Sangamon Sun

City of Peru Committee of the Whole met Nov. 26.

Here is the minutes provided by the committee:

A Committee Of A Whole meeting was called to order by City Clerk Dave Bartley in the Peru City Council Chambers on Monday, October 15, 2018 at 5:30 p.m.

City Clerk Dave Bartley called the roll with Aldermen Potthoff, Ferrari, Lukosus, Radtke, Sapienza, Payton and Ballard present; Alderman Waldorf absent; Mayor Harl present.

MINUTES

Clerk Bartley presented the Committee Of A Whole Minutes of October 15, 2018. Alderman Waldorf made a motion that the minutes be received and placed on file. Alderman Lukosus seconded the motion; motion carried.

PRESENTATION Regard the health insurance renewal

Joni de Souza and Amy Kipart from Brennan & Stuart were present, and Joni gave a presentation regarding the current situation with our health insurance renewal.

ÿ Renewal

o KBA/Companion Life

ß Renewal 41%, overall annual increase - $426,217.12

ß Fixed Costs 29.6% annual increase - $98,989.92

ß Claims Costs 61.6% annual increase - $347,227.20

ß Renewal Monthly Maximum Costs - $121,952.44 - $1,463,429.28 annual maximum cost ß Renewal numbers good until 11/29/18

o Renewal Components

ß 10-15% increase based on changing the contract type from 12/12 to 24/12. This means any claims incurred this year but not paid out until next year will be covered under the 2019 contract

ß Group is running at 147% loss ratio. This is through 10 months, but the first two months had no and low claims. Projecting out your claims for 12 months - $1,032,078

ß Seven large claimants - claims in excess of $25,000 (2 over $25K, 1 over $50K, 3 over $60K, and 1 over $70k)

ÿ Observations/Suggestions

o Companion Life still has not priced the City of Peru properly. Your projected claims are $1,032,078 and Companion is putting the maximum claims liability at 901,558.08 for this next year. We will have a repeat of this year again next year if claims continue the way they are now

o Two options for the upcoming year one option is to keep the aggregating specific (lowered to $120,000) or no aggregating specific but three lasers - $75,000, $75,000, and $120,000 (an extra $150,000) in liability potential

o City of Peru needs to move to 24/12 contract to protect the City from claims incurred this year but not paid out before 12/31/18

o Aggregate Accommodation (like being on a budget plan for gas or electric) should be added for $2.50 per employee per month. This means the City would not be fronting money and waiting until the end of the year if you go over the aggregate. This year the amount you would be due through 10 months would be $123,000 without the aggregating specific being considered

o Terminal Liability should be considered. This would allow the City to return to fully insured in the future and have claims paid that were incurred under the contract but not paid out until after the contract termination. This will add about 5% to the costs

o Sun Life is looking to hold your current costs but increase the claims costs by around 90%. This is more in line with where you should be

o Move in TPA presently, I am not recommending a move in TPAs. Until claims from 2018 are paid out, I would stay with KBA. In the future (within the 2019 plan year or in 2020) I would look at making a move to a different TPA who is able to be more flexible and proactive in benefit design

o BCBS is not really an option this year. You would need to add terminal liability to your plan this year to have them as an option in 2020

ÿ Quoting process spreadsheet attached

o KBA several options available with aggregating specific and without but with lasers

o Benefit Mall reinsurance option with Sun Life. Can use either KBA or Auxiant. Currently the rates are for a 12/12 contract. I am waiting to firm up rates and get a 24/12 contract. Should have this week.

o Auxiant A different Third-Party Administrator (TPA) and American Fidelity as the reinsurer. Not competitive with Companion Life.

o BCBS fully insured option BCSB would make the city go through underwriting and would consider its past history with BCBS as well as what happened this year. Lastly there would be no coverage for claims incurred this year and paid out after 12/31/18, meaning the City would be 100% responsible for the claims with no reimbursement available

ÿ Employee Costs

o Based on Maximum Costs:

ß Employee - $772.00

ß Employee & Spouse - $1470.41

ß Employee & Child(ren) - $1309.19 ß Family-$2174.44

o Based on Expected Costs:

ß Employee - $672.20

ß Employee & Spouse - $1271.61

ß Employee & Child(ren) - $1133.24 ß Family-$1875.84

Joni stated that expected and maximum cost will be adjusted based on the decision to choose the lasering option and the addition of Terminal Liability insurance.

Self-Funded topics discussed:

Aggregate Accommodation stop loss insurance normally reimburses at the end of the year if you exceed you aggregate stop loss. Aggregate accommodation provides for an advance reimbursement if the plan exceeds their aggregate during the plan year. This feature can help smooth out cash flow for the plan if it pays more claims than expected this feature costs $2.50 per employee per month. Based on 72 employees this would coast $180 a month or $2,160 per year

o The Council decided not to go with this option based on the input of Finance Officer Justin Miller

Aggregating Specific Deductible extra form of risk on large claimants exceeding the individual stop loss currently $140,000. Only the amount above the $40,000 specific counts towards the $140,000 aggregating specific

Laser additional form of risk that alters the individual stop loss limit for certain individuals on the options with KBA the laser amounts are $75,000, $75,000, and $120,000. This means City of Peru has an additional liability above the current $40,000 specific of $35,000, $35,000, and $80,000 for three members

o The Council discussed both options and the risks based on input from Joni and decided to go with the lasering option even though the premium was higher by $30,000. Joni believed there is greater potential for savings based on one individual case.

Joni reviewed the follow definitions

Contract Period the time covered under a contract designating when a claim is incurred and when the claim must be paid to qualify for reimbursement currently the contract period is 01/01/18 thru 12/31/18

Contract Type The first number refers to the incurred period and the second refers to the paid period currently the contract type is 12/12. This means claims incurred from 01/01/18 thru 12/31/18 have to paid between 01/01/18 thru 12/31/18 to be under this contract and to be eligible for reimbursement if an individual exceeds their specific deductible of $40,000 or if the whole group exceeds the aggregate ($563,330.88 plus the aggregating specific)

COMMITTEE OF A WHOLE MEETING NOVEMBER 26, 2018

Terminal Liability refers to the period of time immediately following termination, during which claims incurred prior to the termination date and are being paid. Most plans allow three or six months for run out protection. Must move to a fully insured plan like your previous coverage with BCBS, not available for staying self-funded The City of Peru does not currently have this option. It adds about 10-15% to the bottom line. This would be the only way to go ack to fully insured and have protection for claims incurred while self-funded but not paid under the contract time frame

o The Council discussed and decided to add this option onto the renewal. ADJOURNMENT

Alderman Waldorf made a motion that the meeting be adjourned. Alderman Payton seconded the motion and motion carried. Meeting adjourned 7:05 p.m.

https://www.peru.il.us/departments/city-government/minutes/committee-as-a-whole-1/2018-cow-1/4319-committee-of-a-whole-minutes-11-26-18/file