From
Lisa Norris, Human Resources Director
Title
Award The Hartford a five-year agreement for Life Insurance effective January 1, 2019 through December 31, 2023 in the amount of $2,616,647, with the option to renew for additional one-year increments. Additionally, award Hartford a five-year agreement for Long-Term Disability insurance effective January 1, 2019 through December 31, 2023 in the amount of $564,186 with the option to renew for additional one-year increments, and uthorize the City Manager to execute annual renewal options for both contracts with aggregate price fluctuations of the lesser of up to $50,000 or 25%, per contract, of the original contract value so long as sufficient funding is appropriated by the City Council to satisfy the City’s obligation during the renewal terms
Presenter
Lisa Norris, Human Resources Director
Recommend Action
Approve
Analysis
The City's current agreement with Dearborn for Life Insurance and Long Term Disability benefits began on January 1, 2015 and expires December 31, 2018. Current benefits offered include:
- City paid Basic life insurance equal to two-times the employee's annual base salary to a maximum of $500,000;
- Voluntary, employee paid Life Insurance options:
1) Employee Supplemental Life equal to 1x, 2x, or 3x annual base salary to a maximum of $350,000;
2) Employee and/or Spouse Accidental Death and Dismemberment Insurance equal to 1x, 2x, 3x, 4x, or 5x annual base salary;
3) Spouse Supplemental Life insurance in increments of $1,000 and up to a maximum $350,000
4) Child Life Insurance in increments of $1,000 to a maximum of $20,000
The City also offers Long-term Disability coverage to employees at no cost to the employee that includes benefit eligibility after 180 days off work, and up to 50% of their pre-disability earnings, with minimum and maximum exceptions and limitations.
The City issued Request for Proposals 18078 & 18079 due in May 2018 for competitive proposals on these benefits to become effective January 2019. Both RFPs were advertised in the Star-Telegram, Bid-Sync, and distributed to 29 carriers viewing the life and 19 carriers viewing the Long Term Disability proposals. Of those who reviewed, 10 carriers for Life Insurance and 9 carriers for Long Term Disability submitted proposals for analysis. There were no Grand Praire carriers who submitted proposals.
Each proposer was ranked on: 1) Plan Benefits and Services, 2) Network/contract terms, 3) References, and 4) Fees/Renewals with weighting applied to each. Based on the analysis, The Hartford received the highest ranking and is selected as the carrier of choice for both Life and Long Term Disability Insurance. Our current carrier, Dearborn, has provided very poor service on several key life insurance issues staff had identified since February and for which we still have not received resolution after numerous in depth phone and face-to-face meetings. This resulted in a very low score for them for the references evaluation category. Additionally, The Hartford is the only carrier that offered additional renewals beyond the 5 year contract period under our provision of the 25% change order rule to allow longer vendor/client relationships, ease in administration and consistency for employees. Overall scorecards and fee analysis are attached.
The Hartford proposal includes the following effective January 1, 2019:
1. Decrease in city-paid Basic Life Insurance rate from .069/$1,000 to .050/$1,000)
2. Increase in Employee Supplemental Insurance Options from 1, 2 or 3 times salary to a maximum of $350,000 to up to 5 times salary to a maximum of $500,000;
3. Increase in city-paid Long Term Disability premiums from $.123/$100 of base salary to $.133/$100 of base salary;
4. Five-year contracts for each product, with the option to renew for additional one-year increments beyond the five-year period if the vendor and city can mutually agree upon the renewal and it follows the City's "25%/$50,000" rule.
This information will be reviewed before the Finance and Government Committee for their consideration prior to Council consideration on the same night.
Financial Consideration
City-paid Life insurance premiums are currently budgeted at $525,968 in fiscal year 2018-2019, which is more than the $521,231 per year projected beginning in January 2019. Long Term Disability premiums are budgeted at $96,986 for fiscal year 2018-2019, and the projected annual cost for this new contract is $111,720 per year. Although the this is a net increase of $9,997 to the projected expenditures, any increases elected in voluntary life for the employee, spouse or child are all 100% paid by the employee and would likely offset this amount. Additionally, the fund typically could absorb this type of minor increase. For years beyond fiscal year 2019, we would assess and appropriate expenditures more easily since the vendor would then be established and we would have history. No additional funding is needed at this time.