Title: UNITED HEALTHCARE CONTRACT

Recommendation:

I recommend the Board approve the contract with United Health Care to act as a servicing agent to administer the District’s employee medical plan for a three year period from 1/1/2007 through 12/31/2009.

Description:

• United Healthcare has been the District’s Medical Care Provider since 1/1/1997 and has a mostly positive reputation with employees.
• United will administer all claims and provide the same services and reports we received when fully insured for a $21.50 per employee per month administration fee, which is guaranteed for a period of three years.  United will continue to fund $200,000 annually to support Wellness and other enrollment costs.
• We recommend purchasing individual stop loss insurance for total claims on any individual that exceeds $500,000 with no maximum for a $4.95 per employee per month premium.  The total per employee per month fee would be $21.50 + $4.95 for a total of $26.45 or an annualized fee of $6,665,400 based on 21,000 employees. 
• Our benefits consultant, Edify, has marketed the excess insurance and negotiated comparable rates with United HealthCare.  We recommend leaving the specific excess with United Health Care for at least the first year to keep a total interest in the plan.  Also, reimbursement waiting periods are eliminated.   A group of 21,000 employees is statistically valid and should not see wide variations in claims.    Therefore, we believe the only difference between fully insured vs. self insured is the premium tax and risk margin the carrier would charge if fully insured.
• An actuarial report by an independent actuary will be conducted by APEX Management Group for compliance with FS 112.08 filing requirements to certify the plans soundness.
• The District will continue to fund this plan utilizing the fully insured premiums proposed by United HealthCare which is 3.8% above 2006 premiums.  All claim payments, administration fees, and specific stop loss premiums will be paid from these funds.
• Performance Guarantees as well as in-network discount guarantees have been negotiated.  We were able to negotiate a flat 3-year servicing fee.  This is a recommendation to approve a 3-year servicing contract; however, we have a clause which allows cancellation by The School District at the end of each year.
• Our consultant, Edify has thoroughly reviewed this plan and fully supported this proposal.

Financial Impact:

The annual costs for the medical plan based on 21,000 (approximately 1,500 waive coverage) employees is $108.7 million.   The source of the funds is the general fund.

For Additional Information, contact:
Joseph M. Moore(Joseph.Moore)\Dianne L. Howard