HomeMy WebLinkAboutFCS-16-117 - Group Benefits Provider Reveiw
REPORT TO: Finance & Corporate Services Committee
DATE OF MEETING: August 8, 2016
SUBMITTED BY: Mike Goldrup, Director, Human Resources 519-741-2200 x 7117
PREPARED BY: Ita Magid, Supervisor, Benefit Development,519-741-2200 x7219
WARD(S) INVOLVED: n/a
DATE OF REPORT: July 20, 2016
REPORT NO.: FCS-16-117
SUBJECT: Group Benefits Provider Review
___________________________________________________________________________
RECOMMENDATION:
For information
BACKGROUND:
Employee benefits are exempt from the purchasing by-law and not required to be
competitively bid. Notwithstanding this exemption, The City conducts a market review
for employee benefits on a periodic basis in order to ensure that it receives value for
money.
In 2010, the City contracted the services of Mercer (Canada) Limited to complete a
market review for the group benefits program. In April 2011, following a competitive
process, the City moved the group benefits program to Sun Life Financial. At that time,
staff indicated that it would be appropriate to review the market again in five years. The
market review has been completed and this report summarizes the findings.
REPORT:
City staff, ,
completed a market analysis and review of the group benefits plan with Sun Life. The
purpose of this undertaking was to determine whether or not the current premium rates
and expense factors being paid to Sun life to administer the group benefits plan are
competitive.
The table below shows the payment structure of City
self-insures health and dental benefits and Sun Life provides claim adjudication under
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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insurer are typically expressed as a percentage of paid claims. Sun Life charges a
premium rate for other insured benefits provided by the City such as Life Insurance, and
Long Term Disability.
Benefit TypePayment Structure
Extended Health CareASO
DentalASO
Life InsurancePremiums
Long Term DisabilityPremiums
Partnering with a benefits consultant in this review:
Ensures the program is meeting the strategic needs of The City of Kitchener
Identifies risks within the program and recommends appropriate mitigation
strategies
Identifies claiming trends within the program and within the insurance industry
Provides the maximum value for the premiums paid
experience and shift in demographics, usual and customary trend factors, as well as
other important factors such as interest rates, changes in provincial health care
legislation, and changes in the dental fee guide. Mercer utilized their national
benchmarking databases to determine competitiveness of insurer fees.
premium rates and expense
factors for the City of Kitchener are competitive
.In other words, a marketing of the
group benefit plan would not result in a sustainable long term reduction in expenses.
The table below provides the results of the market verification by benefit type. The
expense level of the comparator group is compared to the expense level of the City of
Kitchener currently serviced by Sun Life.
Comparator
City of
#Group
Kitchener
BenefitComparator BasisAverageComment
Expense
GroupsExpense
Level
Level
Life15%of premium7.50%7.50%Competitive
Long Term Disability21%of premium11.85%11.30%Competitive
Extended Health19% of paid claims5.75%5.30%Competitive
Dental17% of paid claims5.33%5.30%Competitive
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Aside from any opportunity for savings on premium rates and expense charges, an
organization may choose to take their plan to market based on governance
requirements, service concerns, to investigate new services/technologies or if the
organization merges with another organization. None of these factors are a
consideration for Kitchener at this time.
Marketing a group benefits program, especially one of the size and complexity of the
City of Kitchener is a significant project. Multiple resources are needed in-house,
including human resources and finance representatives and most likely a benefits
committee. Evaluation of insurer quotes is a complex exercise and often an
takes 4-
6 months. A change in insurers also necessitates an implementation period of at least
6-8 months punication support, booklets and policy
review, employee education and administrative training are all elements to consider
during such a transition.
In order to conduct a full marketing of
fees of approximately $75,000 would be required based on past experience. The cost
and effort of a full marketing of the program is not warranted at this time based on the
review completed. Staff will continue to monitor the value for money associated with the
group benefits program and, assuming there are no issues in the interim, undertake
another formal market review around the year 2021.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The recommendatio
vision through the delivery of core service.
FINANCIAL IMPLICATIONS:
None at this time
COMMUNITY ENGAGEMENT:
INFORM in
advance of the committee meeting.
ACKNOWLEDGED BY:
Dan Chapman, Deputy CAO
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