R-09-12-17-8A1 - 12/17/2009RESOLUTION NO. R -09-12-17-8A1
WHEREAS, the City of Round Rock has previously entered into an
agreement with Aetna Life Insurance Company ("Aetna") for stop loss
insurance, and
WHEREAS, the City Council desires to renew said Agreement 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 the required document package with Aetna for stop
loss insurance, a copy of said agreement 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 17th day of December, 2009.
ALAN MCGRAW, Mayor
City of Round Rock, Texas
SARA L. WHITE, City Secretary
O:\wdox\SCC1nts\0112\0905\MUNICIPAL\R91217A1.DOC/rmc
We want you to know®
Aetna®
November 23, 2009
City Of Round Rock
Linda Gunther
221 East Main Street
Round Rock, TX 78664
Dear Ms. Gunther:
Kendra Hoduski
Senior Account Manager
Great Hills Corporate Ctr. Bld 3 9050 Capital of Texas Highway North Suite 150
Austin, TX 78759
Phone: 512/342-6903
Fax: 512-346-7406
HoduskiKaetna.com
Thank you for allowing us to serve your health insurance and health benefit needs over the past year. We are hopeful that
this package will provide you with the information you need in order to develop your company's future benefits program. As we
approach the January anniversary of your program with our company, we are pleased to present you with our
renewal for the 2010 policy period.
At Aetna*, we believe it is fundamental that you understand the full financial picture of your benefit plan. Therefore,
the enclosed package provides the following important information about the cost of your current program, potential
changes you may want to consider and the value that Aetna brings to you and your company.
I. Future Program Costs- This section illustrates the cost projections to operate your current benefit
program for the period 01/01/2010 through 12/31/2010. This section contains the
Stop Loss exhibit.
Aetna's charge for maintaining your current Stop Loss protection levels will decrease 18.1%
over the current rate based on the proposed $100,000 ISL level.
Your aggregate trigger factor will increase 15.7%.
II. Stop Loss Assumptions- This section includes specific information regarding what's included
and excluded from your Stop Loss quotation, plus there is a separate page explaining leveraged trend.
Accepted for City of Round Rock
By:
Title:
Date:
Sincerely,
In the absence of any changes impacting the conditions of this renewal as outlined in the Financial
Assumptions section, the rates, and factors presented here will remain in effect through December 31, 2010.
If you would like to make any plan changes, please contact me by December 1, 2009. If you have any questions,
please contact me at 512/342-6903.
We are committed to working with you to provide quality products and services that reinforce
your decision to do business with Aetna and help manage your current and future health care costs.
Sincerely,
,77
Senior Account Manager Senior Underwriting Consultant
"Aetna" is the brand name used for products and services provided by one or more of the Aetna group of subsidiary
companies. The Aetna companies that offer, underwrite or administer benefit coverage include Aetna Health Inc.,
Aetna Health of California Inc., Aetna Health of the Carolinas Inc., Aetna Health of Illinois Inc., Aetna Dental Inc., Aetna
Dental of California Inc., Aetna Life Insurance Company, Aetna Health Insurance Company of New York, Corporate
Health Insurance Company and Aetna Health Administrators, LLC.
These health benefit and health insurance plans contain limitations and exclusions.
Policy form numbers include GR -29, GR -700-W, GR -88435.
Stop Loss Exhibit
ASC
City of Round Rock
Renewal Period: 1/1/10 through 12/31/10
Contractholder Number - 819919
• Minimum Stop Loss Aggregate Limit will be set using the first month enrollment x
Stop Loss Aggregate Limit (PEPM) Composite Factor x number of contract months.
• Premium rates are billed and Aggregate Factors are administered on a composite basis.
• Please see the Stop Loss Caveats for additional information.
• This is a FIRM quote.
CONCESSION 11-19-2009
Plan Characteristics
Individual Limit
Aggregate Limit
Stop Loss Coinsurance Level
Mental/Nervous Apply
Contract Basis
Terminal Liability Option
Benefits applied to ISL
Benefits applied to ASL
Commissions
Individual Lifetime Stop Loss Payment
Maximum Annual ASL Payment
Policy Period Length (months)
Cost & Factors
Current
$ 75,000
125%
100%
Yes
Paid
No Extension (N/A)
Rx/Medical
Rx/Medical
0%
$ 1,000,000
$ 1,000,000
12
Total Expected Non -pooled APM Claims $
Total Expected Non -pooled Medical Claims $
Pooling/Coinsurance Adjustment
Attachment Point
Lives covered under Stop Loss
Rate Cost/ee/month
Trigger Factor
Comparisons
Annual Stop Loss premium
(at proposed lives of 771)
Maximum Claim Liability
(at proposed lives of 771)
% Increase in Rate/ee/month
% Increase in Trigger Factor
1,176,216
3,586,584
5,953,500
756
$ 96.56
$ 656.25
$ 893,373
Proposed
Option 3
$ 100,000
125%
100%
Yes
Paid
No Extension (N/A)
Rx/Medical
Rx/Medical
0%
$ 1,000,000
$ 1,000,000
12
$ 1,422,514
$ 4,028,764
167,480
7,023,447
771
$ 79.08
$ 759.13
$ 731,648
$ 6,071,625 $ 7,023,447
(18.1%)
15.7%
11/23/2009 Page 1
Stop Loss Assumptions
City Of Round Rock Contractholder Number - 819919
Renewal Rate Period: 01/01/2010 through 12/31/2010
This caveat document outlines specific information for the quotationprovided.
Stop Loss is available to cover claims for all of the Plan Sponsor's eligible employees and their dependents who
are enrolled on a timely basis and are covered under the ASC plan, provided the employees satisfies the following
definition: an employee means an employee of the Insured who Aetna determines is physically able to perform all
the regular duties of employment, is regularly working at least 25 hours per week and for whom the Insured is
deducting any required U.S. FICA taxes.
This is a firm quote
Due to concerns about anti -selection, a chosen Individual Stop Loss amount cannot be decreased at a future renewal unless the number of
Stop Loss lives changes substantially; at which time, Aetna will suggest the appropriate Individual Stop Loss amount for the renewal year.
Stop Loss Policy Year - The Stop Loss policy year must agree with the ASC contract year, both of which must end on
the customers standard renewal date.
Rate/Factor Adjustments - We reserve the right to adjust the premium rate and Aggregate factor during the policy year if
there are a) changes to the medical plan, b) deviations from any of our quote assumptions (e.g. policy period, type of
Stop Loss coverage, runoff coverage for employees who terminated prior to the renewal date, etc.), or c) changes in
other factors bearing on the Stop Loss risk that result in a combined manual change of 10% or more (e.g. , single/
family split, age/gender mix, etc.). However, we will not change the rate or factor based on changes in the make-up of
the group unless the number of covered employees (either in total, by type of medical plan, by single/family split, by age/
gender or by location) changes by more than 10% from the number assumed in the quote. We also will not change the
rate or Aggregate factor based on actual Stop Loss experience after the effective date.
Family Participation - This quotation assumes 46.6% family participation.
Large Group Acquisition - In the event that a large group (in excess of 10% of total covered lives) is acquired after the
original effective date and is covered under the Stop Loss policy, we reserve the right to underwrite the individuals within
this group based on current large claim data provided by the customer. If this information is not forthcoming, we will
apply the Actively -at -Work and Dependent Non -Confinement underwriting rules to those in the new group on the effective
date of their coverage under Stop Loss.
Coverages Excluded from Individual Stop Loss - Non-integrated (APM, PCS) drug benefits will apply to the Individual
Stop Loss limit while separate ancillary benefits such as: Dental, Vision and Temporary Disability will not apply to the
Individual Stop Loss limit.
Coverages Included under Aggregate Stop Loss - Aggregate Stop Loss coverage includes the following benefits:
Medical and Pharmacy.
11/23/2009
www.aetna.com Stop Loss Assumptions ASC
Stop Loss Assumptions
City Of Round Rock Contractholder Number - 819919
Renewal Rate Period: 01/01/2010 through 12/31/2010
Mental/Nervous and Substance Abuse - Mental/Nervous and Substance Abuse claims will be covered by Individual and
Aggregate Stop Loss only when Aetna's vendor provides these benefits. If these benefits are provided by an outside
vendor, the claims resulting from these services will be excluded from Individual and Aggregate Stop Loss.
HIPAA — Stop Loss coverage for new entrants (those who become covered after the Stop Loss effective date) are subject to HIPAA's
pre-existing conditions limitation in accordance with Aetna Life Insurance Company's then current standard underwriting practices
established for applying pre-existing condition limitations to group accident and health insured plans in accordance with HIPAA,
Public Law No. 104-191.
Reimbursement for Aggregate Stop Loss Claims - The monthly budget feature standardly applies to Aggregate Stop
Loss claims as long as the Stop Loss policy remains in effect; however, this feature is not available under the following
conditions: 1) when customers choose to fund claims through multiple primary wire lines or 2) when customers choose
to fund claims through one primary wire line and report through one or more internal wire lines. For these plans,
reimbursement will be made within 120 days after the policy year end.
The Aggregate liability limit will equal the sold trigger factor times the number of months in the policy year times the total
number of covered Stop Loss lives reported for that policy year (exception: when a customer drops in size during the
policy year, the actual enrolled lives at the start of the policy year will be utilized to determine the liability limit for that
policy year).
Maximum Annual Aggregate Stop Loss Payment Amount - This quote assumes $1,000,000 Maximum Annual
Aggregate Stop Loss Payment Amount.
Individual Lifetime Stop Loss Payment Amount - This quote assumes a $1,000,000 Individual Lifetime Stop Loss
Payment Amount. The Individual Lifetime Stop Loss Payment Amount will be capped to be no greater than the
underlying lifetime medical plan maximum, for a given Participant, minus the Individual Stop Loss Amount in effect
for each policy period.
Producer Commissions - There are no producer commissions included for Stop loss
Prior to acceptance of this proposal, we reserve the right to withdraw or modify it for any reason. However, in no event
may this proposal, as it pertains to Stop Loss, be accepted after the earlier of a) 90 days from the date of this proposal,
or b) the proposed effective date for Stop Loss coverage.
11/23/2009
www.aetna.com Stop Loss Assumptions ASC
Stop Loss Leveraged Trend Illustration
City Of Round Rock Contractholder Number - 819919
Renewal Rate Period: 01/01/2010 through 12/31/2010
Stop Loss is the coverage of catastrophic medical services above a deductible level (ISL).
Leveraged Trend occurs in Stop Loss as a result of the combination of:
- Medical Trend = the increase in total medical costs from one plan year to the next.
- Changes in Utilization = catastrophic claims may occur more or less frequent than other medical care.
- Leveraging due to deductible level = see example below.
Leveraging due to Deductible - Example:
The following chart assumes that a customer has a $110,000 deductible.
The customer will fund the first $110,000 of any claim.
A $225,000 claim in Year 1 would result in $115,000 being funded by Aetna
Due to medical trend of 12%, that claim if incurred in Year 2 would be $252,000,
which would result in $142,000 being funded by Aetna. So, the amount funded
by Aetna has grown 23%. The 23% is known as leveraged trend.
This is why stop loss renewal increases are higher than typical medical trend.
Year 1 Year 2 Change
Claimant $225,000 $252,000 12%
ISL Deductible $110,000 $110,000 0%
ISL Claim (Aetna Funded) $115,000 $142,000 23%
300000
250000
200000
150000
100000
50000
0
Year 1
Year 2
■Aetna Funded
o Customer Funded
To help reduce Stop Loss Cost, you can increase the Deductible ISL to $120,000
Year 1 Year 2 Change
Claimant $225,000 $252,000 12%
ISL Deductible $110,000 ,$42001 9%
ISL Claim (Aetna Funded) $115,000 $132,000 15%
Note: 110K and 120K ISL thresholds available for 10/01/06 effective dates and later, in addition
as a reminder Underwriting Guidelines allow for increases but not decreases in the deductible level.
This example is illustrative, the trend numbers and factors do not represent your case specific
experience or actual stop Toss deductible.
11/23/2009
www.aetna.com
Stop Loss Leveraged Trend ASC
DATE: December 8, 2009
SUBJECT: City Council Meeting — December 17, 2009
ITEM: 8A1. Consider a resolution authorizing the Mayor to execute a required document
package with Aetna Health Administrators, LLC regarding stop loss insurance.
Department:
Staff Person:
Justification:
Human Resources
Teresa Bledsoe, Human Resources Director
The City's stop loss coverage for the City's health benefit plan expires on 12/31/09. This is to extend and
amend the existing coverage effective 1/1/2010.
This coverage protects the City's self-funded plan from catastrophic financial losses..
Strategic Plan Relevance:
Goal 13 — Continue and enhance sound business and financial practices and tools.
Funding:
Cost:
The cost of this insurance is a function of the number of employees and dependent units covered.
This coverage represents an 18.1% premium reduction from the current plan year 2009.
Source of funds:
Outside Resources: N/A
Public Comment: N/A
EXECUTED
DOCUMENT
FOLLOWS
We want you to know®
)(Aetna®
November 23, 2009
City Of Round Rock
Linda Gunther
221 East Main Street
Round Rock, TX 78664
Dear Ms. Gunther:
Kendra Hoduski
Senior Account Manager
Great Hills Corporate Ctr. Bld 3 9050 Capital of Texas Highway North Suite 150
Austin, TX 78759
Phone: 512/342-6903
Fax: 512-346-7406
HoduskiKAaetna.com
Thank you for allowing us to serve your health insurance and health benefit needs over the past year. We are hopeful that
this package will provide you with the information you need in order to develop your company's future benefits program. As we
approach the January anniversary of your program with our company, we are pleased to present you with our
renewal for the 2010 policy period.
At Aetna", we believe it is fundamental that you understand the full financial picture of your benefit plan. Therefore,
the enclosed package provides the following important information about the cost of your current program, potential
changes you may want to consider and the value that Aetna brings to you and your company.
I. Future Program Costs- This section illustrates the cost projections to operate your current benefit
program for the period 01/01/2010 through 12/31/2010. This section contains the
Stop Loss exhibit.
Aetna's charge for maintaining your current Stop Loss protection levels will decrease 18.1%
over the current rate based on the proposed $100,000 ISL level.
Your aggregate trigger factor will increase 15.7%.
II. Stop Loss Assumptions- This section includes specific information regarding what's included
and excluded from your Stop Loss quotation, plus there is a separate page explaining leveraged trend.
Sincerely,
Accept for City of Round Rock
By:
Title: Jv r
Date: 19-- -
In the absence of any changes impacting the conditions of this renewal as outlined in the Financial
Assumptions section, the rates, and factors presented here will remain in effect through December 31, 2010.
If you would like to make any plan changes, please contact me by December 1, 2009. If you have any questions,
please contact me at 512/342-6903.
We are committed to working with you to provide quality products and services that reinforce
your decision to do business with Aetna and help manage your current and future health care costs.
Sincerely,
114.,7
Senior Account Manager Senior Underwriting Consultant
"Aetna" is the brand name used for products and services provided by one or more of the Aetna group of subsidiary
companies. The Aetna companies that offer, underwrite or administer benefit coverage include Aetna Health Inc.,
Aetna Health of California Inc., Aetna Health of the Carolinas Inc., Aetna Health of Illinois Inc., Aetna Dental Inc., Aetna
Dental of California Inc., Aetna Life Insurance Company, Aetna Health Insurance Company of New York, Corporate
Health Insurance Company and Aetna Health Administrators, LLC.
These health benefit and health insurance plans contain limitations and exclusions.
Policy form numbers include GR -29, GR -700-W, GR -88435.
Stop Loss Exhibit
ASC
City of Round Rock
Renewal Period: 1/1/10 through 12/31/10
Contractholder Number - 819919
• Minimum Stop Loss Aggregate Limit will be set using the first month enrollment x
Stop Loss Aggregate Limit (PEPM) Composite Factor x number of contract months.
• Premium rates are billed and Aggregate Factors are administered on a composite basis.
• Please see the Stop Loss Caveats for additional information.
• This is a FIRM quote.
CONCESSION 11-19-2009
Plan Characteristics
Individual Limit
Aggregate Limit
Stop Loss Coinsurance Level
Mental/Nervous Apply
Contract Basis
Terminal Liability Option
Benefits applied to ISL
Benefits applied to ASL
Commissions
Individual Lifetime Stop Loss Payment
Maximum Annual ASL Payment
Policy Period Length (months)
Cost & Factors
Current
$ 75,000
125%
100%
Yes
Paid
No Extension (N/A)
Rx/Medical
Rx/Medical
0%
$ 1,000,000
$ 1,000,000
12
Total Expected Non -pooled APM Claims $
Total Expected Non -pooled Medical Claims $
Pooling/Coinsurance Adjustment
Attachment Point
Lives covered under Stop Loss
Rate Cost/ee/month
Trigger Factor
Comparisons
Annual Stop Loss premium
(at proposed lives of 771)
Maximum Claim Liability
(at proposed lives of 771)
% Increase in Rate/ee/month
% Increase in Trigger Factor
1,176,216
3,586,584
5,953,500
756
$ 96.56
$ 656.25
Proposed
Option 3
$ 100,000
125%
100%
Yes
Paid
No Extension (N/A)
Rx/Medical
Rx/Medical
0%
$ 1,000,000
$ 1,000,000
12
$ 1,422,514
$ 4,028,764
167,480
7,023,447
771
$ 79.08
$ 759.13
$ 893,373 $ 731,648
$ 6,071,625 $ 7,023,447
(18.1%)
15.7%
11/23/2009 Page 1
Stop Loss Assumptions
City Of Round Rock Contractholder Number - 819919
Renewal Rate Period: 01/01/2010 through 12/31/2010
This caveat document outlines specific information for the quotationprovided.
Stop Loss is available to cover claims for all of the Plan Sponsor's eligible employees and their dependents who
are enrolled on a timely basis and are covered under the ASC plan, provided the employees satisfies the following
definition: an employee means an employee of the Insured who Aetna determines is physically able to perform all
the regular duties of employment, is regularly working at least 25 hours per week and for whom the Insured is
deducting any required U.S. FICA taxes.
This is a firm quote
Due to concerns about anti -selection, a chosen Individual Stop Loss amount cannot be decreased at a future renewal unless the number of
Stop Loss lives changes substantially; at which time, Aetna will suggest the appropriate Individual Stop Loss amount for the renewal year.
Stop Loss Policy Year - The Stop Loss policy year must agree with the ASC contract year, both of which must end on
the customer's standard renewal date.
Rate/Factor Adjustments - We reserve the right to adjust the premium rate and Aggregate factor during the policy year if
there are a) changes to the medical plan, b) deviations from any of our quote assumptions (e.g. policy period, type of
Stop Loss coverage, runoff coverage for employees who terminated prior to the renewal date, etc.), or c) changes in
other factors bearing on the Stop Loss risk that result in a combined manual change of 10% or more (e.g. , single/
family split, age/gender mix, etc.). However, we will not change the rate or factor based on changes in the make-up of
the group unless the number of covered employees (either in total, by type of medical plan, by single/family split, by age/
gender or by location) changes by more than 10% from the number assumed in the quote. We also will not change the
rate or Aggregate factor based on actual Stop Loss experience after the effective date.
Family Participation - This quotation assumes 46.6% family participation.
Large Group Acquisition - In the event that a large group (in excess of 10% of total covered lives) is acquired after the
original effective date and is covered under the Stop Loss policy, we reserve the right to underwrite the individuals within
this group based on current large claim data provided by the customer. If this information is not forthcoming, we will
apply the Actively -at -Work and Dependent Non -Confinement underwriting rules to those in the new group on the effective
date of their coverage under Stop Loss.
Coverages Excluded from Individual Stop Loss - Non-integrated (APM, PCS) drug benefits will apply to the Individual
Stop Loss limit while separate ancillary benefits such as: Dental, Vision and Temporary Disability will not apply to the
Individual Stop Loss limit.
Coverages Included under Aggregate Stop Loss - Aggregate Stop Loss coverage includes the following benefits:
Medical and Pharmacy.
11/23/2009
www.aetna.com Stop Loss Assumptions ASC
Stop Loss Assumptions
City Of Round Rock Contractholder Number - 819919
Renewal Rate Period: 01/01/2010 through 12/31/2010
Mental/Nervous and Substance Abuse - Mental/Nervous and Substance Abuse claims will be covered by Individual and
Aggregate Stop Loss only when Aetna's vendor provides these benefits. If these benefits are provided by an outside
vendor, the claims resulting from these services will be excluded from Individual and Aggregate Stop Loss.
HIPAA — Stop Loss coverage for new entrants (those who become covered after the Stop Loss effective date) are subject to HIPAA's
pre-existing conditions limitation in accordance with Aetna Life Insurance Company's then current standard underwriting practices
established for applying pre-existing condition limitations to group accident and health insured plans in accordance with HIPAA,
Public Law No. 104-191.
Reimbursement for Aggregate Stop Loss Claims - The monthly budget feature standardly applies to Aggregate Stop
Loss claims as long as the Stop Loss policy remains in effect; however, this feature is not available under the following
conditions: 1) when customers choose to fund claims through multiple primary wire lines or 2) when customers choose
to fund claims through one primary wire line and report through one or more internal wire lines. For these plans,
reimbursement will be made within 120 days after the policy year end.
The Aggregate liability limit will equal the sold trigger factor times the number of months in the policy year times the total
number of covered Stop Loss lives reported for that policy year (exception: when a customer drops in size during the
policy year, the actual enrolled lives at the start of the policy year will be utilized to determine the liability limit for that
policy year).
Maximum Annual Aggregate Stop Loss Payment Amount - This quote assumes $1,000,000 Maximum Annual
Aggregate Stop Loss Payment Amount.
Individual Lifetime Stop Loss Payment Amount - This quote assumes a $1,000,000 Individual Lifetime Stop Loss
Payment Amount. The Individual Lifetime Stop Loss Payment Amount will be capped to be no greater than the
underlying lifetime medical plan maximum, for a given Participant, minus the Individual Stop Loss Amount in effect
for each policy period.
Producer Commissions - There are no producer commissions included for Stop loss
Prior to acceptance of this proposal, we reserve the right to withdraw or modify it for any reason. However, in no event
may this proposal, as it pertains to Stop Loss, be accepted after the earlier of a) 90 days from the date of this proposal,
or b) the proposed effective date for Stop Loss coverage.
11/23/2009
www.aetna.com Stop Loss Assumptions ASC
Stop Loss Leveraged Trend Illustration
City Of Round Rock Contractholder Number - 819919
Renewal Rate Period: 01/01/2010 through 12/31/2010
Stop Loss is the coverage of catastrophic medical services above a deductible level (ISL).
Leveraged Trend occurs in Stop Loss as a result of the combination of:
- Medical Trend = the increase in total medical costs from one plan year to the next.
- Changes in Utilization = catastrophic claims may occur more or less frequent than other medical care.
- Leveraging due to deductible level = see example below.
Leveraging due to Deductible - Example:
The following chart assumes that a customer has a $110,000 deductible.
The customer will fund the first $110,000 of any claim.
A $225,000 claim in Year 1 would result in $115,000 being funded by Aetna
Due to medical trend of 12%, that claim if incurred in Year 2 would be $252,000,
which would result in $142,000 being funded by Aetna. So, the amount funded
by Aetna has grown 23%. The 23% is known as leveraged trend.
This is why stop loss renewal increases are higher than typical medical trend.
Year 1 Year 2 Change
Claimant $225,000 $252,000 12%
ISL Deductible $110,000 $110,000 0%
ISL Claim (Aetna Funded) $115,000 $142,000 23%
300000
250000
200000
150000
100000
50000
0
Year 1
Year2
■Aetna Funded
®Customer Funded)
To help reduce Stop Loss Cost, you can increase the Deductible ISL to $120,000
Year 1 Year 2 Change
Claimant $225,000 $252,000 12%
ISL Deductible $110,000 $120,000 9%
ISL Claim (Aetna Funded) $115,000 $132,000 15%
Note: 110K and 120K ISL thresholds available for 10/01/06 effective dates and later, in addition
as a reminder Underwriting Guidelines allow for increases but not decreases in the deductible level.
This example is illustrative, the trend numbers and factors do not represent your case specific
experience or actual stop loss deductible.
11/23/2009
www.aetna.com
Stop Loss Leveraged Trend ASC