Agenda 10/27/2020 Item #16E 6 (Group Health Reinsurance)16.E.6
10/27/2020
EXECUTIVE SUMMARY
Recommendation to approve the purchase of Group Health Reinsurance through SunLife in the
estimated amount of $346,872 effective January 1, 2021.
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 SunLife with a self -insured retention of $1,000,000 per member. The current Stop Loss coverage
expires at midnight, December 31, 2020.
For the 2020 renewal, the Board approved an increase in the specific retention level from $450,000 to $1
million at a premium savings of approximately $680,000. Thus far through August, there have been no
claims that have exceeded the $1 million level with the closet reaching $320,000. There are not likely to
be any claimants in calendar year 2020 that will incur claims exceeding $1 million, hence, the County
will retain significant savings in premium cost due to the decision to increase the retention level. In
addition, the current program contains an experience rated refund option and it is likely that the County
will receive an additional $32,000 in experience based premium refunds.
For the January 1, 2021 renewal, 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
at the $1,000,000 retention level from ten (10) carriers. The substantive policy provisions sought by the
County included 1) an experience rated refund option, 2) a second -year rate cap (to address market
volatility), and 3) the carrier must follow the County's Plan definition for Medical Necessity when
making coverage determinations. Three carriers responded, however, only two (SunLife and HMIG) were
considered substantially compliant with requested second year rate cap requirements.
WTW recommends that the County select SunLife for the January 1, 2021 renewal for the following
reasons:
■ If the County does not renew with SunLife, it forfeits the 2020 experience rated refund in the amount
of $32,500. Further, it is likely the County will forego an additional experience rated refund for 2021
for as much as $34,600.
■ The HMIG policy applies its own definition of medical necessity versus the definition used under the
County's Health Plan. This is a material coverage deficiency because HMIG could deny a claim that
would be considered payable under the SunLife policy.
■ Sun Life caps its second -year rate increase to 40% in 2022, whereas HMIG caps theirs at 50%.
■ The HMIG proposal excludes coverage for post age 65 members.
■ While the net cost for the SunLife policy is $14,396 higher than the HMIG policy, these coverage
deficiencies are considered material and make the SunLife proposal the better value.
■ Stability in working with one carrier for more than one year is perceived favourably by the markets.
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The comparison is illustrated below:
dic J Ad mun ist rat
ProvidMomCigna
SPECIFPC STOPLOSS
LASERS
Allegiance:
MedicalflRx4 .
None No n e
Contract Type
12124
12124
Specific Deductible
$1,0DO. 000
$1,000,000
Specific Annual Maximum'
Unlimited
Unlimited
Specific Run -In Limit
Unlimited
Unlimited
No New LASER at Renewal Provision
Included
Included
Rate Cap at Renewal Provision
40%
40%
Experience Refunds
Included
Included
Medical Necessity Determination
Plan
Plan
Plan Mirroring
Included
Included
Reimb ursement Process Initiation
Automatic
Automatic
Actt%?ely at Work Provision
Waived
Waived
Retiree Inclusion
Included
Included
Specific Premium
22461 Composite
$12.01
$12.87
Annual Specific Premium
$323,694
$346,972
Difference from Current Premium
Total Ann ua I Stop Loss1
Lowest+
xpected Va In • of el • FI Refu n d
IN et Meren ce Ad in sted to r E xpenen ce Rated Refu n 4
$0
$23,179
i
896
$32, SOD
$14,396
Sun Life carries a Best's "A" (Superior) financial rating. Coverage will commence January 1, 2021 for a
one-year period.
FISCAL IMPACT: The estimated cost of group health reinsurance in calendar year 2021 is $346,872
based upon an average enrollment of 2,246 employees. The composite rate per enrolled employee is
$12.87 per month. Premiums are remitted monthly based upon actual enrollment. There are enough 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, raises no legal
issues, and requires majority vote for approval. -JAK
RECOMMENDATION: To approve the purchase of Group Health Reinsurance from SunLife as
outlined in the Executive Summary and authorize the County Manager or designee to sign the documents
necessary to commence coverage effective January 1, 2021.
Prepared by: Jeffrey A. Walker, CPCU, ARM, Division Director, Risk Management Division
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ATTACHMENT(S)
1.2021 CCG MDSL MKT Report Final (PDF)
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10/27/2020
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.E.6
Doe ID: 13681
Item Summary: Recommendation to approve the purchase of Group Health Reinsurance through
SunLife in the estimated amount of $346,872 effective January 1, 2021.
Meeting Date: 10/27/2020
Prepared by:
Title: Division Director - Risk Management — Risk Management
Name: Jeff Walker
09/24/2020 2:39 PM
Submitted by:
Title: Division Director - Risk Management — Risk Management
Name: Jeff Walker
09/24/2020 2:39 PM
Approved By:
Review:
Administrative Services Department
Administrative Services Department
Office of Management and Budget
County Attorney's Office
Office of Management and Budget
County Manager's Office
Board of County Commissioners
Paula Brethauer Level 1 Department Reviewer
Len Price Level 2 Department Head Review
Debra Windsor Level 3 OMB Gatekeeper Review
Jeffrey A. Klatzkow Level 3 County Attorney's Office Review
Laura Wells Additional Reviewer
Nick Casalanguida Level 4 County Manager Review
MaryJo Brock Meeting Pending
Completed 09/28/2020 9:00 AM
Completed 10/14/2020 9:58 AM
Completed 10/14/2020 10:13 AM
Completed 10/14/2020 2:58 PM
Completed 10/14/2020 3:10 PM
Completed 10/20/2020 3:10 PM
10/27/2020 9:00 AM
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Co -rev Comity
Collier County Government
2021 Medical Stop Loss
Marketing Report
September 24, 2020 - DRAFT
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Introduction
Each year Willis Towers Watson (WTW) 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.
The coverage sought is referred to as specific stop loss. This coverage reinsurers the CCG for any one
claimant (employee, spouse or dependent) whose claims exceed a specific predetermined level.
Although aggregate stop loss is available, past analysis of those terms have shown that purchasing
this coverage in conjunction with specific stop loss would offer little real protection and represents a
poor value.
Due to the financial status of the insurance fund, last year the CCG increased its specific retention
level from $450,000 to $1 million. Based on the quotes received, this change saved the CCG
approximately $680,000. Thus far this year, there have been no claims that have exceeded the $1
million level with, the closet reaching $320,000 through August. There are not likely to be any
claimants this year with claims exceeding $1 million. Therefore, the increase in the retention level
was financially beneficial to the CCG.
The current program expires at the end of this year. For the upcoming policy year, WTW sought
specific stop loss coverage on behalf of the CCG. Since the increase in the retention level was
significant this year, it was decided not to consider retention levels in excess of $1 million.
Marketing Summary and Recommendation
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WTW worked to secure terms for the specific medical stop loss program from the current carrier, Sun r
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 $1 and $1.25 million. However, for the
reasons noted above, only the $1 million retention level was considered. 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, WTW believes the risk management needs of the CCG are best met by
renewing coverage with Sun Life at the $1,000,000 retention level. Although improved terms are
available through HMIG and Berkshire Hathaway, the CCG would forfeit an experience rated refund
of $32,000 for the current year and would lose this provision in the future. In addition, there are
other limitations associated with the HMIG and Berkshire Hathaway quotes that make them less
attractive and increase risk to the CCG.
The balance of this report provides further detail supporting the above recommendation as well as
other pertinent information concerning the quotes received.
September 24, 2020
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Marketing Summary
Specific stop loss quotations were requested from the following carriers:
■ Berkley (declined to quote — concerns over ongoing claims)
■ Berkshire Hathaway (quote provided)
■ HMIG (quote provided)
■ Optum (declined to quote — uncompetitive rates)
■ QBE (declined to quote manual rates 40% over current)
■ Swiss Re (too many vendors in the past 5 years)
■ Sun Life (incumbent quote received)
■ Symetra (declined to quote manual rates more than 3 times current)
■ TMHCC Insurance Group (declined to quote — manual rates 40% above current)
■ Voya (declined to quote — uncompetitive with current rates)
All the carriers above are rated A or better by A.M. Best. Carriers that declined to quote did so for
the reasons noted.
The three carriers quoting were the incumbent Sun Life, Berkshire Hathaway and HMIG. None of the
carriers required lasers on any member.
■ Sun Life - for the current $1 million retention level, the quote was 7.2% ($23,179 annually) over
current with a maximum renewal cap of 40% and an experience rated refund provision.
■ Berkshire Hathaway —for the current $1 million retention level, the quote was 6% ($18,327 T_
annually) less than the current. However, the quote did not include a rate cap or experience M
rated refund provision. This makes the Berkshire Hathaway quote less attractive than HMIG.
■ HMIG — for the current $1 million retention level, the quote was 7% ($23,718 annually) less than
current with a 50% rate cap, but no experience rated refund provision.
Since neither the Berkshire Hathaway or HMIG proposals contain an experience rated refund
provision, it is important to understand how the program works. Sun Life retains 30% of premium
and the remaining amount is divided equally between Sun Life and the policyholder. The refund is
limited to 10% of the total premium. Since this is an incurred policy the refund would be due in
March 2022. At the current time, the estimated experience rated refund for 2020 is $32,500.
Through August, the highest claimant has only accumulated $320,000 toward the $1 million
retention level. This claimant is highly unlikely to reach $1 million and there are no other claimants
anywhere close to $1 million.
On the surface it would appear to make sense to move from Sun Life to HIMG. Overall, the annual
cost of the HMIG option is $48,896 less than the renewal terms offered by Sun Life. However, there
are other material factors to consider.
■ If the CCG does not renew with Sun Life, it forfeits the experience rated refund.
■ The experience rated refund of $32,500 closes the gap with HMIG to $17,400.
■ It is highly likely the CCG will receive another experience rated refund for 2021.
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■ The HMIG policy applies its own definition of medical necessity versus the one contractually
deployed by Allegiance. This offers a significant loophole for HMIG to deny a claim that would be
considered payable under the current plan.
■ Sun Life caps their rate increase to 40% in 2022, whereas HMIG caps theirs at 50%.
■ Stability in working with one carrier for more than one year is perceived favorably by the
markets.
WTW believes that the factors noted above make the Sun Life renewal superior to the HMIG
quotation.
The full analysis of our marketing is included with this report. The estimated impact of the
experience rated refund is shown in the table below.
Reinsurance Carrier
Medical Administrator
Provider
SPECIFIC .• LOSS
LASERS
SunLife
AllegianceCurrent Renewal
None None
Contract Type
12/24
12/24
Specific Deductible
$1,000,000
$1,000,000
Specific Annual Maximum'
Unlimited
Unlimited
Specific Run -In Limit
Unlimited
Unlimited
No New LASER at Renewal Provision
Included
Included
Rate Cap at Renewal Provision
40%
40%
Experience Refunds
Included
Included
Medical Necessity Determination
Plan
Plan
Plan Mirroring
Included
Included
Reimbursement Process Initiation
Automatic
Automatic
Actively at Work Provision
Waived
Waived
Retiree Inclusion
Included
Included
Specific Premium
2246 FComposite
$12.01
$12.87
Annual Specific Premium
$323,694
$346,872
Difference from Current Premium
Total Annual Stop Loss Costs
Difference from Lowest ($)
Expected Value of Experience Rated Refund
Net Difference Adjusted for Experience Rated Refund
$0
$323,694
$23,179
$346,872
$46,896
$32,500
$14,396
September 24, 2020
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