To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Sheryl Coffey, HR Manager
Lauren Welch, Benefits Specialist
Title
Resolution Approving a Contract Between the Town of Castle Rock and Cigna Health and Life Insurance Company for 2022 Stop Loss Insurance Coverage
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 2022. Being self-insured has many benefits, two of which are having greater flexibility and control over our health plan, and the ability to manage plan dollars when we are having both good claims years and challenging claims experience with the plan.
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 stop loss deductible is set at $110,000 per employee per year. Any medical claims exceeding that amount are covered by the stop loss insurance.
Our 2022 contract for stop loss coverage with Cigna totals $1,692,532, an amount requiring Town Council approval.
Discussion
In the last few years, we have seen an increase in claims activity and a number of large-dollar claims which have impacted the renewal of our stop loss coverage. These dynamics, coupled with an increase in the number of Town staff on the plan were leading the Town to a higher than expected renewal rate.
The 2021 contract rate for stop loss coverage was $1,559,937. The contract amount for stop loss coverage with Cigna for 2022 is expected to be $1,692,532, an 8.5% increase from the 2021 contract. After careful evaluation, we have determined that Cigna’s stop loss coverage rate for 2022 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 2022 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 2022 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 $1,692,532 for stop loss (reinsurance) coverage for the 2022 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 a Resolution approving a contract between the Town of Castle Rock and Cigna Insurance Company for stop loss insurance services.”
Attachments
Attachment A: Resolution
Exhibit 1: Agreement for Stop Loss Coverage with Cigna Insurance Company