The City operates a self-funded health insurance program for eligible employees, retirees and dependents. The City purchases stop loss insurance, also known as excess insurance, to protect the City's Stay Well Fund against catastrophic and unpredictable claims. Stop-loss insurance is designed for employers who self-fund employee benefit plans but are not financially positioned to assume 100% of loss liability.
Proposals from qualified insurance companies for specific and aggregate reinsurance for the Stay Well Health Care Program were solicited by Lockton, the City's health care and benefits consultant. These reinsurance plans provide maximum limits on the amount of the loss the Stay Well Health Care Program will incur from the payment of claims incurred by members and dependents for medical services and prescription drugs. The current reinsurance policy covers all expenses in excess of $250,000 each year for claims incurred by an individual member or dependent.
Eleven (11) carriers were contacted for potential quotes, and seven (7) of those carriers declined to quote. The remaining four (4) proposals received from Cigna, QBE, Voya, and Sun Life were evaluated. All but Cigna's quote was contingent upon receiving updated claims information through September 30, 2017. QBE was the only option priced less than Cigna, but QBE's proposal would likely increase after receiving updated claims information based on past experience with QBE.
All respondents provided for a $250,000 specific stop loss amount and alternate proposals at $275,000 and $300,000. The alternate proposals were evaluate based on claims trend and projected future high dollar claims. The alternate proposals were not considered to be cost effective because the premium savings were not significant enough to outweigh the added risk to the City of increasing the stop loss threshold.
Attached is an analysis of the proposals for reinsurance received. The Stay Well Committee reviewed the bid proposals and recommended the Cigna plan proposal, which includes a rate cap of 45% for 2020, at the $250,000 specific limit. Cigna's aggregate maximum claim limit is 7% more than the current maximum aggregate claim limit. Attached is the Stay Well Committee recommendation.