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HomeMy WebLinkAboutResolution - 2015-R0364 - Application For Renewal - Blue Cross Blue Shield - Stop Loss Coverage Policy - 11/05/2015Resolution No. 2015-RO364 Item No. 5.5 November 5, 2015 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock is hereby authorized and directed to execute for and on behalf of the City of Lubbock.. an Application for renewal of a Stop Loss Coverage Policy, by and between the City of Lubbock and Blue Cross Blue Shield of Texas, and related documents. Said Application is attached hereto and incorporated in this resolution as if fully set forth herein and shall be included in the minutes of the City Council. THAT the City Manager may execute any routine documents and forms associated with said coverage. Passed by the City Council on November 5. 2015 - -., 0 /�X GL C. ROB RTSON, MAYOR ATTEST: Reb I cca Garza, CitASecret APPROVED AS TO CONTENT: for 'le ;St Hutcheson irector of Human Resources and Risk Management APPROVED AS TO FORM: M tc ell Satterwhi ssi ant City Attorney RES.Risk Mgmt-Application-Stop Loss Coverage Policy 10.14.2015 Resolution No. 2015-RO364 BlueCross BlueShield of Texas APPLICATION FOR STOP LOSS COVERAGE Employer Group Name: City of Lubbock Employer Group Address: 1625 13th Street City: Lubbock State of Situs: TX Zip Code: 79401 Account Number: 010097 Employer Group Number(s): 010097, 106837 Effective Date of Policy 01/01/16 Policy Period: These specifications are for the Policy Period commencing on 01/01/16 and ending on 1231/16 The specifications below shall become effective on the first day of the Policy Period specified above and shall continue in full force and effect until the earliest of the following dates: (1) The last day of the Policy Period; (2) The date the Policy terminates; or (3) The date this Application for Stop Loss Coverage (herein called the "Application") is superseded in whole or in part by a later executed Application. A. Aggregate Stop Loss Insurance: ❑ Yes ® No If yes, complete items 1 through 9 below. 1. ❑ New Coverage ❑ Renewal of Existing Coverage 2. Stop Loss Coverage Period: ❑ New Coverage (Select one from below): ❑ Standard: Claims incurred and paid during the Policy Period. ❑ "Run-in" included: Claims incurred on or after and paid during the Policy Period. "Run-in" includes claims paid by Policyholder's prior claim administrator: Yes ❑ No ❑ If yes, such claims must be reported by the Policyholder to the Company (Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company) within 12 months of the Policy Effective Date and paid by the Policyholder's prior claim administrator within 6 months after the Policy Effective Date. ❑ Renewal of Existing Coverage: Claims incurred on or after the original Effective Date of Policy and paid during the Policy Period. 3. Aggregate Stop Loss Insurance shall apply to: ❑ Medical Claims ❑ Outpatient Prescription Drug Claims ❑ Dental Claims ❑ Other (please specify): A Division of Health Care Service Corporation, a Mutual Legal Reserve Company an Independent Licensee of the Blue Cross and Blue Shield Association TXStopLossApp-11/10 4 5. 0 Average Claim Value: per Employee Attachment Factor: % of the Average Claim Value Aggregate Claim Liability and Run -Off Claim Liability Factors a. Employer's Claim Liability for each Policy Period shall be the sum of the Monthly amounts obtained by multiplying the number of Coverage Units for each Month by the following factors: $ for each Employee Coverage Unit $ for each Employee/Family Coverage Unit Please use the continuous text field directly below for any other structure (leaving the fields above blank). Note: you can use the "return" key to create additional rows, if needed: b. Employer's Run -Off Claim Liability shall be calculated by multiplying the sum average of all Coverage Units during each of the three calendar Months immediately preceding termination by the factors shown below. Settlement for the final accounting period will be described in the section of the Policy entitled SETTLEMENTS, Run -Off Period subsection of the Policy. $ for each Employee Coverage Unit $ for each Employee/Family Coverage Unit Please use the continuous text field directly below for any other structure (leaving the fields above blank). Note: you can use the "return" key to create additional rows, if needed: CAP Arrangement ❑ Yes ❑ No Aggregate Stop Loss Claims a. The amount of Paid Claims during the current Policy Period, less: i. Individual (Specific) Stop Loss Claims ii. Any claims in excess of the Individual (Specific) Stop Loss Claims per Covered Person per Lifetime Maximum iii. Any claims in excess of the Individual (Specific) Stop Loss Claims maximum Point of Attachment that exceeds the Aggregate Point of Attachment. The Aggregate Point of Attachment shall equal the sum of the Employer's Claim Liability amounts calculated Monthly as described in Item 5.a. above for the indicated Policy Period. b. In the event of termination at the end of a Policy Period, the Final Settlement Aggregate Point of Attachment shall equal the sum of the Employer's Claim Liability amount for the Final Policy Period and the Employer's Run -Off Claim Liability calculated as described in item 5.b. above. However, for the indicated Policy Period the minimum Aggregate Point of Attachment shall be $ c. Aggregate Stop Loss Claims shall not exceed a lifetime maximum of for the indicated Policy Period. Premium (Select one): ❑ Annual Premium (Due on the first day of the Policy Period): $ ❑ Monthly Premium shall be equal to the amounts obtained by multiplying the number of Coverage Units for a particular Month by $ for each Employee Coverage Unit $ for each Employee/Family Coverage Unit TXStopLossApp-11/10 2 Please use the continuous text field directly below for any other structure (leaving the fields above blank). Note: you can use the "return" key to create additional rows, if needed: 9. The premium is based upon a current membership of Individual Coverage Units and Family Coverage Units. B. Individual (Specific) Stop Loss Insurance: ® Yes ❑ No If yes, complete items 1 through 6 below. 1. ❑ New Coverage ® Renewal of Existing Coverage 2. Stop Loss Coverage Period: ❑ New Coverage (Select one from below): ❑ Standard: Claims incurred and paid during the Policy Period. ❑ "Run-in" included: Claims incurred on or after and paid during the Policy Period "Run-in" includes claims paid by Policyholder's prior claim administrator: Yes ❑ No ❑ If yes, such claims must be reported by the Policyholder to the Company (Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company) within months of the Policy Effective Date and paid by the Policyholder's prior claim administrator within months after the Policy Effective Date. ® Renewal of Existing Coverage: Claims incurred on or after the original Effective Date of Policy and paid during the Policy Period. 3. Individual (Specific) Stop Loss Insurance shall apply to: ® Medical Claims ® Outpatient Prescription Drug Claims ❑ Dental Claims ❑ Vision Claims ❑ Other (please specify): 4. Individual (Specific) Stop Loss Claims a. For NA who is identified by the health identification (ID) number NA, the amount of Paid Claims during the current Policy Period in excess of the Individual Point of Attachment of $NA. Such amount shall apply for the Policy Period. b. For each other Covered Person: The amount of Paid Claims during the current Policy Period in excess of the Individual Point of Attachment of $350,000 per Covered Person but not to exceed a maximum Point of Attachment of $ Unlimited per Policy Period. Paid Claims in excess of the maximum point of attachment shall not be eligible to satisfy the Aggregate Point of Attachment. Such amount shall apply for the Policy Period. c. Covered Person per Lifetime Maximum: The Individual (Specific) Stop Loss Claims shall not exceed Unlimited per Covered Person per Lifetime. Paid Claims in excess of the Covered Person per Lifetime Maximum shall not be eligible to satisfy the Aggregate Point of Attachment. Point of Attachment ® Includes Claim Administrator's Provider Access Fee ❑ Excludes Claim Administrator's Provider Access Fee TXStopLossApp-11/10 5. Premium (select one): ❑ Annual Premium (Due on the first day of the Policy Period): $ ® Monthly Premium shall be equal to the amounts obtained by multiplying the number of Coverage Units for a particular Month by $ for each Employee Coverage Unit $ for each Employee/Family Coverage Unit Please use the continuous text field directly below for any other structure(leaving the fields above blank). Note: you can use the "return" key to create additional rows, if needed: 521.45 Composite 6. The premium is based upon a current membership of 1,382 Individual Coverage Units and 1,398 Family Coverage Units. Additional Provisions: 12115 Stop Loss Policy - Claims incurred 01/0112016 through 12./31/2016 and paid 01/01/2016 through 03/31:2017. Premium is based on 2,780 enrolled. The undersigned person represents that he/she is authorized and responsible for purchasing stop loss coverage on behalf of the Employer Group. It is understood that the actual terms and conditions of coverage are those contained in this Application the Stop Loss Coverage Policy into which this Application shall be incorporated at the time of acceptance by Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company ("HCSC"). Upon acceptance, HCSC shall issue a Stop Loss Coverage Policy to the Employer Group. Upon acceptance of this Application and issuance of the Stop Loss Coverage Policy, the Employer Group shall be referred to as the "Policyholder." Tave Lawhorn Sales Representative Trang Nguyen Name of Underwriter Sig ture of A46thorized Purchaser Glen C. Robertson, Mayor Title of Authorized Purchaser INTERNAL USE ONLY Date Application approved by Underwriting: _ TXStopLossApp-11/10 4 BlueCross BlueShield 19 of Texas APPLICATION FOR STOP LOSS COVERAGE Employer Group Name: Employer Group Address: City: Account Number: Employer Group Number(s): Effective Date of Policy City of Lubbock 1625 13th Street Lubbock State of Situs: TX 010097 010097, 106837 01/01/16 Zip Code: 79401 Policy Period: These specifications are for the Policy Period commencing on 0 1/0 1/16 and ending on 12/31/16 The specifications below shall become effective on the first day of the Policy Period specified above and shall continue in full force and effect until the earliest of the following dates: (1) The last day of the Policy Period; (2) The date the Policy terminates; or (3) The date this Application for Stop Loss Coverage (herein called the "Application") is superseded in whole or in part by a later executed Application. A. Aggregate Stop Loss Insurance: ❑ Yes ® No If yes, complete items 1 through 9 below. 1. ❑ New Coverage ❑ Renewal of Existing Coverage 2. Stop Loss Coverage Period: ❑ New Coverage (Select one from below): ❑ Standard: Claims incurred and paid during the Policy Period. ❑ "Run-in" included: Claims incurred on or after and paid during the Policy Period. "Run-in" includes claims paid by Policyholder's prior claim administrator: Yes ❑ No ❑ If yes, such claims must be reported by the Policyholder to the Company (Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company) within 12 months of the Policy Effective Date and paid by the Policyholder's prior claim administrator within 6 months after the Policy Effective Date. ❑ Renewal of Existing Coverage: Claims incurred on or after the original Effective Date of Policy and paid during the Policy Period. 3. Aggregate Stop Loss Insurance shall apply to: ❑ Medical Claims ❑ Outpatient Prescription Drug Claims ❑ Dental Claims ❑ Other (please specify): A Division of Health Care Service Corporation, a Mutual Legal Reserve Company an Independent Licensee of the Blue Cross and Blue Shield Association TXStopLossApp-1 1/10 4. Average Claim Value: per Employee Attachment Factor: % of the Average Claim Value Aggregate Claim Liability and Run -Off Claim Liability Factors a. Employer's Claim Liability for each Policy Period shall be the sum of the Monthly amounts obtained by multiplying the number of Coverage Units for each Month by the following factors: $ for each Employee Coverage Unit for each Employee/Family Coverage Unit Please use the continuous text field directly below for any other structure (leaving the fields above blank). Note: you can use the "return" key to create additional rows, if needed: b. Employer's Run -Off Claim Liability shall be calculated by multiplying the sum average of all Coverage Units during each of the three calendar Months immediately preceding termination by the factors shown below. Settlement for the final accounting period will be described in the section of the Policy entitled SETTLEMENTS, Run -Off Period subsection of the Policy. $ for each Employee Coverage Unit $ for each Employee/Family Coverage Unit Please use the continuous text field directly below for any other structure (leaving the fields above blank). Note: you can use the "return" key to create additional rows, if needed: 6. CAP Arrangement ❑ Yes ❑ No 7. Aggregate Stop Loss Claims a. The amount of Paid Claims during the current Policy Period, less: i. Individual (Specific) Stop Loss Claims ii. Any claims in excess of the Individual (Specific) Stop Loss Claims per Covered Person per Lifetime Maximum iii. Any claims in excess of the Individual (Specific) Stop Loss Claims maximum Point of Attachment that exceeds the Aggregate Point of Attachment. The Aggregate Point of Attachment shall equal the sum of the Employer's Claim Liability amounts calculated Monthly as described in Item 5.a. above for the indicated Policy Period. b. In the event of termination at the end of a Policy Period, the Final Settlement Aggregate Point of Attachment shall equal the sum of the Employer's Claim Liability amount for the Final Policy Period and the Employer's Run -Off Claim Liability calculated as described in item 5.b. above. However, for the indicated Policy Period the minimum Aggregate Point of Attachment shall be $ c. Aggregate Stop Loss Claims shall not exceed a lifetime maximum of for the indicated Policy Period. Premium (Select one): ❑ Annual Premium (Due on the first day of the Policy Period): $ ❑ Monthly Premium shall be equal to the amounts obtained by multiplying the number of Coverage Units for a particular Month by $ for each Employee Coverage Unit $ for each Employee/Family Coverage Unit TXStopLossApp-11/10 2 Please use the continuous text field directly below for any other structure (leaving the fields above blank). Note: you can use the "return" key to create additional rows, if needed: 9. The premium is based upon a current membership of Individual Coverage Units and Family Coverage Units. B. Individual (Specific) Stop Loss Insurance: ® Yes ❑ No If yes, complete items 1 through 6 below. 1. ❑ New Coverage ® Renewal of Existing Coverage Stop Loss Coverage Period: ❑ New Coverage (Select one from below): ❑ Standard: Claims incurred and paid during the Policy Period. ❑ "Run-in" included: Claims incurred on or after and paid during the Policy Period "Run-in" includes claims paid by Policyholder's prior claim administrator: Yes ❑ No ❑ If yes, such claims must be reported by the Policyholder to the Company (Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company) within months of the Policy Effective Date and paid by the Policyholder's prior claim administrator within months after the Policy Effective Date. ® Renewal of Existing Coverage: Claims incurred on or after the original Effective Date of Policy and paid during the Policy Period. 3. Individual (Specific) Stop Loss Insurance shall apply to: ® Medical Claims ® Outpatient Prescription Drug Claims ❑ Dental Claims ❑ Vision Claims ❑ Other (please specify): 4. Individual (Specific) Stop Loss Claims a. For NA who is identified by the health identification (ID) number NA, the amount of Paid Claims during the current Policy Period in excess of the Individual Point of Attachment of $NA. Such amount shall apply for the Policy Period. b. For each other Covered Person: The amount of Paid Claims during the current Policy Period in excess of the Individual Point of Attachment of $350,000 per Covered Person but not to exceed a maximum Point of Attachment of $ Unlimited per Policy Period. Paid Claims in excess of the maximum point of attachment shall not be eligible to satisfy the Aggregate Point of Attachment. Such amount shall apply for the Policy Period. c. Covered Person per Lifetime Maximum: The Individual (Specific) Stop Loss Claims shall not exceed Unlimited per Covered Person per Lifetime. Paid Claims in excess of the Covered Person per Lifetime Maximum shall not be eligible to satisfy the Aggregate Point of Attachment. Point of Attachment ® Includes Claim Administrator's Provider Access Fee ❑ Excludes Claim Administrator's Provider Access Fee TXStopLossApp-11 /10 5. Premium (select one): ❑ Annual Premium (Due on the first day of the Policy Period): $ ® Monthly Premium shall be equal to the amounts obtained by multiplying the number of Coverage Units for a particular Month by $ for each Employee Coverage Unit $ for each Employee/Family Coverage Unit Please use the continuous text field directly below for any other structure fleavinq the fields above blank). Note: you can use the "return" key to create additional rows, if needed.- $21.45 eeded. $21.45 Composite 6. The premium is based upon a current membership of 1,382 Individual Coverage Units and 1,398 Family Coverage Units. Additional Provisions: 12/15 Stop Loss Policy - Claims incurred 01/01/2016 through 12:'3112016 and paid 01/01,12016 through 03131'2017. Premium is based on 2,780 enrolled. The undersigned person represents that he/she is authorized and responsible for purchasing stop loss coverage on behalf of the Employer Group. It is understood that the actual terms and conditions of coverage are those contained in this Application the Stop Loss Coverage Policy into which this Application shall be incorporated at the time of acceptance by Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company ("HCSC"). Upon acceptance, HCSC shall issue a Stop Loss Coverage Policy to the Employer Group. Upon acceptance of this Application and issuance of the Stop Loss Coverage Policy, the Employer Group shall be referred to as the "Policyholder." 1 Tave Lawhorn Sales Representative Trang Nguyen Name of Underwriter Sign re of Authorized Purchaser Glen C. 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Albert Lucio Mc & H Life Agency Inc Blue Cross Blue Shield of Texas Blue Cross Blue Shield of Texas Blue Cross Blue- Shield of Texas - STOP LOSS PROPOSAL_ FOR City of Lubbock Texas Effective Date: 01/01/2016 Through Date: 12/31/2016 Specific Deductible (per Covered Individual) $350,000 $375,000 $400,000 $30,000 Policy Year Maximum Specific Benefit Unlimited Unlimited Unlimited Unlimited Lifetime Maximum Specific Benefit Unlimited Unlimited Unlimited Unlimited Covered Benefits Med, Rx Card - Med, Rx Card Med, Rx Gard Med, Rx Card Specific Premium - Composite Rate 2,594 $2147 $19 83 $1840 $19.63 Total Lives 2,594 Estimated Contract Specif c Premium $668,318 $617.268 $572,755 $611043 Contract Basis 12115 12/15 12/15 12/12 Commission 000% 000% 0 M 000% Note: This proposal is not complete unless accompanied by the proposal notes and the basis of offer noted on the following pages Individual Special Requirements: Underwriter: DMS (September 29, 2015) 10466846003-2015-457072-2-1 Page 1 of 6 � (1.2".) 1 Milliman 1120 South 101 s1 Street 3.0'o Suite 400 Rx Rebates Omaha, NE 68124 (.},90 o) USA 0.0° 0 Tel +1402 393 9400 Individual Stop -Loss Fax +1 402 384 5776 0.000 milliman.com September 2, 2015 Mr. Travis Sartain Partner NIHBT 8144 Walnut Hill Lane Dallas, TZ 75231 Re: City of Lubbock Renewal Evaluation for the 2016 Plan Year Dear Mr. Sartain: At your request, `Iilliman, Inc. (`Iilliman) has completed an evaluation of City of Lubbock's 2016 renewals. This letter includes the executive summary, detailed analysis, methodology, reliance, and limitations of our findings. Executive Summary CM- of Lubbock currently offers its eligible employees various medical, dental, life, disability, and other types of coverage. You engaged Milliman to evaluate the 2016 plan year Qanuary 1, 2016 - December 31, 2016) medical and dental renewals proposed by the insurance carrier. Our evaluation of the carriers' proposals is shown in the table below: Medical - _-lctive,'COBR1 (Self Insured`. Claims Cost (1.2".) (I.20 0) Claims _administration 3.0'o 3.00 o Rx Rebates (4.90o) (.},90 o) Organ Transplant Fee 0.0° 0 5.00 0 Individual Stop -Loss 25.50,0 0.000 ACA Fees 36.60.0) (36.60o) Total Medical - Active/COBRA (0.6%) (1.2%) Offices in Principal Cities Worldwide M Milliman September 2, 2015 Medical - Retirees (Self -Insured) Claims Cost 18.0910 18.0°o Claims -administration 3,0% 3.00o Rt Rebates (4.9" 0) (4.9"o) Organ Transplant Fee 0.00'0 5.0° 0 Individual Stop -Loss 25.50 0 0.0'0 ACA Fees (36.6%) 36.6° 01 Total Medical - Retirees 17.2% 16.8% Dental (Self -Insured) Claims Cost (24.1%) 0) (2-1.100) Claims _administration 0.000 5.0°o Total Dental 0? 701 111) e0i. We estimate that self-insured annual claims and expenses for the 2016 plan year will be approximately: • $21.75 million for Active/COBRA medical and prescription drugs based on current enrollment levels of 2,135 employees and a projected premium of $849.00 per employee per month (PEPM). However, we recommend that City of Lubbock continue to budget at $854.43 PEPM for an annual budget of $21.89 million; and • $9.36 million for Retiree medical and prescription drugs based on current enrollment levels of 644 employees and a projected premium of $1,211.24 per employee per month (PEPM); and • $1.36 million for dental based on current enrollment levels of 2,675 employees and a projected premium of $42.41 PEPM. However, we recommend that City of Lubbock continue to budget at $54.89 PEPM for an annual budget of $1.76 million. See Attachments #14 for more details. We will use these figures in our projection of budgets for the upcoming plan year. Note that these figures also depend on current plan designs, claims experience that was available to us, and proposed expenses. If enrollment levels, plan designs, vendors, or locations should change dramatically, this number should be updated with the new information. 2 ■ Milliman September 2, 2015 Detailed Analysis L Renewal Evaluation — Medical & Prescription Drugs (self-insured) Prq eaed Chaiig 111 Prei11llU11 - Clai,,v � � E %pews — Adive/ COBR.=1 Attachment #5 shows our calculation of estimated claims costs and expenses for the Active,/COBRA medical and prescription drug plan. Using the carrier's proposed increases to expenses listed in the Executive Summar- above and shown in Attachment #2, we estimate that City of Lubbock's claims and expenses ,vill be $849.00 PEPM which is 0.60 0 less than current premiums. Based on current enrollment, this amounts to $21.75 million in annual premium. However, we recommend that Citi- of Lubbock continue to budget at $854.43 for an annual budget of S21.89 million. If claims do not trend as much as our estimate or Citv of Lubbock is able to reduce expenses, then this amount could be lower. 1'rojected Change in Premium - Claizvs E Expenses — Retiree Attachment #6 shows our calculation of estimated chains costs and expenses for the Retiree medical and prescription dnig plans. Using the carrier's proposed increases to expenses listed in the Executive Summary above and shown in Attachment #3, we estimate that City of Lubbock's claims and expenses «-ill be S1,211.24 PEPM which is 17.2'o more than current premiums. Based on current enrollment, this amounts to $9.36 million in annual premium. If claims do not trend as much as our estimate or City of Lubbock is able to reduce expenses, then this amount could be lower. E %penes - Ada11n1strat1o11 Fees ees Blue Cross Blue Shield of Texas (BCBS of TZ and other vendors perform carious services for the efficient administration and financial stability of the plan. As referenced earlier, Attachments #2-3 show a summary of the current and proposed fees for 2016 with our assessment. BCBS of IN is proposing a 4.8° o increase to claims administration fees. Since this is with the 3-50 o increase we typically see, we recommend accepting this proposal. Etipenses— Individual Stop -Loss Preilli MIS Attachments #7-9 show our analysis of the risks of large claims and stop -loss coverage. Details of the risk associated with various levels of individual stop -loss can be found in Attachment #7 and are summarized in the table below: ■ Milliman September 2, 2015 Individual Stop- Probability of a Claim Number of Loss Deductible over the Deductible Members $400,000 0.050 0 1.9 $375,000 0.04'o 17.2 $550,000 0.050o 2.6 $325,000 0.050 o 5.0 Additionally, Attachment #8 shows expected stop -loss reimbursements at various lei -els of individual stop -loss coverage. Note that as the individual deductible increases, the expected reimbursements decrease. Generally, the guideline is that the appropriate deductible would be one where the additional claims liability is minimized compared to the corresponding premium savings. Should BCBS of TZ provide quotes at additional levels, we will include these figures in our analysis. Attachment #9 compares recent years' paid stop -loss premiums to reimbursements received and calculates a loss ratio over the time period. The combined loss ratio since 2012 has been 3.10 o. Stop -loss carriers typically target paid loss ratios between 700 o and 800 o for groups of this size. The stop -loss carrier may wish to base the proposed premium more heavily- on their risk pool and less on City- of Lubbock's actual experience. City- of Lubbock should take this into account «hen considering increasing the deductible level with this carrier or another one. BCBS of TZ has proposed a 25.5'o increase to the current individual stop -loss premium levels. We believe this increase is much too high given actual and expected loss ratios. Further, we believe a 0.0% increase to premiums is fair and subsequently recommend further negotiations with the carrier. In this calculation, we have used the proposed individual stop -loss pretnitun rates from BCBS of T,"-- with. Zwith the current deductible. E %penises — .14,gregate Stop -Loss Prenaiarnzr Self-insured employers may also purchase aggregate stop -loss coverage to protect against aggregate claim fluctuation. Groups with fewer employees will generally have a lower tolerance for risk than groups of a larger size. Typically, for a group this size, the probability- of an aggregate reimbursement occurring is insignificant. The followmi g table highlights the inherent variability of aggregate medical claims. The "No Deductible" and current ISL deductible scenarios are displayed in Attachments #10-11. tA■ Milliman September 2, 2015 Individual Stop- Loss Deductible Probability ofAggregate Claims Exceeding 105% of Expected 115% of Expected 125% of Expected No Deductible 16.60 0 0.70o — 0.00 0 $400,000 .14.30o 0.20 0 -- 0.00 0 $375,000 14.1'o 0.20 0 — 0.00 0 $350,000 13.800 0.20 0 — 0.000 $325,000 13.60o 0.100 — 0.000 To assess the aggregate stop -loss risk, we performed a Monte Carlo simulation on the current enrollment. The spread of expected claims without and with individual stop -loss is shown in these attachments. The vertical axis shows the probability of exceeding a certain level of expected claims. The horizontal axis shoes a range as a percent of expected average claims. Assuming that City of Lubbock's 2,779 enrollees in the census data correspond to 5,569 covered lives, we simulated 10,000 scenarios, or 10,000 rears of claims experience. The results of our Monte Carlo analysis indicate that, with no individual stop -loss as displayed in Attachment #10, there is a 0.70 o probability that City of Lubbock will realize an aggregate claim total greater than 1150 0 of the expected claims resulting from pure randomness. This probability drops to approximately 0.00% at a level of 1250 0. With individual stop -loss set at 5350,000, as displaced in Attachment #11, the probability of aggregate claims greater than 1150 0 of the expected claims drops to 0.10 0, and the chance of having aggregate claims greater than 1250 0 of the expected claims is approximately 0.00 0. Note that this assumes that the attachment point is set correctly. Trend : lnalysis — Claiiiis — <-elf irel COBRf=1 Using a six-month rolling average, we performed a linear regression analysis of City of Lubbock's monthly paid claims and enrollment to calculate that the claims in the Active/COBRA self-insured plan have been increasing at an annualized rate of 3.80 o for medical and 103'o for prescription drugs. Note that prescription drug trend includes combined claims data from both the Active/COBRA plan and the Retiree plans due to limited reporting data. The results are displayed in Attachments # 12-13. Nationally, based on the Rlilliman sllirl illarket Sreruey of employers, annual trend for medical and prescription drugs combined is approximately- 5-9° o for 2014 with expectations for 2015 at the same or slightly higher level. Additionally, the Milliman Medieallrade-v (_1 L111), which examines the total cost to deliver healthcare, saw increases of 63"o from 2014 to 2015. In order to mitigate variations due to the inherent variability in claims data on individual groups, we blended the calculated trends for City of Lubbock v-ith national averages as appropriate to arrive at the trend levels used in the budget calculations. ■ Milliman September 2, 2015 Trend Analysis — Claims — Retiree Using a six-month rolling average, we performed a linear regression analysis of City of Lubbock's monthly paid claims and.enroUment to calculate that the claims in the Retiree self-insured plans have been increasing at an annualized rate of 5.3% for medical and MY o for prescription drugs. Note that prescription drug trend includes combined claims data from both the Active/COBRA plan and the Retiree plans due to limited reporting data. The results for annualized medical trend is displayed in Attachment #14. Nationally, based on the Alillinran [laid -Market Sumg of employers, annual trend for medical and prescription drugs combined is approximately 5-90 o for 2014 with expectations for 2015 at the same or slightly higher level. Additionally, the Milliman Aledieallndev (MVI), which examines the total cost to deliver healthcare, saw increases of 6.3% from 2014 to 2015. In order to mitigate variations due to the inherent variability in claims data on individual groups, we blended the calculated trends for Citi- of Lubbock with national averages as appropriate to arrive at the trend levels used in the budget calculations. Preliminary Budgeting— Prerni!lAV Equivalencies for the 2016 Plan Y ear—: lctiue/COBRA Attachment #15 contains our findings and recommendations for distributing the previously calculated total premium on a PEPiLM basis over the relevant tier options. We expect tier pricing levels for a 4 -tier plan to be 1.000 for EE Only, 2.135 for EE + Spouse, 1.674 for EE + Child(ren), and 2.971 for Family. That is, the cost of a spouse is expected to be about 14% greater than the cost of an employee. Citi- of Lubbock's current tier factors vary from our expectation of the cost of coverage for each tier. For this analysis, we kept the current tier pricing levels in place. Based on the factors above, we "spread" the premiums over the tiers to reflect the assumed variances, while maintaining the same average total premiums calculated in Attachment #5. Referring to Attachment #15, we arrive at the "CY 2016 Proposed" premiums. The variances between these and the current premiums are shown in the bottom rows of the attachment, and the total costs are shown in the far right column. Employer Subsidies and Employee Contributions — Activel COBRA At this time, we have assumed that Citj- of Lubbock will keep the employer subsidy for 2016 at the same percent as it is currently. As a result, City of Lubbock's portion of total medical costs is remaining flat at 80.2°'0 of the total cost. Please refer to Attachment #16 for details. Preliminary Budgeting — Premium Equivalencies for the 2016 Plan Year — Retiree Attachment #17 contains our findings and recommendations for distributing the previously calculated total premium on a PEPM basis over the relevant plan and tier options. Based on our Milliman September 2, 2015 actuarial cost model, Health Cost Guidelines, x-.2014, the relative values of Citi- of Lubbock's medical plan designs, including expenses, are 100.00 o for the Non --Medicare Retiree plan and 49.10 0 for the -Medicare Retiree plan. That is, the cost of the -Medicare Retiree plan is expected to be about 510 0 less than the cost of the Non --Medicare Retiree plan. Addidonallv, tier pricing levels for a 4 -tier plan should be 1.000 for EE Only, 2.135 for EE + Spouse, 1.674 for EE + Child(ren), and 2.971 fot Family-. That is, the cost of a spouse is expected to be about 14% greater than the cost of an employee. Citi- of Lubbock's current plan pricing lei -els vary from our plan pricing relativities and their tier factors vary from our expectation of the cost of coverage for each tier. For this analcsis, we have combined the Non --Medicare and -Medicare Retiree plan premium equivalencies at the request of Citi- of Lubbock using-Milliman's recommended tier factors. Based on the factors above, we "spread" the premiums over the tiers to reflect the assumed variances, while maintaining the same average total premiums calculated in Attachment #r6. Referring to Attachment #17, we arrive at the "CY 2016 Proposed" premiums. The variances between these and the current premiums are shown in the bottom rot -,-s of the attaclunent, and the total costs are shorn in the far right column. Elllployer Subsidies- and Employee Conttibutioms — Retiree At this time, we have assumed that CM- of Lubbock will keep the employer subsidy- for 2016 at the same percent as it is currently-. As a result, Citi- of Lubbock's portion of total medical costs .N -M decrease to 53.50 0 of the total cost due to the changes in premium equivalencies discussed above. Please refer to Attachment # IS for details. ■ Milliman September 2, 2015 2. Renewal Evaluation —Dental (self-insured) Projected Change in Premittm — Claims � � E %penes Attachment 4#19 shows our calculation of estimated claims costs and expenses for the self-insured dental plans. Using proposed expenses, we estimate that City- of Lubbock's claims and expenses will be $42.41 PEPM which is 22.7'o less than current premiums. Based on current enrollment, this amounts to $1.36 million in annual premium. However, we recommend that Citi of Lubbock continue to budget at $54.89 PEPNI for an annual budget of $1.76 million. If claims do not trend as much as our estimate or Citv of Lubbock is able to reduce expenses, then this amount could be lower. E- penes - Administration & Other Fees BCBS of TZ has proposed a 0.0'o increase to claims administration fees. Since this is below the 3- 5% increase we typicallv see, we recommend accepting this proposal. Trend _'hall sis - Claims Using a six-month rolling average, we performed a linear regression analysis of Citi- of Lubbock's monthly- paid claims and enrollment to calculate that the claims in the self-insured dental plans have been decreasing at an annualized rate of 7.0'o. The results are displayed in Attachment #20. Nationallv, based on the Millinaan Mid-Afarket Survey of employers, annual trends are approximately 0-50 o for 2014 with expectations for 2015 at the same or slightly- lower level. In order to mitigate variations due to the inherent variability in claims data on individual groups, we blended the calculated trends for City of Lubbock with national averages as appropriate to arrive at the trend levels used in the budget calculations. Prelimiit,rry Bredgeting — Premium Equivalencies for the 2016 Plait Year Attachment #21 contains our findings and recommendations for distributing the previously - calculated total premium on a PEPM basis over the relevant tier options. We expect tier pricing levels for a 4 -tier plan to be 1.000 for EE Only, 2.043 for EE + Spouse, 2.421 for EE + Child(ren), and 3.804 for Family. This indicates that, on average, children in a family unit incur more claims than a spouse incurs. City of Lubbock's current tier factors vary- from our expectation of the cost of coverage for each tier. For this analysis, we kept the current tier pricing levels in place. Based on the factors above, we "spread" the premiums over the tiers to reflect the assumed variances, while maintaining the same average total premiums calculated in Attachment #19. Referring to Attachment #21, we arrive at the "CY 2016 Proposed" premiums. The variances Milliman September 2, 2015 between these and the current premiums are shown in the bottom rows of the attachment, and the total costs are shown in the far right column. Etrplger Sitbsidier and Etvployee Conttibutions At this time, we have assumed that Citi- of Lubbock will keep the employer subsidy- for 2016 at the same percent as it is currently-. As a result, Citi- of Lubbock's portion of total dental costs is remaining flat at 73.60 o of the total cost. Please refer to Attachment #22 for details. Milliman Assumptions and Methodology The steps we used to arrive at the results are outlined below: September 2, 2015 1. We collected enrollment information from various vendors through 1IHBT. We assumed that those employees electing coverage would continue to elect that same coverage and that employees waiving coverage would continue to waive coverage. 2. Chums and expense information was also provided by various vendors through IIHBT. 3. Our expected claims range encompasses the current plan designs offered to employees. Should plan designs change, the Benefit Plan Design Factor should be updated accordingly. 4. We calculated trends using a regression analysis and blended those results with national averages where appropriate. 5. For the specified plans, we calculated a manual rate on the group based on demographics and plan designs using our proprietary- actuarial pricing model, Healtb Cort Guidelines, U. 2014. G. Using claims experience, the calculated manual rate where indicated, and assumed trend factors, we calculated a projected claims costs on a per employee per month basis. 7. We performed an analysis of aggregate claim variability to determine an appropriate level of individual stop -loss coverage. 8. Using plan pricing levels, tier pricing levels and enrollment assumptions, ,-,-e calculated premium equivalency rates by plan and coverage tier. 9. Using employer subsidy assumptions, we calculated employer subsidies and employee contributions by plan and coverage tier. Reliance and Limitations In performing our analysis for City of Lubbock, we relied on the data provided to us from various vendors through NIHBT. We have not audited this data, but we performed a limited review for reasonableness and we found no material defects in the data used in this report. If the underlying data is inaccurate or incomplete, then the results of our review may be inaccurate or incomplete. Differences between our projections and actual amounts depend on the extent to which future experience conforms to the assumptions made for this analysis. It is likely that actual experience will not conform exactly to the assumptions used in this analysis. actual amounts will differ from projected amounts to the extent that actual experience deviates from expected experience. 10 Milliman September 2, 2015 The services provided for this project were performed under the signed Consulting Services Agreement between Milliman and MHBT dated January- 31, 2003 as well as the signed Services Agreement between 1lilliman and City- of Lubbock dated June 11, 2012. This letter and its attachments have been prepared for the use of MHBT in their relationship with City- of Lubbock and are only to be relied upon by these organizations. No portion may be provided to any other partly without i\Iillunan's prior written consent. "NElliman does not intend to benefit anc other recipient of this report, even if Milliman consents to the release of this report to that recipient. Please contact us if you have any questions. Sincerely-, Jason E. Speer, F.S.A., M. A.A.A. Principal & Consulting Actuary - /34't,4 t Blaine A. Weber Senior Benefits Consultant & Underwriter Paul Penke Benefits Consultant & Financial Anal-st 11 k � � ■ ( a ) ! /k ■ Milliman Renewal Evaluation Summa - Medical Active/COBRA Onl - City of Lubbock - GdrWer BCBS of TX ANachnnent#2 1. Enrollment is taken from the June 2015 FMR. 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction the carrier's 2016 PY proposed expenses. 5. Aggressive and Conservative budgets are presented for illustrative purposes and should not be taken as Milliman's recommended budgeting levels Prepared on: ptp 9/2/2015 Milliman, Inc. City of Lubbock Pricing 2016RE_RE Aggressive Budget' CY 2015 CY 2016 Milliman Milliman Total Medical - Self -Insured $20,761,429 $22,741,241 Percent Increase Over Current Claims & Claims & Total Annual Cost Over Current ($1,129,091) Current Carrier Milliman 10% Coverage Enrollment/ Rates Total Annual Initial Projected ... - . Basis Volume' (PEPW Cost Expenses Expenses4 Expected Claims Cost (PEPM)3 ilEmployees 1 2.1351 1182.351 $20.043,785 $772.76 $772.76 Percent Increase Over Current Total Annual Cost Over Current (1.291.) ($245,667) (1.2%) ($245,667) Claims Administration lEmplovees 1 2.1351 $42.31 T $1.083.982 $43.581 $43.58 Percent Increase Over Current 3.0% 3.0% Total Annual Cost Over Current $32,537 $32,537 Rx Rebates lEmolovees 1 2.135 ($7.72) ($197,786) (37.341 (57.34) Percent Increase Over Current Total Annual Cost Over Current (4.9%) $9,736 (4.9%) $9,736 Organ Transplant Fee JEE Only 1,069 56.08 $77,994 EE + Family1,066 514.60 $186.763 Total 2.135 $10.33 $264.757 S10.331 $10.85 0.0% 5.0% Percent Increase Over Current Total Annual Cost Over Current $0 $13,238 Individual Stop -Loss lEmoloyees 1 21351 $20.051 $513.681 _$25_1_6F $20.05 Percent Increase Over Current 25.5% 0.0% Total Annual Cost Over Current $130,918 $0 ACA Fees lEmolovees 1 2,1351 $7.111 $182.101 S4.501 $4.50 ncludes PCORI & Transibcnal Reinsurance Fees Percent Increase Over Current (36.6%) (36.6%) Total Annual Cost Over Current ($66,710) ($66,710) Composite JEmployees 1 2,1351 $854.431 $21,890,520 $849.001 $844.40 Total Medical - Self -Insured 2,1351 $21,890,520 --s--ii-7751,3357$211,633,654 Percent Increase Over Current (0.6%) (1.251.) Total Annual Cost Over Current ($139,185) ($256,866) 1. Enrollment is taken from the June 2015 FMR. 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction the carrier's 2016 PY proposed expenses. 5. Aggressive and Conservative budgets are presented for illustrative purposes and should not be taken as Milliman's recommended budgeting levels Prepared on: ptp 9/2/2015 Milliman, Inc. City of Lubbock Pricing 2016RE_RE Aggressive Budget' Conservative Budgets Composite PEPM $810 $888 Total Medical - Self -Insured $20,761,429 $22,741,241 Percent Increase Over Current (5%) 4% Total Annual Cost Over Current ($1,129,091) $850,721 Chance of Exceeding Budget 75% 10% 1. Enrollment is taken from the June 2015 FMR. 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction the carrier's 2016 PY proposed expenses. 5. Aggressive and Conservative budgets are presented for illustrative purposes and should not be taken as Milliman's recommended budgeting levels Prepared on: ptp 9/2/2015 Milliman, Inc. City of Lubbock Pricing 2016RE_RE Milliman Renewal Evaluation Summa - Medical Retirees Onl - City of Lubbock - Carrier BCBS of TX Attachment #3 1. Enrollment is taken from the June 2015 FMR. 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction the carrier's 2016 PY proposed expenses. 5. Aggressive and Conservative budgets are presented for illustrative purposes and should not be taken as Milliman's recommended budgeting levels Prepared on: 9/2/2015 pfP Milliman, Inc. City of Lubbock Pricing 2016_RE Aggressive Budgets Conservative Budgets CY 2015 CY 2016 $1,268 Milliman Milliman $9,799,311 Percent Increase Over Current 12% 23% Total Annual Cost Over Current Claims & Claims & Chance of Exceeding Budget 75% 10% Current Carrier Milliman Coverage Enrollment/ Rates Total Annual Initial Projected Basis I Volume' (PEPM)2 Cost Expenses Expenses° Expected Claims Cost (PEPM)3 lEmployees 1 644 $962.11111111 $7,435,218 $1,135,661 $1.135.66 Percent Increase Over Current 18.0% 18.0% Total Annual Cost Over Current $1,341,193 $1,341,193 Claims Administration lEmplovees 1 644 $42.311 $326,972 $43.58 $43.58 Percent Increase Over Current 3.0% 3.0% Total Annual Cost Over Current $9,815 $9,815 Rx Rebates Emplovees 644 ($7.72) (559,660) (57.34) $7.34) Percent Increase Over Current (4.9%) (4.951.) Total Annual Cost Over Current $1,937 $2,937 Organ Transplant Fee JEE Only 315 16.08 $22,982 EE + Family329 $14.60 557,641 $10.431 $10.95 Total 644 $10.431 $80,623 0.0% 5.0% Percent Increase Over Current Total Annual Cost Over Current $0 $4,031 Individual Stop -Loss JEmployees 644 $20.051 $154,946 $25,16 $20.05 Percent Increase Over Current 15.5% 0.0% Total Annual Cost Over Current $79,490 $0 ACA Fees lEmployees 1 6441 $5.91 J $45,698 $3.75 $3.75 nc�udes PCORI & Transitional Reinsurance Fees Percent Increase Over Current (36.6%) (36.6%) Total Annual Cost Over Current (S16,741) ($16,741) Composite Employees 6441 $1,033.101 $7,983,797 $1,211.24 $1,206.66 Total Medical - Self -Insured 644 $7,983,797 $9,360,491 $9,325,032 Percent Increase Over Current 17.2% 16.8% Total Annual Cost Over Current $1,376,694 $1,341,235 1. Enrollment is taken from the June 2015 FMR. 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction the carrier's 2016 PY proposed expenses. 5. Aggressive and Conservative budgets are presented for illustrative purposes and should not be taken as Milliman's recommended budgeting levels Prepared on: 9/2/2015 pfP Milliman, Inc. City of Lubbock Pricing 2016_RE Aggressive Budgets Conservative Budgets Composite PEPM $1,154 $1,268 Total Medical -Self-Insured $8,921,670 $9,799,311 Percent Increase Over Current 12% 23% Total Annual Cost Over Current $937,873 $1,815,514 Chance of Exceeding Budget 75% 10% 1. Enrollment is taken from the June 2015 FMR. 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction the carrier's 2016 PY proposed expenses. 5. 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