To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Sheryl Coffey, Human Resource Manager
Title
Resolution Approving the Renewal of an Existing Contract Between the Town of Castle Rock and Cigna Health and Life Insurance Company for Stop Loss Insurance Coverage for Calendar Year 2023
Body
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Executive Summary
As part of the Town’s total compensation package, Castle Rock provides a self-insured health care plan for Town staff.
The Town has successfully utilized a self-insured business model to provide health care coverage for Town staff and is continuing this practice for 2023. Being self-insured allows the Town greater flexibility and control over our health plan, and the ability to manage plan dollars when we are having both good claims years and those years in which claims run high.
As part of a self-insured plan, the Town purchases “stop/loss” coverage, also referred to as “reinsurance,” to protect the organization from large-dollar claims. This provides the Town a guarantee, or “safety net,” from bad years, which we know do happen from time to time. The Town’s 2022 individual (specific) stop/loss deductible was $110,000 per employee/dependent per year. For 2023, the Town will be moving to an individual (specific) stop/loss deductible of $120,000 per employee/dependent per year. Any medical claims exceeding that amount are covered by the stop/loss insurance.
With the change in our individual (specific) stop/loss deductible, our 2023 renewal for stop/loss coverage with Cigna totals $1,688,781, an amount requiring Town Council approval.
Discussion
As you know, in the last year, the Town has grown significantly adding more employees and dependents to our health plan. We have also experienced an increase in claims activity and a number of large-dollar claims which have impacted the renewal of our stop/loss coverage. These dynamics, dictate a higher renewal rate.
For 2023, our renewal premium would be $1,798,905 if we were to stay with the same individual (specific) stop/loss deductible of $110,000. By moving to the higher individual (specific) stop/loss deductible of $120,000, our renewal premium is $1,688,781. Because of the higher deductible, $60,000 in additional dollars has been estimated for 2023 leaving us with approximately a $45,124 savings.
It has been determined that Cigna’s stop loss coverage rate for 2023 is within market parameters and represents the best option for the Town and its employees.
Conclusion
Moving forward with stop/loss coverage with Cigna for 2023 allows the Town to continue to manage its health care plan in a manner which realizes the best overall stop/loss renewal rate for the 2023 plan year, which protects the Town and its employees from large catastrophic claims costs.
Budget Impact
The expenditure will come from the Employee Benefit Trust Fund in an amount not to exceed $1,688,781 for stop loss (reinsurance) coverage for the 2023 benefits plan year.
Staff Recommendation
It is recommended that Council authorize staff to enter into an agreement with Cigna Insurance Company for its stop loss coverage for the Town’s 2022 self-insured health care plan.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Alternative Motions
“I move to approve the resolution as introduced by title, with the following conditions: (list conditions).
“I move to continue this item to the Town Council meeting on _____ date to allow additional time to (list information needed).”
Attachments
Attachment A: Resolution
Attachment B: Renewal Letter