SR 10-23-2018 3I
City Council
Report
City Council Meeting: October 23, 2018
Agenda Item: 3.I
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To: Mayor and City Council
From: Christina Winting, Acting Director of Human Resources, Human Resources
Department
Subject: Annual Premiums to Blue Shield of California for Employee Health Benefits
Recommended Action
Staff recommends that the City Council authorize the City Manager to execute a
contract with Blue Shield of California (Blue Shield) for a total amount not to exceed
$82,957,553 over a three-year period. Subsequent renewals following the three-year
period would be exercised by Professional Services Agreement Renewal Letter.
Executive Summary
Like many employers, the City provides a range of medical plans as part of employee
benefit plans, with the City and employees sharing the cost. One of the City’s current
providers of employee health and welfare benefits, Aetna, proposed a rate increase for
January 1, 2019. Following receipt of this information, staff requested that the City’s
insurance broker, Alliant Insurance Services, Inc. (Alliant), solicit proposals for the City’s
medical insurance plan. A Request for Proposals (RFP) was conducted and Blue
Shield offered a more competitive rate structure for a three -year period. Blue Shield
proposed to match the City’s current benefit structure by offering an HMO (Health
Maintenance Organization) and PPO (Preferred Provider Organization) plan. Two
additional plan offerings will also be made available, the first being a high deductible
PPO with a Health Savings Account, and the second a limited network HMO. Blue
Shield would dispense medical health insurance to City employees in accordance with
their negotiated contracts and memorandums of understanding. The estimated
calendar year cost of premiums proposed by Blue Shield for 2019-2021 is as follows:
Calendar Year Premiums Proposed
2019 $26,234,914
2020 $27,415,458
2021 $29,307,154
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Staff’s recommendation to contract with Blue Shield will save $552,961 in employee
health premiums in the first year alone, and without compromising the level of coverage
currently in place.
Discussion
The City currently offers Aetna as one of its medical insurance plans to its
miscellaneous employee (non-safety) bargaining units, the participants of the Executive
Pay Plan and the Santa Monica Firefighters, Local 1109 (IAFF). The City uses Alliant, a
fee-based insurance brokerage, to act as the City’s agent in negotiating the best health
plans and rates for the City. Alliant is responsible for conducting an annual analysis of
the premium renewals and goes out to bid as appropriate. Given the high cost of
premiums being charged by Aetna, the City asked Alliant to initiate a Request for
Proposals (RFP) process to obtain quotes from medical insurance providers.
Contractor/Consultant Selection
Bid specifications were prepared for the 2019 insurance renewals by Al liant. The
following insurance companies responded to the RFP:
1. Aetna
2. Blue Shield
3. United Health Care
4. Health Net
5. Anthem Blue Cross
6. Cigna
7. Blue Shield CSAC EIA.
Based on Alliant’s evaluation and analysis, Blue Shield emerged as the preferred
vendor based on cost, benefit structure and network access. Blue Shield’s overall rate
structure for the first year is projected to result in an overall savings to the City of 1.5%
or $552,961 in employee health premiums for those covered under the plans.
Financial Impacts & Budget Actions
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Blue Shield requires an initial binding payment in the amount of $2,159,215 which will
be credited towards the City’s first month’s premium. Subsequent payments would be
billed and paid monthly. The contract will be charged to acco unts 01274.511740,
01253.577970, and 01274.51174B. Budget authority for subsequent budget years will
be requested in each budget for Council approval. Future funding is contingent upon
Council approval and budget adoption.
Prepared By: Colby Bakke, Staff Assistant lll
Approved
Forwarded to Council
REFERENCE:
Contract No. 10775
(CCS)