To: Honorable Mayor and Members of Town Council
From: Fritz Sprague, Deputy Town Manager
Sue Morgan, Human Resources Manager
Title
Resolution Approving a Contract between the Town of Castle Rock and Aetna Life Insurance Company (Award of Contract for 2019 Healthcare Plan Stop Loss)
Body
________________________________________________________________________________
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 healthcare coverage for Town staff and is continuing this practice for 2019. 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 health of any organization is cyclical, as are corresponding medical claims. The Town’s 2019 stop loss deductible is set at $100,000 per-employee per-year. Any medical claims exceeding that amount is covered by the stop loss insurance.
Our 2019 contract renewal for stop loss coverage with Aetna $1,433,607, requiring Town Council approval.
Discussion
This year we have seen an increase in claims activity that are driving renewal costs. Claims also has an impact on the renewal of our stop loss coverage. The 2018 contract rate for stop loss coverage was $1,181,759. Due to the aforementioned dynamics driving our experience, the contract amount for stop loss coverage with Aetna for 2019 will be $1,433,607. After careful evaluation of this premium rate, our recommendation is the rate for 2019 is within market parameters.
Conclusion
The Town continues to be well-positioned with regard to health insurance due to strong overall plan performance, acknowledging some high claims (which is the cyclical nature of health insurance), and an appropriate fund balance in the Employee Benefit Trust Fund. Moving forward with stop loss coverage with Aetna for 2019 allows us to continue to manage the plan in a manner where both the Town and employees are able to realize the best overall stop loss renewal rate for the 2019 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 $1,433,607 for stop loss (reinsurance) coverage for the 2019 benefits plan year.
Staff Recommendation
It is recommended that Council authorize staff to enter into an agreement with Aetna Life Insurance Company for its stop loss coverage for the Town’s 2019 self-insured healthcare plan.
Proposed Motion
“I move to approve a Resolution approving a contract between the Town of Castle Rock and Aetna Life Insurance Company for stop loss insurance services.”
Attachments
Attachment A: Resolution
Exhibit 1: Agreement and Policy