R96-148 AUTHORIZING APPLICATIONS

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DEPARTMENT OF FINANCIAL MANAGEMENT RISK MANAGEMENT DIVISION MEMORANDUM 96-100 October 16, 1996 MEMO TO: The Honorable Mayor and City Council FROM: James L. Williams, Jr., City Manager Beth B. Couter, Finance Director Gerard J. Bauer, Risk Manager SUBJECT: Group Health Insurance Proaram Administrator Transmitted herewith is a resolution and supporting documentation authorizing application and agreement with Blue Cross/Blue Shield of Illinois (Health Care Services Corporation) for excess insurance and third party administration of the City's self-funded group health insurance program for contract year 1996-1997. We issued a request for proposals (RFP) for this program in June of 1995, and indicated our intention of maintaining a three-year relationship with the selected vendor. Presently, we are entering the second year of that arrangement. During this past year, we introduced a preferred provider organization (PPO) option for the majority of our employees. With the exception of Library General Service employees, all full time City employees and otherwise eligible retirees can now elect to participate either in the , comprehensive major medical plan (CMM) or the PPO at their discretion, with the privilege of switching plans at renewal each year. Presently, there are 500 subscribers in the comprehensive plan, and 124 in the PPO. The intent of the PPO is to provide a managed care plan that will save money for both the City and the subscriber, while maintaining the highest possible quality of, and greatest possible access to, health care. In the first year of operation, net claim discounts for the PPO plan were in the neighborhood of 8.5%. This permitted for lower plan premiums than those of the comprehensive plan. We anticipate that net PPO discounts will be even higher in the coming year. As part of the renewal, we reexamined the proposals we received last year, and compared their costs with those of the current Blue Cross renewal. The following chart shows a comparison of the projected Blue Cross costs for the coming year and those of last year's competitors, given their quoted fees and claims discounts, adjusting for inflation, and making uniform assumptions about 1996-1997 projected claims, population size, and claims development lag.