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Village of Downers Grove

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					                               COUNCIL WORKSHOP ITEM


ITEM:                    Recommendation for Renewal of Benefit Program
DATE:                    April 10, 2001
PREPARED BY:             Mary LaLonde
PURPOSE:                 The purpose of this item is to provide an understanding of the benefit programs
                         that are due for renewals of their contracts, which is done on an annual basis at
                         the beginning of the fiscal year.


DISCUSSION:

Staff is recommending a one year contract with the following companies to become effective
May 1, 2001:


Humana/Employers Health (Health Insurance Program Administration) for an estimated
annual cost of $135,792 for the administration of the medical, vision and traditional dental programs.

Humana, Inc. (Specific Stop Loss Insurance) for an estimated annual cost of $171,300.

Kraemer Loney, Inc. (Benefits Consultant) for an annual cost of $26,741.

AIG Life Insurance (Life/Accidental Death & Dismemberment Insurance) for
an estimated annual cost of $43,389.

Fortis, Inc. (Long Term Disability Insurance) for an estimated annual cost of $40,822.          .

Health Plan Management (Flexible Benefits Program) for an estimated annual cost of
$13,930.

Creative Care Management (Employee Assistance Program) for an estimated annual cost
of $16,374.




Health Insurance Program Administration (Humana/Employers Health)

The Village of Downers Grove has utilized the services of a third party claims administrator (TPA) since
the Village became self-insured in 1981. It is our practice to obtain alternative quotes for this

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type of service every five years to make certain that fees and services are competitive. This process was
conducted two years ago, therefore, quotes for TPA services were not obtained this year. The company
providing TPA services since May of 1999 has been Humana/Employers Health (Employers Health)
located in Green Bay, Wisconsin.

A review of the service received from Employers Health over the past year indicates an overall level of
satisfaction. Employee complaints are minimal and those problems/issues which occur are most often
resolved in an expedient manner by Employers Health. Although satisfied overall, we do feel it is prudent
to add a “performance guarantee” to the Village’s contract with Employers Health. This guarantee is being
proposed primarily to ensure that claims are processed in a timely manner. This guarantee would stipulate
that should Employers Health not process claims within a certain timeframe, that the Village would receive
some type of compensation for this, usually in the form of decreased administrative fees, e.g. one month free
administration.

Employers Health has proposed an overall increase of 10% in their administrative fees for the year
2001/02. Although we are experiencing an increase in fees, we will continue to experience substantial
discounts through the networks associated with Employers Health which will offset these fees. Based on
 these continued savings, and our belief that service will continue at a satisfactory level, staff recommends
that the Village of Downers Grove contract with Humana/Employers Health for an additional one year
period effective May 1, 2001.

Specific Stop Loss Insurance

Specific stop loss is the point at which the single year claims for an individual are reimbursed to the Village
from an outside insurance company. Currently the specific stop loss point is at $75,000. Should an
individual’s annual claims exceed this point, the Village of Downers Grove would be reimbursed for that
amount over and above the $75,000. At this time, staff would not recommend an increase in this
attachment point. Criteria used to determine the feasibility of increasing the stop loss limit indicates that it
would not be worthwhile for the Village to assume additional risk at this time.
Quotes for stop loss coverage are requested on an annual basis due to the competitive nature of the stop
loss industry. This year we requested quotes from 16 companies with only three companies responding
to our request. The following are the companies which provided quotes on the Village’s group:

        Hartford                                                    $ 367,848/annually
        Kemper                                                      $ 245,131/annually
        Humana, Inc.                                                $ 171,300/annually

As you can see, the most competitive rate has been quoted by Humana, Inc., which is the Village’s current
stop loss carrier. This quote represents an approximate 29% increase over last year’s cost. Based on
the fact that Humana has provided the most competitive rate, along with the fact that this
company has received an excellent rating (A+) in the industry, staff recommends that the Village contract
with Humana, Inc. for stop loss coverage for a one year period beginning May 1, 2001.
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Insurance Consultant (Kraemer Loney, Inc.)

The Village of Downers Grove contracted with Kraemer Loney Inc. in June, 1989 to provide the Village
with insurance consultant services. Ms. Catherine Loney acts as the primary account person for the
Village of Downers Grove and brings to the Village a wealth of experience in the insurance industry. It is
our belief that she continuously works in the best interest of the Village of Downers Grove and we feel that
the expert guidance provided by her and her staff during the past twelve years has been invaluable.
Kraemer Loney, Inc. is proposing a 5% increase in their fees for the next plan year. Based on the excellent
working relationship we continue to enjoy with Ms. Loney, the experience she brings to the Village, along
with a modest fee increase, staff recommends that the Village of Downers Grove contract with Kraemer
Loney Inc. for an additional one year period.

Fortis Benefits Insurance Company (Long Term Disability)

The Village implemented its first LTD program in September of 1995 after Village staff determined that
LTD was a missing component in the Village’s otherwise comprehensive benefit package. The Village
chose Fortis Benefits Insurance Company to administer this program. This company was chosen not only
for their expertise in the LTD industry, but because of the fact that they were the only company which fully
integrated benefits with those of the Illinois Municipal Retirement Fund (IMRF). In exploring alternative
companies for this year’s renewal it was found that Fortis continues to be the only company with this unique
feature.

This year Fortis is proposing a 12.5% increase in premium. This increase is based on two individuals who
have obtained full disability benefits through the LTD program over the past year. Please note that although
overall we have experienced seven disability cases since 1995, this is only the second premium increase
we have seen. Because Fortis fully integrates with other sources, premiums have been kept at a fairly
consistent level. Although we are seeing a premium increase this year and this is not insignificant, we
continue to believe that this program is an extremely important aspect of our overall benefit package. It is
also our belief that Fortis continues to be the best company to provide such a benefit. Based on these
factors, staff recommends that the Village renew its contract with Fortis Insurance Company for one
additional year.

AIG Life (life/AD&D)

The Village of Downers Grove provides term life and accidental death and dismemberment
(life/AD&D) insurance to all full-time personnel and part-time personnel who are budgeted to work 1000
hours or more per year.

This year quotes were requested from two companies for life/AD&D coverage. AIG Life, our current
carrier, has indicated that they would continue our contract for an additional year at no increase, while the
second company responding (Fortis) indicated a rate substantially higher than that of AIG. Based on AIG
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Life providing the most competitive quote, we recommend that the Village of Downers Grove renew its
life/AD&D contract with them for an additional year.

Health Plan Management – HPM (Flexible Benefits Program)

The Village contracted with HPM in February 1993 to administer the Village’s flexible benefits program.
 Since that time the services received from HPM have been satisfactory. HPM has provided the Village
with expedient processing of claims, quick response to questions, timely processing of reports, and
assistance in communicating the flexible benefits program to employees.                          HPM has
proposed a one year renewal contract with no increase in their administrative fee. Based on our
satisfaction with the services provided by HPM, and the fact that there will be no increase in administrative
fees, it is our recommendation that the Village of Downers Grove retain the services of this company for
an additional year.

Creative Care Management (Employee Assistance Program)

The services of Creative Care Management were initially retained by the Village of Downers Grove in 1990
to provide an Employee Assistance Program (EAP) to Village employees. Since that time we feel that the
services received from CCM have been at a satisfactory level. Evidence that CCM continues to provide
satisfactory services can be seen in the level of program utilization, which currently is at 6.3%. The national
average used to determine a successful EAP is between 4 and 6%. In addition to providing EAP services
to employers, CCM also began providing pre-certification and medical case management on
mental/nervous cases to the Village in May of 1999. This has enabled CCM to immediately begin managing
the case which oftentimes can be treated on an out-patient basis versus the more costly in-patient basis.
 The higher level of utilization is one indication that this added service has been successful. CCM has
proposed an additional one year contract at no increase in administrative costs. It is our recommendation,
therefore, that based on the success of this program as evidenced by our group’s level of utilization, along
with no increase in administrative costs, that the Village of Downers Grove retain the services of CCM for
EAP services for one additional year.

There are sufficient monies budgeted for all of the above expenditures. If there are no concerns regarding
these recommendations, I request that they be placed on a consent agenda prior to the May 1 contract
renewals. Please do not hesitate to contact me if I can provide further information, or assistance regarding
this matter.




ATTACHMENT:
None

RECOMMENDATION:
Staff is recommending a one year contract with the following companies to become effective
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May 1, 2001:

• Humana/Employers Health (Health Insurance Program Administration) for an estimated
annual cost of $135,792 for the administration of the medical, vision and traditional dental programs.

•    Humana, Inc. (Specific Stop Loss Insurance) for an estimated annual cost of $171,300.

•    Kraemer Loney, Inc. (Benefits Consultant) for an annual cost of $26,741.

• AIG Life Insurance (Life/Accidental Death & Dismemberment Insurance) for
an estimated annual cost of $43,389.

•    Fortis, Inc. (Long Term Disability Insurance) for an estimated annual cost of $40,822.         .

• Health Plan Management (Flexible Benefits Program) for an estimated annual cost of
$13,930.

• Creative Care Management (Employee Assistance Program) for an estimated annual cost
of $16,374.




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