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HomeMy WebLinkAboutAgenda Report - January 2, 1985 (52)_ CI'iY OQ€7I�II, ME�.TIC� � 5 yC�r�i SELF INSURANCE Assistant City Nianager Glenn apprised the City Council that HE DRUM CARE as a way of further controlling costs of employee health BENEFITS care benefits, Staff has explored means of providing similar benefits at reduced costs or expanded benefits at the same cost. An excellent means of accomplishing this is to self fund - that is, the city will pay directly the fees charged by the provider. The major advantages of taking this approach are: 1) Any savings are the cities not the insurance company's 2) The interest on necessary reserves belongs to the City and not the insurance company 3) No surprises from large premium increases - we monitor the history of paid claims on a monthly basis In all fairness, the plan is not without se-ne risk: If an inordinate amount of usage is experienced the City is liable for that. However, if this happened under our present plan the present carrier would raise premiums the following year and we would pay for those claims a year later. The City has asked Delta Benefit Plans, our agent for employee benefits, to explore the feasibility of a self funded program for dental care benefits. Delta Benefit Plans has submitted a program administered by California Dental Service for the City of Lodi. Mr. McCormack has also done a cost project for us based on our past experience and indicates we should have first year savings in excess of $12,000. The proposed program provides the same basic benefits as our present plan so there will be no reduction in service to our employees. It also includes a stop -loss provision which will cap the cities liability. Council is requested to authorize the establishment of a self funded program for dental care benefits. Following discussion with questions being directed to Staff, Council, on motion of Mayor Pro Tempore Hinchman, Reid second, approved the self funding of dental care benefits for the City of Lodi As outlined, which program is to be administered oy the California Dental Service. This program will be effective as of January 1, 1985. .-tea { To: Honorable Mayor Members of the City Council Fran: Assistant City Manager Subject: Self Raiding of Dental Care Benefits As a way of farther controlling costs of enployee health care benefits we have explored means of providing similar benefits at reduced costs or expanded benefits at the same cost. An excellent means of accomplishing this is to self fund - that is, the ci+-, will pay directly the fees charged by the provider. The major advantages of taking this approach are: 1) Any savings are the cities not the insurance company's 2) The interest on necessary reserves belongs to the City and not the insurance company 3) No surprises frau large premium increases - we monitor the history of paid claims on a monthly basis. In all fairness, the plan is not without some risk: If an inordinate amount of usage is experienced the City is liable for that. However, if this happened under our present plan the present carrier would raise premiums the foil.owing year and we would pay for those claims a year later. We have asked Delta Benefit Plans, our agent for enployee benefits, to explore the feasibility of a self funded program for dental care benefits. Delta Benefit Plans has submitted the attached program administered by California Dental Service for the City of Lodi. Mr. McCormack has also done a cost project for us based on our past experience and indicates we should have first year savings in excess of $12,000. The proposed program provides the same basic benefits ss our present plan so there will be no reduction in service to our enployees. It also includes a stop-loss provision which will cap the cities liability. Council is requested to authorize the establishment of a self funded program for dental care benefits. E� eL. Glenn Assistant City Manager w �,�� TA PF:MFFIT PI ANS t yr CITY OF LODI Dental Insurance Cost Projections January - December 1985 California Dental Service _ Expected paid claims (monthly) $ 6,250.00 Administration (19% of paid claims monthly) 1,187.50 Total Projected Monthly Cost $ 7,437.50 Expected paid claims (annual) (CDS will pay 11 months of claims for the first year because of lag) $68,750.00 Retention 13,06"L. 50 Total Projected Annual Cost $81,812.50 Travelers Employee Only Premium (Monthly@ $12.41 x 300 average employees) $ 3,723.00 - Additi6nal Dependent Premium (Monthly @ $21.84 x 190 average dependents) 4,149.60 Total Projected Monthly Cost $ 7,872.60 Total Projected Annual Costl $94,471.20 RECOMMENDATION: - Annualized calculated savings by selecting California Dental Service vs. Travelers $12,658.70 jDoes not inceude any Aate incAea6e i that may be ,implemented Aug"t 1985. DELTA BENEFIT FLANS ..- --PL __ o®11Ii1RAM11111ai�IlA I - F:�d.'� 0 PROPOSED PROGRAM AND COST FOR DOLLAR GUARD Proposed Proaram Usual, Customary and Reasonable Fee Concept Co -payment - Diagnostic & Preventive: 100%* Other Basic: 85/15 Crowns & Casa Restoraions: 50/50 Prosthodontics: 50/50 $25 deductible per patient per calendar year (No deductible on Diagnostic and Preventive) $1,000 maximum par patient per calendar year *Diagnostic and Preventive services include procedures 010-160 and 800-812. DOLLAR GUARD PROGRAM The CBS charge for Administration is 19.00.* This fee is ex- pressed as a percentage of amounts paid by CDS and reflects the rate of utilization anticipated under the City of Lodi Dental Program. *The administration charge stated above includes brokerage commission. A 150% Stop Loss shall be provided for no additional charge per eligible per month. CDS shall not charge for claims paid and administration .in excess of the maximum liability during the contract year. FINANCING OF THE DOLLAR GUARD PROGRAM The various funding methods for the Dollar Guard Program are explained in Exhibit I (Banking options) of this proposal. If Banking Option Number 7 is chosen, CDS requires an Initial Deposit of $7,000 which is approximately one third of the total prefund amount. After three months this amount will be in- creased to the Maximum Prefund amount of $21,000 which is estimated to be approximately one and one half months of paid dental expenses plus administration. 04 USUAL, CUSTOMARY AND REASONABLE FEE CONCEPT CDS will pay the applicable percentage of the lesser of the dentist's usual, customary and reasonable fee or the fee actually charged for covered services, provided he is a CDS participating dentist. The amounts payable to a non -participating dentist will be the applicable percentage of the fee charged not to exceed the fee which satisfies the majority of CDS participating dentists. The amounts payable by CDS to a participating dentist outside California shall not exceed the applicable percentage of the customary fees in California. PARTICIPANT ELIGIBILITY All employees and their covered dependents are eligible while the employee is working on a permanent, full-time basis. Covered dependents are defined as lawful spouse and unmarried dependent children to age 19 or to age 25 if enrolled as a full-time student in an accredited school, college or university. Children include stepchildren, adopted children and foster children, provided such children are dependent upon the employee for support and maintenance. Unmarried children 19 years or over may continue to be eligible as dependents if they are incapable of self-support because of physica,l'or mental incapacity that commenced prior to reaching age 19, provided a physician's certificate is submitted within six months following their 19th birthdays or the effective date of the Agreement, and thereafter upon request by CDS, but not more frequently than annually after the incapacitated and de- pendent children have attained age 21. Dependents in military service are not eligible. EFFECTIVE DATE OF COVERAGE All permanent full-time employees and their eligible dependents are covered on the first day of the month following 1 month of continuous full-time employment. 2 A;#� Employees who have been absent from work due to labor dispute, lay-off or approved leave of absence and who return to work and their eligible dependents will be covered on the first day of the month following the return to work, provided that the absence does not exceed six months. Such employees shall be considered as newly -hired employees with respect to the appli- cation of deductibles, maximums and waiting periods for themselves and their eligible dependents. If the absence ex- ceeds six months, then the employee shall be considered as newly --hired in every respect and must fulfill the eligibility requirements. Services provided during the period the employees and their dependents were not eligible due to labor dispute, lay-off or approved leave of.absence are not covered by the Program. TERMINATION OF COVERAGE Coverage for the employee shall terminate -on the last day of the month in which full-time employment has terminated. Depen- dents shall remain Eligible until the last day of the mont'Z coincident with or following the date the employee's eligibility terminates or the date they lose their dependent status, whichever occurs first. Eligibility shall, in any event, terminate immediately upon termination of the Program. EXTENSION OF BENEFITS All benefits cease on.the date coverage terminates, except that CDS will pay for Single Procedures which were commenced while the patient was eligible. EVIDENCE OF COVERAGE CDS' cost for printing Evidence of Coverage is included in the rates quoted herein. Our standard 8 11'2" x 3 3/4" Brochure is printed on colored cover stock and contains approximately twenty text pages printed on white stock. An additional charge will be necessary if customized brochures are requested. REPORTS Upon request and at no additional charge to the Group, CDS will provide a quarterly Experience Report, monthly Group Activity Report and a Schedule A (Form 5500) per contract year. Utiliza- tion Reports are available at an additional charge. 3 Wo IMPORTANT This proposal is based on the information submitted to CDS for consideration. It is assumed that CDS is to be the only dental carrier and all eligible employees and their dependents will be enrolled under this program. Should there be significant variations from this information at time of enroll -went, CDS reserves the right to adjust rates, benefits and/or copay- ments. This proposal is valid for an effective date of January 1, 1985 and guaranteed for a one or a two year contract period with an initial. and continuing enrollment of .100-399. eligible employees. If, prior to the effective date or during the contract period, any government agency imposes a new tax or increases an exis- ting tax on the amount of dues or on the number of persons covered, the dues and administration charge will be increased by the amount of any such new or increased taxes. Full explanation of benefits, limitations and exclusions is available in a sample contract. Timely submission of eligibility information and dues on or prior to the first of each month is most important to the quality of service which CDS can deliver to the employees of City of Lodi. Delays in obtaining eligibility status can cause corresponding slow -ups in the entire claims processing cycle, particularly in responding to dentist's predetermination re- quests on Attending Dentist's Statements. CDS RESERVES THE RIGHT TO COMPARE THE GROUP'S CURRENT PLAN OF BENEFITS TO THE CDS PROCEDURE CODES SO THAT EACH ITEM WILL BE CONSISTENT WITH THE CDS PROGRAM LIMITATIONS. 4