6708 A-
RESOLUTION NO. 6 , 7 0 8
A RESOLUTION ACCEPTING BIDS AND AUTHORIZING THE
CITY MANAGER TO AWARD A CONTRACT FOR EMPLOYEE
HEALTH INSURANCE; AND FOR OTHER PURPOSES.
WHEREAS, an invitation to bid was duly advertised and bids
received pursuant thereto are attached as Exhibit A for employee
health insurance; and
WHEREAS, the most responsible and responsive bidder has
been determined, and it is the desire of the Board of Directors to
authorize the issuance of a contract for such purpose to the most
responsive and responsible bidder; and
WHEREAS, the Prudential Insurance Company has provided health
insurance coverage for employees of the City of Little Rock for one
year; and
WHEREAS, the Prudential Insurance Company has provided
excellent claim service for employees of the City of Little Rack.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of
the City of Little Rock, Arkansas:
Section 1. The City Manager is hereby authorized to enter
into a contract with the Prudential Insurance Company for a total con-
tract price as set out, the funds for which have been allocated. in
the budget.
Section 2. The insurance to be purchased hereby shall
comply with the bidding specifications. From time to time as may be
required, the City MManager and the Director of Finance are hereby
authorized and directed to issue the necessary warrants in payment
of the contract price.
Section 3. This resolution shall be in full force and effect
from and after its adoption and approval.
ADOPT.CD: December 3 , 1981
P. i/
ATTEST: /44!
APPROVED:
��� CLERK _AA MA'OR
MEMORANDUM
CITY OF LITTLE ROCK
DEPT:
TO: Mahlon ■ a ' in, City Manager
FROM: Ronal. /" loyd, Director of DATE: 11/25/81
Per•/ -1
SUBJECT: City Employees ' Group Health FOLLOW UP:
Plan
Attached is a letter to you from Mr. Steve Madigan of
the Atkins Insurance Corporation who assisted us in
evaluating our medical plan proposals.
Mr. Madigan ' s recommendation, with which I concur, is
that we remain with our present carrier. The reasons
for doing so are outlined in Mr. Madigan' s letter.
Additionally, on Tuesday, November 24, I met with
employee representatives from the three unions and
employees representing the non-affiliated employees
to discuss the proposals. The employees unanimously
expressed their desire to remain with our present car-
rier in view of the slight differences in rates pro-
posed by BC/BS and particularly in view bf the excel-
lent claims service provided by Spradley and Coker
under our arrangement with Prudential .
•
I have also attached for your information a copy of
a letter to me from Mr. Eddie Choate in which he out-
lines a summary of potential savings with Blue Cross
Blue Shield. Mr. Madigan has reviewed the letter,
and he has indicated that his initial analysis has
not changed.
Mr. Madigan and I are, of course, prepared to discuss
the proposals in more detail at your convenience.
Below is a tabulation of the rates submitted by the
three companies .
Medical
Employee Family Life and AD&D
Prudential $47. 09 $80. 50 $. 455 per $1, 000
BC/BS $45. 50 $78 .47 $. 440 per $1, 000
Group Admin. , Inc . $31. 55 $56. 17 $ . 410 per $1, 000
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November 25, 1981
Mr. Mahlon Martin, City Manager
City Hall Building
Little Rock, Arkansas 72201
Re: City Employees Group Health Plan
Dear Mahlon:
During the past week we have received three group medical bids from
the following companies: The Prudential Insurance Company, our
present carrier, Blue Cross-Blue Shield, and Group Administrators,
Inc. of Shreveport, Louisiana.
After careful review by the personnel office, the employee Insurance
Committee and Atkins Insurance Corporation, we have unanimously
agreed to stay with the Prudential Insurance Company.
The primary reasons for rejecting the totally self-insured quote from
Group Administrators, Inc. are as follows:
1 . They estimated our first year claims to be $60,000 less
than this year's results, which we believed to be improper.
2. The proposal also relied on surpluses to fund medical
reserves to pay claims following termination.
3. There was no mention of any premium taxes due or the
possible need of a 501 (c) 9 trust for the fund monies.
4. No examples were given of their computer claims analysis
reports.
5. The claims would have been paid out of state which the
employee committee said they would oppose.
6. The proposal and supporting documents received were not
prepared in a totally professional manner.
Group Administrators, Inc. did however propose the lowest rates at 66%
of our renewal rates with Prudential .
The reasons for rejecting the Blue Cross-Blue Shield proposal are as
follows: •
1 . The rates quoted were only around 3% lower than the
Prudential proposal and we felt that it would not be
advisable to switch for such a small difference. This
decision was based in part on the fact that many carriers
refused to quote because we have changed companies three
times in the last three years. The City of Little Rock
has an image problem with the insurance companies for
this reason.
•
Mr. Mahlon Martin, City Manager
November 25, 1981
Page Two
2. We already have approximately $160,000 in medical
termination reserves set aside with our Prudential
contract and switching carriers would have required
us to do the same thing again with Blue Cross-Blue
Shield . The first year of a new policy with any
company therefore places an unusual burden on the
funded dollars going into the plan.
3. The Blue Cross-Blue Shield contract did not offer as
much flexibility to the City as the Prudential contract
when examining our options to invest our own medical
reserve funds and monthly excess premiums, if any.
4. The Blue Cross-Blue Shield contract estimated a larger
expense charge to handle our plan than did the Prudential
Insurance Company.
5. Final accounting with the Blue Cross-Blue Shield contract
would not be presented until 6 months after the end of
the policy year, under their retrospective rating basis,
and Prudential could provide such data within 3 months.
In conclusion, we approved the Prudential renewal because of their
flexibility of funding and the fast claim service. We also appreciated
the Prudential Insurance Company picking up our cash flow burden in
August, September and October when we had already reached our
annual maximum funding liability. Under most minimum premium
contracts we would have been required to continue paying claims out of
our own account until the year end settlement was made.
We also believed that our history of changing carriers every year has
limited the number of companies that would quote our insurance plan.
Therefore, we felt it wise to stay with Prudential unless we could have
found another quote with sizable savings.
Cordially,
Steve Madigan, CLU, Manager
Life and Employee Benefits Division
SM:vg
Blue Cross
Blue Shield
of Arkansas
601 Gaines Street
Little Rock,Arkansas 72203
November 24, 1981
Mr. Ron Lloyd ,
Personnel Director
City of Little Rock
City Hall i
Little Rock, Arkansas 72201
Dear Mr. Lloyd:
This letter is to summarize the savings offered to the City of Little Rock
for the group insurance program proposed by Arkansas Blue Cross and Blue
Shield.
1. Savings to the City - Health, Life and AD & D Insurance
While duplicating the benefit format offered by your present
carrier, we are offering a lower rate guaranteed twelve months.
This lower rate represents an initial annual savings to the
City of $32,359.80.
2. Savings to the Employees - Health Insurance
The employees participating in the City's health insurance
program with dependent coverage will enjoy an annual savings
of $15,541.68.
3. Savings to the City - $50,000 Pooling Charge
Due to the claims history of your group, the $50,000 pooling
charge is an unnecessary expense. To remove this charge would
reduce your rates to $44.61 per individual and $121.54 per family.
This converts to an additional annual savings of $27,607.30.
4. Savings to the City - Rate Guarantee
The rates proposed for the City of Little Rock are guaranteed
until January 1, 1983. This compares favorably to the rate
guarantee offered by your present carrier, November 1, 1982.
With health care costs rising at such a rapid rate, this additional
two month rate guarantee represents a sizable savings. For example,
if Arkansas Blue Cross and Blue Shield only guaranteed your rates
until November 1, 1982, we could reduce your annual premium another
$28,187.85.
ARKANSAS BLUE CROSS AND BLUE SHIELD. INC.
Mr. Ron Lloyd
City of Little Rock
November 24, 1981
Page 2
In view of the above considerations, I feel that you and members of the
City Council will agree there are substantial savings offered by the
Arkansas Blue Cross and Blue Shield bid. This savings is further enhanced
by our new claims delivery system which currently serves the needs of the
Arkansas Public School Employee program with an average claim turn around
time of 4.2 days.
With a potential savings of $103,696.63 coupled with an efficient claims delivery
service, it appears that our program is well suited to the needs of the City of
Little Rock. We look forward to renewing our relationship as your group in-
surance provider.
Sincerely,
/-
Eddie Choate
Group Sales Representative
EC/ka
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