Ordinance No. 5,588900726 -2
ORDINANCE NO. 5588
AN ORDINANCE AWARDING TO J. E. STONE AND ASSOCIATES,
INC., THE CONTRACT FOR THE ADMINISTRATION OF THE MEDICAL
AND DENTAL INSURANCE PROGRAM OF THE CITY OF BAYTOWN;
AUTHORIZING AND DIRECTING THE MAYOR TO EXECUTE AND THE
CITY CLERK TO ATTEST TO SAID CONTRACT; AUTHORIZING
PAYMENT OF ONE HUNDRED SEVENTY -EIGHT THOUSAND FIVE
HUNDRED SEVENTY -FOUR AND NO 1100 ($178,574.00) DOLLARS
PURSUANT TO THE TERMS OF SAID CONTRACT; AND PROVIDING
FOR THE EFFECTIVE DATE THEREOF.
WHEREAS, the City Council of the City of Baytown, Texas, did
authorize the administration to request proposals for
administration of the self- funded medical and dental insurance
program the City of Baytown provides for its employees; and
WHEREAS, a review of various proposals submitted indicates
that the proposal of J. E. Stone and Associates, Inc. for claims
administration, utilization review, individual and aggregate stop
loss coverage, and administration of a Section 125 pre -tax
program would be the most beneficial to the City of Baytown; NOW
THEREFORE,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN,
TEXAS:
Section 1: That the City Council of the City of Baytown,
Texas, hereby accepts proposal of J. E. Stone and Associates,
Inc. for claims administration of the City of Baytown medical
and dental insurance program, utilization review, individual and
aggregate stop -loss coverage, administration of a Section 125
pre -tax program for the sum of ONE HUNDRED SEVENTY- -EIGHT THOUSAND
FIVE HUNDRED SEVENTY -FOUR AND N01100 ($178,574.00) DOLLARS
authorizes payment thereof.
Section 2: That the Mayor and City Clerk are hereby
authorized and directed to execute and attest to the contract
with J. E. Stone and Associates, Inc., a copy of which is
attached hereto as Exhibit "A."
Section 3: This ordinance shall take effect immediately
from and after its passage by the City Council of the City of
Baytown.
INTRODUCED, READ and PASSED by the affirmative vote of the
City Council of the City of Baytown, this the 26th day of July,
1990.
TT O. HUTTO, ayor
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ATTEST:
kjCL—Ea.' P."HALV, City Clerk
RANGALL B. STRONG, Attorney
C:1 :49:11
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900726-2a
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J. E. Stone
K. L Haynes, A.S.A., E.A.
T. F. McCord
E. C. Baker
July 13, 1990
Ms. Betty Thomason
Risk Manager
City of Baytown
2401 Market Street
Baytown, Texas 77522
J. E. STONE & ASSOCIATES, INC.
Actuaries and Benefit Consultants
Marathon Oil Tower
5555 San Felipe, Suite 550
Houston, Texas 77056
71 3/522 -8830
SUBJECT: RESPONSE TO JUNE 18, 1990 RFP
CLAIMS ADMINISTRATION AND INSURANCE SERVICES
Dear Ms. Thomason:
The intent of this letter is to respond to the City of Baytown Request for Proposal which was
issued June 18, 1990. Insurance underwriting proposals (rates and coverages) are
summarized in this letter. Claims administration and utilization review services are also
summarized within our letter and are supplemented by the attached proposal prepared by
Health Administration Services, Inc. An additional attachment is included which is our
firm's services brochure, including client references and key employee biographies.
Based on the information previously made available by your department and the RFP, our
firm issued bid specifications to 39 insurance underwriting and service providers. In
response, we received a total of 7 proposals. A summary of the proposals received is as
follows:
gPrvirP.c
Claims Administration/Utilization
Review
Life Insurance
Accidental Death & Dismemberment
K1,, i.r A
Proposals
ALTA
Donovan Benefit Systems
Health Administration Services, Inc.
Union Central
Reliance Standard Life
Provident Life & Accident
J. E. STONE & ASSOCIATES, INC.
Aggregate & Specific Stop Loss Lloyds of London
0 Long Term Disability No proposals received
Reasons provided for not responding to the bid specifications include lack of adequate
underwriting time, industry restrictions and lack of underwriting data. Lf you would like to
receive a listing of those insurance underwriting and service provider companies contacted
by our firm, we would be glad to make this available.
Claims Administration/Utilization Review Services
As indicated above, 3 proposals were received with respect to administrative services. The
proposals were all from third party administrators, all of whom have claim paying offices in
Houston, Texas. The most competitive proposal received was from Health Administration
Services, Inc. The next most competitive company was ALTA Health Strategies, Inc.
Assuming an average of 559 employees per month, the annual claims administration cost
from Health Administration Services, Inc. would be $35,540. ALTA's charge for annual
services would be $53,608.28. The City of Baytown RFP requests hospital pre- certification
services which our letter addresses as utilization review services. There are many add -on
types of services which can be housed under this terminology and you should refer to the
actual proposal from Health Administration Services, Inc. for a detailed discussion.
However, a comparison of the basic services would indicate that the proposal from Health
Administrative Services, Inc. is $1.50 per employee per month in comparison to ALTA's
quote of $1.82 per employee per month (ALTA would also charge a $1.25 per employee set-
up fee). All items, with one exception, specified on page 2 of the RFP are included in the
accompanying proposal. The exception is the printing of employee booklets. Health
Administrative Services, Inc. has indicated that they will prepare the written text and
estimate that the additional cost to print the handbook would approximate $1,500.
As an optional service, Health Administration Services, Inc. has included a proposal for their
preferred provider organization.
Flexible Benefits (Section
The 3 third party administrators providing claims administration proposals also included
Section 125 recordkeeping. However, our understanding is that the Section 125 plan
implemented for employees for the City of Baytown would offer only a premium conversion
account. These can easily be accommodated internally by your accounting department or
outside accounting vendor. A plan document should be prepared as well as annual 5500s.
Our firm can provide a sample plan document at no charge and would be available to assist
in the completion of Form 5500.
J. E. STONE & ASSOCIATES, INC.
Aggregate & Speeilic Stop Loss Coverag
The proposal received with respect to aggregate and specific stop loss coverages was from
Cox Insurance Group, Inc. which is a correspondent for Lloyd's of London. We anticipate
receiving additional stop loss proposals but these will be after the city's deadline of July 18.
Assuming 559 employees covered for medical benefits and 504 employees covered for dental
benefits, the estimated annual premium for the aggregate is $21,376.32. The attachment
factor for the medical coverage is $333.60 per employee per month and $19.11 per employee
per month for the dental coverage. Assuming a consistent employee work force, the
attachment point would be $2,353,366.08. The maximum indemnity under the aggregate stop
loss coverage is $1 million and the contract would be underwritten on an incurred and paid
basis. Specific stop loss insurance is required if aggregate stop loss coverage is purchased.
Three levels of individual specific stop loss coverage ($50,000, $75,000 and $100,000) have
been quoted. The maximum indemnity would be $1 million in excess of the deductible
selected. The maximum aggregate indemnity for all specific excess claims combined during
the period of insurance is $2 million. The individual specific stop loss coverage applies only
to medical benefits and assuming 559 employees on average during the 12 month policy
period the estimated costs are as follows:
Deductible Estimated Annual Premium
$ 50,000
$148,785.56
$ 75,000
$ 90,681.97
$100,000
$ 60,960.12
Please note that minimum premiums apply should the work force substantially reduce. The
minimum premiums in order of the above referenced deductibles would be $104,197.50,
$63,444.70 and $42,720.98.
The underwriter has requested the following information prior to final approval:
1. Confirmation that the City of Baytown is unaware of any potential losses which
are likely to exceed the specific stop loss deductible during the policy period.
2. Information pertaining to individual claims in excess of $50,000 which are
anticipated.
3. Confirmation of the average medical and dental enrollment for future and prior
claims experience periods.
4. Claims enrollment information for the period 6/1/90 to 10/1/90.
5. Confirmation that retirees are included in the claims information previously made
available.
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J. E. STONE & ASSOCIATES, INC.
Employee Life Insurance
Union Central provided the most competitive proposal with respect to employee life and
optional employee /dependent coverage.
The proposed rate for an employee life plan which would provide 1 times annual base salary
is $.331$1,000. Please note that a waiver of premium provision is included which would
continue coverage for employees disabled prior to age 70 for 1 year. The maximum life
insurance benefit would be $200,000 and any amounts over $75,000 would require evidence
of insurability.
The optional life insurance program proposed by Union Central would provide coverage for
employees, spouses and eligible children. The coverage would be as follows:
Classification Benefit
Employees $25,000 to $500,000
Spouses $25,000 to $250,000 (not to exceed
50% of the employee's amount)
Children $10,000 on each child (age 6 months
to 19124)
The minimum benefit would be $25,000 on employees and spouses and waiver of premium
is included. The rates would be as follows:
Awe
Non- Smoker
Smoker
$25,000 to
$101,000
$25,000 to
$101,000
$100,000
and over
$100,000
and over
<30
.09
.07
.15
.12
30 -34
.10
.08
.16
.13
35 -39
.13
.10
.24
.20
40 -44
.21
.16
.41
.32
45 -49
.28
.24
.63
.52
50 -54
.44
.37
.99
.81
55 -59
.79
.67
1.61
1.30
60 -64
1.40
1.03
2.41
1.83
65 -69
2.53
1.85
3.85
2.92
70 &
5.14
3.90
7.05
5.39
over
Child(ren) $2.50 per month regardless of the number of
children covered.
0
J. E. STONE & ASSOCIATES, INC.
Accidental Death & Dismemberment Coverage
Provident Life & Accident has provided a proposal for employee accidental death and
dismemberment coverage (provided by the employer) as well as a voluntary plan for
employees, spouses and children.
The rate for the employer provided coverage would be $.04 per $1,000. The voluntary plan
can be summarized as follows:
Classification Benefit
Employee $10,000 to $300,000
in increments of $10,000
Spouses 50% of the employee's election
Spouse/children 40% of the employee's election/
10% of the employee's election
Children only 15% of the employee's election
The rates would be $.04 per $1,000 for employee only coverage and $.06 for family coverage.
Long Term Disability
We did not receive a proposal with regard to long term disability coverage. if this is of
additional interest to the City of Baytown, 1 am sure that this type of coverage could be
obtained given additional underwriting time.
All administrative services and insurance coverages referenced in this letter would be
arranged through J. E. Stone & Associates, Inc. Premiums and service fees would be
collected by J. E. Stone & Associates, Inc. and distributed to service providers and insurance
underwriters on behalf of the City of Baytown.
Acceptance of any or all of the proposals within this letter requires a signature of an
authorized employee of the City of Baytown.
Thank you for your consideration.
Sincerely.
Af--5��
J. E. Stone
Managing Director
0
). E. STONE & ASSOCIATES, INC.
By: 2jz��_ Agreed by:
T. E. Stone & Associates, I.nc.
City of Baytown
The City of Baytown agrees to contract through J. E. Stone
and Associates, Inc. for the following services:
Claims Administration - $53,608.28 (Alta Health
Strategies)
Utilization Review - $1.82 per month per employee plus
set -up charge of $1.25 per employee (Alta Health
Strategies)
Flexible Benefits (Section 125) assistance at no charge
- (J. E. Stone and Associates)
Aggregate Stop Loss Coverage - $21,376.32 (Lloyd's of
London)
Individual Stop Loss with $75,000 deductible -
$90,681.97 (Lloyd's of London)
Agreed by - -
City of Baytown
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