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Corporate Services
Report
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Report To: General Government Committee
Date of Meeting: October 19, 2015
Report Number: COD-024-15 Resolution: Gb-0% ° `5
File Number: By-law Number:
Report Subject: Great West Life 2016 Renewal & Market Comparison for Benefits
Recommendations:
1. That Report COD-024-15 be received;
2. That the Great West Life Benefit program renewal at 4.8% effective November 1, 2015 for
the 2016 benefit year be approved;
3. That staff be authorized undertake a market competitive process for the future renewal of
the health benefit program; and
4. That Great West Life be advised of Council's decision.
Municipality of Clarington
Report COD-024-15 Page 2
Report Overview
The renewal of the Municipality's health benefit program has been maintained at a very
competitive rate over the past few years, and is recommended for renewal in 2016 with a
market comparison be undertaken for the future provision of the benefit program to ensure
competitive pricing.
1 . Background
1.1. Great West Life Benefit Program from 2012 to 2015
Great West Life were approved for continuation of the health benefit program in 2012 and
future years through resolution #GPA-485-12 (attachment #1).
The services provided by Great West Life over the past few renewal periods have been
exceptional, and the renewal rates have been very reasonable at the following:
November 2012 at 0.9 % for 2013 benefit year
November 2013 at 2.3 % for 2014 benefit year
November 2014 at 1.7 % for 2015 benefit year
1.2 Renewal Proposal for 2016
The market renewal rates going into 2016 in the industry in general appear to be well in
excess of 5%. The proposed renewal rate for November 1, 2015 to November 1, 2016 is
4.8 %. There have been a number of detailed negotiation discussions to get the rate
down to the proposed level. The proposed rate is significantly impacted by the high
American dollar posing an extremely negative affect on the investment and benefit
market, and as such the 4.8 % proposed rate is reasonable under the current market
conditions. The 4.8% increased premium renewal impact for all groups including the
Library, Museum, Municipal and Newcastle Arena employees is approximately $12,000
monthly or $144,000 annually (excluding 8% tax and in-year adjustments for single to
family coverage, approved added positions or other non-rate related changes to the
program). The benefit program has been built into the tax base on an incremental basis
impacted only by the annual renewal amount. The benefit program is a contractually
negotiated item that has been validated by an independent consultant review at the time
of the last market renewal, to be comparable in the Region and area municipalities.
The renewal amount at approximately $144,000 would fall within the purchasing by-law
approval limits for the CAO approval, however given the potential to go to market in order
to meet the timelines for the November 2016 renewal for 2017, Council approval is
requested for the renewal and proposed 2017 market competition. Staff will report back
after that with recommended future options.
2. Proposal
2.1. Renewal 2015 and 2016 Proposal for Market Competition
Municipality of Clarington
Report COD-024-15 Page 3
Generally renewal increases are based primarily on claims history, and as such the past
renewal rates have been very reasonable based on Clarington claims, however the
impact of the high American dollar is translating to predictions of high market rates for
2016 and more so for 2017. The predicted impact for the 2017 renewal is in the area of
15%. In order to secure a predictable impact for the November 1, 2016 and future,
staff recommend proceeding in mid 2016 to engage consultants to undertake the
market competition for the benefit program, at an estimated cost of approximately
$20,000. It may not be possible depending on the individual renewal timeframes of the
municipalities, but Staff will also investigate if there is a possibility to go to market co-
operatively with the area municipalities.
The benefit program last went to market in 2008 with the award to Great West Life.
Prior to that the program was with Manulife. The award gave the Municipality a zero
percent commitment for 17 months; thereafter there was a significant impact to bring the
rates into line with the market impact during the zero percent timeframe. Since then the
rates have been extremely reasonable. There is a known potential for any initial award
to be reduced to obtain the business, with the following years playing catch-up for the
reduced initial offer. As such going to market is not a recommended action unless the
rates are totally unacceptable.
Generally going to market within a few year period does not result in the best price
because it is a huge bid submission by the benefit carriers and they are not interested in
committing to parties who price-test the market frequently. There are only a few major
players in the market, and the Municipality's total program value is considered a small to
medium account. The small firms are not able to provide coverage for the entire
package, and as such, the Municipality needs the large firms to bid, to make the
competitive offer produce any real savings.
Notwithstanding the market comparison must be undertaken by consultants who have
the expertise in market statistics and benefit comparisons, there is a significant
Administrative impact on Clarington's existing very lean Payroll, and Purchasing
Divisions. It requires a lengthy participation in the program RFP specification
development, and an approximate 6 to 8 month commitment is required to change over
all documentation and benefit specifics for individuals. In addition switching plans
creates uncertainty with employees and they lose confidence in plan providers as the
new Provider sorts through the unique elements of each plan. This usually requires a
significant amount of payroll staff assistance in the plan administration.
The existing plan with Great West Life has also added value to employees by offering
an Optional Life program that is paid individually by employees for additional life
insurance, and a Best Doctors program.
Therefore the recommended strategy to commit to the upcoming renewal term with
Great West Life, would seem to be in the best interest of the Municipality. The market
competition will be undertaken in 2016 for November 2016 and future renewals. The
bid is recommended to proceed under the existing program specifications because the
collective agreement provides that benefit changes are to be negotiated. The last
market review included an Administrative Services Only (ASO) consideration, which
was explored and not recommended due to risk and the cost of the individual claims
Municipality of Clarington
Report COD-024-15 Page 4
transferring to the Municipality, and the requirement to establish significant reserves.
The size of the municipality's program and the introduction of an internal benefit division
requiring additional staff did not support the ASO program development.
3. Concurrence
This report has been reviewed by the Director of Finance who concurs with the
recommendations.
4. Conclusion
It is respectfully recommended that Council approve the recommendations to renew the
benefit program as outlined in this report for 2016. Staff will report back with the
outcome of the market competition bid, with recommendations for the provision of the
future benefit program.
5. Strategic Plan Application
Not applicable.
Submitted by: Reviewed by _
arie Marano Franklin Wu,
Director of Corporate Services Chief Administrative Officer
Staff Contact: Kerri McMullen, Compensation and Benefits Coordinator 905-623-3379 ext.
2206 or KMcMullen @clarington.net
Attachments:
Attachment 1 — Resolution #GPA-485-12; Great West Life Renewal 2012 and Future
The following is a list of the interested parties to be notified of Council's decision:
Great West Life
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Attachment 1 to
Report COD-024-15
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Leadirtg the Way ^
TO: Marie Marano, Director of Corporate Services
FROM: Anne Greentree, Deputy Clerk
DATE: October 23, 2012
RE: GREAT WEST LIFE RENEWAL NOVEMBER 1, 2012 AND FUTURE
FILE NO.: L06.GE
Please be advised that, at the October 22, 2012 Council meeting, Council approved the
following Resolution #GPA-485-12:
THAT Report COD-023-12 be received;
THAT the Great West Life Benefit program renewal at 0.9% premium increase
for the period of November 1, 2012 to October 31, 2013 be approved; and
THAT the Director of Corporate Services be authorized to approve administrative
agreements as required for the current and future renewals, subject to
satisfactory service and acceptable terms.
nne Greentre47
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