. Union representatives indicated concern that Advocate Health Care hospitals are not in
the UHC plan.
To move forward with UHC, the City of Elgin employees and retirees would go through an
enrollment process. This process is streamlined by electronically enrolling employees and
firI"
Health Insurance Plans
February 3, 2006
Page 4
retirees via a spreadsheet. UHC does not require HMO participants to choose a PCP which
makes this process more efficient. Additionally, UHC would receive the deductible and out of
pocket expenses already incurred so the employees and retirees will get credit under the new
PPO plan.
The HMO network disruption is roughly 10% (25 members) in a move to UHC. The disrupted
members would have to utilize a new doctor.
Despite potential disruption caused by leaving Unicare, and additional cost savings possible by
selecting UHC, Global Benefits recommends that the City enter into an agreement with Blue
Cross Blue Shield. Choosing BCBS over UniCare is based upon the premium cost savings,
coverage enhancements and the potential for improved customer/member service.
Recommending BCBS over United HealthCare is based upon their better track-record in
customer/member service, the value of their brand equity with City employees, their lower
customer turnover ratio and a higher level of confidence in their pricing. Though UHC presents
even greater savings than BCBS, Global Benefits feels the potential for a substantial second-year
renewal increase is greater with UHC. During the renewal process, the City must look beyond
the first year and aim for a long term relationship with whichever provider we select. Global
Benefits also indicated that BCBS has the deepest provider discounts in the Elgin area and
"0". therefore their proposed premium has more credibility than that of UHC. BCBS's services better
fit the needs of our employees as it relates to the flexibility of out of state HMO networks and the
use of the Advocate Health Care system.
Per labor contract negotiations, all employees shall contribute a portion of the cost of the
premium. An employee with the PPO family plan would contribute the most; $1,021.37 a year
based on a 7.5% contribution. An employee with HMO single coverage would be required to
contribute the least; $215.76 a year based on a 7.5% contribution.
Employees will be able to use pre-tax income to pay for their premium contributions as well as
other non-covered medical expenses and childcare under the City's flexible spending plan which
was implemented last year.
COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED
All City bargaining groups..
?"1/G IMPACT
The policy year costs for March 2006 through February 2007 are $190,383 lower than 2005 —
2006. The monthly premium for the Blue Cross Blue Shield of Illinois PPO plan including
medical and prescription claims, and administration fees are shown below.
T
Health Insurance Plans
040' February 3, 2006
Page 5
Monthly
Type of Coverage 2006/2007 2005/2006 Difference
Single $371.84 388.96 ($17.12)
Employee + 1 $790.94 809.65 ($18.71)
Family $1134.86 1,159.53 ($24.67)
The monthly premium for the Blue Cross Blue Shield of Illinois HMO plan is as follows:
Single $239.73 252.58 ($12.85)
Employee + 1 $511.88 533.52 ($21.64)
Family $735.20 764.06 ($28.86)
The proposed premiums charged to the participating departments (based on the number of
employees and the type of coverage chosen) as well as the current employee contribution of
7.5% (8.5% Fire union) will pay for the HMO and PPO premiums.
The annual PPO Plan cost (including prescription drugs) is anticipated to be $4,840,548. The
annual HMO Plan cost is anticipated to be $1,590,180. There are sufficient funds budgeted in
the Health Insurance Fund, account numbers 635-0000-796.50-15 (PPO - $5,500,000); 635-
0000-796.50-04 (HMO-$1,875,000) to cover the projected insurance expenses.
The anticipated cost of the life insurance/accidental death and dismemberment is $74,271. There
are sufficient funds budgeted in the Health Insurance Fund, account number 635-0000-796.50-02
($80,000)to cover projected premium expenses.
ttoW_LIMPACT
None.
ALTERNATIVES
1. Accept the proposals as recommended for coverage of all eligible, participating
employees.
2. Select one of the other health insurance proposals.
Respectfully submitted for Council consideration.
GAC
Attachment