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Home My WebLink About1982-12-07; City Council; 7095-1; Agreement for employee insuranceJZCm OF CARLSBAD — AGENDA 3ILL AB#_ZO<?^"*/ MTG. DEPT._ 1 ?/7/R? CM ' APPROVAL OF AGREEMENT WITH CROWN LIFE FOR EMPLOYEE INSURANCE OPPT. HD.^Z^- ri(TY ATTYV/JT^ P.ITYMRR 2* — Q UJ OcdQ_ Q_ Oz I RECOMMENDED ACTION: Adopt Resolution No. 707$? approving retrospective premium adjust- ment agreement. Direct staff to revise employee insurance premium as of January 1, 1983 to reflect increased premium. ITEM EXPLANATION: The City Council approved a revised schedule of benefits for the employee insurance program on July 20, 1982. The new schedule of benefits became effective August 1, 1982. In addition to revising the schedule of benefits, the City staff, along with Mike Baker of the Wyatt Company, has negotiated a revised method of premium payment or retrospective premium adjustment. The city's premium may be adjusted up or down at the end of the policy year, July 31, 1983 depending upon the city's claims experience in the medical, dental, and vision programs. If the city's claims experience is good the city will receive a refund of premium. There is no limit on the amount of refund. If the city's claims experience is poor, the city may have to pay additional premium. The maximum amount of additional premium would be approximately $50,000. The premium rates originally quoted by Crown were based on a July 1, 1982 implementation date. Since the program was not implemented until August 1, 1982, premium rates have increased slightly. The increased rate has not been charged to miscellaneous employees, they have been charged at the lower rate based on a July 1, 1982 implementation date. Consequently, the city has been been under- collecting premiums from employees in this group. This problem does not exist with police, fire and management employees since their contribution is a fixed dollar amount. It is recommended that the revised rate be charged miscellaneous employees beginning January 1, 1983. FISCAL IMPACT Total cost of the revised program is estimated at $438,000. Fiscal cost of the program will depend on enrollment and claims experience to be determined at the end of the policy year. Funds are available in this year's budget in the amount of $429,000 to fund current year's expenses. If the city is required to pay additional premium, the cost will be covered by increasing overhead charges in next year's budget and/or increasing employee contri- butions. EXHIBITS: 1. Resolution No. fO 7 q 2. Letter from Crown Life dated October 26, 1982 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 RESOLUTION NO. 7078 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA APPROVING MEMORANDUM OF AGREEMENT WITH CROWN LIFE INSURANCE COMPANY FOR EMPLOYEE INSURANCE. WHEREAS, the City Council approved a revised schedule of benefits for the employee insurance program on July 20, 1982, and WHEREAS, the revised schedule of benefits became effective August 1, 19 82, and WHEREAS, the City staff and Crown Life Insurance Company have negotiated an agreement providing for a retrospective premium adjustment for medical, dental, and vision insurance. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad as follows: 1. That the above information is true and correct. 2. That the Memorandum of Agreement attached hereto as Exhibit I is hereby approved. 3. That the Mayor is authorized and directed to sign the agreement on behalf of the City. PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of Carlsbad held the 7th day of December 1982, by the following vote, to wit: AYES: Council Members Casler, Lewis, Kulchin, Chick and Prescott NOES: N°ne ABSENT: None 24 25 ATTEST:26 27 28 - , /lA-tt.^ «J - MARY H. CASLER, Mayor ALETHA L. RAUTENKRANZ, City CJerk (SEAL) MEMORANDUM OF AGREEMENT Retrospective Premium Adjustment G-5^018 City of Carlsbad AGREEMENT is made between Crown Life Insurance Company (hereinafter called the Company) and City of Carlsbad (hereinafter called the Policyholder). WHEREAS pursuant to an application made by the Policyholder, the Company issued a policy of group Life and Health Insurance to the Policyholder as Policy No. 0-5*1018 insuring eligible employees of the Policyholder from August 1, 1982, under said policy which continues to be in full force and effect. AND WHEREAS it is intended to establish a method of premium adjustment under the above^policy whereby the Company and the Policyholder shall agree to adjust premium depending on the claim and premium experience under the said policy, the method of adjustment to be known as Retrospective Premium Adjustment. AND WHEREAS this method applies to the policy period which is defined as being the period commencing August 1, 1982, and ending July 31, 1983- AND WHEREAS the following shall be considered in the computation: 1. "Premiums" shall refer to the billed health premiums for the policy period under consideration and shall not include the premiums applicable to the Life and AD&D benefits^ 2. "Specific Stop Loss Charge" shall refer to an amount equal to two point four percent (2.^%) of the premiums. EXHIBIT I 3 ....**& -2- 2a. "Aggregate Stop Loss Charge" shall refer to an amount equal to two point two percent (2.2%) of the premiums. 3- "Incurred Claims" shall refer to the total health cash claims processed at the Company's Home Office during the policy period together with'changes in the reserve for incurred •but unreported claims but shall exclude any Life and AD&D claims. In addition, health claim amounts in excess of $50,000 per individual processed during the policy period shall be pooled and excluded from the retrospective premium calculation in consideration of the above pooling charge. 4. "Expenses" shall mean the amount of expenses assigned the aforementioned policy in accordance with the Company's ; , standard expense allocation formulas as established from time tcj time. For the policy period commencing August 1, 1982, the expenses shall be equal to fourteen point five percent (1^.5%) of premium. 5. "Net Cost" shall mean an amount equal to the incurred claims plus expenses plus specific stop loss charge plus aggregate stop loss charge. 6. "Expected Claims" shall mean premiums less expenses less specific stop loss charge less aggregate stop loss charge. NOW THEREFORE in consideration of the payment or payments to be made by either party under this agreement, it is hereby agreed that should the expected claims be in excess of the incurred claims for the policy period under co: jideration, the Company shall declare such excess amounts as a surplus. The surplus will be refunded in cash. -3- Furthermore, it is hereby agreed that should the incurred claims exceed the expected claims for the policy period under consideration, then the Company shall declare as a deficit the difference between the incurred claims and the expected claims. Such deficit shall be recovered by direct payment by the Policyholder to the Company, payable within sixty (60) days after receipt of written notification. Under this Agreement, the Policyholder shall not be liable for any one policy period by direct payment for more than sixteen percent (16%) of expected claims. Interest shall be credited to the surplus or charged against the deficit from the end of the policy period under consideration to the date of the payment made by either party under this agreement. The rate of interest for the policy period commencing August 1, 1982, shall be based on the prevailing 90 Day Treasury Bill rate less one percent (1%). Interest rates for subsequent policy periods may be subject to change. % % This Agreement shall be effective during the policy period unless the policy is terminated prior to the end of the policy period, in which case this Agreement shall be effective to the termination date of the policy. In the event that policy termination occurs prior to the end of the policy period, a?",, obligations and calculations under this Agreement shall be applied on a pro rata basis based on the number of months in the policy period during which this Agreement was effective. .*• The Retrospective Premium Adjustment method may be carried on for subsequent policy periods, in which event this agreement shall automatically i ^new unless otherwise cancelled in writing by either party 30 days prior to the beginning of each subsequent policy period. This Agreement will be declared null and void if not signed and returned to the Company by the Policyholder within sixty (60) days of the date of signature by the Company. Signed and Sealed at Toronto, Canada this day of 1982. CROWN LIFE INSURANCE COMPANY PER: K. FRASER TITLE: Assistant Superintendent Group Underwriting Dept. Signed and Sealed at this day of 1982, CITY OF CARLSBAD PER: TITLE: