04-0686R


RESOLUTION AUTHORIZING EXECUTION OF AGREEMENTS WITH BLUE CROSS AND BLUE SHIELD OF MINNESOTA TO PROVIDE ADMINISTRATIVE SERVICES AND STOP LOSS INSURANCE TO THE CITY GROUP HEALTH PLAN DURING YEAR 2005, AT AN ESTIMATED COST TO THE CITY OF $1,025,504.

BY COUNCILOR STEWART:

     RESOLVED, that the city is hereby authorized to execute agreements with Blue Cross and Blue Shield of Minnesota under which that company will provide administrative services and stop loss insurance to the city group health plan during calendar year 2005 for an administrative fee of $26.50 per single employee or per family per month and a fee for stop loss coverage of $10.88 per single employee per month and $29.06 per family per month, for a total estimated cost of $1,025,504, or to continue the agreement currently in force between the parties but with the terms set forth above, which shall be paid from the group health fund.


STATEMENT OF PURPOSE:  This resolution authorizes the city of Duluth to execute agreements with Blue Cross and Blue Shield of Minnesota to provide administrative services and stop loss insurance to the city’s group health insurance plans for 2005. Blue Cross and Blue Shield has provided administrative services and stop loss insurance to the city’s group health plans since 2000, and was the successful bidder for continuing this service in the recently completed request for proposal process.


The cost of administrative services will be $26.50 per month for single employees and for families, for a total estimated cost for administrative services of $661,440. The cost of providing stop loss coverage will be $10.88 per month for single employees and $29.06 per month for families, for a total estimated cost for stop loss coverage of $364,064.


The cost of the administrative services and stop loss insurance will decrease for 2005 by $101,582 as a result of the competitive bidding process. This cost of administering the group health insurance plans represents an estimated 7.5 percent of the total cost of the group health insurance plans, with claims estimated at 92.5 percent of the total cost. Blue Cross and Blue Shield robust contract negotiation strategy with medical providers is a major tool in helping to manage the overall cost of claims and thereby limiting increased costs for the group health plan.