Item 6b Supp
ITEM NO: _6b_supp_________ DATE OF MEETING:__January 12, 2010* *Updated January 6, 2010 Commission Briefing on Self-Funding Employee Medical and Dental Benefits Background Port's Medical and Dental insurance have historically been fully insured Premium sharing was introduced in 2009 as one cost containment measure Wellness Rewards Program provides an opportunity for employees to reduce their premium share 2 Survey of Other Entities Port staff visited the Cities of Kent, Bellevue, Everett Selected as they are comparable in size Discussed their self-funded program Learned how they incorporate wellness into their program Discussed their approach to maintaining solvency Learned about state regulatory compliance 3 Benefits of a Self-Funded Model Direct cost savings versus fully insured program Estimated savings of 6% - 8% (~$1 million) Additional saving opportunity with a self-funded pharmacy program Premium tax savings provides significant cost savings Ability to audit claim payments against claim projections Potential future savings with Health Savings Accounts or Health Reimbursement Accounts Future potential opportunity for small business to be selected as a vendor in support of the self-funded plan 4 Risks of a Self-Funded Model Potential claims underfunding Specific stop loss insurance mitigates this risk Aggregate stop loss insurance mitigates this risk Failure to maintain solvency requirements Impact is the loss of the ability to be self-funded Laws and regulations affecting self-funded employers could change 5 Challenges of a Self-Funded Model More contracts to procure and administer Three contracts vs. the current one Additional demands on staff time, at least in 2010 Team approach mitigates this challenge 6 Estimated Annual Savings - Fixed Costs Item Fully Insured Self-funded Savings (Current) (Proposed) (Annual) Medical Carrier Admin Fee $1,620,000 $970,000 $650,000 Dental Carrier Admin Fee $220,000 $140,000 $80,000 Stop Loss Coverage $980,000 $730,000 $250,000 Pharmacy Rebate $0 ($114,000) $114,000 Cash Flow $0 ($22,000) $22,000 Actuarial Services $0 $15,000 ($15,000) State Fees $0 $13,000 ($13,000) Consultant/Broker Fees $150,000 $150,000 None TOTAL $2,970,000 $1,882,000 $1,088,000 Note: The Port would receive an estimated rebate of ~$1 million in 2012 from Premera once final claims are closed. 7 Future Commission Action Required STEP WHEN Request authorization to execute a contract, via competitive January 12, 2010 selection process, with a benefits consultant/broker Request authorization to execute 3 contracts, via competitive Late Spring, 2010 selection process with Medical Claims Administrator Dental Claims Administrator Stop Loss Insurance Provider 8 Conclusion Self-funding team recommends adopting a self-funded model Benefits outweigh the risks and challenges Risks and challenges can be managed 9
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