Agenda 12/10/2019 Item #16E 5 (Group Health Reinsurance - SunLife)12/10/2019
EXECUTIVE SUMMARY
Recommendation to approve the purchase of Group Health Reinsurance through SunLife in the
estimated annual amount of $327,008, effective January 1, 2020.
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 Voya/ReliStar with a self-insured retention of $450,000 per member. The current Stop Loss
coverage expires at midnight, December 31, 2019.
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 $2,000,000 per claimant. WTW approached eight
carriers. Four carriers submitted quotes. Of the four, only Sunlife and Voya met the required coverage
terms and presented competitive price 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; that they had concerns over one claimant with potential high dollar cost; or that they could not
write coverage at retention levels of $1,000,000 or higher.
In order to determine the level of self-insured retention to purchase, WTW performed a retention analysis
on the Voya and Sun Life proposals 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 Sun Life and that the County increase its retention from the
current $450,000 retention level to $1,000,000, representing a 67% decrease from current premium rates.
WTW determined that by moving to a $1,000,000 self-insured retention, there is a 98% likelihood that the
premium savings will not be exceeded by losses and hence, these premiums savings or some portion
thereof, will accrue to the county with no overall increase in financial exposure. WTW recommends that a
16.E.5
Packet Pg. 2593
12/10/2019
reinsurance reserve line item be created in Fund 517, Group Health and Life, to accrue premium savings
as an offset against potential adverse loss experience, should that occur. This recommendation is further
supported by the excellent financial position of the Health Plan. 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. Sun Life carries a Best’s “A” (Superior) financial rating.
Coverage will commence January 1, 2020 for a one-year period.
FISCAL IMPACT: The estimated cost of group health reinsurance in calendar year 2020 is $327,008
based upon an average enrollment of 2,269 employees. The composite rate per enrolled employee is
$12.01 per month. Premiums are remitted monthly based upon actual enrollment. There are sufficient
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, 2020.
Prepare by: Jeffrey A. Walker, CPCU, ARM, Division Director, Risk Management Division
ATTACHMENT(S)
1. 2020 01 MDSL PROP Renew Mktg revd 2019 11 04 (PDF)
2. 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (PDF)
3. 2020 CCG MDSL MKT Report - Final (PDF)
16.E.5
Packet Pg. 2594
12/10/2019
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.E.5
Doc ID: 10767
Item Summary: Recommendation to approve the purchase of Group Health Reinsurance through
SunLife in the estimated annual amount of $327,008, effective January 1, 2020.
Meeting Date: 12/10/2019
Prepared by:
Title: Division Director - Risk Management – Risk Management
Name: Jeff Walker
11/05/2019 3:32 PM
Submitted by:
Title: Division Director - Risk Management – Risk Management
Name: Jeff Walker
11/05/2019 3:32 PM
Approved By:
Review:
Administrative Services Department Paula Brethauer Level 1 Division Reviewer Completed 11/05/2019 3:43 PM
Administrative Services Department Len Price Level 2 Division Administrator Review Completed 11/18/2019 4:13 PM
County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Completed 11/19/2019 10:20 AM
Office of Management and Budget Valerie Fleming Level 3 OMB Gatekeeper Review Completed 11/19/2019 11:01 AM
Office of Management and Budget Laura Wells Additional Reviewer Completed 11/21/2019 10:45 AM
County Manager's Office Sean Callahan Level 4 County Manager Review Completed 11/25/2019 10:10 AM
Board of County Commissioners MaryJo Brock Meeting Pending 12/10/2019 9:00 AM
16.E.5
Packet Pg. 2595
Collier County Government
Stop Loss Summary
Effective: 01/01/2020
Sun Life
Current Renewal Proposed
$400,000 $1,005,802 $1,439,817 $1,416,434
Variance --43%41%
Rank --2 1
$450,000
Current Deductible $1,005,802 $1,192,586 $1,044,855
Variance --19%4%
Rank --2 1
$500,000 $1,005,802 $986,198 $847,309
Variance ---2%-16%
Rank --2 1
$1,000,000 $1,005,802 $359,682 $327,008
Variance ---64%-67%
Rank --2 1
$2,000,000 $1,005,802 Unable to quote
$2M deductible $101,258
Variance ---90%
Rank --1
Actual rates will be based on final underwriting/enrollment
Above costs do not include additional laser liability.
VoyaSpecific Deductible Level
16.E.5.a
Packet Pg. 2596 Attachment: 2020 01 MDSL PROP Renew Mktg revd 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year
Stop Loss Cost Analysis - Reduce Deductible to $400,000
1/1/2020
Current Renewal Option
Reinsurance Carrier Voya Voya Sun Life
Medical Administrator Allegiance Allegiance Allegiance
Provider Network(s)Cigna Cigna Cigna
SPECIFIC STOP LOSS Medical/Rx Medical/Rx Medical/Rx
LASERS None None None
Contract Type 12/24 12/24 12/24
Specific Deductible $450,000 $400,000 $400,000
Specific Annual Maximum Unlmited Unlimited Unlimited
Plan Mirroring Included Included Included
No New LASER at Renewal Provision Included Included Included
Rate Cap at Renewal Provision Included Included Included
Maximum Renewal Increase 40%40%75%
Experience Rated Refund Provision Included Included Not Included
Target Loss Ratio 65%65%-
Maximum Refund 15%15%-
Retiree Inclusion Included Included Included
Specific Premium
1,052 Single --$23.09
1,217 Family --$77.03
2,269 Composite $36.94 $52.88 -
Monthly Specific Premium $83,817 $119,985 $118,036
Total Annual Stop Loss Costs $1,005,802 $1,439,817 $1,416,434
Cost Difference ($)$434,014 $410,632
Cost Difference (%)43.15%40.83%
Additional LASER Liability ($ in excess of ISL Ded)None None None
Proposal Finalization Date / Requirements Firm through
11/08
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
conditions.
16.E.5.a
Packet Pg. 2597 Attachment: 2020 01 MDSL PROP Renew Mktg revd 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Stop Loss Cost Analysis - Current Deductible $450,000
1/1/2020
Current Renewal Option
Reinsurance Carrier Voya Voya Sun Life
Medical Administrator Allegiance Allegiance Allegiance
Provider Network(s)Cigna Cigna Cigna
SPECIFIC STOP LOSS Medical/Rx Medical/Rx Medical/Rx
LASERS None None None
Contract Type 12/24 12/24 12/24
Specific Deductible $450,000 $450,000 $450,000
Specific Annual Maximum Unlmited Unlimited Unlimited
Plan Mirroring Included Included Included
No New LASER at Renewal Provision Included Included Included
Rate Cap at Renewal Provision Included Included Included
Maximum Renewal Increase 40%40%40%
Experience Rated Refund Provision Included Included Included
Target Loss Ratio 65%65%65%
Maximum Refund 15%15%10%
Retiree Inclusion Included Included Included
Specific Premium
1,052 Single --$16.70
1,217 Family --$57.11
2,269 Composite $36.94 $43.80 -
Monthly Specific Premium $83,817 $99,382 $87,071
Total Annual Stop Loss Costs $1,005,802 $1,192,586 $1,044,855
Cost Difference ($)$186,784 $39,053
Cost Difference (%)18.57%3.88%
Additional LASER Liability ($ in excess of ISL Ded)None None None
Proposal Finalization Date / Requirements Firm through
10/28
Firm through
11/08
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
conditions.
16.E.5.a
Packet Pg. 2598 Attachment: 2020 01 MDSL PROP Renew Mktg revd 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Stop Loss Cost Analysis - Increase Deductible to $500,000
1/1/2020
Current Renewal Option
Reinsurance Carrier Voya Voya Sun Life
Medical Administrator Allegiance Allegiance Allegiance
Provider Network(s)Cigna Cigna Cigna
SPECIFIC STOP LOSS Medical/Rx Medical/Rx Medical/Rx
LASERS None None None
Contract Type 12/24 12/24 12/24
Specific Deductible $450,000 $500,000 $500,000
Specific Annual Maximum Unlmited Unlimited Unlimited
Plan Mirroring Included Included Included
No New LASER at Renewal Provision Included Included Included
Rate Cap at Renewal Provision Included Included Included
Maximum Renewal Increase 40%40%40%
Experience Rated Refund Provision Included Included Included
Target Loss Ratio 65%65%65%
Maximum Refund 15%15%10%
Retiree Inclusion Included Included Included
Specific Premium
1,052 Single --$13.21
1,217 Family --$46.60
2,269 Composite $36.94 $36.22 -
Monthly Specific Premium $83,817 $82,183 $70,609
Total Annual Stop Loss Costs $1,005,802 $986,198 $847,309
Cost Difference ($)($19,604)($158,493)
Cost Difference (%)-1.95%-15.76%
Additional LASER Liability ($ in excess of ISL Ded)None None None
Proposal Finalization Date / Requirements Firm through
10/28
Firm through
11/08
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
conditions.
16.E.5.a
Packet Pg. 2599 Attachment: 2020 01 MDSL PROP Renew Mktg revd 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Stop Loss Cost Analysis - Increase Deductible to $1,000,000
1/1/2020
Current Renewal Option
Reinsurance Carrier Voya Voya Sun Life
Medical Administrator Allegiance Allegiance Allegiance
Provider Network(s)Cigna Cigna Cigna
SPECIFIC STOP LOSS Medical/Rx Medical/Rx Medical/Rx
LASERS None None None
Contract Type 12/24 12/24 12/24
Specific Deductible $450,000 $1,000,000 $1,000,000
Specific Annual Maximum Unlmited Unlimited Unlimited
Plan Mirroring Included Included Included
No New LASER at Renewal Provision Included Included Included
Rate Cap at Renewal Provision Included Included Included
Maximum Renewal Increase 40%40%40%
Experience Rated Refund Provision Included Included Included
Target Loss Ratio 65%65%65%
Maximum Refund 15%15%10%
Retiree Inclusion Included Included Included
Specific Premium
2,269 Composite $36.94 $13.21 $12.01
Monthly Specific Premium $83,817 $29,973 $27,251
Total Annual Stop Loss Costs $1,005,802 $359,682 $327,008
Cost Difference ($)($646,120)($678,794)
Cost Difference (%)-64.24%-67.49%
Additional LASER Liability ($ in excess of ISL Ded)None None None
Proposal Finalization Date / Requirements Firm through
10/28
Firm through
11/08
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
conditions.
16.E.5.a
Packet Pg. 2600 Attachment: 2020 01 MDSL PROP Renew Mktg revd 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Stop Loss Cost Analysis - Increase Deductible to $2,000,000
1/1/2020
Current Renewal Option
Reinsurance Carrier Voya Voya Sun Life
Medical Administrator Allegiance Allegiance Allegiance
Provider Network(s)Cigna Cigna Cigna
SPECIFIC STOP LOSS Medical/Rx Medical/Rx Medical/Rx
LASERS None None
Contract Type 12/24 12/24
Specific Deductible $450,000 $2,000,000
Specific Annual Maximum Unlmited Unlimited
Plan Mirroring Included Included
No New LASER at Renewal Provision Included Included
Rate Cap at Renewal Provision Included Included
Maximum Renewal Increase 40%40%
Experience Rated Refund Provision Included Included
Target Loss Ratio 65%65%
Maximum Refund 15%10%
Retiree Inclusion Included Included
Specific Premium
1,052 Single -$1.08
1,217 Family -$6.00
2,269 Composite $36.94 -
Monthly Specific Premium $83,817 $8,438
Total Annual Stop Loss Costs $1,005,802 $101,258
Cost Difference ($)($904,544)
Cost Difference (%)-89.93%
Additional LASER Liability ($ in excess of ISL Ded)None None
Proposal Finalization Date / Requirements Firm through
11/08
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
conditions.
Unable to
quote
16.E.5.a
Packet Pg. 2601 Attachment: 2020 01 MDSL PROP Renew Mktg revd 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Stop Loss History
$400,000 $450,000 $500,000 $1,000,000 $2,000,000
2013 1 1 1 0 0
2014 1 1 1 1 0
2015 4 3 2 1 0
2016 4 2 2 0 0
2017 2 2 2 0 0
2018 3 3 3 1 0
2019 through Sept 2 2 2 0 0
$400,000 $450,000 $500,000 $1,000,000 $2,000,000
2013 $266,119 $216,119 $166,119 $0 $0
2014 $677,829 $627,829 $577,829 $77,829 $0
2015 $1,212,848 $1,112,848 $1,053,928 $553,928 $0
2016 $307,500 $165,045 $65,045 $0 $0
2017 $470,719 $370,719 $270,719 $0 $0
2018 $1,061,555 $911,555 $761,555 $2,707 $0
2019 through Sept $396,143 $296,143 $196,143 $0 $0
$400,000 $450,000 $500,000 $1,000,000 $2,000,000
2013 $50,000 ($50,000)($216,119)($216,119)
2014 $50,000 ($50,000)($550,000)($627,829)
2015 $100,000 ($58,920)($558,920)($1,112,848)
2016 $142,455 ($100,000)($165,045)($165,045)
2017 $100,000 ($100,000)($370,719)($370,719)
2018 $150,000 ($150,000)($908,847)($911,555)
2019 through Sept $100,000 ($100,000)($296,143)($296,143)
All Coverage
Options
Compared with
This Option
Year Number of Claims Exceeding
Year Amount of Claims Exceeding
Year Difference in Claims from Current Coverage
16.E.5.b
Packet Pg. 2602 Attachment: 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year
Analysis of Stop Loss Alternatives
Current Option Option
Voya Voya Sun Life
Stop Loss Deductible $450,000 $400,000 $400,000
Estimated Annual Premium (P) $1,005,802 $1,439,817 $1,416,434
Expected Total Claims (C)$551,828 $636,662 $636,662
Expected Cost of Risk Transfer (P-C)$453,974 $803,155 $779,772
Return on Premium (C/P)55%44%45%
Premium Savings vs. Current $0 ($434,015)($410,632)
Likelihood of Better Economic Outcome 0%0%
# of Claims
95% Confidence Interval
Minimum 0 0 0
Maximum 8 9 9
Distribution of Add'l Claims vs. Current
Minimum ($34,554)($34,554)
Maximum ($152,499)($152,499)
Average ($84,834)($84,834)
5% Perc ($51,233)($51,233)
10% Perc ($62,097)($62,097)
15% Perc ($63,709)($63,709)
20% Perc ($68,959)($68,959)
25% Perc ($72,917)($72,917)
30% Perc ($77,014)($77,014)
35% Perc ($76,039)($76,039)
40% Perc ($76,602)($76,602)
45% Perc ($79,026)($79,026)
50% Perc ($81,642)($81,642)
55% Perc ($83,684)($83,684)
60% Perc ($90,557)($90,557)
65% Perc ($89,405)($89,405)
70% Perc ($96,572)($96,572)
75% Perc ($93,959)($93,959)
80% Perc ($100,847)($100,847)
85% Perc ($102,867)($102,867)
90% Perc ($109,515)($109,515)
95% Perc ($117,486)($117,486)
16.E.5.b
Packet Pg. 2603 Attachment: 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Analysis of Stop Loss Alternatives
Current Option Option
Voya Voya Sun Life
Stop Loss Deductible $450,000 $450,000 $450,000
Estimated Annual Premium (P)$1,005,802 $1,192,586 $1,044,855
Expected Total Claims (C)$551,828 $551,828 $551,828
Expected Cost of Risk Transfer (P-C)$453,974 $640,758 $493,027
Return on Premium (C/P)55%46%53%
Premium Savings vs. Current $0 ($186,784)($39,053)
Likelihood of Better Economic Outcome 0%0%
# of Claims
95% Confidence Interval
Minimum 0 0 0
Maximum 8 8 8
Distribution of Add'l Claims vs. Current
Minimum $0 $0
Maximum $0 $0
Average $0 $0
5% Perc $0 $0
10% Perc $0 $0
15% Perc $0 $0
20% Perc $0 $0
25% Perc $0 $0
30% Perc $0 $0
35% Perc $0 $0
40% Perc $0 $0
45% Perc $0 $0
50% Perc $0 $0
55% Perc $0 $0
60% Perc $0 $0
65% Perc $0 $0
70% Perc $0 $0
75% Perc $0 $0
80% Perc $0 $0
85% Perc $0 $0
90% Perc $0 $0
95% Perc $0 $0
16.E.5.b
Packet Pg. 2604 Attachment: 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Analysis of Stop Loss Alternatives
Current Option Option
Voya Voya Sun Life
Stop Loss Deductible $450,000 $500,000 $500,000
Estimated Annual Premium (P)$1,005,802 $986,198 $847,309
Expected Total Claims (C)$551,828 $483,167 $483,167
Expected Cost of Risk Transfer (P-C)$453,974 $503,031 $364,142
Return on Premium (C/P)55%49%57%
Premium Savings vs. Current $0 $19,604 $158,493
Likelihood of Better Economic Outcome 0.0%99.9%
# of Claims
95% Confidence Interval
Minimum 0 0 0
Maximum 8 7 7
Distribution of Add'l Claims vs. Current
Minimum $34,554 $34,554
Maximum $124,467 $124,467
Average $68,661 $68,661
5% Perc $44,234 $44,234
10% Perc $49,834 $49,834
15% Perc $52,027 $52,027
20% Perc $52,180 $52,180
25% Perc $57,693 $57,693
30% Perc $58,095 $58,095
35% Perc $59,192 $59,192
40% Perc $64,462 $64,462
45% Perc $63,652 $63,652
50% Perc $67,398 $67,398
55% Perc $68,074 $68,074
60% Perc $71,334 $71,334
65% Perc $71,776 $71,776
70% Perc $79,667 $79,667
75% Perc $81,026 $81,026
80% Perc $81,321 $81,321
85% Perc $91,466 $91,466
90% Perc $87,696 $87,696
95% Perc $93,850 $93,850
16.E.5.b
Packet Pg. 2605 Attachment: 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Analysis of Stop Loss Alternatives
Current Option Option
Voya Voya Sun Life
Stop Loss Deductible $450,000 $1M $1M
Estimated Annual Premium (P)$1,005,802 $359,682 $327,008
Expected Total Claims (C)$551,828 $177,500 $177,500
Expected Cost of Risk Transfer (P-C)$453,974 $182,182 $149,508
Return on Premium (C/P)55%49%54%
Premium Savings vs. Current $0 $646,120 $678,794
Likelihood of Better Economic Outcome 96.4%98.0%
# of Claims
95% Confidence Interval
Minimum 0 0 0
Maximum 8 3 3
Distribution of Add'l Claims vs. Current
Minimum $218,853 $218,853
Maximum $840,667 $840,667
Average $374,329 $374,329
5% Perc $226,454 $226,454
10% Perc $236,371 $236,371
15% Perc $260,527 $260,527
20% Perc $278,173 $278,173
25% Perc $292,180 $292,180
30% Perc $302,972 $302,972
35% Perc $320,139 $320,139
40% Perc $343,544 $343,544
45% Perc $350,590 $350,590
50% Perc $362,911 $362,911
55% Perc $378,725 $378,725
60% Perc $395,498 $395,498
65% Perc $405,725 $405,725
70% Perc $416,218 $416,218
75% Perc $430,213 $430,213
80% Perc $454,750 $454,750
85% Perc $488,023 $488,023
90% Perc $499,834 $499,834
95% Perc $567,382 $567,382
16.E.5.b
Packet Pg. 2606 Attachment: 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Analysis of Stop Loss Alternatives
Current Option Option
Voya Voya Sun Life
Stop Loss Deductible $450,000 $2M $2M
Estimated Annual Premium (P)$1,005,802 Declined to quote $101,258
Expected Total Claims (C)$551,828 $40,690
Expected Cost of Risk Transfer (P-C)$453,974 $60,568
Return on Premium (C/P)55%40%
Premium Savings vs. Current $0 $904,544
Likelihood of Better Economic Outcome 95.3%
# of Claims
95% Confidence Interval
Minimum 0 0
Maximum 8 2
Distribution of Add'l Claims vs. Current
Minimum $215,158
Maximum $1,386,315
Average $511,138
5% Perc $234,952
10% Perc $292,596
15% Perc $330,449
20% Perc $355,376
25% Perc $374,778
30% Perc $398,703
35% Perc $411,804
40% Perc $430,454
45% Perc $445,306
50% Perc $475,048
55% Perc $510,279
60% Perc $540,467
65% Perc $564,569
70% Perc $596,128
75% Perc $631,760
80% Perc $658,682
85% Perc $703,947
90% Perc $759,378
95% Perc $872,300
16.E.5.b
Packet Pg. 2607 Attachment: 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Total Claims Exceeding Deductible
Claims Exceeding Stop Loss Deductible $400,000 $450,000 $500,000 $1,000,000 $2,000,000
Minimum $0 $0 $0 $0 $0
Maximum $2,940,322 $2,787,823 $2,663,356 $1,947,156 $1,401,508
Average $636,662 $551,828 $483,167 $177,500 $40,690
5% Perc $286,759 $235,526 $191,292 $9,072 $574
10% Perc $357,922 $295,825 $245,991 $59,454 $3,229
15% Perc $399,446 $335,737 $283,709 $75,209 $5,287
20% Perc $431,378 $362,419 $310,239 $84,246 $7,043
25% Perc $457,217 $384,300 $326,607 $92,120 $9,522
30% Perc $486,508 $409,494 $351,399 $106,523 $10,792
35% Perc $502,553 $426,513 $367,321 $106,375 $14,709
40% Perc $520,385 $443,783 $379,321 $100,238 $13,329
45% Perc $547,076 $468,050 $404,398 $117,460 $22,744
50% Perc $582,855 $501,213 $433,815 $138,302 $26,165
55% Perc $618,757 $535,074 $466,999 $156,348 $24,794
60% Perc $662,889 $572,332 $500,998 $176,834 $31,865
65% Perc $685,624 $596,219 $524,444 $190,494 $31,651
70% Perc $737,393 $640,821 $561,155 $224,603 $44,694
75% Perc $770,472 $676,513 $595,488 $246,300 $44,753
80% Perc $816,656 $715,810 $634,489 $261,060 $57,127
85% Perc $879,596 $776,729 $685,263 $288,706 $72,781
90% Perc $956,532 $847,017 $759,321 $347,182 $87,638
95% Perc $1,110,951 $993,466 $899,615 $426,084 $121,165
16.E.5.b
Packet Pg. 2608 Attachment: 2020 01 CCG- MDSL Alternatives Analysis 2019 11 04 (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
Collier County Government
2020 Medical Stop Loss
Marketing Report
November 4, 2019
16.E.5.c
Packet Pg. 2609 Attachment: 2020 CCG MDSL MKT Report - Final (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
1
November 4, 2019
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 Voya.
Aggregate stop loss would protect the CCG if 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 represents 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, Voya. 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, $500,000, $1 million
and $2 million respectively. Specific stop loss reinsurance 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 Sun Life at either a $500,000 or $1,000,000 retention level.
Selecting the $500,000 retention level would result in an annual savings of approximately $158,000
versus the current program through Voya. Selecting the $1 million retention level would result in
annual savings of approximately $679,000 versus the current program through Voya. The savings
at these two levels is greater than the Voya quote.
The balance of this report provides further detail supporting the above recommendation as well as
other pertinent information concerning the quotes received.
Marketing Summary
Specific stop loss quotations were requested from the following carriers:
◼ Swiss Re (declined to quote)
◼ Voya/ReliaStar (incumbent – quote provided)
◼ Sun Life (quote received)
◼ Berkshire (declined to quote)
◼ Optum (quote received)
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◼ HM Insurance Group (declined to quote)
◼ QBE (quote received)
◼ Symetra (declined to quote)
All 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. The top two carriers were Voya (incumbent) and
Sun Life. The major differences were as follows for the current retention level of $450,000.
◼ Sun Life - for coverage terms identical to current, the quote was 3.88% over current ($39,053)
with a maximum renewal cap of 40% and no lasers.
◼ Voya – for coverage terms identical to current, the quote was 18.57% ($186,784) above current
with a 40% rate cap and no lasers.
There is an additional drawback with Voya, as they are not listed with the State to offer a $2 million
retention. However, we believe moving from $450,000 to $2 million is a significant increase and
should not be considered despite the CCG reserve fund status. Making this big jump would lock CCG
into a higher retention level. Making a significant move backward in future years would likely raise
suspicions of behalf of underwriters, making it difficult to obtain retention levels in the current
range. Although we are not recommending this level, it is comforting to know Sun Life offers a higher
retention level should the CCG still wish to consider a $2 million retention either now or in the
future.
Optum and QBE also quoted but their terms for the current coverage were significantly higher than
Voya or Sun Life, 31% and 34% respectively. As a result, these carriers were not considered further in
this analysis.
To aid the CCG in selecting what level of coverage to purchase, Wills Towers Watson completed two
separate analyses. The purpose of each is summarized below:
1. A traditional spreadsheet analysis showing what each carrier quoted for the requested
retention levels.
2. A stochastic forecast model, which uses Willis Towers Watson’s data on a large population of
large claimants along with the CCG’s actual claims data to forecast the expected stop loss claims
at each retention level quoted.
Any decision to increase the retention level should be based on an assessment of the CCG’s current
risk tolerance appetite. The following analysis provides the detail supporting these recommendations
to assist the CCG in reaching a final decision.
As in the past, 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.
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Packet Pg. 2611 Attachment: 2020 CCG MDSL MKT Report - Final (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)
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Quote Cost Analysis
The attached document labelled “2020 01 MDSL PROP Renew Mktg revd 2019 11 04” outlines what
the two top carriers, Voya and Sun Life, quoted at each retention level. The 2020 Sun Life quote for
the current stop loss level represents an annual cost increase of approximately $39,053 or 3.88%.
The proposed terms at each level are reasonable given current market conditions. Stop loss renewal
increases typically range from 15% to 30%, due to three factors:
1. Carriers’ risk expectations based on a review of emerging high cost claims/trigger diagnoses.
2. 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 a cost increase of 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%.
3. Carrier concerns about hyperinflation in large claimants. The number and average size of large
claimants is increasing at a more rapid rate than trend observed for health care plans in general.
All quotes received were for a 12/24 basis. This means coverage applies to all claims incurred in 2020
and paid by December 31, 2022, so there is no concern at the end of the year about getting claims
paid as they will be included.
Retention Level Analysis
We used CCG’s 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 “2020 01 CCG- MDSL Alternatives Analysis 2019 11 04.” 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 2018 and through September of 2019. The
number of claims exceeding $450,000 was two each year for 2016 and 2017 and three each year for
2015 and 2018. The amount of claims in excess of the deductible ranged from $165,000 to
$1,113,000 during this period. The current annual premium estimated for 2019 is $1,005,802.
There is a separate page that analyzes each retention level quoted by Voya and Sun Life. Each of
these pages contains the following information:
1. The estimated annual premium for the stated stop loss level,
2. Expected annual claims at that level,
3. The expected cost of risk transfer (the difference between the premium paid and the expected
losses),
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4. The expected probability of a better outcome, which shows the potential that the premium
savings in moving to a higher retention level will not be offset by increased claims paid by the
CCG due to the larger retention level,
5. A distribution of the expected claims at certain probability levels.
Following is a summary of what the data produced as a result of the analysis summarized in the
tables at each retention level. These observations are all based on the Sun Life quotes, which were
more attractive than Voya at every level.
1. Reducing the retention level to $400,000 would not be a sound decision since it is unlikely that
the additional premium paid for the lower retention would be offset by reimbursements made
by the carrier.
2. The models suggest that moving to a $500,000, $1.0 million or $2.0 million retention would
produce results where there is a high likelihood that the premium savings of moving to the
higher retention rate would not be offset by increased claims paid by the CCG as a result of the
higher retention level.
3. The annual saving compared to the 2019 estimated cost of reinsurance is approximately
$158,000 at $500,000, $679,000 at $1.0 million and $905,000 at $2.0 million.
The reasoning behind not increasing the retention to $2 million is outlined earlier in this report.
If the CCG moves to the $1 million retention, Willis Towers Watson recommends setting up a sub
fund under the insurance fund. We would suggest depositing the savings from the current premium,
as compared to the premium for this larger retention, into the sub account.
Funds in the sub account would be utilized to reinsure the insurance fund for the costs of any
claimant with total claims over $500,000 but less than $1 million. A $1 million retention level will
exhibit greater volatility with respect to the potential for large claimants especially given current
trends. This fund would provide protection to the overall fund should large claimant and experience
in excess of $500,000 but less than $1 million be greater than anticipated.
We would assist the CCG in evaluating the adequacy of this sub fund on an annual basis.
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Packet Pg. 2613 Attachment: 2020 CCG MDSL MKT Report - Final (10767 : Approval to Purchase Group Health Reinsurance for Calendar Year 2020)