PORT OF SEATTLE 
MEMORANDUM 

COMMISSION AGENDA 
Item No.        6b 
Date of Meeting     May 4, 2010 
DATE:    April 28, 2010 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:    Tammy Woodard, Sr. Manager, Total Compensation 
Jeff Hollingsworth, Risk Manager 
SUBJECT:  Resolution No. 3636, First Reading. Adoption of a Self-Funded Health Insurance
Program 

BACKGROUND
The Port of Seattle has historically fully insured the medical and dental insurance provided to
employees and retirees. In early 2009 the Port's benefit consultant, Towers Watson (the firm
was known as Watson Wyatt at the time) presented the results of a self-funding feasibility study
conducted for the Port. This study showed that self-funding medical and dental benefits was a
financially viable option and had the potential to save the Port 6% - 8% (up to $1 million) of the
cost of fully insuring the benefit program. 
The savings associated with a self-funded health benefit program come from reduced claims
administration fees, less taxes, reduced stop loss insurance costs, direct rebates on pharmacy
claims and cash flow earnings resulting from the Port holding the funds to pay claims until they
are actually needed. These savings are slightly offset by actuarial costs and state fees that are not
required of fully insured programs. The costs and potential savings associated a self-funded
medical and dental benefit program were detailed in briefings to the Commission on January 12,
2010 and April 27, 2010. 
With a self-funded benefit program the Port will contract with a third party claims administrator
to process and administer medical and dental claims. The claims administrator could be an
insurance company like Premera or a company whose purpose is to provide claims
administration services for self-insured medical and dental programs. The claims administrator
will process claims for Port employees and retirees and request funds from the Port on a weekly
basis to pay the claims processed for the week. With this arrangement the Port pays only for
actual claims rather than paying a premium based on expected claims. 
While there is expected cost savings associated with adopting a self-funded medical and dental
benefit program, there are some risks associated with a self-funded program. The most 
significant risk is greater than expected claims costs. Purchasing stop loss insurance will
mitigate this risk. Risks and costs associated with a self-funded medical and dental benefit
program were detailed at January 12, 2010 and April 27, 2010 Commission Briefings.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
April 28, 2010 
Page 2 of 2 
Engaging employees in maintain their health also helps manage the risk of higher than expected
claims costs, and ensuring that employees understand what self-funding is, and what is it not, is
important. Human Resources and Development will continue its employee outreach program
through email communications, updates to the Port's Self-Funding Intranet page and other means 
to share information and address questions raised by employees as the self-funded medical
program is implemented. 
RECOMMENDATION: 
Self-funding medical and dental benefits is a common practice among mid-size and larger
employers, as well as among Washington public employers (see April 27, 2010 Commission
briefing memo for details). The self-funding benefits team expects the benefits to outweigh the
risks and recommends the Commission adopt a self-funded medical and dental benefit program. 
Chapter 82-65 WAC requires Washington public employers to adopt a self-funded program by
ordinance or resolution of the entities governing body. Resolution No. 3636 will adopt a selffunded
medical and dental benefit program for the Port of Seattle, specify that the program will
be administered consistent with Chapter 82-65 WAC, and authorize the Chief Executive Officer
to take all steps required and execute all documents necessary to adopt, implement and manage a
self-insured health plan for the Port of Seattle. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: 
January 12, 2010  Commission briefing on self-funding of Port Medical and Dental Benefits. 
January 12, 2010  Commission authorization for a two-year contract with a benefits consulting
firm with an option to renew annually for three years. 
April 27, 2010  Updated briefing on the Self-Funded Medical and Dental Benefits Program.