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NEWPORT BEACH, CALIFORNIA
APPLICATION FOR GROUP INSURANCE
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CITY OF NEWPORT BEACH
NAME OF APPLICANT (FULL LEGAL NAME)
3,300 NEWPORT SMEVARD, NEWPORT BEACH, CALIF NIA 92663
ADDRESS OF APPLICANT
hereby applies to Pacific Mutual Life Insurance Company for a plan of group insurance providing the coverages checked below:
For Participants Only For Dependents
Life Insurance Coverage ................................. ...............................
IX.. ...............................
❑
Accidental Death and Dismemberment Coverage ..........................
[a
Weekly Disability Coverage ............................. ...............................
❑
Long Term Disability Coverage ....................... ...............................
❑
BasicMedical Coverage ................................... ...............................
( I.. ...............................
12
MajorMedical Coverage .................................. ...............................
( X.. ...............................
I
Comprehensive Medical Coverage ................... ...............................
❑ .................................
❑
DentalCoverage .............................................. ...............................
[X.. ...............................
Ik
Prescription Drug Coverage ................... ...............................
❑ ....... .... ..........
.......❑
Other................................................ ...............................
❑ ............................
❑
It is requested that insurance be effective on the
first
day of August 1982
1. Are benefits applied for replacing any group insurance currently, or formerly, in effect? ❑ No 1X Yes.
2. Are benefits applied for in addition to any group insurance currently or formerly in effect? MCI ❑ Yes.
If answer to either question is "Yes ", indicate:
Name of Company(ies) Prudential Type of coverage(s) Life, ADSD_ Medical_ Dental
• If answer to 1. is "Yes", indicate:
Has coverage been terminated? ❑ No XX Yes. Last day coverage was in force Sully 310 1982
The Group Insurance applied for in this application shall not become effective until:
1. This application is approved by Pacific Mutual at its Home Office; and
2. An advance payment equal to an estimated one month's premium is received by Pacific Mutual at its Home Office; and
3. If the cost of the insurance is contributed to by employees, the required per cent of the eligible employees shall have agreed
to make the required contribution to apply toward the premium for this insurance.
Premium payments are payable monthly in advance, and are due on the first day of each month after the effective date of this
insurance.
No agent has power on behalf of Pacific Mutual to make or modify any application for insurance, or to bind Pacific Mutual by making
any promise or representation or by giving or receiving any information.
The above statements are true and complete to the best of my knowledge and belief. I understand and agree that such statements
and answers shall become a part of any policy or policies which may ultimately be issued by Pacific Mutual, and are made to induce
Pacific Mutual to issue the insurance as applied for.
Signed at Newport Beach, California
Cl rY AND STATE
W
day of July 19 82
• / . r'
Writing Agent cj /
GR- 4441 -G II /78 SIGN RE
PACIFIC MUTUAL
• //-� RECEIPT FOR ADVANCE PAYMENT
Received from _ / _ _ �__. _-%� — - 0e--c"
L'Y
the sum of $ ".16 G J
as advance payment toward the first premium or premiums for Group Insurance for which application has been made on this day to Pacific Mutual.
If Pacific Mutual notifies the Applicant in writing of the acceptance of the application, such insurance shall be effective from the date agreed upon
and specified in such notice, with premiums therefor being payable from such effective date, and the amount for which receipt is hereby acknowledged
shall be applied towards the payment of such premiums. IMPORTANT — No insurance is provided by the premium deposit for which this receipt is being
given. Insurance shall be provided on the effective date indicated above only in the event that this application is approved as submitted. If Pacific
Mutual does not accept the application, the amount for which receipt is hereby acknowledged will be returned.
Date "J / 2__ Writing Agent Z' t&? THIS RECEIPT RECEIPT IS ISSUED ON THE CONDITION THAT ANY CHECK, DRAFT OR OTHER ORDER THE PAYMENT OF MONEY BE
GOOD AND COLLECTABLE.
GR- 4441 -G 11 /7e
i
- PACIFIC MUTUAL
PACIFIC MUTUAL LIFE INSURANCE COMPANY
ROGER W. BECK 700 NEWPORT CENTER DRIVE
2nd VICE PRESIDENT P.O. BOX 9000
GROUP ADMINISTRATION NEWPORT BEACH, CALIFORNIA 92660
TELEPHONE (7141 7604252
August 6, 1982
Mr. Robert L. Wynn, City Manager
City of Newport Beach
3300 Newport Blvd.
Newport Beach, CA 92663
Group Policy: GK -19800
Effective Date: August 1, 1982
• Dear Mr. Wynn:
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It is a pleasure to advise you of our formal acceptance of your application for
a Plan of Group Insurance.
Upon completion, the contractual and administrative materials will be deliver-
ed to you by our resident Group Insurance Representative in your area who
will be happy to furnish any information and assistance you may require.
We appreciate your designating Pacific Mutual as the underwriter of your
insurance program, and this opportunity to be of service to you.
r R eck
RWB:mc
<VIEWE!VIED xn
PERSONNEL
21- A V I X11982►
CITY OF
• NEWPORT BEACH,
CALIF.
0
CITY OF NEWPORT BEACH
PERSONNEL OFFICE C
July 12, 1982
TO: MAYOR AND CITY COUNCIL AGENDA ITEM F. 3 (c) �J
FROM: Personnel Director POiJ !/
SUBJECT: EMPLOYEE INDEMNITY HEALTH E DENTAL PLAN AND LIFE INSURANCE JUL 12 1982
By the CITY COUNCIL
BACKGROUND: On May 17, 1982, City staff was informed by representatiiyves Or I &WH
Prudential Insurance Company that the annual premium for the Employee Indemnity
Health b Dental Plan and Life Insurance would be increased by 108% effective
July 1, 1982. Based on this premium increase notification, the City in conjunc-
tion with the City's Consultant, Ed Huffman, initiated a Request for Proposals (RFP)
to determine if a more favorable provider for the Employee indemnity Health s Dental
Plan and Life Insurance could be obtained through competitive bids.
DISCUSSION: The RFP was submitted to twenty -five (25) nationally recognized group
benefit carriers. Of this total, eighteen carriers declined to submit bids primarily
because they did not wish to insure municipalities at this time. Four submitted
modified proposals that were deemed unacceptable by the City. The City did receive
three bids from Pacific Mutual, Aetna and Continental which met proposal requirements
and are compared herein with the current carrier, Prudential.
ANALYSIS OF BIDS: The following four factors were utilized in evaluating the three
bids: annual premiums, carrier retention, pooling level and major medical conversion
policy.
The ranking of the three bids by annual premium is:
First Year
Premium "
Aetna
$1,296,415
Continental
1,312,292
Pacific Mutual
1,342,397
Prudential
1,657,546
Aetna has submitted the lowest bid on the basis of a total annual first -year premium.
As compared to Prudential, the first -year savings is more than $360,000:. However,
both Pacific Mutual and Continental are also very competitive.
While Aetna's annual premium is in fact the lowest, it should be noted that the
annual premiums required by the bidding carriers should be viewed as an estimate
of the expected annual charges under the plan. This is because if the annual
premiums are more than sufficient to cover the claims and expenses under the plan,
the surplus will be returned to the City. Conversely, if the annual premiums are
not sufficient to cover the claims and expenses under the plan, the annual premiums
will be increased by the carrier in the following year to recover the loss it in-
curred under the City's plan.
(see next page)
i
0
-2-
6
INDEMNITY HEALTH & DENTAL PLAN AND LIFE INSURANCE (Continued)
CARRIERS' RETENTION: While it is important to compare annual premiums, the amount
of the carrier's 'retention', or cost of doing business, i.e. 'overhead', salaries,
supplies, taxes, etc., is the only real cost variable since the claims paid will be
the same regardless of which carrier pays them and the premiums that exceed the
claims and retention will be returned to the City.
Since carriers use different methods of amortizing their expenses, it was the Con -
sultants's experience that both the first -year charges and the five -year average
charges provide the most meaningful comparisons.
The bidders' retention projections, which are not guaranteed, but are based on
current costs, are as follows:
Carrier First -Year Five -Year Average
Pacific Mutual $ 94,121 $ 78,673
Aetna 109,558 102,787
Continental 119,755 114,208
Prudential 203,876 203,876
This comparison shows that Pacific Mutual offers the lowest expenses as their cost
of doing business in this case. Their bid is $15,000 lower than Aetna's in the
first vpar and S24.000 lower for the five -vear averaae. All three bidders are far
below Prudential's.
POOLING LEVEL: The third factor is the charge for pooling (insurance protection)
of individual claims which exceed a specified amount during the Plan year. For
example, in 1981, the specified amount was $12,000 and the City paid Prudential
$27,000 for this insurance. In 1981, the City experienced numerous claims which
exceeded the $12,000 amount. As a result of this insurance, $246,000 was not charged
to the City. Considering that Prudential charged $27,000 for the insurance, the
City saved $219,000 by having this insurance in 1981.
Currently, the lowest pooling level obtainable from Aetna, Pacific Mutual and Pru-
dential is $25,000 and $30,000 from Continental. The annual pooling charges for
this protection are as follows:
Continental's charge for pooling is the lowest; however, their pooling level is
$30,000. Pacific Mutual's charge is nearly $7,000 more and Aetna's $15,000 more.
As compared to Prudential all three are competitive.
(see next page)
Pooling
Cost
Continental
$30,000
$ 37,391
Pacific Mutual
25,000
43,995
Aetna
25,000
53,164
Prudential
25,000
99,527
Continental's charge for pooling is the lowest; however, their pooling level is
$30,000. Pacific Mutual's charge is nearly $7,000 more and Aetna's $15,000 more.
As compared to Prudential all three are competitive.
(see next page)
I
• -3-
INDEMNITY HEALTH & DENTAL PLAN AND LIFE INSURANCE (Continued)
MAJOR MEDICAL CONVERSION: Finally, each of the three competitive bidders offers
a Major Medical Conversion Policy which offers a health plan at the election of
the employees who terminate or retire from the City regardless of their state of
health. These employees also assume the premium payments for such plans. Pacific
Mutual and Aetna offer the converting individual a choice of three deductibles
and Continental offers only a $100 deductible plan. While Continental will charge
the City $225 per conversion, Pacific Mutual and Aetna will make no charge to the
City.
LOCATION: While it is not a critical factor, the geographical location of Pacific
Mutual in Newport Beach would give Pacific Mutual the ability to provide excellent
service to the City and its employees.
CONCLUSION: Based on the discussion of this report, it is City Staff's and
the Consultant's conclusion that Pacific Mutual has submitted the most competitive
overall bid to underwrite the City's Employee Indemnity Health & Dental Plan and
Life Insurance & Accidental Death & Dismemberment Insurance.
RECOMMENDATION: Based on the conclusion of this report, it is recommended that
the attached resolution be approved which authorizes the City Manager to enter
into an agreement, effective August 1, 1962, with Pacific Mutual for:
(a) An Indemnity Health & Dental Plan
(b) Group Life and Accidental Death & Dismemberment
Insurance.
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