Board Agenda - June 05, 2007

l. Third party administration for 2008 Employee Health Plan

Presenter: Danny Modisette

Purpose: A - Request decision - closure required

Time: No time limit

Description:

In a continuing effort to monitor costs and seek additional services for the employee health plan, we submitted a certified sealed proposal (CSP) for third party administration services for 2008. The district's health care consultants (Wachovia), benefits and risk management staff, and representatives of the employee benefits committee interviewed finalists. At their May meeting, the employee benefits committee met with district staff and consultants to review the proposals. They are recommending CIGNA Healthcare, Inc. as the new third party administrator for the Plano ISD Employee Health Benefit Plan and the Plano ISD Flexible Benefit Plan.

CIGNA Healthcare, Inc. is a nationally recognized leader (2006 recipient of the J.D. Powers & Associates award in claims and customer service) in health plan services, both fully-insured and self-funded, and is currently the third party administrator for the district's self-funded dental plans. The district will maintain status as a self-funded health plan and purchase services from CIGNA on an administrative services only (ASO) basis.

CIGNA's services will include call/claim resolution, increased provider network discounts from the current 45.2% to 53.2%, large case management, utilization review, and all other standard ASO services. CIGNA's preferred provider network (PPO) includes a larger number of total member providers, and is also a better match than the current network of the top 280 providers by dollars spent in 2006. Increased network savings is a financial benefit to employees and the district.

Employees will continue to have access to a flex debit card, as well as improved options for submitting claims on flexible spending accounts. CIGNA's Sherman/Denison office will continue to be responsible for assisting PISD employees and paying claims for medical and alternate plans, as well as the dental plans. Another service center will be assigned to handle flexible spending accounts.

ASO fees are $20.70 per employee per month (PEPM) enrolled in the health plan; the PPO access fee is $10.50 PEPM enrolled in a medical plan; flexible spending $5.79 PEPM enrolled; debit card fee $1.00 per activated card. Projected total claim liability will decrease the district's costs by approximately - 0.022 %, as a result of improved service capabilities of a large insurance company. CIGNA has offered a not-to-exceed rate guarantee of 4% for renewals for second and third year services. In addition, CIGNA will prefund the claim account, removing the liability for the district to maintain a separate bank account for the health fund. This saves the district approximately $60,000 in banking fees alone, plus it removes liability for fraudulent claims.

Although preliminary stop loss insurance quotes were also provided in this CSP, prices cannot be locked in at this early date. Final stop loss calculations will be obtained later in the year, and be presented to the board for approval in the fall.

Recommendation:

To approve CIGNA Healthcare, Inc., as third-party administrator for the Plano ISD Employee Health Benefit Plan and the Plano ISD Flexible Benefit Plan, effective 1/1/08, pending contract approval by the district's legal counsel.

Business Impact:

Third party administration fees are a business expense to the self-funded employee health benefit plan.

Summary:

Appendix:

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