HomeMy WebLinkAboutCOD-016-19Clarftwn
Staff Report
If this information is required in an alternate accessible format, please contact the Accessibility
Coordinator at 905-623-3379 ext. 2131.
Report To: General Government Committee Report Number: COD-016-19
Date of Meeting: September 23, 2019 By-law Number:
Submitted By: Marie Marano, Director of Corporate Services
Reviewed By: Andrew C. Allison, CAO Resolution#: GG-444-19
File Number:
Report Subject: Health Benefit Program Renewal 2019
Recommendations:
1. That Report COD-016-19 be received;
2. That the presentation by DJ Nascimento from Mosey & Mosey be accepted with
thanks and advised of Council's decision;
3. That Council approve the recommendation by Mosey & Mosey to transfer the
Extended Health and Dental Benefits programs to an Administrative Services Only
(ASO) funding arrangement with Sun Life effective January 1, 2020; with the
renewal for the transition period effective November 1, 2019 until ASO conversion,
at an overall impact of 5.9% as negotiated by Mosey & Mosey;
4. That the Non-ASO benefit program renewal continue with Sun Life until the next
renewal period for this program on November 1, 2020 under a combined net 0%
impact after moving to the ASO funding model; and
5. That the Library and Museum be advised of the renewal program, and that they
continue to be invoiced for their portion of the benefit program, as applicable.
Page 81
Municipality of Clarington
Report COD-016-19
Report Overview
Page 2
The scheduled renewal of the Group Benefits Program is November 1, 2019. The
recommendation from Mosey & Mosey is to transfer to an Administrative Services Only
(ASO) funding model for those benefit programs that are eligible for consideration under an
ASO program, and the remaining benefits program that are not eligible for ASO
consideration, to renew until November 1, 2020.
1. Background
Health Benefit Program Renewal in 2019 by Report COD-001-19
1.1. At the January 14, 2019 Council Meeting, Council passed the following Resolution #C-
019-19:
That Report COD-001-19 be received;
That the presentation by DJ Nascimento from Mosey & Mosey Benefit Plan
Consultants outlining the Health Benefit Program renewal and ASO
consideration, be received with thanks;
That the recommendation by Mosey & Mosey to remain under the Insured
Funded Arrangement (also referred to as non -refunded accounted arrangement)
with Sun Life be approved until October 31, 2019 as outlined in the presentation
and executive summary;
That the Director of Corporate Services be authorized to sign the appointment
letter with Mosey & Mosey to renew the Benefit Program with Sun Life through
the Local Authority Services (LAS) under either option of Insured Funded or
ASO, as decided by Council provided that Mosey and Mosey shall certify that
they are not receiving a retention bonus or retention payment from Sun Life;
That DJ Nascimento of Mosey & Mosey be advised of Council decision; and
That Staff report back to General Government Committee as soon as possible
after September, 2019 on options for renewal, including ASO
Municipality of Clarington
Report COD-016-19
Page 3
2. November 1, 2019 Benefit Program Renewal and Moving to
ASO
2.1. Mosey & Mosey have been diligently working with Sun Life through the Local Authority
Services (LAS) arrangement, to prepare the scheduled November 1, 2019 renewal for
the Health Benefits Program (LAS is an arm of the Association of Municipalities of
Ontario (AMO)). They were able to negotiate an overall reduced renewal rate of 5.9%
down from the proposed 8.6% increase that would otherwise have been applicable
without the benefit of the LAS/Mosey & Mosey consortium pooling. After moving to the
ASO funding model, the combined net impact for the entire program is 0% until the next
renewal in November 2020. Their overall renewal, ASO considerations and
recommendations are outlined in Attachment #1.
2.2. Mosey and Mosey have recommended moving to an ASO funding arrangement with
Sun Life, on January 1, 2020 for the Extended Health and Dental benefit program.
They state that the Health and Dental premiums are now at a level to cover the
expected claims and related expenses. The ASO funding would be applicable to
Extended Health and Dental benefits. The remaining benefit program that covers for
Life, Accidental Death & Dismemberment (AD&D), and Long Term Disability (LTD), is
not eligible for ASO funding.
2.3. The renewal on November 1, 2019 at an overall 5.9% will be applicable on all benefits
until the ASO conversion on January 1, 2020 (Attachment 1, page 3). After ASO
conversion, the overall impact inclusive of the service related ASO costs, is no change
until the renewal on November 1, 2020 for all benefits (Attachment #1, page 7).
3. ASO Financial Consideration (by the Director of Finance)
3.1. The Director of Finance provides the following information related to the financial
consideration of the recommendations.
3.2. The Municipality has established an ASO Benefits Reserve Fund which will be used to
fund the volatility in claims from year to year. The balance as at December 31, 2018
was $545,911.
3.3. In 2018, the Municipality hired Morneau Shepell to complete an Alternative Funding
Arrangement Report for the Municipality. This report looked at the financial
sustainability and funding requirements of alternative arrangements for our employee
benefits program.
3.4. The report indicated a potential claims fluctuation from month to month of up to $62,000
over the preceding 21 month period. The current reserve fund would be sufficient for
this level of volatility. The report further recommended a reserve of between 3% and
Municipality of Clarington Page 4
Report COD-016-19
5% of non -pooled paid claims. Based on the report this would be a reserve balance of
$51,500 and $85,800; the existing reserve balance is enough based on these
recommendations.
3.5. The major financial difference between the two funding alternatives relates to risk
transfer, with potential volatility of claims in any given year. The Municipality is
financially in a position to respond to this volatility however it will be prudent to annually
review the balance in the ASO Benefits Reserve Fund to ensure that the tax levy
impacts are stable.
3.6. Monthly invoices for ASO services will be paid from the Municipal Reserve Fund, with
an annual overall reconciliation at each year end.
4. Concurrence
This report has been reviewed by the Director of Finance who concurs with the
recommendations.
5. Conclusion
5.1. Once converted to the ASO model, the expectation is to remain as an ASO program
going forward given that a return to a fully funded model is anticipated to be costly.
5.2. It is respectfully recommended that Council approve the transfer of the funding
arrangement to ASO on January 1, 2020 for Extended Health and Dental Benefit
benefits and the renewal of the overall benefit program at 5.9% with Sun Life, through
Mosey & Mosey/LAS effective November 1, 2019.
Staff Contact: Marie Marano, Director of Corporate Services ext. 2202, or Trevor Pinn,
Director of Finance, ext. 2602, as applicable, or Kerri McMullen, Compensation and Benefits
Supervisor, ext. 2206
Attachments:
Attachment 1 — Mosey & Mosey 2019 Renewal Rates and ASO Information
Interested Parties:
The following interested parties will be notified of Council's decision:
DJ Nascimento, Mosey & Mosey,
Linda Kent, Library Chief Executive Officer
Heather Ridge, Museum Executive Director
Group Benefits Program
2019 Renewal Rates and ASO Information
Ab
MOSCY&MOSCY
THE CORPORATION OF THE
MUNICIPALITY OF CLARINGTON
2019 RENEWAL RATES &
ASO INFORMATION
Overall Summary
The employee group benefits for the Corporation of the Municipality of Clarington are
underwritten by Sun Life and Chubb Insurance, which are both scheduled to renew effective
November 1, 2019. The proposed adjustment was to be +8.6% to the current monthly
rates, which translated to a monthly premium increase of $26,978 including PST. Mosey
& Mosey's negotiations resulted in an overall adjustment of +5.9%, which generates
additional monthly premium of $18,304 including PST.
Under an ASO arrangement, even though there is additional risk, there is also additional
flexibility with setting the Health and Dental rates. Therefore, due to these expense savings
and by using lower trend factors, we have determined that the rate adjustments for an ASO
arrangement can be -3.4% to Health and "no change" to Dental, which would result in an
aggregate "no change" in monthly premiums for the combined group benefit plan,
compared to the current premiium costs.
Now that the Health and Dental premiums are at a level sufficient to cover the expected
claims and related expenses, our recommendation is that the Municipality of Clarington
should change the funding arrangement for these benefits to ASO. We suggest an effective
date of January 1, 2020 for this change, as a separate ASO policy will need to be set-up
by Sun Life.
Therefore, as long as the Municipality of Clarington is willing to accept the additional
risk associated with an ASO funding arrangement, Mosey & Mosey recommends
changing to ASO effective January 1, 2020. This will require a separate ASO policy
number to be set-up with Sun Life. Note that the revised ASO rates can only be
implemented under the new ASO policy number.
Regardless, please note that the Health and Dental renewal rates mentioned above will be
implemented effective November 1, 2019 until the ASO transfer can be complete. Should
the Municipality of Clarington provide direction to proceed with changing the Health and
Dental funding arrangment to ASO, the timing of this change can then be finalized. Once
the new ASO policy is set-up, that is when the revised ASO Health and Dental rates would
be implemented.
YE
Executive Summary
The employee group benefits for the Corporation of the Municipality of Clarington are underwritten by Sun
Life and Chubb Insurance, which are both scheduled to renew effective November 1, 2019. Below is an
illustration of the insurers' proposed renewal rate adjustments by benefit and our subsequent negotiated
adjustments.
LLAON
ProposedI
..
Current
Rate
Monthly
Rate Monthly
Benefits
Premium
Change
Premium
Change Premium
Employee Life
$18,014.86
+16.0%
$20,898.18
+11.0%
$19,982.78
Dependent Life
$2,538.16
+9.0%
$2,766.23
+3.6%
$2,630.22
AD&D
$1,581.14
N/C
$1,581.14
N/C
$1,581.14
Long Term Disability
$57,586.59
+10.0%
$63,343.80
+5.0%
$60,464.98
$79,720.75
$88,589.35
$84,659.12
Pooled Benefits
+11.1%
+6,2%
Total EHC
$145,254.62
+8.0%
$156,874.36
+6.5%
$154,696.82
Dental
$64,166.51
+7.0%
$68,657.62
+4.0%
$66,733.83
$209,421.13
$225,531.98
$221,430.65
Experience -Rated Benefits
+7.7%
+5.7%
_100.
•
is
Monthly Cost I.
0-
Change in Dollar Value (Annual)
I
1
1 $323,733.72
$219,644.64
The overall proposed adjustment is +8.6% to the current monthly rates. This translates to a monthly premium
increase of $26,978 including PST. Mosey & Mosey's negotiations resulted in an adjustment of +5.9%, which
generates additional monthly premium of $18,304 including PST.
Pages 4 to 7 of this report contain Sun Life's updated Administrative Services Only (ASO) proposal for the
Municipality of Clarington, along with Mosey & Mosey's analysis. Now that the Health and Dental premiums
are at a level sufficient to cover the expected claims and related expenses, our recommendation is that the
Municipality of Clarington should change the funding arrangement for these benefits to ASO. We suggest an
effective date of January 1, 2020 for this change, as a separate ASO policy will need to be set-up by Sun
Life.
YE
2
Monthly Renewal Rates and Cost Summary for Fully Funded
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
All Divisions Combined
November 1, 2019 Renewal
".
(Health & Dental Insured)
Monthly
Monthly
Volume
Premium
Premium
Adjustment
Life Insurance
83,218,000
$
18,014.86
$
19,982.78
11.0%
Dependent Life Insurance
347
2,538.16
2,630.22
3.6%
Accidental Death & Dismemberment
83,218,000
1,581.14
1,581.14
0.0%
Long Term Disability
1,631,906
57,586.59
60,464.98
5.0%
Extended Health Care
Single
47
7,640.34
8,136.94
Couple
119
39,497.97
42,065.24
Family
228
98,116.31
104,494.64
6.5%
Dental
Single
47
3,012.14
3,132.49
Couple
119
15,311.50
15,923.85
Family
228
45,842.87
47,677.49
4.0%
TOTAL MONTHLY PREMIUM
$
289,141.88
$
306,089.77
TOTAL MONTHLY COST INCLUDING PST
$
312,273.23
$
330,576.95
TOTAL ANNUAL COST - ALL
BENEFITS
$
3,747,278.76
$
3,966,923.40
Variance To Current Cost
$
219,644.64
5.9%
YE
3
Administrative Services Only (ASO) Arrangement
Underwriting the Health and Dental benefits on an ASO basis is a funding arrangement that larger groups
explore, because they have the financial stability to be able to take on the additional risk (of being fully liable
for claims costs), while also lowering their administrative costs.
If the Municipality of Clarington's underwriting arrangement was to change from insured non -refund to ASO,
the plan would no longer qualify for coverage under Sun Life's Extended Health Policy Protection Plan (EP3)
pool. This is because the industry -wide drug pooling arrangement only applies to fully insured drug plans,
and not to ASO or Refund Accounting plan with stop loss. The industry felt the most effective way to address
high cost catastrophic drug claims was to select a segment of the market that was completely within the scope
of the life and health industry (i.e., fully insured plans).
As shown on the following page, the Extended Health Care (EHC) Claims Handling Charge billed by Sun Life
on their monthly ASO Statements is calculated based on an estimated composite charge. Within their year-
end financial accounting, Sun Life reconciles the previous period's EHC Claims Handling Charge on the basis
of the actual charges applied to:
• Pay Direct Drug claims;
• EHC claims submitted and reimbursed electronically (i.e., submitted online and direct deposit);
• EHC claims paper submitted but reimbursed electronically (i.e., direct deposit); and
• EHC claims paper submitted and reimbursed on paper (i.e., cheque).
Note that prior to Clarington's inclusion within the LAS Consortium, the in -Canada pooling threshold was
$15,000 (compared with the LAS Consortium's $20,000 threshold). Therefore, we requested that Sun Life's
ASO proposal be based on your original $15,000 threshold.
YE
4
Below is Sun Life's ASO proposal for the Municipality of Clarington.
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
Contract 102128
ASO Fee Schedule Quote
cnu um a udsau un 7o ur peru udrrrrs rasa puurau uaurra
Claims Handling Charges I Proposed I Fees guaranteed for 12 months
Fees
Extended Health Care
Pay Direct Drug
Electronic Submission / Electronic Reimbursement
Paper Submission / Electronic Reimbursement
Paper Submission / Paper Reimbursement
Estimated Composite Claims Charge (Applied to ASO Monthly Billing
and reconciled to actual charges on the
3.90%
% of paid claims less pooled claims - PDD
3.60%
% of paid claims less pooled claims - electronic
3.80%
% of paid claims less pooled claims - mixed
4.25%
% of paid claims less pooled claims - paper
3.90% % of paid claims less pooled claims
Dental Care 1 3.90% % of paid claims
Profit Charge Proposed Fees guaranteed for 12 months
Fees
Extended Health Care 0.30% % of paid claims less pooled claims
Dental Care 0.30% % of paid claims
Best Doctors
$1
per employee/month
Special Printing Charges
as incurred
Other Charges
as incurred
Consulting Fees
Proposed
Fees
Extended Health Care
0.75%
0.75%
% of paid claims less pooled claims
% of paid claims
Dental Care
Applicable Taxes I as required by legislation
Interest Rates Proposed
Budget ASO X 90 Days T-Bill - 0.5% / Prime + 2%
Large Amount Pooling/Stop Loss Charge I Proposed I Fees guaranteed for 12 months
Fees
Extended Health Care 1 21.84% % of paid claims less pooled claims
Pooling Arrangement (description) All emergency out -of -country claims, including Travel Assistance, from first
dollar as well as the portion in excess of $15000 of all other EHC claims per
individual per plan year
YE
5
Based on Sun Life's ASO proposal on the previous page, below is an illustration of how the Municipality of
Clarington's plan would have performed over the past 2 years and 9 months, if the funding arrangement had
been ASO.
Municipality of Clarington
Health and Dental Consolidated Analysis
Retrospective (2 Years, 9 Months) ASO Analysis
$1,358,295
$2,033,497
$2,375,641
$5,767,433
1,256,602
1,722,727
1,787,881
4,767,210
(88,105)
(105,098)
(96,936)
(290,139)
$1,168,497
$1,617,629
$1,690,945
$4,477,071
154,379
275,001
230,844
660,224
134,615
185,729
192,795
513,139
$1,457,491
$2,078,359
$2,114,584
$5,650,434
($99,196)
($44,862)
$261,057
$116,999
* Pooling credit for the 9 month period of October 1, 2016 to June 30, 2017 is based on the pro -rated threshold of $11,250.
"* Charge for Out-of-Country/$15,000 Stop Loss threshold is based on 21.84% of non -pooled paid claims.
""* General Administration, Claims Handling, Profit Charge, Best Doctors, Consulting Fees and Premium Taxes.
Under an ASO arrangement, even though there is additional risk, there is also additional flexibility with setting
the Health and Dental rates. Therefore, due to these expense savings and by using lower trend factors, we
have determined that the rate adjustments for an ASO arrangement can be -3.4% to Health and "no change"
to Dental, which would result in an aggregate "no change" in monthly premiums for the combined group
benefit plan, compared to the current premiium costs.
Therefore, as long as the Municipality of Clarington is willing to accept the additional risk associated with an
ASO funding arrangement, Mosey & Mosey recommends changing to ASO effective January 1, 2020. This
will require a separate ASO policy number to be set-up with Sun Life. Note that the revised ASO rates can
only be implemented under the new ASO policy number. For illustration purposes, this revised premium
(including the ASO premiums) appears on the following page.
Regardless, please note that the Health and Dental renewal rates outlined on page 3 will be implemented
effective November 1, 2019. Should the Municipality of Clarington provide direction to proceed with changing
the Health and Dental funding arrangment to ASO, the timing of this change can then be finalized. Once the
new ASO policy is set-up, that is when the revised ASO Health and Dental rates would be implemented.
YE
I*
ASO Premiums effective January 1, 2020
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
All Divisions Combined
Monthly
Monthly
Volume
Premium
Premium
Adjustment
Life Insurance
83,218,000
$ 18,014.86
$
19,982.78
11.0%
Dependent Life Insurance
347
2,538.16
2,630.22
3.6%
Accidental Death & Dismemberment
83,218,000
1,581.14
1,581.14
0.0%
Long Term Disability
1,631,906
57,586.59
60,464.98
5.0%
Extended Health Care
Single
47
7,640.34
7,380.60
Couple
119
39,497.97
38,154.84
Family
228
98,116.31
94,780.39
-3.4%
Dental
Single
47
3,012.14
3,012.14
Couple
119
15,311.50
15,311.50
Family
228
45,842.87
45,842.87
0.0%
TOTAL MONTHLY PREMIUM
$ 289,141.88
$
289,141.46
TOTAL MONTHLY COST INCLUDING PST
$ 312,273.23
$
312,272.78
TOTAL ANNUAL COST - ALL
BENEFITS
$ 3,747,278.76
$
3,747,273.36
Variance To Current Cost
$
(5.40)
0.0%