Employee Benefit Trust Minutes - 10/25/2005 CITY OF WICHITYA FALLS
EMPLOYEE BENEFITS TRUST MEETING
October 25,2005
Present: Bill Sullivan, Chair
Darron Leiker, City Manager
David Winney, Director of Human Resources it
Gail Garmon, Employee Benefits Coordinator
Cassie Stennett, Broker
Marvin Traywick, Consultant
The meeting was called to order at 2:00 PM
Agenda Items:
Approval of Minutes
Jim Dockery had two corrections to the minutes of the previous meeting. A. Change
Darron Leiker's title to City Manager and B. In the Financial Statement change
expenditures from 6.5 million to 6.6 million. Bill Sullivan made a motion to accept the
minutes with those corrections. Darron Leiker seconded the motion. Motion carried.
Section 125---Flex Spending Account
Bill Sullivan stated that he had received the revised documents from Alt Benefits and
asked the board to authorize him to sign and return them to Alt. Jim Dockery questioned
whether or not they included use of the debit card. It was not clear whether Alt
understood if the City did or did not intend to make the debit card a part of the benefit. It
was decided that the final decision on that point would be made at the meeting of
November 3.
Results on Insurance Bids
Marvin Traywick and Cassie Stennett gave a report on information received from Blue
Cross/Blue Shield, CoreSource, and Texas Municipal League. Their report showed that
the City's projected total for administration and payment of claims is a total of
$8,234,608. The BCBS total was $5,493,990 with $493,709. for administration and the
remaining $5,000,281. for payment of claims. CoreSource total combined was
$8,344,917. and TML was $8,950,992. total. When asked how BCBS could come in
with such a low figure, Marvin explained that BCBS had taken into account the previous
years claims and calculated what their total to pay these same claims would have been.
Based on the discount rates that BCBS has with providers, they calculated that they could
pay claims and administer the plan for the $5,493,990. Cassie explained that the
prescription portion of the City's plan was not included in this figure because the City is
in the middle of a three year contract with the current carrier, Pharmacare. Jim explained
that this would add approximately one million dollars to the total. Bill Sullivan
expressed concern over this possibly being a first year rate and asked what were the
chances of BCBS raising the cost considerably in the next one to two years. Marvin
explained that while this in fact is a one year arrangement, BCBS is eager to get the
City's business, that they are a large presence in the area and that while they may raise
the bid upon renewal, it should not be much more than the difference between actual paid
claims and the estimated claims total.
Cassie explained that the bids were for administration purposes only. The City would
remain self funded. Cassie then gave a report on the City's stop loss renewal with J.
Allen Hall Associates, comparing it to the proposed stop loss portion of the BCBS
package. She explained that the proposed renewal contract calls for a total 2006
premium of$240,997.00, approximately$10,000 less than the 2005 contract, bringing the
City's total fixed cost to around $425,964 ($222,567 medical/dental administration,
$44,629 aggregate premium, and $196,368 specific premium, minus $37,600 rebate from
Pharmacare). With BCBS the City's fixed cost would then be around $617,550 ($452,631
medical administration, $41,078 dental administration, $36,350 aggregate premium, and
$125,091 specific premium, minus $37,600 rebate from Pharmacare). However the
projected savings on the claims paid between the City's claims administration and BCBS
claims administration would be around$1,500,000.00.
Cassie stated that she has asked BCBS for a rate guarantee which she will report on at the
next meeting of November 3.
Cassie and Marvin noted that they had also asked for two basic plan designs, one that the
City could afford to offer the employee with no employee premium, making sure of
100%participation of all eligible employees, preventing any adverse selection, and a step
up plan where the employee would pay a premium but would have slightly better
coverage. The two plans that BCBS presented for review were very favorable. Cassie
pointed out the differences between the two plans. Both were noticeably different from
the City's current four plans. Both plans included a co-pay for doctor office visits which
the City plans currently do not have. The board did suggest making a few changes. Cassie
will go back to BCBS with the changes and ask for reevaluation. The premiums which
the City would charge for the two plans would need to be determined by the factors that
BCBS used to set these plans benefits.
Jim Dockery again questioned what would happen if the City went with BCBS at a
reasonable administration fee and that fee increased dramatically with the renewal.
Cassie pointed out that if the City stays with it's current situation and the claims go up
next year, then the City's cost would go up. If the City goes with BCBS and the claims
go up then of course BCBS cost to the City would go up. The same would be true with
stop loss reinsurance, etc. Cassie stated that she had two carriers who declined to bid
because of the City's retiree ratio. BCBS is taking into consideration the retiree ratio.
Y3,
Jim Dockery inquired as to whether the $600,000. expense of the On-Site Clinic was
included in the factors when BCBS calculated it's proposal figures. Cassie started that
the On-Site Clinic figures have never been figured into the Trust calculations but that it
might be possible to add them in.
Jim asked about preparing now for the increase that might happen in the second year, in
order not to have to raise employee rates to cover the difference. It was discussed that the
employee and City rates should be set now to be able to cover that increase if it happens.
If the board budgets now for the maximum liability, it would build a reserve that would
cover increases. It was noted that the Trust already has a reserve of around $300,000.
going into the new plan year. At the end of the coming year, it is expected that there will
be a reserve of around$1,500,000.00.
Cassie then reported that under the new Medicare Part D program, the Trust is possibly
eligible to be reimbursed from $75,000 to $100,000 for the retiree prescription costs to
the plan. It would be in the form of a subsidy from Medicare. Cassie and the Trust office
have been working with a company by the name of Part D Advisors, to do the
calculations and the filing of the necessary paperwork to set this in place. The fee to Part
D Advisors for this service will be 25% of the subsidy. Darron Leiker made a motion
that the board authorize Bill Sullivan to sign the registration document with Part D
Advisors. Jim Dockery seconded the motion. Motion carried.
It was decided that Cassie would go back to BCBS for a final proposal based on the
changes that had been suggested and bring those figures to the next meeting to be held on
Nov. 3. It was also decided that if the decision were made to go with the BCBS
proposal, that the effective date would need to be January 1, 2006. It was then decided
that the board members would discuss this issue with the City Council before making any
final decisions.
The meeting was adjourned at 5:05 PM
Respectfully submitted,
4am
ail Garmon"j4A—'
Employee Benefits Coordinator