Loading...
R-09-09-24-11B1 - 9/24/2009RESOLUTION NO. R -09-09-24-11B1 WHEREAS, the City of Round Rock desires to retain professional services to provide independent third -party administration of the City's self-funded health plan, and WHEREAS, Aetna Life Insurance Company ("Aetna") has submitted a proposal to provide said services, and WHEREAS, pending the final negotiation of the terms and provisions of an Administrative Services Agreement, the City Council desires to approve a Letter of Understanding with Aetna, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City a Letter of Understanding with Aetna Life Insurance Company, a copy of said Letter of Understanding being attached hereto as Exhibit "A" and incorporated herein for all purposes. The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. RESOLVED this 24th day of September, 2009. Ce M ./1,-. ALAN MCGRAW, Mayor City of Round Rock, Texas ATTEST: SARA L. WHITE, City Secretary O:\wdox\SCC1nts\0112\0905\MUNICIPAL\R90924B1.DOC/rmc September 1, 2009 City of Round Rock Linda Gunther 221 East Main Street Round Rock, TX 78664 Dear Ms. Gunther: Re: Letter of Understanding for City of Round Rock Thank you for selecting Aetna. We are excited about the opportunity to continue our relationship with the City of Round Rock. Prior to delivery of the final formal contract, we provide this Letter of Understanding which outlines and confirms the services Aetna has agreed to provide to City of Round Rock and also addresses any special issues that may not be addressed specifically by our written contract. This Letter of Understanding is not a substitute for the final contractual documents. It is still important that the final contractual documents be finalized and signed as soon as possible. This Letter of Understanding relates to the final contractual documents that will be entered into by City of Round Rock and Aetna Life Insurance Company effective January 1, 2010. This letter is organized as follows: I. BENEFITS AND FINANCIAL ARRANGEMENTS II. ADMINSTRATIVE SERVICES AGREEMENT FEES AND UNDERSTANDINGS III. GUARANTEES IV. SERVICES NOT INCLUDED IN ADMINISTRATIVE SERVICES AGREEMENT FEES V. CONCLUSION EXHIBIT 1 L BENEFITS AND FINANCIAL ARRANGEMENTS Aetna will administer the following benefit flans for City of Round Rock: Benefit Financial Arrangement Medical and Pharmacy Administrative Services Agreement Dental Adtninistrative Services Agreement Vision Administrative Services Agreement FSA Administrative Services Agreement COBRA Adtninistrative Services Agreement 2 II. ADMINISTRATIVE SERVICES AGREEMENT FEES AND UNDERSTANDINGS ADMINISTRATIVE SERVICES AGREEMENT FEES: Aetna and City of Round Rock have agreed upon the following: Medical/Dental/Pharmacy: Benefit Projected Enrollment 2010 Fee Mature Choice II/APM 771 $31.56 PEPIvI Dental 782 $4.35 PEPM Vision 782 $1.00 PEPM $10, 000 Wellness Allowance*** $1.08 PEPM FSA 123 $6.90 PIVIPM COBRA ** ** ***The Wellness Allowance zvill be applied to the cost of onsite biometric screenings and incentives. Any expenses beyond the wellness allowance are the responsibility of City of Round Rock. Any balance of this allowance fund retraining at end of the policy year will be forfeited. Please refer to the Wellness quote/brochure for more details. Self Funded Fees include: Informed Health® Line Aetna Compassionate Cares" Program Vision One® discount program Aetna Natural Products and ServicessM Program GlobalFitrm Aetna Navigator." member self-service website Medical Management services including inpatient precertification, outpatient precertification, next generation case management, concurrent review, retrospective review and discharge planning Two ad-hoc reporting hours Aetna as claim fiduciary for Level 1 and Level 2. City of Round Rock performs claim fiduciary for voluntary appeals after Levels 1 & 2 are exhausted (Option 4). I-IIPAA Administration Beginning RightsM Maternity Program [This program is included for our Choice II products] Aetna Health ConnectionssM Disease Management Program MedQuerysrr Simple Steps to a Healthier Life® [This program is included for our Choice II products] Services provided at an additional cost include: - National AdvantageTM Program (NAP): The fee for NAP is 50% of savings Facility Charge Review (FCR): The fee for the FCR program is 50% of savings Claims Subrogation: A contingency fee of 23.5% is collected upon recovery 3 MEDICAL UNDERSTANDINGS: • Participation Requirement — There is a minimum requirement of 250 enrolled employees for administration of the proposed self-funded plan. However, any Performance Guarantee is contingent upon the total number of covered lives (i.e., the total number of City of Round Rock employees enrolled for coverage) set out in our proposal. • Self -Funded Fee Guarantee - The first-year fees for the self-funded coverages included in this proposal for the period January 1, 2010 through December 31, 2010 are guaranteed according to the per employee, per month fees as illustrated on the financial exhibit(s). We guarantee that the 2011 fees will increase over the first-year mature fees by no greater than 5%. • Advance Notification of Fee Change — We will notify City of Round Rock of any fee change within 120 days of the fee change. ■ Funding Method- The claim payment method for your Medical coverages will be on a drafts cleared basis. The payment method for APM (managed pharmacy) prescription drug coverage is on a cleared basis. Late Payment - If City of Round Rock fails to provide fiends on a timely basis to cover benefit payments as provided in the Agreement, and/or fails to pay Service Fees on a timely basis as provided in such Agreement, Aetna will assess a late payment charge. The current charges are: ■ late funds to cover benefit payments (e.g., late wire transfers after 24-hour request): 12.0% annual tate 14 late payments of Service Fees after 31 day grace period: 12.0% annual rate Aetna will provide advance written note to City of Round Rock of any change to late payment charges. The late payment charges described in this section are without limitation to any other rights or remedies available to Aetna under the Agreement or at law or in equity for failure to pay. ■ Aetna Choice POS II Service Center - We have assumed that claim administration and member services for the quoted Aetna Choice® POS II plans will be provided centrally by the Bismarck, North Dakota Service Center. • Toll -Free Medical Member Services - The cost for toll-free access to our Member Service representatives is included in our quotation. Members will be able to reach the Member Service representatives Monday through Friday, 8:00 a.m. to 8:00 p.m. CST. • Medical EOB Suppression — Unless required by state law, we do not produce EOBs for Aetna Choice® POS II claims when there is no member liability. Our claim system automatically suppresses an EOB where benefits are assigned and the member's liability is either zero or consists of a copayment only. Additionally, EOBs are always available electronically through Aetna Navigator. • Run -Off Claims Processing -- Our quoted administrative service fees are mature; we have included the cost of processing self-funded run-off claims for 12 months following the termination of our administrative service agreement. 4 Claim Fiduciary — Our quoted Administrative fees assutne Aetna will be the ERISA claim •fiduciary for the two levels of mandatory plan appeals for the medical and dental coverages. City of Round Rock will be the ERISA claim fiduciary for a final, voluntary level of appeal. The claim fiduciary is responsible for final claims determination and the legal defense of the decisions it snakes �• Health Insurance Portability and Accountability Act (HIPAA) - Our proposal assumes that Aetna will be providing HIPAA certifications of coverage for terminated employees. ■ Aetna Health Connections Disease Management -- Our Aetna Health Connections Disease Management program provides innovative and individualized clinical programs, information and support for total, invated health management to help members achieve their optimal state of health. Aetna Health Connections Disease Management integrates a full suite of 35 chronic conditions and common co -morbidities in a holistic fashion, with an Aetna nurse acting as a generalist to address the total health of those members who will benefit most from disease management services. Our program also includes MedQuery®, which uses member data such as medical claims, pharmacy claiins, laboratory reports, self-reported data, and demographic information to identify potential gaps in care. This information is shared with physicians to help improve clinical quality and patient safety. Our Aetna Health Connections Disease Management program charge structure for City of Round Rock will be is included in our Choice II fees. ■ National Advantage"' Program — City of Round Rock has elected to participate in the National Advantage Program (NAP) under the Administrative Services Agreement. City of Round Rock has elected to participate in the Facility Charge Review (FCR) component of NAP. FCR utilizes a vendor for making reasonable charge determination. The vendor is Global Claim Services. The fee for the National Advantage program is 50% of savings and is not included in the per employee per month fee. Since the fee is only charged when contracted rates or R&C savings are applied, there is no downside to enrolling in the program. ✓ Formulary Rebates -- In this quote, Aetna has elected to retain all rebates to help offset medical and pharmacy service fee costs • Producer Compensation - Aetna has various programs for compensating agents, brokers and consultants. If you would like information regarding compensation programs for which your producer is eligible, payments (if any) which Aetna has made to your producer, or other material • relationships your producer may have with Aetna, you may contact your producer or your Aetna account representative. Information regarding Aetna's programs for compensating producers is also available at www.aetna.com. 5 DENTAL UNDERSTANDINGS ▪ Participation Requirement — There is a minimum requirement of 250 enrolled employees for administration of the proposed self-funded plan. However, any Performance Guarantee is contingent upon the total number of covered lives (i.e., the total number of City of Round Rock employees enrolled for coverage) set out in our proposal. • Self Funded Fee Guarantee - The first-year fees for the self-funded coverages included in this proposal for the period January 1, 2010 through December 31, 2010 are guaranteed according to the per etnployee, per month fees as illustrated on the financial exhibit(s). = Advance Notification of Fee Change — We will notify City of Round Rock of any fee change within 120 days of the fee change. ▪ Late Fee Payment - If City of Round Rock fails to provide funds on a timely basis to cover benefit payments as provided in the Agreement, and/or fails to pay Service Fees on a timely basis as provided in such Agreement, Aetna will assess a late payment charge. The current charges are: ' late funds to cover benefit payments (e.g., late wire transfers after 24-hour request): 12.0% annual rate ' late payments of Service Fees after 31 day grace period: 12.0% annual rate Aetna will provide advance written note to City of Round Rock of any change to late payment charges. The late payment charges described in this section are without limitation to any other rights or remedies available to Aetna under the Agreement or at law or in equity for failure to pay. ▪ Run -Off Claim Processing -- Our quoted administrative service fees are mature; we have included the cost of processing self-funded run-off claims for 12 months following the termination of our administrative service agreement. ■ DPPO Service Center - We have assumed that claim adtninistradon and member services for the quoted DPPO plan will be provided centrally by the Jacksonville, Florida Service Center. • Toll -Free Dental Member Services --Member services for all Aetna dental plans are provided on a regional basis through our national Dental Service Centers. The cost for toll-free access to our Member Service representatives is included in our quotation. This service is available to all members enrolled in the quoted plan of benefits. Members will be able to reach the Member Service representatives Monday through Friday, 8:00 a.m. to 8:00 p.m. EST. 6 The following is a list of additional factors that may impact our administrative services fees for the medical/dental benefit plan. We reserve the right to change our fees, at any time during the policy year effective on the date the change occurred, in the following circumstances We assumed the following for purposes of our proposal: We reserve the right to change our rates if: Enrollment by line of coverage would be as follows: Choice II/APM - 771 employee lives Dental PPO — 782 employee lives The actual enrollment in any line of coverage changes from the assurned enrollment by 15%. The enrolled member to employee ratio by line of coverage would be no greater than Choice II/APM — 2.0 The actual member to employee ratio for case size less than 1,000 employees exceeds the assumed ratio by 10% or more. The processed claims transactions (PCT) per employee per year ratio by line of coverage would be Choice II — 24.3 PCT per year The actual PCT ratio exceeds the assumed ratio by 15% or more. Your plan design remains unchanged. The plan design changes from the proposed benefits. Please note any changes must be approved by Aetna. FSA/COBRA: • FSA Administration - We have assumed 200 of City of Round Rock employees will participate in the Flexible Spending Account (FSA) plan. Our FSA fees are provided based upon the assumptions noted in our FSA proposal. If actual services vary from those assumed, an adjustment to our fees may be necessary. Please refer to the most recent FSA documents for additional information regarding our quotation. ▪ **COBRA Administration - Aetna will provide COBRA Administration for City of Round Rock. The costs associated with these services vary depending on account structure and number of participants. Therefore, since the variable costs are not known at this time, the cost of COBRA and all other continuation administration services is excluded from the pricing provided. If this service is elected, these charges will be billed as incurred. Please refer to the most recent COBRA documents for additional information regarding our quotation. III. GUARANTEES Performance Guarantees -- Medical \Ve will put 10% of our Medical annualized administrative service fees at risk through Performance Guarantees. The annualized administrative service fee will be calculated at the beginning of the contract period and will be based on the total number of employees enrolled in the medical plans throughout the guarantee period. This guarantee does not apply to non -Aetna benefits or networks. The guarantees described herein will be effective for a period of 12 months and will run from January 1, 2010 through December 31, 2010. Please refer to our attached Performance Guarantee document for complete descriptions of each guarantee. IV. SERVICES NOT INCLUDED IN ADMINISTRATIVE SERVICES AGREEMENT FEES The quoted Administrative service fees do not include charges for such things as: ■ Printing expenses for booklets/certificates and costs for customized forms. Charges for customized communications such as special open enrollment packets are charged as incurred. �e Other miscellaneous services excluded from our Administrative fees include: optional, or customized, reports and extra claim tapes, consulting services and special research, drafting of custom agreements and/or contracts, data processing services, and special claim office services and/or audits. ■ Our fees do not include the cost for third party stop loss reports. Reporting options and associated fees can be provided upon request. • Our fees do not include the cost for Retiree Drug Subsidy Reporting. Associated fees for Retiree Drug Subsidy Reporting can be provided upon request. If City of Round Rock would like us to provide these services, additional charge(s) will apply. Direct charges for items not anticipated in our assumptions and special services beyond those outlined wi11 be added and collected as part of the Administrative services fees billed to City of Round Rock on a per employee per month basis. 8 VL CONCLUSION We are extremely excited about the opportunity to transition City of Round Rock's benefit plans to Aetna, and to provide high quality service to City of Round Rock and its employees. Your business is extremely important to us and we appreciate it! This confirms our understanding of the products, services, fees, plan designs, account structure and assumptions as presented. If there is an addition or correction you would like to make to the material in the Letter of Understanding, please contact me. If we do not hear from you, we will assume that the letter is accurate and proceed with the implementation and administration of your plan. Accepted for the City of Round Rock: Accepted for Aetna: Officer Aetna Sale Support/Underwriting Mgr Print Name/Title: Date Please note: This letter is not meant to supersede the final contract or any item in our proposal that is not mentioned here. Sincerely, Kendra Hoduski Senior Account Manager 9 DATE: September 17, 2009 SUBJECT: City Council Meeting — September 24, 2009 ITEM: 11B1. Consider a resolution authorizing the Mayor to execute a Letter of Understanding with Aetna Life Insurance Company for independent third -party administration of self-funded health plans. Department: Staff Person: Justification: Human Resource Department Teresa Bledsoe The City sent out a Request for Proposals to solicit proposals from vendors for Administrative Services to administer the City's Employee Self -Insured Benefit Plan. We conducted a market search to identify the lowest net cost provider who could still meet our provider access, quality of care and customer service requirements with enhanced value added benefits. Aetna was selected as providing the best value for the City in this regard. Funding: Cost: Estimated cost will be $342,197 which is a 20.7% reduction of current annual cost. Source of funds: General Fund, Water/Wastewater Utility Fund The cost of this insurance is a function of the number of employees and dependent units covered. Outside Resources: N/A Background Information: N/A Public Comment: N/A EXECUTED DOCUMENT FOLLOWS September 1, 2009 City of Round Rock Linda Gunther 221. East Main Street Round Rock, TX 78664 Dear Ms. Gunther: Re: Letter of Understanding for City of Round Rock Thank you for selecting Aetna. We are excited about the opportunity to continue our relationship with the City of Round Rock. Prior to delivery of the final formal contract, we provide this Letter of Understanding which outlines and confirms the services Aetna has agreed to provide to City of Round Rock and also addresses any special issues that may not be addressed specifically by our written contract. This Letter of Understanding is not a substitute for the final contractual documents. It is still important that the final contractual documents be finalized and signed as soon as possible. This Letter of Understanding relates to the final contractual documents that will be entered into by City of Round Rock and Aetna Life Insurance Company effective Januai}r 1, 2010. This letter is organized as follows: I. BENEFITS AND FINANCIAL ARRANGEMENTS II. ADMINSTRATIVE SERVICES AGREEMENT FEES AND UNDERSTANDINGS III. GUARANTEES IV. SERVICES NOT INCLUDED IN ADMINISTRATIVE SERVICES AGREEMENT FEES V. CONCLUSION 1 Q--o�-z�-II$'l I. BENEFITS AND FINANCIAL ARRANGEMENTS Aetna will administer the following benefit plans for City of Round Rock: Benefit Financial Arrangement Medical and Pharmacy Administrative Services Agreement Dental Adtninistrative Services Agreement Vision Administrative Services Agreement FSA Administrative Services Agreement COBRA Administrative Services Agreement 2 II. ADMINISTRATIVE SERVICES AGREEMENT FEES AND UNDERSTANDINGS ADMINISTRATIVE SERVICES AGREEMENT FEES: Aetna and City of Round Rock have agreed upon the following: Medical/Dental/Pharmacy: Benefit Projected Enrollment 2010 Fee Mature Choice II/APM 771 $31.56 PEPM Dental 782 $4.35 PEPM Vision 782 $1.00 PEPM $10, 000 Wellness Allowance*** $1.08 PEPM FSA 123 $6.90 PMPM COBRA ** ** ***The Wellness Allowance will be applied to the cost of onsite biometric screenings and incentives. Any expenses beyond the wellness allowance are the responsibility of City of Round Rock. Any balance of this allowance fund remaining at end of the policy year will be forfeited. Please refer to the Wellness quote/brochure for more details. Self Funded Fees include: - Informed Health® Line Aetna Compassionate Care&M Program Vision One® discount program Aetna Natural Products and ServicessM Program G1obalFitrMi Aetna NavigatorT'M member self-service website Medical Management services including inpatient precertification, outpatient precertification, next generation case management, concurrent review, retrospective review and discharge planning - Two ad-hoc reporting hours Aetna as claim fiduciary for Level 1 and Level 2. City of Round Rock performs claim fiduciary for voluntary appeals after Levels 1 & 2 are exhausted (Option 4). - HIPAA Administration Beginning R.ightsM Maternity Program [This program is included for our Choice II products] Aetna I-Iealth Connectionssm Disease Management Program MedQuerysM Simple Steps to a Healthier Life® [This program is included for our Choice II products] Services provided at an additional cost include: - National AdvantageTM Program (NAP): The fee for NAP is 50% of savings Facility Charge Review (FCR): The fee for the FCR program is 50% of savings - Claims Subrogation: A contingency fee of 23.5% is collected upon recovery 3 MEDICAL UNDERSTANDINGS: • Participation Requirement — There is a minimum requirement of 250 enrolled employees for administration of the proposed self-funded plan. However, any Performance Guarantee is contingent upon the total number of covered lives (i.e., the total number of City of Round Rock employees enrolled for coverage) set out in our proposal. ■ Self -Funded Fee Guarantee - The first-year fees for the self-funded coverages included in this proposal for the period January 1, 2010 through December 31, 2010 are guaranteed according to the per employee, per month fees as illustrated on the financial exhibit(s). We guarantee that the 2011 fees will increase over the first-year mature fees by no greater than 5%. ■ Advance Notification of Fee Change — We will notify City of Round Rock of any fee change .within 120 days of the fee change. • Funding Method- The claim payment method for your Medical coverages will be on a drafts cleared basis. The payment method for APM (managed pharmacy) prescription drug coverage is on a cleared basis. ✓ Late Payment - If City of Round Rock fails to provide funds on a timely basis to cover benefit payments as provided in the Agreement, and/or fails to pay Service Fees on a timely basis as provided in such Agreement, Aetna \will assess a late payment charge. The current charges are: • late funds to cover benefit payments (e.g., late wire transfers after 24-hour request): 12.0% annual rate • late payments of Service Fees after 31 day grace period: 12.0% annual rate .Aetna will provide advance written note to City of Round Rock of any change to late payment charges. The late payment charges described in this section are without limitation to any other rights or remedies available to Aetna under the Agreement or at law or in equity- for failure to pay. • Aetna Choice® POS II Service Center - We have assumed that claitn administration and member services for the quoted Aetna Choice® POS II plans will be provided centrally by the Bismarck, North Dakota Service Center. ✓ Toll -Free Medical Member Services - The cost for toll-free access to our Member Service representatives is included in our quotation. Members will be able to reach the Member Service representatives Monday through Friday, 8:00 a.m. to 8:00 p.m. CST. • Medical EOB Suppression — Unless required by state law, we do not produce EOBs for Aetna Choice® POS II claims when there is no member liability. Our claim system automatically suppresses an EOB where benefits are assigned and the member's liability is either zero or consists of a copayment only. Additionally, EOBs arc always available electronically through Aetna Navigator. • Run -Off Claims Processing -- Our quoted administrative service fees are mature; we have included the cost of processing self-funded run-off claims for 12 months following the termination of our adtninistrative service agreement. 4 ■ Claim Fiduciary — Our quoted Administrative fees assume Aetna will be the ERISA claim fiduciary for the two levels of mandatory plan appeals for the medical and dental coverages. City of Round Rock will be the ERISA claim fiduciary for a final, voluntary level of appeal. The claim fiduciary is responsible for final claims determination and the legal defense of the decisions it makes • Health Insurance Portability and Accountability Act (HIPAA) - Our proposal assumes that Aetna will be providing HIPAA certifications of coverage for terminated employees. • Aetna Health Connections Disease Management -- Our Aetna Health Connections Disease Management program provides innovative and individualized clinical programs, information and support for total, integrated health management to help members achieve their optimal state of health. Aetna Health Connections Disease Management integrates a full suite of 35 chronic conditions and common co -morbidities in a holistic fashion, with an Aetna nurse acting as a generalist to address the total health of those members who will benefit most from disease management services. Our program also includes MedQuetyo, which uses member data such as medical claims, pharmacy claims, laboratory reports, self-reported data, and demographic information to identify potential gaps in care. This information is shared with physicians to help improve clinical quality and patient safety. Our Aetna Health Connections Disease Management program charge structure for City of Round Rock will be is included in our Choice II fees. ■ National AdvantageT"' Program — City of Round Rock has elected to participate in the National Advantage Program (NAP) under the Administrative Services Agreement. City of Round Rock has elected to participate in the Facility Charge Review (FCR) component of NAP. FCR utilizes a vendor for making reasonable charge determination. The vendor is Global Claim Services. The fee for the National Advantage program is 50% of savings and is not included in the per employee per month fee. Since the fee is only charged when contracted rates or R&C savings are applied, there is no downside to enrolling in the program. ■ Formulary Rebates -- In this quote, Aetna has elected to retain all rebates to help offset medical and pharmacy service fee costs • Producer Compensation - Aetna has various programs for compensating agents, brokers and consultants. If you would like information regarding compensation programs for which your producer is eligible, payments (if any) which Aetna has made to your producer, or other material relationships your producer may have with Aetna, you may contact your producer or your Aetna account representative. Information regarding Aetna's programs for compensating producers is also available at www.aetna.com. 5 DENTAL UNDERSTANDINGS ■ Participation Requirement — There is a minimum requirement of 250 enrolled employees for administration of the proposed self-funded plan. However, any Performance Guarantee is contingent upon the total number of covered lives (i.e., the total number of City of Round Rock employees enrolled for coverage) set out in our proposal. ■ Self Funded Fee Guarantee - The first-year fees for the self-funded coverages included in this proposal for the period January 1, 2010 through December 31, 2010 are guaranteed according to the per employee, per month fees as illustrated on the financial exhibit(s). • Advance Notification of Fee Change — We will notify City of Round Rock of any fee change within 120 days of the fee change. • Late Fee Payment - If City of Round Rock fails to provide funds on a timely basis to cover benefit payments as provided in the Agreement, and/or fails to pay Service Fees on a timely basis as provided in such Agreement, Aetna will assess a late payment charge. The current charges are: • late funds to cover benefit payments (e.g., late wire transfers after 24-hour request): 12.0% annual rate ' late payments of Service Fees after 31 day grace period: 12.0% annual rate Aetna will provide advance written note to City of Round Rock of any change to late payment charges. The late payment charges described in this section are without limitation to any other rights or remedies available to Aetna under the Agreement or at law or in equity for failure to pay. • Run -Off Claim Processing — Our quoted administrative service fees are mature; we have included the cost of processing self-funded run-off claims for 12 months following the termination of our administrative service agreement. • DPPO Service Center - \Ve have assumed that claim administration and member services for the quoted DPPO plan will be provided centrally by the Jacksonville, Florida Service Center. • Toll -Free Dental Member Services — Member services for all Aetna dental plans are provided on a regional basis through our national Dental Service Centers. The cost for toll-free access to our Member Service representatives is included in our quotation. This service is available to all members enrolled in the quoted plan of benefits. Members will be able to reach the Member Service representatives Monday through Friday, 8:00 a.m. to 8:00 p.in. EST. 6 The following is a list of additional factors that may impact our administrative services fees for the medical/dental benefit plan. We reserve the right to change our fees, at any time during the policy year effective on the date the change occurred, in the following circumstances We assumed the following for purposes of our proposal: We reserve the right to change our rates if: Enrollment by line of coverage would be as follows: Choice II/APM - 771 employee lives Dental PPO — 782 employee lives The actual enrollment in any line of coverage changes from the assumed enrollment by 15%. The enrolled member to employee ratio by line of coverage would be no greater than Choice II/APM -- 2.0 The actual member to employee ratio for case size less than 1,000 employees exceeds the assumed ratio by 10% or more. The processed claims transactions (PCI) per employee per year ratio by line of coverage would be Choice II — 24.3 PCT per year The actual PCT ratio exceeds the assumed ratio by 15% or more. Your plan design remains unchanged. The plan design changes from the proposed benefits. Please note any changes must be approved by Aetna. FSA/COBRA: • FSA Administration - We have assumed 200 of City of Round Rock employees will participate in the Flexible Spending Account (FSA) plan. Our FSA fees are provided based upon the assumptions noted in our'FSA proposal. If actual services vary from those assumed, an adjustrnent to our fees may be necessary. Please refer to the most recent FSA docutnents for additional information regarding our quotation. • **COBRA Administration - Aetna will provide COBRA Administration for City of Round Rock. The costs associated with these services vary depending on account structure and number of participants. Therefore, since the variable costs are not known at this time, the cost of COBRA and all other continuation administration services is excluded from the pricing provided. If this service is elected, these charges will be billed as incurred. Please refer to the most recent COBRA documents for additional information regarding our quotation. III. GUARANTEES Performance Guarantees -- Medical We will put 10% of our Medical annualized administrative service fees at risk through Performance Guarantees. The annualized administrative service fee will be calculated at the beginning of the contract period and will be based on the total number of employees enrolled in the medical plans throughout the guarantee period. This guarantee does not apply to non -Aetna benefits or networks. The guarantees described herein will be effective for a period of 12 months and will run from January 1, 2010 through December 31, 2010. Please refer to our attached Performance Guarantee document for complete descriptions of each guarantee. IV. SERVICES NOT INCLUDED IN ADMINISTRATIVE SERVICES AGREEMENT FEES The quoted Administrative service fees do not include charges for such things as: • Printing expenses for booklets/certificates and costs for customized forms. Charges for customized communications such as special open enrollment packets are charged as incurred. • Other miscellaneous services excluded from our Administrative fees include: optional, or customized, reports and extra claim tapes, consulting services and special research, drafting of custom agreements and/or contracts, data processing services, and special claim office services and/or audits. s Our fees do not include the cost for third party stop loss reports. Reporting options and associated fees can be provided upon request. • Our fees do not include the cost for Retiree Drug Subsidy Reporting. Associated fees for Retiree Drug Subsidy Reporting can be provided upon request. If City of Round Rock would like us to provide these services, additional charge(s) will apply. Direct charges for items not anticipated in our assumptions and special services beyond those outlined will be added and collected as part of the Administrative services fees billed to City of Round Rock on a per employee per month basis. 8 VI. CONCLUSION We are extremely excited about the opportunity to transition City of Round Rock's benefit plans to Aetna, and to provide high quality service to City of Round Rock and its employees. Your business is extremely important to us and we appreciate itl This confirms our understanding of the products, services, fees, plan designs, account structure and assumptions as presented. If there is an addition or correction you would like to make to the material in the Letter of Understanding, please contact me. If we do not hear from you, we will assume that the letter is accurate and proceed with the implementation and administration of your plan. Accepted for the �City �of Round Rock: / Officer Print Name/Title: NOV)WOW WycY" C1194-61" 11 1 r Date Acc-pte Aetna a e Support/Underwriting Mgr Please note: This letter is not meant to supersede the final contract or any item in our proposal that is not mentioned here. Sinc K. n. ra Hoduski iior Account Manager 9 September 1, 2009 City of Round Rock Linda Gunther 221 East Main Street Round Rock, TX 78664 Dear Ms. Gunther: Re: Letter of Understanding for City of Round Rock Thank you for selecting Aetna. We are excited about the opportunity to continue our relationship with the City of Round Rock. Prior to delivery of the final formal contract, we provide this Letter of Understanding which outlines and confirms the services Aetna has agreed to provide to City of Round Rock and also addresses any special issues that may not be addressed specifically by our written contract. This Letter of Understanding is not a substitute for the final contractual documents. It is still important that the final contractual documents be finalized and signed as soon as possible. This Letter of Understanding relates to the final contractual documents that will be entered into by City of Round Rock and Aetna Life Insurance Company effective January 1, 2010. This letter is organized as follows: I. BENEFITS AND FINANCIAL ARRANGEMENTS II. ADMINSTRATIVE SERVICES AGREEMENT FEES AND UNDERSTANDINGS III. GUARANTEES IV. SERVICES NOT INCLUDED IN ADMINISTRATIVE SERVICES AGREEMENT FEES V. CONCLUSION I - -c 1 -Z' -it 1 I. BENEFITS AND FINANCIAL ARRANGEMENTS Aetna will administer the following benefit plans for City of Round Rock: Benefit Financial Arrangement Medical and Pharmacy Administrative Services Agreement Dental Administrative Services Agreement Vision Administrative Services Agreement FSA Administrative Services Agreement COBRA Administrative Services Agreement 2 II. ADMINISTRATIVE SERVICES AGREEMENT FEES AND UNDERSTANDINGS ADMINISTRATIVE SERVICES AGREEMENT FEES: Aetna and City of Round Rock have agreed upon the following: Medical/Dental/Pharmacy: Benefit Projected Enrollment 2010 Fee Mature Choice II/APM 771 $31.56 PEPM Dental 782 $4.35 PEPM Vision 782 $1.00 PEPM $10, 000 \Vellness Allowance*** $1.08 PEPM FSA 123 $6.90 PMPM COBRA ** ** ***The \Vellness Allowance will be applied to the cost of onsite biometric screenings and incentives. Any expenses beyond the wellness allowance are the responsibility of City of Round Rock. Any balance of this allowance fund remaining at end of the policy year will be forfeited. Please refer to the \Vellness quote/brochure for more details. Self Funded Fees include: - Informed Health® Line Aetna Compassionate CaresM Program Vision One® discount program Aetna Natural Products and ServicessM Program G1obalFitTM Aetna NavigatorTM member self-service website Medical Management services including inpatient precertification, outpatient precertification, next generation case management, concurrent review, retrospective review and discharge planning - Two ad-hoc reporting hours Aetna as claim fiduciary for Level 1 and Level 2. City of Round Rock perforans claim fiduciary for voluntary appeals after Levels 1 & 2 are exhausted (Option 4). - HIPAA Administration Beginning RightsM Maternity Program [This program is included for our Choice II products] - Aetna Health ConnectionssM Disease Management Program MedQueaysrt Simple Steps to a Healthier Life® [Phis program is included for our Choice II products] Services provided at an additional cost include: - National AdvantageTM Program (NAP): The fee for NAP is 50% of savings Facility Charge Review (FCR): The fee for the FCR program is 50% of savings Claims Subrogation: A contingency fee of 23.5% is collected upon recovery 3 MEDICAL UNDERSTANDINGS: • Participation Requirement — There is a minimum requirement of 250 enrolled employees for administration of the proposed self-funded plan. However, any Performance Guarantee is contingent upon the total number of covered lives (i.e., the total number of City of Round Rock employees enrolled for coverage) set out in our proposal. • Self -Funded Fee Guarantee - The first-year fees for the self-funded coverages included in this proposal for the period January 1, 2010 through December 31, 2010 are guaranteed according to the per employee, per month fees as illustrated on the financial exhibit(s). We guarantee that the 2011 fees will increase over the first-year mature fees by no greater than 5%. • Advance Notification of Fee Change — We will notify City of Round Rock of any fee change within 120 days of the fee change. • Funding Method- The claim payment method for your Medical coverages will be on a drafts cleared basis. The payment method for APM (managed pharmacy) prescription drug coverage is on a cleared basis. • Late Payment - If City of Round Rock fails to provide funds on a timely basis to cover benefit payments as provided in the Agreement, and/or fails to pay Service Fees on a timely basis as provided in such Agreement, Aetna will assess a late payment charge. The current charges are: • late fluids to cover benefit payments (e.g., late wire transfers after 24-hour request): 12.0% animal rate • late payments of Service Fees after 31 day grace period: 12.0% annual rate Aetna will provide advance written note to City of Round Rock of any change to late payment charges. The late payment charges described in this section are without limitation to any other rights or remedies available to Aetna under the Agreement or at law or in equity for failure to pay. • Aetna Choice® POS II Service Center - We have assumed that claim administration and member services for the quoted Aetna Choice® POS II plans will be provided centrally by the Bismarck, North Dakota Service Center. • Toll -Free Medical Member Services - The cost for toll-free access to our Member Service representatives is included in our quotation. Members will be able to reach the Member Service representatives Monday through Friday, 8:00 a.m. to 8:00 p.m. CST. • Medical EOB Suppression — Unless required by state law, we do not produce EOBs for Aetna Choice® POS II claims when there is no member liability. Our claim system autotnatically suppresses an EOB where benefits are assigned and the member's liability is either zero or consists of a copayment only. Additionally, EOBs are always available electronically through Aetna Navigator. • Run -Off Claims Processing — Our quoted administrative service fees are mature; we have included the cost of processing self-funded run-off claims for 12 months following the termination of our administrative service agreement. 4 • Claim Fiduciary — Our quoted Administrative fees assume Aetna will be the ERISA claim fiduciary for the two levels of mandatory plan appeals for the medical and dental coverages. City of Round Rock will be the ERISA claim fiduciary for a final, voluntary level of appeal. The claim fiduciary is responsible for final claims determination and the legal defense of the decisions it makes • Health Insurance Portability and Accountability Act (HIPAA) - Our proposal assumes that Aetna will be providing HIPAA certifications of coverage for terminated employees. • Aetna Health Connections Disease Management — Our Aetna Health Connections Disease Management program provides innovative and individualized clinical programs, information and support for iolal, iniwaled health management to help members achieve their optimal state of health. Aetna Health Connections Disease Management integrates a full suite of 35 chronic conditions and common co -morbidities in a holistic fashion, with an Aetna nurse acting as a generalist to address the total health of those members who will benefit most from disease management services. Our program also includes MedQueryo, which uses member data such as medical claims, pharmacy damns, laboratory reports, self-reported data, and demographic information to identify potential gaps in care. This infortnation is shared with physicians to help inprove clinical quality and patient safety. Our Aetna Health Connections Disease Management program charge structure for City of Round Rock will be is included in our Choice II fees. • National AdvantageTM Program — City of Round Rock has elected to participate in the National Advantage Program (NAP) under the Administrative Services Agreement. City of Round Rock has elected to participate in the Facility Charge Review (FCR) component of NAP. FCR utilizes a vendor for making reasonable charge determination. The vendor is Global Claim Services. The fee for the National Advantage program is 50% of savings and is not included in the per employee per month fee. Since the fee is only charged when contracted rates or R&C savings are applied, there is no downside to enrolling in the program. ▪ Formulary Rebates — In this quote, Aetna has elected to retain all rebates to help offset medical and pharmacy service fee costs • Producer Compensation - Aetna has various programs for compensating agents, brokers and consultants. If you would like information regarding compensation programs for which your producer is eligible, payments (if any) which Aetna has made to your producer, or other material relationships your producer may have with Aetna, you may contact your producer or your Aetna account representative. Information regarding Aetna's programs for compensating producers is also available at www.aetna.com. 5 DENTAL UNDERSTANDINGS • Participation Requirement — There is a minitnurn requirement of 250 enrolled employees for administration of the proposed self-funded plan. However, any Performance Guarantee is contingent upon the total number of covered lives (i.e., the total number of City of Round Rock employees enrolled for coverage) set out in our proposal. ■ Self Funded Fee Guarantee - The first-year fees for the self-funded coverages included in this proposal for the period January 1, 2010 through December 31, 2010 are guaranteed according to the per employee, per month fees as illustrated on the financial exhibit(s). • Advance Notification of Fee Change — We will notify City of Round Rock of any fee change within 120 days of the fee change. • Late Fee Payment - If City of Round Rock fails to provide funds on a timely basis to cover benefit payments as provided in the Agreement, and/or fails to pay Service Fees on a timely basis as provided in such Agreement, Aetna will assess a late payment charge. The current charges are: ' late funds to cover benefit payments (e.g., late wire transfers after 24-hour request): 12.0% annual rate ▪ late payments of Service Fees after 31 day grace period: 12.0% annual rate Aetna will provide advance written note to City of Round Rock of any change to late payment charges. The late payment charges described in this section arc without limitation to any other rights or remedies available to Aetna under the Agreement or at law or in equity for failure to pay. ■ Run -Off Claim Processing -- Our quoted administrative service fees are mature; we have included the cost of processing self-funded run-off claims for 12 months following the termination of our administrative service agreement. • DPPO Service Center - We have assumed that claim administration and member services for the quoted DPPO plan will be provided centrally by the Jacksonville, Florida Service Center. • Toll -Free Dental Member Services — Member services for all Aetna dental plans are provided on a regional basis through our national Dental Service Centers. The cost for toll-free access to our Member Service representatives is included in our quotation. This service is available to all members enrolled in the quoted plan of benefits. Members will be able to reach the Member Service representatives Monday through Friday, 8:00 a.m. to 8:00 p.m. EST. 6 The following is a list of additional factors that may itnpact our administrative services fees for the medical/dental benefit plan. We reserve the right to change our fees, at any time during the policy year effective on the date the change occurred, in the following circumstances We assumed the following for purposes of our proposal: \Ve reserve the right to change our Cates if: Enrollment by line of coverage would be as follows: Choice II/APM - 771 employee lives Dental PPO — 782 employee lives The actual enrollment in any line of coverage changes from the assumed enrollment by 15%. The enrolled member to employee ratio by line of coverage would be no greater than Choice II/APM — 2.0 The actual member to employee ratio for case size less than 1,000 employees exceeds the assumed ratio by 10% or more. The processed claims transactions (PCT) per employee per year ratio by line of coverage would be Choice II — 24.3 PCT per year The actual PCT ratio exceeds the assumed ratio by 15% or more. Your plan design remains unchanged. The plan design changes from the proposed benefits. Please note any changes must be approved by Aetna. FSA/COBRA: • FSA Administration - We have assumed 200 of City of Round Rock employees will participate in the Flexible Spending Account (FSA) plan. Our FSA fees are provided based upon the assumptions noted in our FSA proposal. If actual services vary from those assumed, an adjustment to our fees may be necessary. Please refer to the most recent FSA documents for additional information regarding our quotation. ■ **COBRA Administration - Aetna will provide COBRA Administration for City of Round Rock. The costs associated with these services vary depending on account structure and number of participants. Therefore, since the variable costs are not known at this time, the cost of COBRA and all other continuation administration services is excluded from the pricing provided. If this service is elected, these charges will be billed as incurred. Please refer to the most recent COBRA documents for additional information regarding our quotation. III. GUARANTEES Performance Guarantees — Medical We will put 10% of our Medical annualized administrative service fees at risk through Performance Guarantees. The annualized administrative service fee will be calculated at the beginning of the contract period and will be based on the total munber of employees enrolled in the medical plans throughout the guarantee period. This guarantee does not apply to non -Aetna benefits or networks. The guarantees described herein will be effective for a period of 12 months and will run from January 1, 2010 through December 31, 2010. Please refer to our attached Performance Guarantee document for complete descriptions of each guarantee. IV. SERVICES NOT INCLUDED IN ADMINISTRATIVE SERVICES AGREEMENT FEES The quoted Administrative service fees do not include charges for such things as: • Printing expenses for booklets/certificates and costs for customized forms. Charges for customized communications such as special open enrollment packets are charged as incurred. a Other miscellaneous services excluded from our Administrative fees include: optional, or customized, reports and extra claim tapes, consulting sen=ices and special research, drafting of custom agreements and/or contracts, data processing services, and special claim office services and/or audits. • Our fees do not include the cost for third party stop loss reports. Reporting options and associated fees can be provided upon request. ■ Our fees do not include the cost for Retiree Drug Subsidy Reporting. Associated fees for Retiree Drug Subsidy Reporting can be provided upon request. If City of Round Rock would like us to provide these services, additional charge(s) will apply. Direct charges for items not anticipated in our assumptions and special services beyond those outlined will be added and collected as part of the Administrative services fees billed to City of Round Rock on a per employee per month basis. VI. CONCLUSION We are extremely excited about the opportunity to transition City of Round Rock's benefit plans to Aetna, and to provide high quality service to City of Round Rock and its employees. Your business is extremely important to us and we appreciate itl This confirms our understanding of the products, services, fees, plan designs, account structure and assumptions as presented. If there is an addition or correction you would like to make to the material in the Letter of Understanding, please contact me. If we do not hear from you, we will assume that the letter is accurate and proceed with the implementation and administration of your plan. Accepter the City of Round Rock: Officer Print Name/Title: Date MS441W/MAPt YI-)74)1 Accepted for Aett etna S e Support/Underwriting Mgr Please note: This letter is not tneant to supersede the final contract or any item in our proposal that is not mentioned here. Senior Account Manager 9