Price agreements establish set prices and specific requirements for a designated period of time, which enables City departments to perform operations without requiring a separate bid for each procurement.
The current contract for Life, Accidental Death & Dismemberment (AD&D) and Long-Term Disability (LTD) insurance will expire on December 31, 2017. The City’s Life, AD&D and LTD insurance is currently provided through The Hartford Insurance Company. To avoid lapse in service, a Request for Proposals (RFP) for Life, AD&D and LTD insurance was issued on April 24, 2017. Lockton Companies (Lockton), the City’s benefits consultant, was contracted to issue the RFP based on a price agreement the CIty has with Lockton for Benefits Consulting Services.
Eight insurance providers responded to the solicitation: Hartford, Cigna, Liberty Mutual, Lincoln Financial, Principal, The Standard, Sun Life Financial, and Voya. Of the eight responses, three were deemed to be unresponsive in pricing and benefits and were not illustrated on the comparison spreadsheet prepared by Lockton. The unresponsive bids were Liberty Mutual, Principal and Voya.
The City’s consultant, Lockton, reviewed the proposals and compiled a comparison spreadsheet of the remaining five proposals for Hartford, Cigna, Lincoln Financial, The Standard, and Sun Life. The evaluation committee, comprised of City staff, selected Lincoln Financial, The Standard, and the Hartford as the top three finalists, and these three finalists were invited for interviews with the evaluation committee to answer concerns and questions to finalize the decision process. As a result the evaluation committee ranked the final three candidates as: 1) The Standard, 2) Lincoln Financial and 3) Hartford.
The Evaluation Committee evaluated each proposal in accordance with the following criteria established in the RFP:
- Program Cost
- Service Team Experience and Capabilities
- Administrative and Billing Capabilities
- Program Plan Design
- Carrier Financial Ratings
- Claims Processing/Technology/Claim Management
The Standard offered the largest savings on overall premium costs with an annual premium of $221,935 for the combined employer paid Life, AD&D and LTD coverage. This reflects a decrease of 18% ($48,729 annual savings) over the current costs. The Standard offered lower rates on the Basic Life and AD&D and the same rate for Basic LTD as follows:
Current Basic Life Premium Standard Purposed Basic Life Premium
$0.169 per $1,000 benefit $0.105 per $1,000 benefit
Current AD&D Premium Standard Purposed AD&D Premium
$0.017 per $1,000 benefit $0.015 per $1,000 benefit
Current Basic LTD Premium Standard Purposed Basic LTD Premium
$0.102 per $100 of covered payroll $0.102 per $100 benefit
All five of the proposals contained a three-year rate guarantee, and The Standard offered an additional fourth year guarantee if after three years the incurred loss ratio for all Life products is less than 80%.
Service Team Experience and Capabilities:
The Hartford has been the provider of the City’s Life, AD&D and LTD insurance since 1990. The response time for LTD and life claims processing has been good with the Hartford, however there has been turnover in the Account Management in the last couple of years that has resulted in inexperience and a decline in customer services provided to our account.
The Standard offers a local Account Manager with 17 years of service with The Standard and a service guarantee that will refund five percent of the previous quarter’s expenses associated with plan administration if service expectations are not met. The Standard specializes in serving groups in the public sector. The Standard offers a local implementation team to assist in making the transition to a different provider as seamless as possible for the employees. The Standard’s employee benefits team gave an excellent and professional presentation to the evaluation committee, and were well prepared.
The account manager for Lincoln Financial is based in Omaha, NE, and commutes to the Kansas City sales office on a regular basis. She had 30 years of Account Management experience with a total of 20+ years in Group Insurance.
The committee did not receive much information on the service team experience and capabilities for Cigna and SunLife.
Administrative and Billing Capabilities:
The Standard, Lincoln Financial and Hartford all offer online administration and self-billing. None of the bidders offered payment by credit card, but they all offered several ways to submit payment: ACH or Wire Online via the website, or with paper check.
Program Plan Design:
Hartford, Cigna, Lincoln Financial, The Standard, and Sun Life agreed to match the current program plan designs with the following exceptions:
- The Standard guarantee issue (without evidence of insurability) amount for spouse life is $80,000 instead of $150,000.
- Cigna’s guarantee issue amount for spouse life is $50,000 instead of $150,000.
- The Cigna waiver of life premium for employees on LTD has a waiting period of 270 days instead of the current 180 days.
- Lincoln Financial offered a guarantee issue amount of $250,000 for employees instead of the current $200,000.
- With Lincoln Financial, the maximum supplemental life amount for employees was up to 5 times their salary or $450,000, whereas the current maximum is up to 6 times their salary or $450,000.
- The accelerated life benefit for Standard and SunLife was 75% up to $500,000 instead of the current 80% up to $500,000.
- For Lincoln Financial, the accelerated benefit is 75% up to $250,000, and for Cigna it is 80% up to $50,000.
Hartford did not present a strong case for improvement of the plans beyond the current plans, and they were not as competitive when compared to the other two candidates.
The Standard offered several enhancement benefits that the other proposals did not include as follows:
- Funding Implementation support activities up to $20,000.
- An extended 4th year rate guarantee, if after 3 years the incurred loss ratio for all Life products is less than 80%.
- Line of Duty benefit which provides public safety officers and additional $50,000 when suffering a loss for which an AD&D benefit is payable and is the result of a line of duty accident.
- Occupational Assault benefit.
- Performance guarantee that if service expectations are not met, they will refund 5% of the previous quarter’s expenses associated with plan administration.
- Workplace Possibilities program that gives employers direct access to certified disability consultants to address and reduce the causes of absence and disability and help to keep employees productive and on the job.
- A $25,000 Reasonable Accommodation Expense Benefit, which reimburses employers for workplace modifications that enable employee to return or remain at work.
- A Rehabilitation Plan Benefit is included, which increases the LTD benefit amount by 10% of pre-disability earnings when the member is participating in an approved rehabilitation plan.
Carrier Financial Ratings:
AM Best Rating:
The Standard - A
Lincoln Financial - A+
Cigna - Not included
SunLife - Not included
Claims Processing/Technology/Claim Management:
The City has had good experience with Hartford with a quick response time to claims processing and follow-up. Lincoln Financial stated that the turnaround time for the initial decision to pay, pend, or deny the claim is within five business days, and LTD claims decisions are issued within four business days from receipt of completed claim information. The Standard stated that their turnaround times for life claims average four business days for new claims with complete information and 13 days for all claims. The Standard offers secure online services and automated processes, and beneficiaries have the option of initiating a claim directly on the provider’s website.