Title
Contract for General Services, Agreement No. AGR24-67 with Blue Cross and Blue Shield of New Mexico, A Division of Health Care Service Corporation, a Mutual Legal Reserve Company, an Independent Licensee of the Blue Cross and Blue Shield Association, in an Amount Not to Exceed $1,300,000, for the Initial Term, plus Applicable Gross Receipts Tax, for the Purpose of Providing Medical Insurance Benefits to Eligible Los Alamos County Employees
Recommended Action
I move that Council approve the contract for general services, 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 $1,300,000, for the initial term, plus applicable gross receipts tax, for the purpose of providing medical insurance benefits to eligible Los Alamos County employees.
County Manager's Recommendation
The County Manager recommends that Council approve the motion as presented.
Body
On April 10, 2024, the County issued Request for Proposal (RFP) 24-67 for Medical Insurance Benefits for Los Alamos County Employees. The County received four (4) responses by the submission deadline, and all responses were considered qualified. Using the criteria established in the RFP, the response from Blue Cross Blue Shield of New Mexico was found to be the most advantageous to the County in providing the desired services and benefits. Blue Cross Blue Shield of New Mexico has been the County’s medical insurance provider since 1999. A rate guarantee was provided for years one through three for the Claims Administration Services identified in the RFP. All renewal years are subject to negotiation and approval by Council.
If approved, the term of this Agreement for Administrative Services, as defined in the Administrative Services Agreement (“ASA”) (Attachment A, Exhibit A), shall commence January 1, 2025, and shall continue through December 31, 2027, unless sooner terminated. At the County’s sole option, the Agreement may be renewed for up to four (4) consecutive one-year periods, unless terminated sooner.
Medical stop loss insurance protects employers from assuming all of the liability for losses that result from an unexpected amount 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 RFP. If approved, the term of this Agreement for Stop Loss Insurance Coverage, as defined in the Stop Loss Agreement (ASA, Exhibit B), shall commence January 1, 2025, and shall continue through December 31, 2025, unless sooner terminated. At the County’s sole option, the Stop Loss Insurance coverage may be renewed for up to six (6) consecutive one-year periods, unless terminated sooner.
In developing the RFP, staff had two major objectives:
1. Maintain the current level of benefits while providing enhancements wherever possible and economically feasible; and
2. provide a continuation of existing services with no increase in cost, if possible, or a reasonable increase if necessary.
These objectives were achieved with the assistance of Aon ("Aon"), the County's current benefits consultant. Aon assisted with the preparation of the RFP as well as with the analysis and evaluation of all responses.
Premiums collected from both the County and the employees fund both claims and any administrative fees associated with the Plan. As a result of the RFP, the Claims Administration Fee was negotiated to $66.49 per member per month. Additionally, the Best and Final offer provided by Blue Cross Blue Shield of New Mexico included a Prescription Drug Rebate Credit of $73.90 and a Medical Drug Rebate credit of $2.50.
The specific Stop Loss premium increased from $214.51 per employee per month to $235.05 per employee per month. This constitutes an increase of approximately 9.6% in this fee. The increase is due to large claims over the $155,000 stop loss level the Plan has experienced since moving to a self-funded arrangement. The Aggregate Stop Loss premium remained the same, $2.19 per employee per month.
County staff, the County Attorney’s office and the staff from Blue Cross Blue Shield of New Mexico, including their legal department, worked diligently to negotiate the language and terms contained in the agreements in Attachment A.
Background Information: The County's group insurance benefits plans, including medical insurance, are renewed at the beginning of every calendar year. Currently, 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 medical plan is currently self-funded. This change was made in January 2013, due to unfavorable rate increases under a fully insured Plan. The Plan has very high participation: Seventy-nine (79) percent of approximately 647 eligible regular and limited-term employees have elected to enroll. The County has offered three medical insurance coverage plans to its employees since 2002.
Based on the claims experience for the last twenty-four (24) months, and the reduction in the Claims Administration fee as a result of the RFP 24-67, the recommendation from AON is to increase premiums by 10.1%. However, after reviewing all information, the benefits committee recommends that Council approve the use of accumulated reserve and increase both employee and employer premiums by 5.1%.
Topics considered by the Health Insurance Committee included:
1. Increasing both Employee and Employer bi-weekly insurance premiums by 10.1%, with the County picking up 5% of the 10.1% increase, resulting in an increase of 5.1% for employees, and utilizing reserve funding to cover the remainder.
2. Eliminating copays for telehealth and mental health services would increase insurance premiums an additional 1.7% and a 11.8% total increase, resulting in an increase of both Employee and Employer split premiums by 6.8%.
3. Eliminating the Blue 35 plan and moving all participants to the Blue 45 plan.
4. Increase Stop Loss Coverage to $165,000.
5. Eliminate Aggregate.
The recommended action to Council incorporates items 1 and 4.
Based on the budgeted revenues in the amount of $10,566,467 less the current vacancy rate of 6%, our estimated Plan revenues for FY2025 will be $9,932.479. The overall combined estimated Plan expenses are $10,000,000. This would result in the use of approximately $67,521 in accumulated reserve.
The estimated accumulated reserve for the Plan is currently $3,617,714. Council has instructed staff to maintain accumulated reserves in the amount of 25% of projected claims. The total projected medical claims for calendar year 2025 are $9,757,120. Therefore, the accumulated reserve level should be at a minimum of $2,439,280. This allows for the use of up to $1,178,434 of accumulated reserves for the purpose of mitigating rates.
Alternatives
Should Council choose not to approve Services Agreement AGR24-67 with Blue Cross Blue Shield of New Mexico, possible alternatives would include re-issuing an RFP for the same services or discontinuing medical insurance coverage for Los Alamos County employees.
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 approximately $67,521 of accumulated reserves for the purpose of mitigating rates
Attachments
A. General Services Agreement No. AGR24-67
B. Draft 2025 Medical Insurance Premiums