It is recommended that the City Council authorize the City Manager to execute an Agreement with Aetna Life Insurance Company for administration of the City's self funded group medical and pharmacy benefit program including COBRA, Flexible Spending Accounts, Employee Assistance Program and Disease Management and Wellness Programs effective January 1, 2013, with an initial three year term and two one year renewal options.

The purpose of this Mayor and Council Communication is to seek authorization from the City Council to enter into a new Agreement with Aetna Life Insurance Company (Aetna) for administrative services related to the City's health benefits program. The City of Fort Worth's program is self-funded and utilizes a third party administrator to process claims. Aetna has been providing these administrative services since January 1, 2005 under its previous Agreement with the City. That contract expires December 31, 2012.

Having worked with the same administrator for several years, Staff determined it would be in the City's best interest to ensure that it was getting the best overall product and price by going out to the market and giving all providers the opportunity to compete for the City's business. On June 9, 2011, a Request for Proposal (RFP) was issued requiring interested vendors to submit proposals by September 8, 2011. The RFP was designed to solicit proposals for the following services individually or in combination with each other: 1) Third Party Administrator (TPA) for the City's self-funded medical plan, 2) Pharmacy Benefit Management (PBM), 3) Flexible Spending Account (FSA) administration, 4) Disease Management and Wellness Program coordination and 5) COBRA administration.

In October 2011, an Ad Hoc Selection Committee was formed and included representation from Human Resources, Police, Fire, Water, Planning and Development, Finance, Parks and Community Services, Transportation and Public Works and retirees. The Committee was active in the analysis of the proposals, on site visits and follow up meetings with potential vendors. Human Resources Staff and the City's benefits consultant, Aon Hewitt, facilitated the RFP review and vendor meetings. Twenty-two vendors were solicited from the Purchasing database system, twenty vendors responded representing 45 proposals. Vendors submitted individual or multiple responses based on the services they could provide.

The Committee considered several factors in evaluating the proposals, including price competitiveness, the organization's ability to administer plans with various plan designs, provider networks, qualifications of the organization's staff, customer satisfaction and complaint records, M/WBE participation and responsiveness to customer service issues.

After a lengthy review process, the Committee unanimously agreed that Aetna provided the best overall quality of service and pricing. In its presentation to the City, Aetna emphasized ways to reduce claims cost through enhanced disease management through Institutes of Quality designated hospitals for certain care, such as heart, muscular and skeletal and Bariatric, networks of physicians and facilities that meet quality of care and cost metrics and Premium Designated Doctors.  In addition, although the issue was not a part of the evaluation process, Aetna's continued performance as TPA means that plan members may remain with their current doctors and hospitals.  

The associated cost and fees are as follows:

A.   Administration of Medical and Pharmacy Claim:

• $32.29 per subscriber per month for active employees and Non Medicare eligible retirees for the period of January 1, 2013 through December 31, 2013.
• $25.08 per subscriber per month for Medicare eligible retirees for the period of January 1, 2013 through December 31, 2013.
• $2.50 per subscriber per month for Disease Management and Wellness - provide disease management and lifestyle behavior change programs and coordinate with existing City programs. Coordination will allow for more thoroughly developed data that can be used to measure results for various disease states and chronic conditions such as diabetes, asthma and cardio vascular diseases.

Total Estimated Annual Cost -  $3,324,666.00

B. COBRA Administration:

• $0.084 per employee per month - provide COBRA new hire notification, qualifying event notices and manage COBRA continuants billing and payments.

Total Estimated Annual Cost - $5,629.00

C. Employee Assistance Program:

• $1.29 per employee per month - provide minimum of six face to face visits to assist employees in addressing personal issues, make referrals to qualified professionals for specialized issues such as financial planning, elder care, child care and include welcome packet for all employees and 16 one hour on site seminars.

Total Estimated Annual Cost - $85,991.00

D. Flexible Spending Accounts:

• $1.234 per employee per month - manage Medical Expense Reimbursement Plan (MERP) for allowable medical, dental and vision benefits and dependent child care for participating eligible employee.

Total Estimated Annual Cost - $82,305.00

NOTE - Annual totals are based on anticipated enrollment of 5,555 active employees, 1,434 Non Medicare eligible retirees and 1,352 Medicare eligible retirees.

The benefit plan operates on a plan calendar year basis and the expected overall total administrative costs are $3,498,591.00 for calendar year 2013, which represents a savings of $313,698.00 per year from the current contract.

In addition to these savings, Aon Hewitt estimates $2.2 million in savings on pharmacy claims and fees and $961,900.00 savings through pharmacy rebates with this contract. Also, Aetna has agreed to provide the City with a one time amount of $125,000.00 that can be used for the Wellness programs and $25,000.00 each year for the next three years for employee communications. Additionally, Aetna has set aside $180,000.00 each year for open enrollment support for the next three years using a M/WBE vendor. Prices will remain flat for the base three years.

The following is a summary of expected administrative costs from Aetna for nine months from January 1, 2013 through the end of the Fiscal Year ending September 30, 2013:

It is anticipated that the Health Benefit Advisory Committee will make a recommendation to the City Manager on premium contribution rates, plan design and a Medicare supplement plan by July 2012. Open enrollment for the 2013 medical plan is scheduled to begin October 1, 2012. The City Manager's budget proposal for Fiscal Year 2012-2013 will include a recommendation to fund this contract through September 2013. Authority for the remaining fiscal years that are encompassed by the Agreement will be requested annually as part of the overall budget process and the contract will include a standard fiscal funding out clause that would comply with state law requirements by allowing the City to terminate the Agreement without penalty, if in the future, the Council elects not to appropriate funds for the contract to continue.