AUTHORIZATION TO ENTER INTO AN ADMINISTRATIVE SERVICE AGREEMENT AMENDMENT WITH BLUE CROSS BLUE SHIELD OF ARIZONA
Staff Contact: Jim Brown, Director, Human Resources and Risk Management
end
Purpose and Recommended Action
Recommendation
This is a request for City Council to approve entering into an administrative service agreement amendment with Blue Cross Blue Shield of Arizona for employee medical benefits for City of Glendale active employees, retirees and COBRA participants for the Fiscal year 2016-2017 with the option to renew three additional years in one year increments.
body
Background
In the fall of 2013, Human Resources & Risk Management conducted an RFP process for employee medical benefits. Human Resources & Risk Management worked with the Total Compensation Committee to review the proposals for administering the city’s self-insured medical benefits plan. Blue Cross Blue Shield of Arizona was selected as the proposal that best matched both the needs of the employees and the City. We subsequently entered into an administrative service agreement with Blue Cross Blue Shield of Arizona to provide employee medical benefits for City of Glendale active employees, retirees and COBRA participants on July 1, 2014. The term of this current service agreement is five years through June 30, 2019 with options to extend four additional years in one year increments.
Analysis
Each year, Blue Cross Blue Shield of Arizona performs an actuarial analysis utilizing the City’s medical claims history to project claims cost and premiums for the upcoming fiscal year. The projections for the expected liability during the upcoming fiscal year resulted in an 8.7% increase in premiums. This increase is due to medical cost inflation and the City’s high claims over the past year. Additionally, the City’s medical plans have been grandfathered into the provisions of the Affordable Care Act however, with additional analysis provided by our outside benefits consultant Segal, we determined that it was in the best interest of the City to un-grandfather our plans. This resulted in a final increase to premiums of 8.4%. Un-grandfathering our medical plans also provides additional benefits to our employees due to allowing preventative care services at no cost. This amendment to the existing service agreement includes the 8.4% increase in premiums which has also been included in the budget for FY16-17.
Previous Related Council Action
On April 23, 2013, Council approved the extension for the Blue Cross Blue Shield of Arizona service agreement through June 30, 2014.
On March 25, 2014, Council approved the contract with Blue Cross Blue Shield of Arizona for the FY14-15 with the option to renew four additional years.
Budget and Financial Impacts
|
Cost |
Fund-Department-Account |
|
$24,088,987 |
2580-18210-540600, Benefits Trust Fund |
Capital Expense? No
Budgeted? Yes
Requesting Budget or Appropriation Transfer? No
If yes, where will the transfer be taken from?