4/7/2015. City Council City Hall Wilmington, North Carolina Dear Mayor and Councilmembers:

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1 ITEM R4 OFFICE OF THE CITY MANAGER (910) FAX(910) TDD (910) /7/2015 City Council City Hall Wilmington, North Carolina Dear Mayor and Councilmembers: Attached for your consideration is a resolution authorizing the City Manager to enter into a Three Year Professional Service Agreement with HealthSCOPE Benefits, a third party administrator (TPA), to administer the City s self-funded group medical plan and provide access to the Cigna network, for employees, retirees and their dependents. This agreement is subject to Annual Appropriation for FY 2016, FY 2017 and FY BCBSNC currently administers the City s self-funded health plan. Due to the competitive nature of the insurance industry; it is recommended that groups review and compare costs and services between third party administrators. In September 2014, the Employee Benefits Committee posted a request for proposals for (TPA s) Third Party Administrators and HealthSCOPE provided a competitive proposal to BCBSNC s renewal. Based on current participation numbers of 966 employees enrolled in the City s health plan, the projected cost for HealthSCOPE to administer the City s self-funded medical plan is $369,372 which is $30,781 per month for a net projected savings of $144,031 a year. Furthermore, LDI, the Pharmacy Benefit Manager, projects rebates of $128,392 which reduces our administrative costs to $240,980 annually. BCBS has stated that the fees for FY 2016 will be $385,011 or $32,084 per month and they retain all rebates provided by Prime Therapeutics. Below are items for consideration: Flexibility in our plan design. As a self-funded plan, we should be able to fully design our health plan. BCBSNC is based on a fully insured chassis which limits their flexibility in plan design. HealthSCOPE provides a dynamic employee portal through which employees will be able to change their coverages, get cost information on procedures, drugs and services, view their claim status, and review all bills paid and deductible status. BCBS provides online tools however; their transparency tool does not capture the member s costs, deductible, copays, etc.

2 HealthSCOPE provides a dedicated representative for our employees who will know our plan in order to accurately answer the employees questions. Being the primary carrier for the Affordable Care Act; group plans have seen a decrease in customer service from BCBS reflected in long wait times when members call customer service and limited staff to assist members. Pharmacy Benefit Manager (PBM). We have the ability to review and select the PBM. With BCBS the City has to pay an additional fee to BCBS to have a choice in PBM. In addition, all rebates would be paid to the City. LDI, the Pharmacy Benefit Manager with HealthSCOPE anticipates rebates of $128,392. When using BCBS s PBM, Prime Therapeutics, BCBS retains any rebates paid to the plan. Additionally, over the past two years BCBS has changed specialty pharmacies 3 times. While this only impacts a small population of our participants (less than 10%), it significantly impacts their access to their medication. The transition caused delays in getting medication; lost prescriptions and overall confusion during the transition. Out-of-Network claims processing improvement. While we encourage our employees to utilize in-network providers; should they visit an out-of-network provider the member would be required to pay the claim and wait to be reimbursed by BCBSNC. BCBSNC does not pay out-of-network providers. This could be a financial burden to the member. National Network Access improvement. When purchasing the Cigna network we are purchasing a national network. The Blues are independent of one another and only linked by membership in the BCBS Association. In cases where the member goes out of state for care; BCBSNC may not be aware of the rules of that state s BCBS and claims may not be paid properly or according to the City s/bcbsnc s contract and we may be charged additional fees for processing those out-of-state claims. Passage of this resolution aligns with City Council s Focus Area of Sustainability and Adaptability. Passage of the attached Resolution is recommended. Respectfully submitted, Sterling B. Cheatham, City Manager R4-2

3 Resolution City Council City of Wilmington North Carolina Introduced By: Sterling B. Cheatham, City Manager Date: 4/7/2015 Resolution Authorizing the City Manager to enter into a Three Year Professional Services Agreement with HealthSCOPE Benefits with access to the Cigna Network to Administer the City's self-funded group medical plan for a total of $369,372 for FY 2016 and Subject to Annual Appropriation LEGISLATIVE INTENT/PURPOSE: The City Council of the City of Wilmington is committed to providing comprehensive, affordable and cost-effective employee benefits to City employees, retirees and their dependents to include group medical coverage. The City periodically compares the current rates and services with that of other third party administrators, network providers (medical and pharmacy) and stop-loss carriers to ensure the City has access to quality services at competitive costs. The City of Wilmington proposes to engage in third party administrative services with HealthSCOPE to provide the following: Access to the Cigna Network Review, processing and payment of medical claims for PPO and HDHP Plans Disease and Care Management Programs Access to Health Savings Account Pharmacy Benefit Management with LDI Online Benefit Enrollment System Medical Cost Transparency Tool THEREFORE, BE IT RESOLVED: THAT, the City Manager shall be authorized to execute a Professional Services Agreement with HealthSCOPE, to provide third party administration of the City s self-funded medical plan and access to the Cigna Network. Costs for this agreement for FY 2016 shall be $30.68 per employee, enrolled in the PPO Plan, per month and $34.43 per employee, enrolled in the HDHP, per month. The monthly fee includes claims administration for the PPO and HDHP Plans, medical management fee, Cigna Network access and online benefit system. Based on current enrollment numbers, the projected costs is $30,781 per month or $369,372 for FY HealthSCOPE has provided for a three year rate guarantee on their claims administration fees. AND THAT, the Professional Services Agreement with HealthSCOPE is subject to the adoption of the FY 2016 budget and annual appropriation thereafter. Adopted at a meeting on 2015 Bill Saffo, Mayor Attest: Approved As To Form: Penelope Spicer-Sidbury, City Clerk City Attorney R4-3

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