HomeMy WebLinkAbout05.02.1974 G-3TO:
FROM :
DATE :
SUBJECT:
city Counciicity Manager
April 29, 1974
Long Term Disability Insurance
.a-2
B j-ds (Agenda item €r--3|
On Iuarch 18, 1974, quotations were received and publj-cly openedfor Long Term Disability Insurance for City employees. At theCouncil meeting of March 2l , 1974, the staff reported that noneof the proposals received quoted the "basic group" of employeesfor which bids were authorized and all proposal-s differed fromthe spe ci fi.c ations . In light of these factors, the Council
acted to tabl-e aff proposals allowing for further staff review.
Final disposition on these bids is now recommended to insure
that the tj-me limit for which bids were guaranteed, by theinsurance companies, is not exceeded. The attached "summary ofquotationsrr compares the specification requirements \,rith proposals
as submitted. the following staff conments revievr the relevantpoints concernj-ng bids submitted (please refer to summary sheet).
Three of the five bids received were deficient in major areas of
coverage as required in the specifications. Time Insurance
Companyts quotation only provides benefits for two years forboth sickeness and accident. St. Paul Fire & i[arine similarlyfails to cover sickness in excess of two years, but does coveraccidents to age 65. It is the staffs belief that the primarybenefit of Long Term Disability Insurance is to provide the
employee with protection for catastrophic accidents or sickness.Limited benefits of two years or less are more appropriately
termed Short Term Disability Insurance and, comparatively, donot cover the employee for the financial- disaster associatedwith the long term disability. The staff cannot recomrnend
acceptance of either the guotation from Ti-me Insurance Companyor St. Paul Fire & Marine due to this fundamenta.l- defj-ciency intheir proposals. In addition, both proposals are limited ininformation supplied for comparison purposes and the bid fromSt. Paul Fire & Marine would require a 1ega1 opinion due to adiscrepancy in the quotation.
Minnesota !,tulua1 Insurance Company's bid is the third proposalhaving a major deficiency. This bid specifically excludes Fire
and Police personnel from coverage - the primary negotiatingtunit requesting this form of insurance. The Counci-1, throughprevious police negotiations, has st.ated its intent to attemptto provide this type of insurance if possible. In addition theproposal specifically requires "evidence of i:rsurability"before employees would be afforded coverage. Such a requirementis contrary to the purpose of a group contract. The staff can-not recommend this bid Eiven the deficiencies in the proposal.Further comparisons of the bid are not being made given thedeficiencies and also the limited information supplied withinthe propos aI.
ME]'IORANDUM
TO:
FROM :
DATE :
SUBJECT:
MEI'IORANDUM
City CouncilCity Manager
APril 29, 7974
I.ong Term Disabil-ity Insurance Bids (Agenda item G-3)
On March 18, L974, quotations were received and publicly openedfor Long Terrn Disability fnsurance for City employees. At theCouncil meeting of March 27, 1974, the staff reported that noneof the proposal-s received quoted the "basic aroup" of employeesfor which bids were authorized and aLl- proposals differed fromthe specifications. In light of these factors, the Council
acted to table all proposal-s afLovring for further staff review.
Final disposition on these bids is no\^/ recommended to insure
that the time limit for which bids were guaranteed, by the
insurance companies, is not exceeded. The attached "summary ofquotations" compares the specification requirements with proposafs
as submj-tted. The foffowing staff coTrunents revj.ew the refevanLpoints concerning bids submitted (please refer to summary sheet).
Three of the five bids received were deficient in major areas of
coverage as required in the specifications. Time Insurance
Company's quotation only provides benefits for two years forboth sickeness and accident. St. Paul fire & Marine similarlyfail-s to cover sickness in excess of t'wo years, but does coveraccidents to age 65. It is the staffs belief that the primary
benefit of Lng Term Disabil-ity Insurance is to provide the
employee with protection for catastrophic accidents or sickness.Iimited benefits of two years or less are more appropriaLely
termed Short Term Disability Insurance and, comparatively, donot cover the empl-oyee for the financial dj-saster associatedwith the long term disability. The staff cannot recommend
acceptance of either the quotation from Time Insurance Companyor St. Paul- fire & Marine due to this fundamental deficiency intheir proposals. In addition, both proposals are limited ininformation supplied for comparison purposes and the bid fromSt. Paul Fj-re & Marine would require a lega1 opinion due to adiscrepancy in the quotation.
Minnesota i4utual Insurance Company's bid is the third proposalhaving a major deficiency. This bid specifically excludes I'j-re
and Police personnel from coverage - the primary negotiatingunit requesting this form of insurance. The Council, throughprevious police negotiations, has stated its intent to attemptto provide t}.is type of insurance if possible. In additj-on theproposal specifically requires "evj-dence of insurability"before employees would be afforded coverage. Such a requirementis contrary to the purpose of a group contract. The st;ff can-not recommend this bj.d gj-ven the deficiencies in the proposal.Further comparisons of the bid are not being made gj.ven thedeficiencies and also the limited information srppi.L.d withinthe proposal.
The bid of Connecticut ceneraL meets all of the specificationrequirements rrith the exception of the 190 day quilificationperiod versus the specification requirement oi 9-0 days. I\,/o"p1ans" were submitted with the bid. plan "A" quotei a 6O*benefit 1eve1 which would be totally coordinated with FICA,PERA, etc.. plan ,,8,, provides a 50t benefit 1evel an{ totalcoordination with tne exception of dependent benefits from FrcA.The cost difference between the two p1ans is very minimal ,P.lan B being 94.83 per month high.:r. The differ3nce between!!9 primary FICA benefit levef and the primary and dependentsFrcA benefit 1eve1 is presently 1s $zoE.90 pLr monthl Therefore,the average married employee ivith at least one child would re-cej-ve a much higher benefit J-evel und.er pl-an ,,B". Using anaverage salary of $12,000 to $l4,O0O per year the benefit l_eve1would be raised to approximately 70 t; 75-percent. However,such a plan would not benefit the singfe employee. He woufdl-oose under as such onfy provid"s L.rrlfits at a 50*leve1 versus the 60E Level of pl-in- ',a". The married disab]edemployee vJithout children would receive benefits approximatelythe same under either plan plan uB,
Other aspects of the Connecticut General bid include coveragefor mental and nervous disability for a period of two years, arehabilitation cfause and a dependents benefit cLause.
Tire rehabilitation crause provides for continuatio! of benefitsif p9 disabled employee il capable of working at anotherpositi-on for which he is quatiiied for by edu6ation or experience.The dependents benefits coverage clause illows for benefiis(66-2/32 of regular benefits) io be continued to if-,u "*pi"y.u"spouse or children in case of death during disability.
Connectj-cut Genera.I did not bid the basic group (public Safetyand department heads). euotes as provided - are- for aii empJ.oyees.
The fifth quotation received by the Cj.ty was from Bankerrs Life.This proposaf presents a number of issuls. rn addition to thebid being received trvo days af ter bids -,,;ere pubJ-j.c1y oDened, theperiod for rvhich rates were guaranteed withii: tfre piop6sai-hasnow lapsed. Both of these issues should be clarifl-ed (}egaIopinion and written extension) prior to further Council c6n_sideratj-on. _ The proposal afso includes life insurance coveragefor aLf employees at a revef of one and one-ha.rf times current
:?]uty f?: ::9f, employee. _ ,The present insurance levef by thecrty i-s $5,000; thus providing a new r.ever of insurance Lenefitsof approximately four times gieater than the present ]evel-. Thetwo bids - Long Term Disability tnsurance and Life Insurance _have been packaged for the p,rrfo"es of bj-dding .rra .u:r.rot l.split. Again, further consl-delation of thj-s froposal p.u".rt"both lega1 and moral questions as to whether oifrer biddirs woufdhave bj-d_ the Long Teim oj.sability Insurance if it woufd havebeen packaged with Life insuranc6, health insurance, etc.
-2-
..!'!l-!.s-,.i_.+.__'.-
Similar to most of the proposals, the Banker's Life quotation
only applies to all employees. The rehabil-itation clause is
not defined in the proposal and there is no dependents benefits
coverage cfause. In addition to other issues raised by the
Banker's Life proposal , the quotation contains a descrepancy
in the bid and such wifl also require clarification.
Re commendati on
The staff would recommend acceptance of the Connectj-cut General
Ptan uBu proposal. This recommendation is made in light of the
above analysis of each of the proposals presented and the major
deficiencres presented in each of the other proposals. In
addition, the staff has found that the market for Long Term
Disability insurance has been receding quickly for municipalities.
Few companies are willing to vrrite such a policy with a large
percentage of public safety and public rvorks employees.
The staff's recommendation that Pfan "8'. of Connecticut Generalrs
bid be accepted should be conclj-tioned by acceptance of this
proposal by the various bargaining units represented.
/
I ffil
Ao-tloo bg Couno-ll:t
\.''Endorse'd-
Uodlfled -
Da { 6^+^n
Date-_
-3-
The proposal submitted by Connecticut General is within the
staffrs estj-mate of cost for this type of insurance. The bid
from Banker's l,j-f e appears to be lower than the cost for
Connecticut General-. However, with the much higher levef of
insurance coverage and a higher rate and lower dividend for theBanker's rife Insurance proposal versus existing insurance rates
and dividends, the total- cost to the City would be much higher
by acceptance of the Bankerrs Life proposal .
/
. SUMMARY OF QUOTA'I'IONS
LONG TERM DISABILITY INSURANCBBid Opening : March 18, !974, 10:00 A.M
N
I
Spcci f icati<,n
I tem
+
d ang
Submitted byAddress --,
ect ICU t Generarry Ekblad
lewood
No-l-80 Da S
N.B
s02.94(2)
498.r_r(2)
$s0.
Shown assume
Pxd by D. A.
Date 3/L8/7 4
Banker's L I e
Bob Rugolski
Ma Iewood
No - Bid Rec ' d.
Mar ch 20 ,L97 4
Yes
Yes
Yes
Yes
Yes
Yes - cne
Co. B 1 Conn
Ma
I. Bid Submitted on or
1B 14
))I aon S
3. Oualification Peri-od- 9 0 Dts to Age 5 - Both
before 3d Sub. on Quotat
4. Benef
b l-I
t
conditions cl-ause
11. ilental & N ervous r rt.
included
I2. Reirabi l- itation Clause
defined
13. Total Premiums mo.
A. Police & Non-Union Empl
Accident & Sickness5. Benefits G60? of wages
6. Max. Benef .L ts ]00 mo.
Total- Coordination of
Benefits
B. Defn. of Tot. D
Attached
ISA I ty
oc ecl-men o1 IC atta ched
l-0. No Pre-ex l-s ng
I
Yes
r
- No evr.
I
ence req. ; l.disability dl-st f2 mo's.treateC, etc
3 mo's. p::io
to co-1t ract
Not S.rorvn
Yes - I'Io
benc f its sltow;.
$39e.89 (422.52) B)
Il. Pub1ic Works (49rs)
C. Other Employees
D. AIl Employees
13. Other fnformation (Not
ile quired )
A.I{in. Benef it Payable
B.Min 8 empl"oyrs for
contract
B.
B.
(1)
N. B.
A-
B-
N. B.
N.B.N
$403.00
Not Shown
100?
P Ian
Plan
Not Shown
752
-0-1008;excl.police
& fire Not
1008
Time Ins. Co.
Mccormack Ins . Agency
White Bear Lake
St. Paul Fire & M
Brad StruveSt. Paul
l'{r- nn . liu tual
Ben Pearce
West St. Pauf
Yes Yes Yes Yes
Yes No No Y(]S
Yes YesNo-2yrs
Sickness &
for both
Accident
No - Acci.dent to
Sickness, only 2
65-
yrs .
Yes Yes
Yes (Not Shorvn)Yes Yes 608
50?Yes (Not Shown)/mo.No - $1,200 Yes Yes
Yes Yes Yes - Yes .
- No Coord.
FICA dependents
No Yes Yes
No No No Lequare5 asNot Shown No
req. ;but not
covered if disabil-
j- ty during lst 12mo's treated, etc.
6 mo's prior to
contr a ct
ence oEvr-Yes - N o evl-dence
ins urabi 1i ty
required
Not Shown Not Shown Not shown Yes- 24 mo.
age , only
II
I
Not Shown Not Shown Not Shown Yes - benefits re-
duced
N
N
$3r4.34
B
B
N.B ., Spec's excluded
( Police & Fire
\ $2e3. oo
N. B.
50?
100t
YCS
7.
I
(1) Error made in submission of bid - opinion requiredaccept ance
(2)
(3)
for
Converted for comparisons
Discrepancy in proposal & quotations, bid received afteropening (opinions required prior to acceptance);guarantee of rates as submitted has lapsed, no formalextension received; bid as submitted rlquires award oflife insurance @ additional cost of $7,684/yr. overexisting City cost.
MAPTEWOOD INSURANCE COIIiIMITTEE
ApxLl 24, 1974
City' of }laplewood
1380 Frost Avenue
llaplewood; Ilinne s ota
Re: Long TerE Dis ab i 1l ty
Of the four quoEations received by the opening date and on tlme, the MinnesoEa
Mutual quotation can be discarded due to the fact Ehat rheir quotation covers a
group that does not include the police departoenE, and their requirement of
lnsurability on the part of each member of the group. Of the remaining three
quotations, Ti.me Insurance Company does not meeE the specification of 'llong TermDisability", as lhe tr^,o year coverage for accident and two year for sLckiress iswithln the "shor! term disability,' definit.ion.
Two bids remain: the Connecticut. General and the St. paul Fire and Marine.
These bids are effective until 5-I7-74 atd 6-20-74 respectively. The connecticuc
General bid is a true long Eerm disability bid providing coverage to age 65 for
both sickness and accidenE. ?he st. Paul Fire and Marine bid meets the long term
requirement for accident coverage, but only provides two years coverage for sickness.
The speeifications called for age 65 on both hazards.
T\.ro variations appear in comparing these bids. connecticut General offers its
coverage on the basis of a 180 calendar day waiting period before benefits beginz
$hile St. Paul Fire and llarine offers coverage after a 90 calendar day waiEingperiod. The specificaEions called for 90 calendar days waiting period.
The benefits of both plans are based on 60% of salary to maximums. connecticut
General is 607" to $11000. and St. Paul Fire and Marine is 60% ro glr200.00. Borh
of these benefit paymenEs coordinate with other benefits that are paid to an employee,
thus the insurance benefits are reduced in each case by the amount of Social Securlty,
Workmen's Compensation, P.E.R.A. and any others paid for by the employer. The
specifications requested this coordination and a $1r000. maxi.mum.
C,entlemen:
Ttre rate quotation froo the Conneccicut General is $482.05 monthly for the entire
package bid, while the SE. Paul Fire and Marine bid is $403.00 per nonth.
Page -2-
Thls explanatLon surnmarizes the tlro quoEaEions thaE come closesE Eo meeting
the specifications put out by the CiEy. The answers to certain questions will
determine the award of a contract.
Does the city $ant a true Long term disabllity coverage for employees?
Connecticut General meeis Ehis requirement.
Is a waiting period of 90 days the most important consideration? SC. paul
Flre and l,larlne meets rhls requirement.
Is t.he decision to purchase to be made rlght away lrithouc regard t.o future
fringe benefit negotiaEion? If noEl then L,hen L,il1 the purchase be made? the
Connecticut General bid expires ot 5-77-74 and Ehe St. Paul I'ire and !,l.ar ine bid
expires on 6-20-74.
If the purchase of coverage is delayed for 90 days or 180 daysl rrilL it be
possible Eo re-obtain bids again? In view of the few bids received2 and theI'drying up" of the markeE in subsequent quotations for oEher bldders, 1t would
appear thaE favorable quotes will not be obtained.
WhaE dollar value shoutd bc put on the purchase of the longer term coverage
for sickness? This value must be weighed by the buyer.
If these questions are resolved by fhe City, the recorunendaEion of the
Insurance Coomillee will be obvious as each question is replied by a single bid
choice.
We will be happy to discuss these bids furEher wlth the Council at any tioe,lf the Councll is desirous of such a meeting.
Sincerely yours 1
I.API,INSUMNCE CO}L\ITTEE
,, John tlinter