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REQUEST FOR COUNCIL ACTION <br />Date:August 8, 2022 <br />Item No.:10.e <br />Department Approval City Manager Approval <br />Item Description: Award the contract for medical insurance to Minnesota Health Care <br />Consortium for plan years 2023-2024 and authorize the 2023 Cafeteria <br />Contribution rates. <br />1 B ACKGROUND <br />2 A cafeteria plan is a type of employee benefit plan offered pursuant to Section 125 of the Internal <br />3 Revenue Code. The Internal Revenue Code sets forth the requirements and tax treatment of cafeteria <br />4 plans. A cafeteria plan allows employees to choose between different types of benefits. Employees <br />5 may choose benefits such as health insurance, group-term life insurance, voluntary “supplemental” <br />6 insurance (dental, accident, etc.) and flexible spending accounts through the plan. <br />7 <br />8 The City of Roseville has a Cafeteria Benefits Plan that meets the requirements of Section 125 of the <br />9 Code. One of the main purposes of a cafeteria plan are the tax savings advantages for both the <br />10 employer and employee. Employees’ pretax contributions are not subject to federal, state or social <br />11 security taxes. As an employer, the City saves on the employer portion of FICA, FUTA and <br />12 worker’s compensation insurance premiums. <br />13 <br />14 Previously, in 2020, the city solicited Request for Proposals (RFP) for medical insurance. The city <br />15 ultimately opted to stay with our current provider as they did not require changes to either the <br />16 benefits provided or insurance plan structures. Based on the RFP in 2020, the city was able to secure <br />17 a 0% increase for rates for 2021 and a rate cap of 12% for 2022. Based on claims paid and our <br />18 insurance pool, the city received an 11.5% rate increase for medical insurance premiums for plan <br />19 year 2022. <br />20 <br />21 Due to the rate increase and a push by our current Service Cooperative (Sourcewell) to push clients <br />22 to structural plan design changes, city staff opted to again seek a Request for Proposals for the 2023 <br />23 benefit plan year. The city received a total of 7 proposals for medical insurance, including from our <br />24 current Service Cooperative (Sourcewell). The renewal rates for 2023 ranged from a premium cost <br />25 decrease of -10.09% up to a 7.12% increase. The RFP also sought a rate cap for 2024, and those rate <br />26 caps from the various proposals ranged from a 5% increase up to a 15% increase. <br />27 <br />28 Staff reviewed the proposals along with the city’s benefits broker, NFP, and based on the cost <br />29 savings and plan designs, staff recommends the city accept the proposal from Minnesota Health Care <br />30 Consortium underwritten by Medica for plan years 2023 and 2024. This proposal had the largest <br />31 reduction in premium rates, and offered similar plan designs for our employees and results in a cost <br />32 savings for both employees and the city. <br />33 <br />34 <br />35 <br />Page 1 of 3 <br /> <br />