Agenda 12/14/2010 Item #16E 1
EXECUTIVE SUMMARY
Agenda Item No. 16E1
December 14, 2010
Page 1 of 2
Recommendation to approve the purchase of Group Health Reinsurance coverage for
calendar year 2011 in the amount of $687,648, a reduction of 28.7%.
OBJECTIVE: To prolecl the Group Health Fund from calastrophic losses through the purchase of
group health reinsurance coverage.
CONSIDERATIONS: The Board of Commissioners through its Risk Management Department
administers a partially self-funded Group Health Insurance Program (the Plan) for its employees and
their eligible dependents. Group Health reinsurance coverage is purchased to protect the health plan
against adverse loss experience. Two types of reinsurance coverage are available. Specific excess
insurance protects the plan if a covered member incurs claims cost in excess of a "per member"
specific deductible. Aggregate excess insurance provides coverage to Ihe Plan if tolallosses exceed
an aggregate deductible for Ihe Plan. Currently, the County purchases specific excess insurance
through ING with a specific deductible of $225,000 per member. The specific excess coverage
provides a maximum lifetime benefit of $2,000,000 per covered member. Aggregate excess coverage
is not purchased.
Willis, Inc., the County's benefits brokerage and actuarial firm, marketed Ihe health reinsurance
program on behalf of the County. Proposals were sought from twelve carriers. Specific retention
levels ranging from $200,000 per claimant to $275,000 per claimant were sought Four carriers
provided proposals.
Willis recommends that the County select a proposal from Zurich Insurance which increases the
specific self insured deductible from $225,000 to $275,000. Increasing the deductible will result in an
estimated annual premium reduction of 28.7% or $276,482. Slatistical simulations project thai the
probability of large Giairnanls exceeding lhe level where savings is negated is only 19%. Thus, ihis
oplion offers the lowest net cost when comparing the cost of coverage and the probability of an excess
insurance recovery. The proposal has no lifetime maximum benefit limit ,Zurich carries a Best's "A"
(Superior) rating.
Willis also analyzed the purchase of aggregale excess insurance. The cost of aggregate coverage is
$29,640 per year. However, based upon the terms of coverage, Ihe actuary determined thai there is a
99% probability that the aggregate deductible will never be met Thus, the purchase of aggregate
reinsurance is not recommended. Staff concurs with these recommendations.
FISCAL IMPACT: The tolal estimated cost of group health reinsurance in calendar year 2011 is
$687,648 based upon an estimated average enrollmenl of 1,976 employees. There are sufficient
funds available in Fund 517 for this purchase.
GROWTH MANAGEMENT IMPACT: There is no growth managemenl impact associaled with this
ilem
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney's Office and is
legally sufficient for Board action. - CMG
RECOMMENDATION: II is recommended that the Board approves the purchase of group health
reinsurance as outlined in the executive summary and aulhorizes the County Manager or designee to
sign the documents necessary to commence coverage effective January 1, 2011.
PREPARED BY: Jeffrey A. Walker, CPCU, ARM, Director, Risk Management
Item Number:
Item Summary:
Meeting Date:
Agenda Item No. 16E1
December 14, 2010
Page 2 of 2
COLLIER COUNTY
BOARD OF COUNTY COMMISSIONERS
1()[1
Rf~COlrlrT1endation to approve the purchase of Group Health Reinsurance coverage for
calendar year 2011 in the amount of $687,648, a reduction of 28.7%.
12/14/20108:00.00 AM
Prepa red By
Jeffrey A. WaHler, CPCU,
ARM
Administrativp Services
Division
Director - Ri51~ Management
Date
Risk Management
11/8/20102:29:19 PM
Approved Ily
Jeffrey A. Walh::r, ereLl.
ARM
AdtllillistrilUve Service,~
Division
Director - Hi",!;: rilflnag0!llnnt
Date
nisI'. Man:l99111C>11t
1118/20102:26 PM
Approved Ily
Colleen C;t(~ene
COI.H1t)1 Altorney
/\';:,-.isl<1l1t County Attorney
Date
C~H.Jtlty Attr.Hfley
11/Y/Z010 3:54 PM
Approved Il)'
Slp\'(; Carncll
/\dtninistra!ive Sef\!!CeS
Divisioll
[JjrcclrH - Pll1 c~h;:bjtl~llC;ene:al Services
Date
r"ll Ch;lSill~:! t Gcnf'ii'l SCI'viu:s
1 "1122!2010 1.36 PM
App.'o\'cd B,y
Lf.'l: C;ol(Ji'n rlie!:'
i\dl n i 11 ic: j 12 i: i \f" ;' "'.. i (;. ,~'~
rJivi~:i()n
l\{jllli,'l,;ll'nt')1" -l,drnini;,1:1Clliv,~ Se'vices
Date
idillin'stl,~iil/t :;;crvicl";:; Uivisir}11
11/23/2U10 3:46 PM
Approved Ill'
(H\l1D CU{Jldini1br
COllll1y rii;:1ll,39"r''T; Olfice
Date
effice ()f M:jn~~J{~Hwllt ii. Uudqel
12/1/20103:33 PM
Approved Ill'
Thelese SitllllCY
Offic(: of M.:111<lf)i!1ll0n/ ;::
Pudqnl
LnnnafA';r Dn('I-,;!lic'!lS Support- TI3l1S
Date
C.1Hh,p If F.I;Jn;:)(1imlPlll 8, Ulld~,!nt
12/1/20103:56 PM
Approved By
fjlark IsacksGl1
CHlice of Manag0nwnt &:
BlI{!Opt
n~,~IJ;1~I';~I;IClltif311d~.Jl:t 1\IF!!YSl, ~:lPl1iol
Date
tJHiet" of Man;:1~W1HCnt & Uuduet
12/2120109:53 AM