Title
Approval of Amendment No. 3 to Existing General Services, Agreement No. AGR24-67 with Blue Cross Blue Shield of New Mexico, in an Amount Not to Exceed $5,100,000, for the Initial Term through December 31, 2027, For the Purpose of Providing Medical Insurance Benefits to Eligible Los Alamos County Employees and Their Dependents, and Authorize the Use of Up to $300,000.00 in Accumulated Reserve Funding Towards Expenses Covered by Amendment No. 3 and Approval of Budget Revision 2027-34 for Employee Benefits and Risk Funds
Recommended Action
I move that Council approve Amendment No. 3 to Agreement No. AGR24-67 with Blue Cross and Blue Shield of New Mexico, A Division of Health Care Service Corporation, in an amount not to exceed $5,100,000, for the initial term through December 31, 2027, for the purpose of providing medical insurance benefits to eligible Los Alamos County employees and their dependents, authorize the use of up to $300,000.00 in accumulated reserve funding towards expenses covered by Amendment No. 3, and approve Budget Revision 2027-34 and include Attachment C as part of minutes of this meeting.
County Manager's Recommendation
The County Manager recommends that Council approve the motion as presented.
Body
On October 29. 2024, Council approved General Services Agreement AGR24-67 for Medical Insurance Benefits for Los Alamos County Employees, which also include their dependents. A rate guarantee was provided for years one through three (1/1/2025 - 12/31/2027) for the Claims Administration Services identified in the RFP. All renewal years (01/01/2028 - 12/31/2031) are subject to negotiation and approval by Council.
In addition to Claims Administration Services, Blue Cross Blue Shield of New Mexico (BCBS NM) provides medical stop loss insurance to protect the County from assuming all of the liability for losses that result from an unexpected number of claims, either from an individual (Specific Stop Loss) or the entire workforce (Aggregate Stop Loss). This type of coverage was included in the Scope of Services identified in the Agreement. If approved, the term the Stop Loss Insurance Coverage, as defined in the Stop Loss Agreement (ASA, Exhibit B-2), shall commence January 1, 2027, and shall continue through December 31, 2027, unless sooner terminated. At the County’s sole option, the Stop Loss Insurance coverage may be renewed for up to five (4) consecutive one-year periods, unless terminated sooner.
As a self-funded insurer, premiums collected from both the County and the employees fund both claims and any administrative fees associated with the Medical Insurance Benefits Plan (Plan). The Administration Fee was $67.68 plus a Prescription Drug Rebate Credit of $77.44 and a Medical Drug Rebate credit of $2.50. For 2027, the Administration Fee is $68.89 plus a Prescription Drug Rebate Credit of $87.38 and a Medical Drug Rebate credit of $2.20.
The specific Stop Loss premium increased from $242.17 per employee per month to $291.96 per employee per month. This constitutes an increase of approximately 20.6% in this fee. The increase is due to large claimants over the $165,000 stop loss level that the Plan has experienced. The Aggregate Stop Loss premium increased from $2.60 to $3.15 with an overall 21.2% increase.
County staff, the County Attorney’s office, and the staff from BCBS NM, including their legal department, worked diligently to negotiate the language and terms contained in Amendment No. 3 in Attachment A.
The County's group insurance plans, including medical insurance plans, are renewed at the beginning of every calendar year. The County pays 80% of the premiums for a full-time eligible employee, 60% for a three-quarter-time eligible employee, and 40% for a half-time eligible employee.
The County’s Plan is currently self-funded. This change was made in January 2013. The Plan has very high participation: Eighty-two percent (84%) of approximately 680 eligible regular and limited-term employees have elected to enroll. The County has offered two medical insurance coverage plans to its employees since 2002.
Based on the forecasted increase in higher claims experience calculated on claims for the last twenty-four (24) months, and the higher overall increase of pharmacy and claim trend, the recommendation from the County’s Benefit Consultant, Aon, is to increase premiums by 15.5%. However, after reviewing all information, the benefits committee recommends that Council approve the use of accumulated reserve amount of up to $300,000 and increase both employee and employer premiums by 12%.
Our estimated Plan revenues for FY2027 are currently $11,352,400. The overall combined estimated Plan expenses are $12,750,000.
The Plan’s estimated accumulated reserve is currently $2,547,821. Council has provided direction to maintain reserves at 25 percent of projected claims. With total projected medical claims for fiscal year 2027 estimated at $10,832,700, the minimum reserve level would be $2,708,172.
To support this target, a budget adjustment of $1,600,000 is also considered in this item. This adjustment will ensure that unbudgeted 2026 claims to date are fully funded and will also allow for the use of up to $300,000 in reserves to help mitigate rate impacts.
Alternatives
Should Council choose not to approve Amendment No. 3 to Existing General Services Agreement AGR24-67 with BCBS NM, possible alternatives would include issuing a new RFP for the same services resulting in a gap of services between the expiration of this Agreement and the award of a new contract resulting from the new RFP or discontinuing medical insurance coverage for Los Alamos County employees. Council could choose not to approve the attached revision. The impact would be that the Risk Fund would be over budget for FY27 which does not meet budget authority guidelines as provided by the County's Financial Policies and by the Department of Finance and Administration (DFA). The proposed revision involves approval of additional budget authority drawn from the present fund balance.
Fiscal and Staff Impact/Planned Item
Employee benefits are included in the County's biennial budget, and the fiscal impact, as noted above, would allow for the use of up to $300,000.00 of accumulated reserves for the purpose of mitigating rates as detailed in Attachment A.
Attachments
A - AGR24-67-A3 Blue Cross Blue Shield of New Mexico
B - General Services Agreement No. AGR24-67 with 2 Amendments
C - Budget Revision 2027-34
D - Draft 2027 Medical Insurance Premiums