Stop loss insurance is purchased to protect self-funded health plans against adverse claims experiences.  Competitive hospital and physician contracts make the use of stop loss protection infrequent; however, the plan must be protected from large individual claims and protect the self-funded health plan from significant losses.  The City has had six (6) catastrophic claims over the last three (3) years, making this insurance critically necessary to maintain the viability of the Group Health Fund.

Renewal of this insurance was accomplished with the assistance and advice of the City’s health insurance broker/consultant – L/P Insurance Services.

Thirteen (13) companies were sent offers to bid, with seven (7) choosing not to bid or offer quotes.  Four (4) carriers did not provide competitive quotes, including the City’s current carrier, Gerber Life Insurance Company which presented an increase of 29.90% over the current premium.  Two (2) carriers offered competitive quotes for consideration.  The detailed analysis is provided in the attachment.

The increases in the various quotes were not unexpected due to large claims in the past year, industry trends and rising healthcare and pharmacy costs. 

After review by the City and with the assistance of our broker, Voya Financial is recommended because they provided the most competitive renewal options.  Voya Financial provided two (2) competitive quotes:   

Option #1 - if the City maintains the current large case deductible of $275,000, the increase is 9.57% over last year's cost.  Our current stop loss amount is $275K – which means that when an individual catastrophic claim reaches this dollar amount in paid claims, our stop loss insurance will begin payment of all claims over this amount for the Fiscal Year. 

Option #2 - If the City raises the current large case deductible to $300,000, Voya’s increase to the annual premium is a competitive 0.76% over the F19 premium. 

City staff determined that our best option was Voya Financial Option #2; increase our stop loss deductible to $300,000 and benefit by the lowest possible increase to our premium of 0.76% 

While this option rises our level of liability by $25,000, if the City experiences one stop loss claim during the next claim period, the Group Health Care Fund will still save $14,149.00 overall by selecting a higher stop loss deductible. 

Therefore, the recommendation is to increase our stop loss level from $275,000 to $300,000.  Additionally, by choosing Voya Financial, the Group Health Fund is well under the anticipated twenty percent (20%) increase the City budgeted for this renewal.  

1.  City Council may choose to approve the proposed contract with Voya Financial as outlined by staff and approve the City Manager to execute the contract;

2.  City Council may choose not to pay for stop-loss insurance;

3.  City Council may direct the City Manager to provide alternatives to staff to address the issue of large claims exposures.

I move to approve the purchase of stop loss insurance with Voya Financial for the City’s self-funded group health plan program for Fiscal Year 20 in the amount of $$447,484 and authorize the City Manager to execute policy documents.