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