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HomeMy WebLinkAbout1998 01 12 Consent Item B COMMISSION AGENDA ITEM B egular Consent X formational January 12. 1998 Meeting MGRj(yJl1 DEPT_ Authorization REQUEST: City Manager requesting City Commission authorization to award a bid for Long Term Disability Insurance. - PURPOSE: The purpose of this agenda item is for the City Commission to authorize the award of a bid for long term disability insurance at a cost of $0.30 per $100 of payroll. CONSIDERATIONS: At the August 25, 1997 City commission meeting, the City Commission approved a unified City Offset Pension Plan and Disability coverage. The Commission authorized the City Manager to bid the long term disability coverage for City employees. On October 22, 1997, the City opened bids for long term disability Insurance. Thirteen b~ds were received, evaluated and references were contacted. On December 16, 1997, the Pension Board met to review the bids for long term disability insurance. The board voted unanimously to recommend that the City Commission award the bid to Standard Insurance Company for Plan 2 at a cost of $0.30 per $100 of payroll. The City budgeted $20,000 for long term disability insurance. Using this year's annual payroll of $5,271,696, and a rate of $0.30 per $100 of payroll, the annual cost for long term disability insurance this year is $15,815. However, as the City's yearly payroll increases, the annual cost will increase even though the rate remains the same. Standard Insurance Company bid a rate guarantee for 2 years. However if Standard is awarded the bid, they will extend the rate guarantee an additional year. FUNDING: There are funds in the FY 97/98 budget. RECOMM ENDA TIONS: City Manager recommending the Commission authorize the award for long term disability insurance to Standard Insurance Company for Plan 2, at a cost of $0.30 per $100 of payroll. IMPLEMENTATION: Upon Commission approval. ATTACHMENTS: Memo of January 5, 1998 to City Manager. Memo of December 10, 1997 to City Manager. Bid tabulation. COMMISSION ACTION: 2 CITY OF WINTER SPRINGS, FLORIDA 1126 EAST STATE ROAD 434 WINTER SPRINGS, FLORIDA 32708.2799 Telephone (407) 327-1800 MEMORANDUM To: Ron McLemore, City Manager From: John J. Drago, Administrative Assistant 9 Date: January 5, 1998 / I Re: Long Term Disability Bids On December 16, 1997, the Pension Board held a Special Meeting to discuss the long term disability bids. All board members and Mr. Tom Lang were provided a copy of my December 10, 1997, memo to you and the bid tabulation summaries. The board asked that I check references for Standard Insurance Company. Below are the references I checked: Reference Comments Broward County Board of County Commissioners Dorothy Cleveland 954-728-2700 County has life, dependent life, and long term disability. 3 year polices with annual renewals. Wonderful. City of Palm Bay Christina Hannon 407 -952-3400 City has life, AD&D, additional life, dependent life and short term disability for the past 6 years with Standard Insurance Company. Satisfied with Standard. City of West Palm Beach Pam Elliott 561-659-8000 City has term life, and long term disability for the past 5 years with Standard Insurance Company. Excellent Company. City of Maitland Theresa Walker 407 -539-6200 City has term life and AD&D with Standard for the past 7 years. Very pleased. The board also asked that I contact those cities that terminated policies with Standard Insurance Company to ascertain why. Below are the cities I called: City Comments City of Melbourne Jeanette Riley 407 -727 -2900 City had term life policy. Good company. Re-bid- got lower rate. City of Indian Rocks Beach May Karayianes 813-595-2517 City paid term life policy. Employee paid long and short term disability. Standard wanted a certain number of employees enrolled in the L TD and STD policies. City could not meet required humber. Both policies were re-bid. Standard was easy to work with. City of Dania Michael Sm ith 954-921-8700 Did not respond. The Pension Board voted unanimously to recommend the award of the long term disability bid to Standard Insurance Company for Plan 2 at a cost of $0.30 per $100 of payroll. JJD/jp 2 MEMORANDUM To: Ron McLemore, City Manager From: John Drago, Administrative Assistant Date: December 10, 1997 Re: Long Term Disability Bids On October 22, 1997, the City opened bids for Long Term Disability Insurance. Thirteen insurance companies submitted bids. Below is staff's analysis and recommendations: REVIEW OF FINALIST'S PROPOSALS The finalists were Standard Insurance Company and Guarantee Life. In review of the finalist's proposals for long term disability insurance for the City of Winter Springs, six areas were identified for focus and comparison. They are: . Definition of Disability The definition of disability used by Guarantee Life in determining the eligibility of claims is: "Unable to perform' each' of main duties of regular occupation." The definition of disability used by Standard Insurance Company in determining the eligibility of claims is: "Unable to perform with reasonable continuity the material duties of your own occupation." The definition used by Standard is a broader definition. The definition used by Guarantee (especially the word "each") could act to exclude the individual who could perform some of the duties of his/her regular occupation, but was effectively prevented from performing the whole scope of the duties of hislher regular occupation. The definition used by Standard is more beneficial to the employee in qualifying for benefits. . Ability to Meet the City's Specification and Plan Designs In the proposal section of the L TD Specifications, the City requested that the insurance company agree to hold the City harmless at all times from and against any and all claims, liability, expenses, losses, etc. This is a common request in the public sector today. Guarantee indicated that they could not agree to this requirement. Standard agreed to this stipulation, thereby meeting the City's request. The City asked for bids on four plan designs. Guarantee bid on only one plan design and Standard bid on two plan designs. . Social Security Integration Disability benefits will be directly reduced by primary and family benefits the insured employee is eligible to receive from social security. Primary benefits are those social security benefits which the employee is eligible to receive because of disability and/or retirement. Family benefits are those social security benefits which the insured employee's spouse, child, or children are eligible to receive as a result of the insured employee's eligibility for social security benefits. Under Guarantee's bid, disability benefits are reduced by primary and family social security payments. Standard bid two options: one with primary and family social security integration, and one with primary social security integration. The Standard bid for primary social security integration will result in a better benefit to the employee in the event of disability. . Financial Stability/Disability Leader in the Marketplace The City required in the bid that insurance companies had to meet five minimum financial stability criteria. Guarantee met two of the five rating criteria and Standard met four of the five rating criteria. Guarantee Life is a stock company founded in 1902 and licensed in 46 states and the District of Columbia, with $1.3 billion in assets. Guarantee has been selling insurance to the public sector since 1972. In 1996, Guarantee Life issued 1,443 new policies with $10,654,000 in premiums. Standard is a mutual company founded in 1906 and licensed in 50 states and the District of Columbia with $3.9 billion in assets. Standard has been selling insurance to the public sector since 1951. In 1996 Standard issued 3,557 new policies with $58,484,000 in premiums. . Service/Claims Management Profile Guarantee Life has 16 full time long term disability claims adjusters on staff. 2 Standard Insurance has the following service profile: 225 - claims/customer service staff 12 - with social security emphasis 4 - with fraud investigation 6 - with tax emphasis 5 - certified vocational consultant's 5 - medical consultant's 5 - board certified physician consultant's . Rates Guarantee Life bid a payroll of $0.28 per $100 of payroll. Using a typical monthly payroll of $439,308; the yearly premiums would be $14,760. Guarantee bid a 2 year rate guarantee. Standard bid a payroll rate of $0.28 per $100 of payroll for Plan 1 and $0.30 per $100 of payroll for Plan 2. Using a typical monthly payroll of $439,308; the yearly premiums would be $14,760 for Plan 1 and $15,815 for Plan 2. Standard bid a 2 year rate guarantee. SUMMARY As we look at the quantitative aspects as well as the qualitative aspects of this bid, it becomes apparent that the City should award the bid to Standard Insurance Company as they are best able to meet the City's criteria. The implementation of this policy could be as early as February 1, 1998. There will need to be some further discussions with Standard as it specifically relates to the contract. RECOMMENDA TION The long tenn disability insurance bid should be awarded to Standard Insurance Company for Plan 2 at a cost of $.30/$100 of payroll. Hold a special meeting of the Pension board in December to review the L TD bids, and ask the Board for a recommendation of award. Place the recommendation for award on the January 12, 1998 Commission Agenda for a February 1, 1998 implementation date. 3 City of Winter Springs Disability Plan Comparison Plans Offered Rate Per $100 Yearly Cost Based Rate Benefit Monthly Company Name by Company of Payroll on 439,308 Payroll Guarantee Duration Maximum Status Combined Insurance Plan 1 - Primary & Full Family Company of America with Social Security Offset $0.25 $13,179 2Year 65 $6,000 Combined 2 Year Maximum Benefit For Claims Not Considered Standard Insurance Plan 1 - Primary & Full Family Social Security Primary & Full Family Company with Social Security Offset $0.28 $14,760 2Year 65 $6,000 Not Considered ~~~1- Primary Social Security $0.30 $15,815 2Year 65 .. $6,000 Recommended Plan, ration Only ... . ,.. .. . ,,'.. Plan 1 - Primary & Full Family Social Security Primary & Full Family and Definition Guarantee Life with Social Security Offset $0.28 $14,760 2Year 65 $6,000 of Disability - Not Considered Plan 1 - Primary & Full Family Canada Life with Social Security Offset $0.39 $20,560 2Year 65 $6,000 Over Budget - Not Considered Plan 1 - Primary & Full Family Security Mutual Life with Social Security Offset $0.39 $20,560 2Year 65 $5,000 Over Budget - Not Considered Plan 1 - Primary & Full Family Florida Combined with Social Security Offset $0.42 $22,141 2Year 65 $6,000 Over Budget - Not Considered Plan 2 - Primary Social Security Integration only $0.44 $23,195 2Year 65 $6,000 Over Budget - Not Considered Plan 3 - 70% All Sources $0.50 $26,358 2Year 65 $6,000 Over Budget - Not Considered Plan 1 - Primary & Full Family $6,000 + Disability UNUM with Social Security Offset $0.43 $22,668 2Year 65 Plus 20% to $5,000 Over Budget - Not Considered Northwestern Mutual Plan 1 - Primary & Full Family Life with Social Security Offset $0.438 $23,090 2Year 65 $6,000 Over Budget - Not Considered United States Life Plan 1 - Primary & Full Family $3,000 Guaranteed Insurance with Social Security Offset $0.45 $23,723 2Year 65 $3,000 Underwritten Over Budget - Not Considered Shenandoah Life Plan 1 - Primary & Full Family Insurance Company with Social Security Offset $0.47 $24,777 2Year 65 $6,000 Over Budget - Not Considered Plan 1 - Primary & Full Family Humana with Social Security Offset $0.51 $26.886 2Year 65 $6,000 Over Budget - Not Considered Trustrnarklnsurance Plan 1 - Primary & Full Family Company with Social Security Offset $0.54 $28,467 2Year 65 $6,000 Over Budget - Not Considered American Bankers & Plan 1 - Primary & Full Family Assurance Company with Social Security Offset $1.15 $60,624 1 Year 65 $6,000 Over Budget - Not Considered City of Winter Springs Disability Plan Comparison Guaranteed Life Standard Insurance Co Standard Insurance Co Plan 1 Plan 1 Plan 2 Rate/$100 of Payroll $0.28 $0.28 $0.30 Rate Guarantee 2 Year 2 Year 2 Year Yearly Cost Based on $439,308 Payroll Per Month $14,760 $14,760 $15,815 Plans Offered Plan 1 Plan 1 Plan 2 Benefit Duration 65SSNRA 65 SSNRA 65 SSNRA Monthly Maximum $6,000 $6,000 $6,000 Zero Day Residual Yes Yes Yes Own Occupation Period 24 Months 24 Months 24 Months Mental & Nervous 24 Months Max 24 Months for each period of continuous disability Drug & Alcohol 24 Months Max 24 Months Max 24 Months Max Social Security Integration 1 Primary, Full Family Primary, Full Family Primary Pre Ex 3/12 3/12 3/12 Rehabilitation Yes Yes Yes Minimum Monthly Benefit $50 $100 $100 Survivor Benefit 3 Months/Monthly Install 3 Months/Lump Sum 3 Months/Lump Sum Waiver Yes Yes Yes Company Information Stock Company Mutual Company Licensed in 50 States Licensed in 46 States Public Business since 1951 1.3 Billion in Assets 3.9 Billion in Assets Ratings Best A Excellent Best A Excellent Best A Excellent A- Weiss Moody's A2 Moody's A2 Standard & Poors A+ Standard & Poors A+ Duff & Phelps AA- Duff & Phelps AA- Meets 2 out of 5 Meets 4 out of 5 Meets 4 out of 5 requested rating criteria requested rating criteria requested rating criteria Disability Total 2 Yes Yes Yes Partial 3 Yes Yes Yes Claims & Support Services Has 16 full time Long 225 Claims/Customer Service Staff Term Disability claims 12 with Social SeCUlily emphesis adjusters on staff. 4 with fraud investigation 6 with tax emphasis 5 Certified Vocational Consultants 5 Medical Consultants 5 Board Certified PhysiCian Consultants (;ases t->rem,ums (;ases t->remlums (#) ($000) (#) ($000) Market Share 1992 1992 2.714 33,706 1993 291 1,212 1993 1.670 34.950 1994 514 3,835 1994 2.566 26,171 1995 1,274 7.666 1995 2.902 34 .259 1996 1.443 10.654 1996 3.557 58.484 1.2, & 3 Please see definitions on the reverse side. SUMMARY OF HIGHLIGHTS FOR STANDARD INSURANCE COMPANY Described below are a few other notable points regarding Standard Insurance Company as the plan of choice: . Standard Insurance Company has been in the public sector (since 1951) establishing themselves as a leader in providing benefits for public employees. . They have more than $272 million Long Term Disability Premiums in force. . They have more than 13,300 Long Term Disability policies in force. . There are 11 regionalized claim management teams with Standard Insurance Company. . 35% of the Group Division is dedicated to disability management services. . Standard Insurance Company's Definition of Disability is more liberal. . Their Own Occupation Definition is stronger. . Standard Insurance Company's Mental & Nervous benefits are for each period of continuous disability rather than just the maximum of 24 months in other plans. . SoCial Security Integration (Definition on previous page) For example: If someone qualifies for $1 ,OOO/month of benefit with Social Security, the maximum family benefit they can qualify for is $2,400/month. This amount varies depending on years employed and income. To be able to receive family benefits is a significant advantage. . In Standard Insurance Company's policy language, Clerical Error and Misstatements are addressed. . Northwestern Mutual's contract is Standard Insurance Company's contract on Northwestern Mutual's paper. Northwestern Mutual's ratings are: Standard & Poors AAA Moodys Aaa Duff & Phelps AAA \ Best A++ . Standard Insurance Company has an extensive Reference list as shown below: Florida Public Groups Bay County Sheriffs Office City of Blountstown Broward County Sheriffs Office Florida Department of Motor Vehicles & Highway Safety City of Indian Rocks Beach Jacksonville Transit Authority City of Maitland Metro Dade Firefighters City of Palm Bay S1. John's County S1. Lucie Sheriffs Department City of West Palm Beach Clay County Broward County Lee County Citrus County Hillsborough County Other Groups Boca Raton Community Hospital Boy Scouts of America Chicago Bears Daytona Beach Community College Freightliner Corporation Grubb & Ellis Company Lanier Worldwide, Inc Levi Strauss & Company Lil' Champ Food Stores Los Angeles Dodgers Nike, Inc. Pendleton Woolen Mills, Inc. Ryder Systems, Inc. Southwest Airlines Co. The size, experience and policy benefits offered by the company establishes Standard Insurance Company as the plan of choice.