Agenda 11/13/2018 Item #16E 211/13/2018
EXECUTIVE SUMMARY
Recommendation to approve the purchase of Group Health Reinsurance through Voya/Relistar in
the estimated amount of $968,567 effective January 1, 2019.
OBJECTIVE: To protect the Group Health Insurance Fund against catastrophic losses through the
purchase of Group Health Reinsurance coverage.
CONSIDERATIONS: The Board of County Commissioners, through the Risk Management Division,
sponsors a partially self-funded Group Health Insurance Program (the Plan) for Board employees,
participating constitutional officer employees, and their eligible dependents.
Group Health Reinsurance, also known as “Stop Loss,” is purchased to protect the Plan against adverse
loss experience. Two types of reinsurance coverage are generally available. Specific Excess insurance
protects the Plan if a covered member incurs claims cost in excess of a “per member” deductible (self -
insured retention). Aggregate Excess insurance provides coverage to the Plan if total losses exceed an
annual aggregate deductible for the Plan. Currently, the County purchases specific excess insurance
through Sun Life with a self-insured retention of $450,000 per member. Aggregate excess coverage is not
purchased. The current Stop Loss coverage expires at midnight, December 31, 2018.
Willis Towers Watson (WTW), the County’s benefits brokerage and actuarial consulting firm, marketed
the Stop Loss program on behalf of the County. WTW sought quotes for specific excess retention levels
(deductibles) ranging from $400,000 per claimant to $500,000 per claimant. WTW approached eight
carriers. Three carriers, Sunlife, Voya/Relistar and American Fidelity offered proposals. The common
response from carriers who did not quote was that they did not believe they could be competitive with the
current composite rate paid by the County; they could not meet the deadline for submittal; or and that they
had concerns over one claimant with potential high dollar cost.
The proposal offering the most competitive terms and pricing was presented by Voya/Reli star. The
Voya/Relistar proposal offered a 7.2% rate reduction to maintain a $450,000 self - insured retention.
Sunlife offered a 3% rate increase. American Fidelity offered a 6.8% rate decrease; however, it contained
a laser provision that required a higher self-insured retention on one member with a known catastrophic
loss potential. The other proposals did not contain a laser provision.
In order to determine the level of self-insured retention to purchase, WTW performed a retention analysis
on the Voya/Relistar proposal to calculate the lowest Expected Cost of Risk Transfer (Estimated Annual
Premium minus Expected Total Claims Recovery). Based upon this analysis, WTW recommends that the
County purchase coverage from Voya/Relistar at the current $450,000 retention level, representing a
7.2% decrease from current premium rates. Staff concurs with this recommendation.
Finally, WTW does not recommend the purchase of Aggregate Excess coverage since historically there is
a 99% probability that the aggregate deductible will never be exceeded. Therefore, the purchase of
aggregate reinsurance is not recommended.
Voya/Relistar carries a Best’s “A” (Superior) financial rating. Coverage will commence January 1, 2019
for a one-year period.
FISCAL IMPACT: The estimated cost of group health reinsurance in calendar year 2019 is $968,567
based upon an average enrollment of 2,185 employees. The composite rate per enrolled employee is
$36.94 per month. Premiums are remitted monthly based upon actual enrollment. There are sufficient
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11/13/2018
funds available in Fund 517, Group Health and Life Insurance for this purchase.
GROWTH MANAGEMENT IMPACT: There is no growth management impact associated with this
item.
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, is approved as to
form and legality, and requires majority vote for approval. -JAK
RECOMMENDATION: To approve the purchase of Group Health Reinsurance as outlined in the
Executive Summary and authorize the County Manager or designee to sign the documents necessary to
commence coverage effective January 1, 2019.
PREPARED BY: Jeffrey A. Walker, CPCU, ARM, Division Director, Risk Management Division
ATTACHMENT(S)
1. 2019 CCG MDSL MKT Report 4 (PDF)
2. $400,000 Stop Loss Quotes FIRM (002) (PDF)
3. $450,000 Stop Loss Quotes FIRM (002) (PDF)
4. $500,000 Stop Loss Quotes FIRM (002) (PDF)
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11/13/2018
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.E.2
Doc ID: 7095
Item Summary: Recommendation to approve the purchase of Group Health Reinsurance through
Voya/Relistar in the estimated amount of $968,567 effective January 1, 2019.
Meeting Date: 11/13/2018
Prepared by:
Title: Division Director - Risk Management – Risk Management
Name: Jeff Walker
10/18/2018 8:31 AM
Submitted by:
Title: Division Director - Risk Management – Risk Management
Name: Jeff Walker
10/18/2018 8:31 AM
Approved By:
Review:
Administrative Services Department Paula Brethauer Level 1 Division Reviewer Completed 10/18/2018 10:45 AM
Administrative Services Department Len Price Level 2 Division Administrator Review Completed 10/22/2018 3:49 PM
Office of Management and Budget Valerie Fleming Level 3 OMB Gatekeeper Review Completed 10/23/2018 8:03 AM
County Attorney's Office Emily Pepin CAO Preview Completed 10/23/2018 10:48 AM
Office of Management and Budget Laura Wells Additional Reviewer Completed 10/23/2018 2:16 PM
County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Completed 10/25/2018 9:29 AM
County Manager's Office Geoffrey Willig Level 4 County Manager Review Completed 11/01/2018 11:22 AM
Board of County Commissioners MaryJo Brock Meeting Pending 11/13/2018 9:00 AM
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Collier County Government
2019 Medical Stop Loss
Marketing Report
October 15, 2018
16.E.2.a
Packet Pg. 1871 Attachment: 2019 CCG MDSL MKT Report 4 (7095 : Recommendation to Purchase Group Health Reinsurance for 2019)
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October 15, 2018
Willis Towers Watson Confidential
Introduction
Each year Willis Towers Watson assists the Collier County Government (CCG) in obtaining quotes,
analyzing the responses and placing stop loss protection for the medical and pharmacy plans offered
to the employees of the CCG and its constitutional affiliates.
Willis Towers Watson sought specific stop loss coverage on behalf of the CCG. Specific stop loss
provides reimbursement of medical and pharmacy claims for an employee, spouse or dependent
whose claims exceed a specified deductible in any one year. The current retention level is $450,000
and the carrier is Sun Life.
Aggregate stop loss would protect the CCG in the event that total claims for covered individuals
exceed a predetermined amount in any one year. The CCG does not currently purchase aggregate
stop loss, as past analysis of the terms has shown that purchasing this coverage in conjunction with
specific stop loss would offer little real protection and represented a poor value.
Marketing Summary and Recommendation
Willis Towers Watson worked to secure terms for the specific medical stop loss program from the
current carrier Sun Life. In addition, a request for proposal document was prepared, approved by the
CCG and distributed to select carriers. Quotations were requested for specific retention levels of
$400,000, $450,000 and $500,000 respectively. Specific terms were requested on a 12/24 basis,
which means the coverage operates on an incurred basis. This coverage is consistent with past
practice.
Based on our analysis, Willis Towers Watson believes the risk management needs of the CCG are
best met by purchasing coverage from Voya at a $450,000 retention level, representing a 7.2%
decrease from current premium rates.
Specific stop loss quotations were requested from the following carriers:
American Fidelity (quote received)
Voya (quote received)
Sun Life (incumbent)
Berkshire (quote received)
Berkley (declined to quote)
HM Insurance Group (quote received)
QBE (quote received)
Symetra (missed deadline)
All of the carriers above are rated A or better by A.M. Best. Carriers that declined to quote did so
because their manual rates were not competitive or they missed the deadline. The initial renewal
quote submitted by Sun Life was 13% higher than current rates. After providing additional
information, the renewal was cut to 3%. The most competitive quote for the current retention level
is from Voya for a 7.2% decrease from current rates. American Fidelity offered a 6.8% reduction but
would impose a laser of $675,000 on one claimant. This claimant was reviewed by the Willis Towers
16.E.2.a
Packet Pg. 1872 Attachment: 2019 CCG MDSL MKT Report 4 (7095 : Recommendation to Purchase Group Health Reinsurance for 2019)
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October 15, 2018
Willis Towers Watson Confidential
Watson retained Medical Director, Michael Neren, M.D., and we believe it is very likely this individual
will have at least $650,000 in ongoing claims. The Voya quotes include a guarantee of no new lasers
at renewal and a 40% cap on the renewal increase. The quote also includes a 15% refund if the loss
ratio is less than 65%.
To aid the CCG in making a selection of what level of coverage to purchase, Wills Towers Watson
completed two separate analyses. The purpose of each is summarized below:
1. A standard spread sheet analysis, which shows what was quoted at each of the stated retention
levels.
2. A stochastic forecast model, which used detailed claims data to forecast the expected stop loss
claims at each retention level to assist the CCG in selecting the most appropriate retention level.
Any decision to increase the retention level should be based on an assessment of the CCG’s risk
tolerance during 2018. The following analysis provides the detail supporting these recommendations
to assist the CCG in reaching a decision.
Willis Towers Watson did not request aggregate stop loss quotes since past analyses have
determined that this coverage is a poor value relative to the cost.
Quote Cost Analysis
The attached document labeled CCG Stop Loss Summary outlines what the carriers quoted at each
retention level. Voya, SunLife and American Fidelity all provided quotes at the current and higher
deductible requested. Only Voya quoted on the $400,000 level. The quotes from QBE and HM
Insurance Group were not competitive.
The initial 13.0% renewal increase is not surprising. Stop loss renewal increases typically range from
15% to 30%, due to two factors--the carriers’ risk expectations based on a review of emerging high
cost claims/trigger diagnoses and what is called leveraged trend. Leveraging is what happens to the
amount of claims exceeding a specific level ($450,000 in the CCG’s case) when claim costs are
increasing.
For example, assume a claim of $550,000 occurred. In this case, the CCG would receive $100,000
back from the reinsurer. Now let’s assume costs increase 5% (which is consistent with medical CPI).
Next year the same claim would cost $577,500. Under this scenario, the amount collected under the
reinsurance would be $127,500 instead of $100,000. This represents an increase of 27.5%.
All quotes were made on a 12/24 basis. This means coverage applies to all claims incurred in 2019
and paid by December 31, 2020, so there is no concern at the end of the year about getting claims
paid as they will be included.
Retention Level Analysis
Willis Towers Watson actuaries developed a Monte-Carlo simulation model using CCG’s large claims
experience in 2013-2017 to forecast the large claims that are likely to occur in 2019. We used CCG’s
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Packet Pg. 1873 Attachment: 2019 CCG MDSL MKT Report 4 (7095 : Recommendation to Purchase Group Health Reinsurance for 2019)
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October 15, 2018
Willis Towers Watson Confidential
actual large claims frequencies over this period to estimate the incidence of large claims, and used a
larger Willis Towers Watson database to model the distribution of large claim amounts. The Willis
Towers Watson database is based on over 3.8 million life-years and provides a larger sample for this
purpose than we would obtain from CCG’s large claim experience.
Refer to the attached document labeled CCG- Analysis of Stop Loss Alternatives 2019. The first page
shows the CCG’s actual number of claimants that exceeded specific levels and the total amount of
claims at each level from 2015 through 2017 and through September of 2018. The number of claims
exceeding $450,000 was two each year 2015-2017. The amount of claims in excess of the deductible
ranged from $165,000 to $1,113,000 during this period.
The third table shows the difference in stop loss recoveries that would have occurred each year
under each of the alternative deductibles. We will refer to this table later in the analysis.
Page 2 of the exhibit shows the estimated annual premiums at each level and the expected claim
amounts based on our model. The difference between these figures is the expected cost of risk
transfer. Generally, the option with the lowest cost of risk transfer offers the best value. According to
our analysis, the $500,000 stop loss deductible represents the best economic value.
This analysis suggests that based on the expected claims at each level, the CCG would expect savings
of $132,936 by choosing a higher stop loss deductible or, pay an additional $170,954 for a lower
deductible. The second section of the exhibit shows the relative cost savings associated with
increasing the specific level and the likelihood that additional claims incurred by the CCG will offset
the premium savings.
In moving from the current $450,000 deductible to the $400,000 level, the CCG would pay $170,954
more in premium. In order to recoup this premium with additional claims, CCG would need to incur
at least 4 additional claims of $400,000 or more. Referring to the bottom table on the previous page,
CCG had 4 claims exceeding $400,000 in 2016 but the additional claim reimbursement at this level
would have been less than the premium differential at $142,455.
Our model shows that there is only a 2% probability that likelihood that additional claims will exceed
this added premium amount at the $400,000 level, or a 98% chance that paying the additional
premium will turn out to be a poor decision.
Conversely, the CCG would save $132,936 in premium annually by increasing the deductible to
$500,000. Our analysis suggests that there is a 1 in 2, likelihood that the additional claims retained by
CCG will result in a net loss vs. the current coverage..
The chart on page 1 of this exhibit shows the difference in claims between the current $450,000 level
and a $500,000 deductible would have been no more than $100,000 in the last 3 plan years. This
would suggest the premium savings of $132,936 would have been a good deal for each of these past
years. However the numbers of very large claims have increased and our model shows that savings
are equally likely to be higher or lower than the premium savings. It is a coin toss if increasing the
retention to $500,000 would save money in 2019.
16.E.2.a
Packet Pg. 1874 Attachment: 2019 CCG MDSL MKT Report 4 (7095 : Recommendation to Purchase Group Health Reinsurance for 2019)
Collier County Government
Stop Loss Cost Analysis - Current Deductible $400,000
Effective: 01/01/2019
Current Option
Reinsurance Carrier Sun Life Voya
SPECIFIC STOP LOSS Medical/Rx Medical/Rx
LASERS None None
Contract Type 12/24 12/24
Specific Deductible $450,000 $400,000
Specific Annual Maximum Unlimited Unlimited
Simultaneous Reimbursement Included Included
Actively at Work Provision N/A Waived
No New LASER at Renewal Provision Included Included
Rate Cap at Renewal Provision Included Included
Maximum Renewal Increase 40%40%
Experience Rated Refund Provision Not included Included
Target Loss Ratio --65%
Maximum Refund --15% of Premium
Retiree Inclusion Included Included
Specific Premium
2,185 Composite $39.82 $43.46
Monthly Specific Premium $87,007 $94,960
Total Annual Stop Loss Costs $1,044,080 $1,139,521
Cost Difference ($)$95,441
Cost Difference (%)9.14%
Additional LASER Liability ($ in excess of ISL Ded)$0.00 $0.00
Proposal Finalization Date / Requirements
Firm offer if
accepted by
10/31/18
This comparison is intended to illustrate the carrier's proposed services and rates and should not be relied upon to fully
determine benefits and rates. Refer to carrier's renewal/proposal for a complete representation of coverage terms and
16.E.2.b
Packet Pg. 1875 Attachment: $400,000 Stop Loss Quotes FIRM (002) (7095 : Recommendation to Purchase Group Health
Collier County Government
Stop Loss Cost Analysis - Current Deductible $450,000
Effective: 01/01/2019
Current Renewal Final Renewal Option Option
Reinsurance Carrier Sun Life Sun Life Sun Life Voya American Fidelity
SPECIFIC STOP LOSS Medical/Rx Medical/Rx Medical/Rx Medical/Rx Medical/Rx
LASERS None None None None $675K Laser on
One Claimant
Contract Type 12/24 12/24 12/24 12/24 12/24
Specific Deductible $450,000 $450,000 $450,000 $450,000 $450,000
Specific Annual Maximum Unlimited Unlimited Unlimited Unlimited Unlimited
Simultaneous Reimbursement Included Included Included Included Included
Actively at Work Provision N/A N/A N/A Waived Waived with
Disclosure
No New LASER at Renewal Provision Included Included Included Included Included
Rate Cap at Renewal Provision Included Included Included Included Included
Maximum Renewal Increase 40%40%40%40%50%
Experience Rated Refund Provision Not included Included Included Included Not Included
Target Loss Ratio --65%65%65%--
Maximum Refund --10% of Premium 10% of Premium 15% of Premium --
Retiree Inclusion Included Included Included Included Included
Specific Premium
2,185 Composite $39.82 $45.00 $41.01 $36.94 $37.13
Monthly Specific Premium $87,007 $98,325 $89,607 $80,714 $81,129
Total Annual Stop Loss Costs $1,044,080 $1,179,900 $1,075,282 $968,567 $973,549
Cost Difference ($)$135,820 $31,202 ($75,514)($70,532)
Cost Difference (%)13.0%3.0%-7.2%-6.8%
Additional LASER Liability ($ in excess of ISL Ded)$0.00 $0.00 $0.00 $0.00 $225,000
Proposal Finalization Date / Requirements
Firm offer if
accepted by
10/31/18
Firm offer if
accepted by
10/31/18
Firm offer if
accepted by
10/19/18
16.E.2.c
Packet Pg. 1876 Attachment: $450,000 Stop Loss Quotes FIRM (002) (7095 : Recommendation to Purchase Group Health
Collier County Government
Stop Loss Cost Analysis - Current Deductible $500,000
Effective: 01/01/2019
Current Renewal Final Renewal Option Option
Reinsurance Carrier Sun Life Sun Life Sun Life Voya American Fidelity
SPECIFIC STOP LOSS Medical/Rx Medical/Rx Medical/Rx Medical/Rx Medical/Rx
LASERS None None None None $675K Laser on
One Claimant
Contract Type 12/24 12/24 12/24 12/24 12/24
Specific Deductible $450,000 $500,000 $500,000 $500,000 $500,000
Specific Annual Maximum Unlimited Unlimited Unlimited Unlimited Unlimited
Simultaneous Reimbursement Included Included Included Included Included
Actively at Work Provision N/A N/A N/A Waived Waived with
Disclosure
No New LASER at Renewal Provision Included Included Included Included Included
Rate Cap at Renewal Provision Included Included Included Included Included
Maximum Renewal Increase 40%40%40%40%50%
Experience Rated Refund Provision Not included Included Included Included Not Included
Target Loss Ratio --65%65%65%--
Maximum Refund --10% of Premium 10% of Premium 15% of Premium --
Retiree Inclusion Included Included Included Included Included
Specific Premium
2,185 Composite $39.82 $37.83 $35.04 $31.87 $30.97
Monthly Specific Premium $87,007 $82,659 $76,562 $69,636 $67,669
Total Annual Stop Loss Costs $1,044,080 $991,903 $918,749 $835,631 $812,033
Cost Difference ($)($52,178)($125,332)($208,449)($232,047)
Cost Difference (%)-5.0%-12.0%-20.0%-22.2%
Additional LASER Liability ($ in excess of ISL Ded)$0.00 $0.00 $0.00 $0.00 $175,000
Proposal Finalization Date / Requirements
Firm offer if
accepted by
10/31/18
Firm offer if
accepted by
10/31/18
Firm offer if
accepted by
10/19/18
This
compari
son is
16.E.2.d
Packet Pg. 1877 Attachment: $500,000 Stop Loss Quotes FIRM (002) (7095 : Recommendation to Purchase Group Health