Agenda Item Wording:
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Contract Approval - Authorization to enter into a five-year contract with Benefit Coordinators Corporation as the third-party administrator of the City’s Health Benefits Programs.
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Deadline for Action: 11/18/2024
Submitting Department: Administration
Contact Name and Phone Number: Andrew Guzman, Risk Manager, (559) 713-4335
Department Recommendation:
Authorize staff to enter into an agreement with Benefits Coordinators Corporation (BCC) as the third-party administrator of the City’s Health Benefit Programs, effective January 1, 2025. This agreement will be for a five-year term for an amount not to exceed the following:
Year 1 - $15.5 million
Year 2 - $16.2 million
Year 3 - $17.0 million
Year 4 - $17.8 million
Year 5 - $18.7 million
Background Discussion:
On January 1, 2005, the City of Visalia joined the PRISMHealth Program, a risk-sharing pool for health benefits. PRISMHealth requires its members to use one of their authorized Benefits Administrators, and at the time of joining the pool, Workterra was the only option. Workterra’s responsibilities include administration of benefits enrollment, consolidated billing for the Medical, Dental, and Vision benefits, Retiree Health premium billing, and Affordable Care Act tracking and reporting for compliance purposes.
On May 22, 2024, the PRISMHealth Committee voted to terminate PRISMHealth’s contract with Workterra, effective December 31, 2025. All members utilizing Workterra for admin services, including the City of Visalia, must transition to another approved PRISMHealth benefits administrator by October 1, 2025. The City’s transition will be effective January 1, 2025.
Benefit Coordinators Corporation (BCC), BRMS, and Businessolver are available administrators for the PRISMHealth Program. Risk Management reviewed the three vendors and identified BCC as the best fit for the City. Risk Management reviewed the following areas of the three vendors: Fixed Costs, administration costs, review of the benefits administration system, and the opportunity to administer additional programs for current and future years to improve ease of administration and streamlined billing.
Cost Comparison by Categories:
• Fixed Cost: BCC has the lowest fixed cost at $7.00 per employee per month (PEPM), Businessolver is the next lowest at $7.05 PEPM, and BRMS is the most expensive at $7.50 PEPM. The Fixed Cost is a fee that is bundled with our medical premium. In the BCC System & Service Fees attachment, the items that indicate “Included in PRISM Medical Program Fees” are paid for by the Fixed Cost.
• Administration Costs: BCC has the lowest overall costs of the three vendors. The benefit administration fee is $0.50 per employee per month (PEPM), the same cost that Workterra is billing now. BCC also collects the following administration fees for
• $1.35 PEPM for Dental program eligibility and billing, Approximately $10,044 per year
• $1.35 PEPM for Vision program eligibility and billing. This is a reduction from Workterra’s $3.62 PEPM fee. Approximately $10,044 per year.
• Affordable Care Act Compliance Fees - Approximately $9,800 per year
• Benefits Administration System: Businessolver and BRMS have feature-rich benefit administration systems, and BCC uses the same platform as our current administrator. The City would have to pay for the enhanced features of the Businessolver and BRMS systems, such as health plan selection tools and enhanced reporting. These enhanced features are not needed for the City and would most likely not be utilized.
All three vendors would be able to implement additional programs for ease of administration and billing.
BCC has been identified as the best vendor to fit the City’s needs for the following reasons:
• The benefit administration system is the same system currently being used, which will simplify the transition and require less training from city staff.
• BCC’s system would allow self-service options for city employees to make their benefit elections during Open Enrollment, their New Hire benefit election period, and during Qualifying Life Events.
• Consolidated billing: Workterra handles Medical, Dental, and Vision eligibility. BCC would continue to administer and consolidate billing for these programs, and also administer the City’s Life and Disability benefits. BCC would be able to administer the City’s Flexible Spending Accounts, Health Savings Accounts, Ancillary Benefits such as Accident and Critical Illness, and Employee Assistance Plan in future years.
• Retiree Billing for health premiums would be billed and administered by BCC. BCC has provided an overview of the transition process to ensure a seamless transition for retirees participating in our health program.
• BCC will continue to track and report on the Affordable Care Act for Federal and State compliance.
Fiscal Impact:
The total annual payments to BCC for administration would be the following:
Year 1, 1/1/2025 - 12/31/2025: $35,335.50
Year 2, 1/1/2026 - 12/31/2026: $33,790.50
Year 3, 1/1/2027 - 12/31/2027: $33,790.50
Year 4, 1/1/2028 - 12/31/2028: $33,790.50
Year 5, 1/1/2029 - 12/31/2029: $33,790.50
The first year’s cost is $1,545 more than years 2-5 due to a one-time set up charge.
BCC will also be paying the City’s consolidated health premium invoices for medical, dental, vision, life insurance, and disability insurance on the City’s behalf. These payments, will be a pass-through from BCC to our benefit programs. Pass-through premiums will fluctuate each year based on benefit plan renewals. The estimated costs include a 5% increase each year to Medical, Life, and Disability plans to account for trends in benefit premium renewals. Dental and Vision premiums are steady because the City pays the actual cost of claims, which typically have a flat trend.
Below is the estimated total annual payments to BCC, which includes administration costs plus pass-through premiums for the City’s benefit programs. The attachment titled Estimated Annual Payments - BCC provides a more detailed breakdown of the total estimated payments.
Total annual payments to BCC with pass-through premiums:
Year 1, 1/1/2025 - 12/31/2025: $15,471,917.50
Year 2, 1/1/2026 - 12/31/2026: $16,208,687.10
Year 3, 1/1/2027 - 12/31/2027: $16,983,917.43
Year 4, 1/1/2028 - 12/31/2028: $17,797,909.28
Year 5, 1/1/2029 - 12/31/2029: $18,652,600.72
These are not new fees to the City and would have been paid to Workterra had their contract not been terminated with our health program. The first invoice from BCC will be generated in December 2024 for January 2025 health premiums.
Prior Council Action: None.
Other: None
Alternatives: None.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to approve staff to enter in a 5-year contract with Benefit Coordinators Corporation (BCC) as the third-party administrator for the health program provided by participation in the PRISMHealth Program and to authorize BCC to assume the consolidated billing responsibilities from Workterra, effective January 1, 2025, subject to City Attorney review and approval.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: 1) BCC System & Service Fees. 2) Estimated Annual Payments - BCC. 3) BCC Master Admin Agreement