HomeMy WebLinkAboutTR 07/98
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REPORT TO COUNCIL
FROM:
Gillis Paterson
Director of Finance
DATE: February 2, 1998
REPORT NUMBER:
TR 07/98
Baba Gajadharsingh
Director of Human Resources
SUBJECT: Employee Group Benefit Insurance - 1998 Renewals
RECOMMENDATION:
The Executive Committee recommend to Council that;
1.
the firm of William M. Mercer Limited be instructed to renew the Group
Hcalth & Dcntal Plans for the Town of Pickering with the present carrier,
Liberty Health, at a renewal premium of $65 I ,000.00, plus 8 per cent Provincial
Sales Tax of approximately $52,000, for the period March 1, 1998 to
December 31, 1998, inclusive. Other terms and conditions shall remain
unchanged;
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2. the firm of William M. Mercer Limited be instructed to renew coverages
with Maritime Life and UNUM Canada for Group Life/Long Term
Disability and Group Accidental Death and Disability for the period ending
December 31, 1998;
3. staff of Human Resources and the Finance Department be instructed to
explore cost effective measures that will assist in reducing the costs for
such coverages; and
4. the appropriate staff ofthe Town of Pickering be given authority to give
effect thereto.
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ORIGIN:
Report Number HR 02/96.
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AUTHOIUTY:
Council Approved Benefit Plans.
FINANCIAL IMPLICATIONS:
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A renewal premium of $655,000.00 represents an increase of 7%, or $43,000.00
over the 1997 premium. The costs for this coverage are included in the Operating
Budgets of each of the departments.
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February 2, 1998
Report to Council # TR 07/98
BACKGROUND:
In 1995, staff of Human Resources, in conjunction with the Corporation's benefit consultant,
William M. Mercer Limited, sought proposals for the Corporation's employee benefit group
insurance program. At that time costs were reduced by approximately $140,000.00 per alUlUm,
with a guaranteed rate until December 31, 1997.
Discussion
The Town's group benefits consultant, William M. Mercer Limited, has assisted the Town for a
number of years in arranging its employee benefits coverage with stable providers that will
provide the best service at a competitive price. They have been working on our behalf over the
last few weeks in preparing for the 1998 renewal. They were able to have the 1997 term
cxtcnded to March I, 1998 with no cost increase, thereby lowering the dollar amount of the
increasc by 1/6th for approximately $8,000.00. The premium of $651,000.00 represents an
increase of $39,000.00 or 6.4% for the period March I, 1998 to December 31, 1998, inclusive.
This incrcase is based solely on the increased eost of the services to the Town, resulting from an
increase in group health and dental plan claims during 1997. In order to achieve the savings
from January I to March I, 1998, the Director of Finance has had to assure the companies
involvcd that, should thcre be a shortfall at ycar cnd, it will be made up from the reservc held by
the insurcrs.
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While negotiations with Maritime Life and UNUM are continuing, it is anticipated that renewals
will be effective April 1, 1998, thereby saving the Town from any cost increases from January 1.
It is anticipated that small premium increases will be experienced with the group life rate
dccreusing and the LTD. rute increasing slightly.
As the Town went to market in late 1995, resulting in premium savings for the years 1996 and
1997, it is recommended that coverage be renewed with the existing providers. It is not
advisable to go to the market too often as it can have the opposite of the desired effect, indicating
to providers that we are not seeking a long term relationship, thereby gradually eliminating the
number of providers that can respond. Moreover, in late 1997, Council approved the hiring of a
Benefits/Compensation Specialist on a one-year contract, temporarily replacing the Manager of
J luman Resources. The process is under way and when hired, the incumbent will be examining
all aspects of the foregoing, presumably in time for the 1999 policy year.
In addition to the foregoing, staff of Human Resources, specifically the new
Benefits/Compensation Specialist, and the Finance Department will explore cost-effective
measures that will assist in reducing future increases in costs, including re-designing and
rationalizing the Town's benefits package, in conjunction with actions such as:
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Educating employees regarding the cost of benefits and cost-savings measures they can assist in;
Claims management;
Lengthening the re-visit period from six to nine months;
Exploring a slightly more aggressive claims management policy with Liberty;
Engage in policy enrolment to ensure eligibility and status of dependents;
Drug cards;
End co-ordination of benefits (with spouse's provider)
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The two departments are working together on these initiatives as Human Resources is
responsible for the provision and co-ordination of benefits for the Town and its employees and
the Finance Department will assist in the financing of those benefits.
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February 2, 1998
Report lo Council RTR 07/98
This Reporl has been prepared on eOl~unction with lhe General Manager and the Director of
IlumHn Rcsources who concur wilh the recommendations
ATTACHMENTS:
HR 02/96
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. Gillis A. Palerson /
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REPORT TO
COUNCIL
FROM:
DATE: December 13,1996
Dayle M. Cameron
Manager of Human Resources
REPORT NUMBER: HR 02/96
SUBJECT: Employee Benefit Group Insurance
- 1997 Renewals
RECOMMENDATION:
A by-law should be enacted to authorize the execution of the necessary documents to
provide the following for entitled Town employees or retired employees during 1997:
(a) group life insurance and long term disability benefits, to be provided by
Maritime Life Assurance Company; and
(c) group health and dental insurance, to be provided by Liberty Health (Liberty
Mutual Insurance Group).
AUTHORITY:
Municipal Act, R.S.O. 1990, chapter M.45, section 207.48.
FINANCIAL IMPLICATIONS:
1997 1997
Premium Premium
Increase Increase
Insurance Coverage (all Group) Insurer (%) ($)
Life Maritime Life 0% nil
Long- Term Disability Maritime life 0% nil
Accidental Death/Dismemberment Unum Canada 0% nil
Health & Dental Liberty Health 12%/17% $67,000/$92,000
Total Overall Increase 7.9%/10.8% $67,000/$92,000
BACKGROUND:
In 1995, we instructed the Corporation's benefits consultant (William M. Mercer Limited)
to seek proposals through specific invitation to sixteen carriers and through newspaper
advertisement, with the primary objective of ensuring that the Corporation's current
group insurance program could continue to be underwritten with those insurers who
could provide the most favourable arrangements possible with respect to plan cost and
claims service.
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Report to Council HR 02/96
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December 13, 1996
Council may recall that as a result of going to the market last year, William M. Mercer
Limited was successful in reducing our premium benefit costs by approximately
$140,000 by changing carriers for Life, Long-Term Disability and Accidental Death and
Dismemberment Insurance. The group life rate is a guaranteed rate until December 31,
1997, and we do not anticipate any change in the renewal rate for long-term disability
coverage for the upcoming year.
Liberty Health, our carrier for health and dental benefits, was at that time and still
remains, a cost-competitive insurer in providing low retention or operating expenses,
given the claims cost of Town employees.
Group life, accidental death and dismemberment and long-term disability benefits are
underwritten on a "fully pooled basis", which means that the cost'to the Town is simply
the premium charged by the insurer and actual claims incurred in a given year do not
affect the cost of the plan as there is no "premium paid vs claims paid out" financial
accounting at year-end.
Charges for health and dental benefits, on the other hand, are on a "pay your own way"
basis, with a financial accounting completed at year end which compares premiums
paid to actual claims. Should there be a surplus of premiums paid by the Town during
the year, this surplus is "refunded" to theTown and/or kept by the carrier in a reserve-
type fund, which can be utilized in future years to offset premium shortfalls and/or
increased premium costs due to increased health and dental claims. The Town
currently has $49,100 in surplus funds on deposit with the insurer.
To establish premium rates for health and dental, Liberty Health determines expected
claims for the upcoming 12-month period based on the actual claims paid during the
previous 12-month period and the expected claims level is then compared to the
current premiums we pay to see whether current premium rates are adequate.
Health Care
In the previous 1994-95 policy year, the total claims paid amounted to $281,410. This
year, total claims paid amounted to $314,447, an increase of approximately 11.7%.
This resulted in a premium shortfall or a deficit of almost $15,900 for health benefits for
the year. A significant part of the increase in claims costs was due to health care
inflation, (i.e. increased cost of prescription drugs and semi-private hospital rooms) and
possibly the result of economic and job uncertainties. In 1995, total paid claims totalled
$281,410. In 1996, total paid claims equalled $314,447, representing an increase of
approximately 11.7%.
U@lal
In the previous 1994-95 policy year, total claims paid equalled $190,407. This year,
total paid claims amounted to $223,080, an increase of approximately 17%. This
resulted in a premium shortfall or a deficit of approximately $39,000 for dental benefits.
A review of the individual claims indicated that there were 72 employees in 1996 who
claimed in excess of $1,000 on behalf of themselves or their dependants, compared to
53 such claimants in 1994-95. The sudden increase in dental claims activity this year
may represent an accumulated state of dental disrepair which has now translated into
increased use of dental services which mayor may not have been influenced by
economic and/or job uncertainties.
For rate adequacy purposes, Liberty Health has proposed an overall premium increase
of 10.8%, or $92,300.
As an alternative to the proposed renewal rate adjustments which require an additional
$92,300 or 10.8% increase in total overall premiums, the Town may utilize some or all
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Report to Council HR 02/96
December 13, 1996
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of the $49,100 in previously generated surplus funds it has on deposit with the insurer
in lieu of premium payments. If the Town was to use the entire surplus to fund part of
the increased premium requirements under both the health and dental, it would reduce
the overall rate increase for all benefits to about 5% or $43,000 for 1997. However, if
all surplus funds were utilized in 1997 to offset premium payments, there would
continue to be a shortfall in the 1997 premium rates which the Town would have to
address in its January 1, 1988 renewal-without the benefit of any surplus funds upon
which to draw.
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It is therefore recommended that the Town utilize approximately half of its surplus funds
($25,000) to reduce the overall increase to about 7.9% or $67,000. By retaining a
portion of our surplus funds, it will provide some funding flexibility when dealing with the
expected continuing shortfall in premiums (due to increased health care costs,
government cost-shifting, inflation, etc.) , at January 1, 1998.
For your information, I am attaching a copy of Liberty Health's Claim Summary and
Analysis by the various employee groups covered by the Town.
ATTACHMENTS:
1. Draft by-law.
2. Copy of liberty Health Claim Summary & Analysis by Employee Group
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DMC:d
Attachments
cc. Executive Director of Operations
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THE CORPORATION OF THE TOWN OF PICKERING
BY-LAW NO.
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Being a by-law to authorize the execution of agreements
to provide for certain employee benefits for 1997
WHEREAS, pursuant to the provisions of section 207.48 of the Municipal Act, R.S.O. 1980, chapter
M.45, the Council of The Corporation of the Town of Pickering may enact a by-law for providing by
contract,
(a) group life insurance for employees or retired employees or any class or classes thereof; and
(b) group accident insurance or group sickness insurance for employees or retired employees or any
class or classes thereof and their spouses and children, and
(c) hospital, medical, surgical, nursing or dental services or payment therefor for employees or
retired employees or any class or classes thereof and their spouses and children;
NOW THEREFORE, the Council of the Corporation of the Town of Pickering HEREBY ENACTS AS
FOLLOWS:
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1. The Mayor and Clerk are hereby authorized to execute the necessary documentation, in a form
acceptable to the Manager of I-Iuman Resources, required to implement a renewal of the
employee benefits, effective January I, 1997, to provide the following:
(a) group life insurance for employees or retired employees or any class or classes thereof,
with Maritime Life Assurance Company;
(b) group accident or sickness insurance (i.e. long teon disability insurance) for employees or
retired employees or any class or classes thereof, with Maritime Life Assurance
Company;
(c) hospital, medical, surgical, nursing or dental services or payment therefor (i.e. health and
dental insurance) for employees or retired employees or any class or classes thereof and
their spouses and chiluren, with Liberty I-Icalth.
BY-LA W read a first, second and third time and finally passed this 13tl) day of January, 1997.
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Bruce Taylor, Clerk
Wayne Arthurs, Mayor
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The Town of Pickerin~
Claim Summary ami Analvsis bv Group
Seotember 1. 1995 - AU~lIst 31. 1 996
Total All Benefits
Prescription Extended lIealth Semi-Private
Drugs Dental Care Care Hospital Vision Care Total All Benefits
% or TofaJ % orTolal % orTo'al %orTotaJ % 01 Total % 01 Total
Group Net Paid Net Paid Net Paid Net Paid Net Pald Net Paid Ne. Paid Net Paid .Net Paid Net Paid Net Paid Net Paid
27,446 32.9% 32.686 39.2% 7.365 8.8% 10,795 12.9% 5,120 6.1 0/0 83,412 100.0%
118,418 42.4% 110,902 39.7% 19,390 6.9% 13,964 5.0% 16,757 6.00/0 279,431 100.0%
28,097 45.8% 23,854 38.9~~ 3,419 5.6% 2,830 4.6% 3,116 5.10/0 61,316 100.0%
40,159 35.3O/~ 55,638 48.8% 9,422 8.30/0 2,390 2.1% 6,309 5.5% 113,917 100.0%
Total All Groups: 214,121 39.8% 223,079 41.5% 39,595 7.4% 29,979 5.6% 31,303 5.8% 538,077 100.0%
TWNPICK.XLS . 10f25,..6
Prepared by LIBERTY HEALTH
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