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HomeMy WebLinkAbout12/16/1997 VB minutes MINUTES OF THE REGULAR MEETING OFTHE MAYOR AND BOARD OF TRUSTEES OF THE VILLAGEOF MOUNT PROSPECT DECEMBER 16, 1997 CALL TO ORDER Mayor Farley called the meeting to order at 7:32 P.M. CALL TO ORDER ROLL CALL ROLL CALL Present upon mil call: Mayor Gerald Farley Trustee George Clowes Trustee Timothy Corcoran Trustee Paul Hoefert Trustee Richard Lohrstorfer ~ Trustee Daniel Nocchi Trustee Irvana Wilks INVOCATION The invocation was given by Trustee Wilks. INVOCATION APPROVAL OF MINUTES APPROVE Trustee Lohrstorfer, seconded by Trustee Hoefert, moved to approve MINUTES the minutes of the regular meeting of December 2, 1997. Upon roll call: Ayes: Clowes, Corcoren, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. APPROVAL OF BILLS Trustee Hoefert, seconded by Trustee Nocchi, moved t.o approve APPROVE the following list of bills: BILLS General Fund $ 894,586 Refuse Disposal Fund 118,609 Motor Fuel Tax Fund 1,736 Community Development Block Grant Fund 7,898 Local Law Enforcement Block Grant Fund 569 Debt Service 3,720 "'" Capital Improvement Fund 17,428 Capital Improvement Construction Fund 112 Downtown Redevelopment Construction Fund 170,842 Police & Fire Building Construction - Flood Control Construction Fund 14,109 Street Improvement Construction Fund - Water & Sawer Fund 125,297 Parking System Revenue Fund 3,589 Risk Management Fund 157,705 Vehicle Replacement Fund 1,520 Vehicle Maintenance Fund 58,151 Computer Replacement Fund 413 Flexcomp Trust Fund 1,759 Escrow Deposit Fund 165,739 Police Pension Fund - Firemens Pension Fund - Benefit Trust Fund - $1,743,782 Upon roll call: Ayes: Clowes, Corcoren, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. Trustee Hoefert, seconded by Trustee Nocchi, moved to accept the financial FINANCIAL ~--~ report through November 30, 1997, subject to audit. REPORT Upon roll call: Ayes: Clowes, Corcoren, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. MAYOR'S REPORT INDIAN PRINCESSES Mayor Farley introduced Tom Trainer and the Indian Princess Kickapoo KICKAPOO TRIBE Tribe, who sang some holiday tunes. RES.NO. 44-97 A Resolution was presented that expressed best wishes to residents of the community during the holiday season. Trustee Wilks, seconded by Trustee Nocchi, moved for passage of Resolution NO. 44-97 A RESOLUTION FOR THE HOLIDAY SEASON Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. HOLIDAY DECORATIONS Mayor Farley and Lil Floros presented the Holiday Decoration Awards, a copy of the names and addresses are attached to these minutes. APPOINTMENTS: Mayor Fadey presented the name of Trustee Richard Lohrstorfer and YOUTH COMMISSION Maggie Meyer, 504 S. Wille Street, a Junior at Prospect High School, as members of the Youth Commission, which should bring the Commission to full compliment of members. Trustee Clowes, seconded by Trustee Corcoran, moved to concur with the recommendation of the Mayor to appoint Trustee Lohrstorfer, term to expire in 2001, and Maggie Meyer, term to expire in 1998, as members of the Youth Commission. Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion cerried. COMMUNICATIONS AND PETITIONS None. OLD BUSINESS PUBLIC HEARING Mayor Farley called a Public Hearing to order at 8:04 P.M. It was noted that notice of this Public Hearing had been published in the Mount Prospect Journal & Topics on December 3rd and in the Mount Prospect Herald on December 4th and was called for the purpose of presenting the annual budget for the Village of Mount Prospect for fiscal year 1998 and the property tax levy for 1997. There wes no audience participation as part of this Public Hearing. BLOOD PROGRAM Members of the Village discussed options for retaining the Village Blood donation program. It was noted that the original budgeted amount for this program was $3,500 however that amount had been reduced by a majority of the Village Board to $1,750. Trustee Nocchi requested corporate sponsorship of this program so it could continue. It was announced that the newest bank in town, Mount Prospect National Bank, 50 North Main Street, has committed to donate $1,000 towards the Blood Program. The budget will be amended to reflect this amended level of funding. Trustee Corcoren expressed his concerns that some of the reimbursable items funded by the Village are inappropriate and noted that he does support the blood program in general. Trustee Nocchi, seconded by Trustee Hoefert, moved to fund the Blood Program in the amount of $2,750, $1,750 from the Village and $1,000 from the sponsorship of the Mount Prospect National Bank. Upon roll cell: Ayes: Clowes Hoefert, Lohrstorfer, Nocchi, Wilks Nays: Corcoran Motion cerried. Page 2 - December 16,1997 Mayor Farley closed the Pubio Hearing at 8:12 P.M. An Ordinance adopting the budget for 1998 was presented, representing a total ADOPT budget of $58,741,549.00. 1998 BUDGET Trustee Clowes stated that since he is a member of TAP, which is funded by 'the Village in the amount of $2,000.00, he didn't feel it appropriate to vote on the proposed budget Ordinance. Trustee Wilks, seconded by Trustee Nocchi, moved for passage of Ordinance No.4900 AN ORDINANCE ADOPTING AN ANNUAL BUDGET FOR THE VILLAGE OF MOUNT PROSPECT FOR THE FISCAL YEAR COMMENCING JANUARY 1, 1998 TO DECEMBER 31, 1998 IN LIEU OF PASSAGE OF AN APPROPRIATION ORDINANCE Trustee Wilks, seconded by Trustee Hoefert, moved to amend the main motion by removing the $2,000.00 budgeted for TAP and vote on that amount separately. Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchl, Wiiks Nays: None Motion carried. Trustee W'~lks, seconded by Trustee Hoefert, moved to approve the budget amount of $2,000.00 to fund TAP. Upon calling the amended motion: Ayes: Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Pass: Clowes Motion carried. Upon calling the main motion, as amended: ORD.NO. 4900 Ayes: Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks, Farley Nays: Clowes Motion carried. An Ordinance was presented for second reading that would adopt the 1997 ADOPT LEVY annual levy for fiscal year 1997. Trustee Wilks stated that she could not support the proposed levy due to the fact that it reflects a 5% increase rather than the 4% originally presented. Trustee Clowes stated that he could not support the proposed levy due to the fact that he preferred cutting costs rather than increasing the levy. Trustee Corcoran, seconded by Trustee Wilks, moved for passage of ORD. NO. 4901Ordinance No. 4901 AN ORDINANCE AUTHORIZING THE LEVY AND COLLECTION OF TAXES FOR THE CORPORATE AND MUNICIPAL PURPOSES OF THE VILLAGE OF MOUNT PROSPECT FOR THE FISCAL YEAR BEGINNING JANUARY 1, 1997 AND ENDING DECEMBER 31, 1997 Upon roll cell: Ayes: Corcoran, Hoefert, Lohrstorfer, Nocchi, Fadey Nays: Clowes, Wilks Motion carried. An Ordinance was presented for second reading that would abate the 1997 levy for corporate and municipal purposes. Trustee Corcoran, seconded by Trustee Nocchi, moved for passage of ORD. NO. 4902 Page 3 - December 16, 1997 Ordinance No. 4902 AN ORDINANCE TO ABATE A PART OF THE TAXES LEVIED FOR CORPORATE AND MUNICIPAL PURPOSES OF THE VILLAGE OF MOUNT PROSPECT FOR THE FISCAL YEAR BEGINNING JANUARY 1, 1997 AND ENDING DECEMBER 31, 1997 Upon roll cell: Ayes: Clowe$, Corcoran, Hoefert. Lohrstorfer, Nocchi, Wilks Nays: None Motion cerried. An Ordinance was presented for second reading that adopts the 1997 levy for Special Service Areas One, Five and Six. ORD.NO. 4903 Trustee Nocchi, seconded by Trustee Wilks, moved for passage of Ordinance No. 4903. AN ORDINANCE AUTHORIZING THE LEVY AND COLLECTION OF TAXES FOR THE MUNICIPAL PURPOSES OF SPECIAL SERVICE AREA NUMBER ONE, SPECIAL SERVICE AREA NUMBER FIVE AND SPECIAL SERVICE AREA NUMBER SIX OF THE VILLAGE OF MOUNT PROSPECT FOR THE FISCAL YEAR BEGINNING JANUARY 1 1997 AND ENDING DECEMBER 31, 1997 Upon mil cell: Ayes: Clowes, Corcoren, Hoefert, Lohrstorfer, Nocch[, Wilks Nays: None Motion cerried. An Ordinance was presented for second reading that would abate a portion of the 1997 levy for Special Services Area Number One. ORD. NO. 4904 Trustee Hoefert, seconded by Trustee Corcoran, moved for passage of Ordinance No. 4904 AN ORDINANCE TO ABATE A PART OF THE TAXES LEVIED FOR UNLIMITED TAX BONDS OF SPECIAL SERVICE AREA NUMBER ONE OF THE VILLAGE OF MOUNT PROSPECT FOR THE FISCAL YEAR BEGINNING JANUARY 1, 1997 AND ENDING DECEMBER 31, 1997 Upon roll cell: Ayes: Clowes, Corcoren, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion cerried. NEW BUSINESS FOREST RIVER A Resolution was presented that would authorize entering in the 1998 FIRE PROTECTON Agreement to provide emergency services of the Fire Department to DISTRICT Forest River Fire Protection District. RES.NO. 45-97 Trustee Hoefert, seconded Dy Trustee Corcoran, moved for passage of Resolution No. 45-97 A RESOLUTION AUTHORIZING EXECUTION OF AN AGREEMENT BETWEEN THE VILLAGE AND THE -- FOREST RIVER FIRE PROTECTION DISTRICT Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion cerried. Page 4 - December 16,1997 Mayor Farley stated that he will ask to meet with representatives of the Fire District to discuss restructuring this Agreement. VILLAGE MANAGER'S REPORT Village Manager Michael Janonis presented various bid results. BID RESULTS: The following bids were received for one tractor with an articulated TRACTOR WITH telescopic 28 foot boom arm rotary cutter:. BOOM ARM Bidder Base Trade-in Net Lewis Equipment Co. $48,051 $4,000 $44,051 Payline West $48,617 $3,500 $45,117 Martin Implement $48,720 $3,500 $45,220 Trustee Hoefert, seconded by Trustee Corcoren, moved to concur with the LEWIs EQUIP. recommendation of the administration and accept the iow qualified bid submitted by Lewis Equipment Company for a tractor with articulated telescopic 28 foot boom arm rotary cutter in an amount not to exceed $44,051, including trade-in allowance. Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. The following bids ware received for one 25,000 lb. GVWR truck on Iow 25,000 GVWR profile cab and chassis with flatbed body and crane: TRUCK Bidder Base Trade-in Net Owens International $62,975 $9,725 $53,250 Lake County Truck $58,500 $4,950 $53,550 Freund International $63,362 $5,000 $58,362 Pollard Motor Co. $64,536 $3,550 $60,986 J. Merle Jones, Inc. $64,689 $3,200 $61,489 Sauber Manufacturing $67,294 $3,600 $53,694 Trustee Hoefert, seconded by Trustee Corcoren, moved to concur with the OWENS recommendation of the administration and accept the Iow qualified bid INTER- submitted by Owens International for a 25,000 lb. GVWR truck at a cost NATIONAL not to exceedS53,250, with-trade-in allowanca. Upon roll call: Ayes: Clowes, Corcoren, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. The following bids were received to provide the traffic Signal Maintenance TRAFFIC for 1998: SIGNAL MAINTENANCE Bidder Total contracting & Material $24,050 Lyons Electric CO. $25,120 Aldridge Electric, Inc. $29,480 Trustee Wilks, seconded by Trustee Hoefert, moved to concur with CONTRACTING the recommendation of the administration and accept the Iow & MATERIAL qualified bid submitted by Contracting & Material Co to provide the COMPANY traffic signal maintenance for 1998 at a cost not to exceed $24,050. Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. A request was presented to authorize the purchase of one 3/4 ton pick-up PICK-UP truck as part of the joint purchase bidding procedure conducted by the TRUCK Page 5 - December 16, 1997 Northwest Municipal Conference. It was noted that as part of this joint purchase, the base bid for a 3/4 ton pick-up truck was $19,679 and with the options deemed necessary for the Mount Prospect use, the total would be $21,294.56. LARRY FAUL CHEV. Trustee Corcoran, seconded by Trustee Hoefert, moved to concur with the recommendation of the administration and authorize the purchase of one 3/4 ton pick-up truck from Larry Faul Chevrolet in conjunction with the joint purchase program conducted by the Northwest Municipal Conference in an amount not to exceed $21,294.56, which includes the required options. Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. INSURANCE Bdan Caputo, Director of Finance, presented various insurance proposals. MEDICAL INSURANCE The first recommendation was for the Village to join IPBC (Intergovernmental Personnel Benefit Cooperative) to provide the medical insurance for employees, and retirees. This recommendation was as set forth in Medical Insurance Alternative #7 in the memorandum from Brian Caputo dated December 5, 1997, the subject of which is 1998 Medical Insurance Program, a copy of which is attached to these minutes. IBPC Trustee Wilks, seconded by Trustee Corcoran, moved to concur with the recommendation of the administration and join IPBC to provide the medical insurance coverage for Village and Library employees and retirees. Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried~ RES. NO. 46-97 A Resolution was presented that would authorize the Village of Mount Prospect to enter into an Agreement with IPBC and adopt their By-Laws as a cooperative venture for providing medical insurance to employees and retirees of the Village and Mount Prospect Public Library. Trustee Wilks, seconded by Trustee Hoefert, moved for passage of Resolution No. 46-97 A RESOLUTION AUTHORIZING ACCEPTANCE OF THE CONTRACT AND BY-LAWS DOCUMENT OF THE INTER- GOVERNMENTAL PERSONNEL BENEFIT COOPERATIVE (IPBC) AND AUTHORIZING MEMBERSHIP IN THE IPBC Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. STOP-LOSS A proposal was presented for the gap and run-out periods for medical MEDICAL INSURANCE insurance coverage. It was noted that if it isn't possible to extend the Village's stop-loss coverage with Medical Excess through September 30, 1998, the staff would be empowered to negotiate coverage with another comparable stop-loss medical insurer for the gap and run-out periods, all of which is described in the December 5, 1997 memorandum from Brian Caputo relative to the 1998 Medical Insurance Program, a copy of which is attached to these minutes. Trustee Corcoran, seconded by Trustee Lohrstorfer, moved to approve the implementation of Medical Insurance Alternative #1 described in the December 5, 1997 memorandum from Brian Caputo relative to medical insurance coverage for the gap and run-out periods. Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. Page 6 - December 16,1997 Trustee Corcoran, seconded by Trustee Lohrstorfer, moved to approve the Life LIFE INSURANCE Insurance Alternative D and Life Insurance Alternative A for the gap period, as outlined in the December 5, 1997 memorandum from Brian CapUto. Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. The following proposals were received for premiums for property insurance PROPERTY ~ for the Village: INSURANCE Annual .Broker Insurer Premium Hobbs Group Arkwright Mutual $33,910 J & H St. Paul Fire & Marine $25,273 J & H Chubb & Sons $32,400 Trustee Wilks, seconded by Trustee Corcoran, moved to concur with the ST.PAUL recommendation of the administration and accept the proposal received FIRE & from St. Paul Fire & Marine for property insurance for the years 1998 MARINE through 2000, at a annual cost of $25,273. Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. ~ The following proposals were received to provide the excess workers' EXCESS compensation insurance for the years 1998 through 2000 WORKERS' Rate Per $100 COMP. Broker Insurance Co. Deductible of Payroll J & H Illinois National $250,000 .2078 ,,.-.. J & H Illinois National $350,000 .1487 J & H Safety National $250,000 .2092 J & H Safety National $350,000 .1503 Hobbs USF&G $250,000 .1554 Hobbs Genesis $250,000 .1815 Trustee Nocchi, seconded by Trustee Lohrstorfer, moved to concur USF&G with the recommendation of the administration and accept the proPosal received from USF&G for excess workers' compensation insurance coverage at a rate of .1554- per $100 of covered payroll with a $250,000 deductible for the years 1998 through 2000. Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. The following proposals were received for third-party workers' compensation THIRD PARTY administrative services for the years 1998 through 2000. WORKERS' COMP. Vendor Amount Custard $16,120 for 3 years GAB $12,000 for 1 year Boyer $23,000 for 3 years Trustee Corcoran, seconded by Trustee Hoefert, moved to concur with the MARTIN recommendation of the administration and accept the proposal submitted BOYER by Martin Boyer Company to provide workers' compensation third-party administrative services from January 1, 1998 through December 31, 2000 at a cost of $23,000. Upon roll call: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. Page 7 - December 16, 1997 Village Manager Janonis expressed appreciation to Brian Caputo and the Finance Department staff for all the work on the insurance proposals. ANY OTHER BUSINESS Trustee Wilks noted Gilbert Basnik has announced his retirement from the Zoning Board of Appeals on February 1, 1998, having served on that Board for over 29 years. CLOSED SESSION CLOSED SESSION Trustee Nocchi, seconded by Trustee Lohrstorfer, moved to go into Closed Session for the purpose of discussing Land Acquisition 5 ILCS 120/2 (c) (5). Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. The Board went into Closed Session at 9:15 P.M~ RECONVENE RECONVENE Mayor Fadey reconvened the meeting at 9:37 P.M. Present upon roll call: Mayor Farley Trustee Clowes Trustee Corcoran Trustee Hoefert. Trustee Lohrstorfer Trustee Nocchi Trustee Wilks ADJOURN ADJOURNMENT Trustee Hoefert, seconded by Trustee Wilks, moved to adjourn ~-~ the meeting. Upon roll cell: Ayes: Clowes, Corcoran, Hoefert, Lohrstorfer, Nocchi, Wilks Nays: None Motion carried. The meeting was adjourned at 9:39 P.M. Carol A. Fields, Village Clerk Page 8 - December 16, 1997 1997 Holiday Decoration Winners GRAND PRIZE The Ziemba Family, 1504 Barberry HOLIDAY FUN - a tie Alan Wozniak, 400 Craig and Philip Jacobs, 702 Elderberry CHRISTMAS FANTASY - a tie Kevin & Karen Grouwinkle, 202 N. Owen Brian & Lori Leahy, 1327 Peartree BEST RELIGIOUS The Junokas Family, 613 N. Wille Street BEST USE OF LIGHTS Mike and Sue Raess, 1928 Hopi Lane BEST MULTI-FAMILY Joanne Walen, 1722 Sable Chase BEST BUSINESS Reflections Beauty Salon BEST BLOCK Verde Drive between Michael Court and Bonita VILLAGE OF MOUNT PROSPECT FINANCE DEPARTMENT INTEROI~I~ICE MEMORANDUM TO: V1LLAGE MANAGER MICHAEL E. ~IANONIS FROM: DIRECTOR OF FINANCE DATE: DECEMBER 5, 1997 SUBJECT: 1998 MEDICAL INSURANCE PROGRAM PURPOSE: To obtain the V'fllage Board's approval of the proposed 1998 Medical Insurance Program. BACKGROUND: The Village's Medical Insurance Program provides medical coverage for full-time employees and retirees of the Village and the Mount Prospect Public Library. The program is comprised of two major parts. First, we have a health maintenance organization (HMO) which covers 34 single enrollees and 64 families. Currently, the Village's HMO is HMO Illinois, a Blue Cross/Blue Shield company. HMO lllinois has been serving the Village for over 10 years. The second part is a self-insured indemnity plan. Under this plan, the Village directly pays claims up to $60,000 per individual per year after individualJfamily deductibles and co-insurance requirements are met by employees. To cover claims over $60,000, the Village has purchased a stop-loss insurance policy. The present insurer is Medical Excess, Inc. Our policy was originally with Lexington but that company merged with Medical Excess. Taken together, Lexington and Medical Excess have been our stop4oss carders for nine years. Harrington Benefit Services serves as the third-party administrator (TPA) for the indemnity plan. Harrington has been our TPA for three years. A preferred provider organization (PPO) network, provided by Preferred Plan, is overlaid on our indemnity plan. The indemnity plan now COvers 92 single enrollees and 186 families. The Village's current policies for the various components of our Medical Insurance Program expire on January 1, 1998. These policies must be renewed or new policies must be purchased. DISCUSSION: In marketing the Village's Medical Insurance Program for 1998, we attempted to explore all possible options. In doing so, we examined converting the program to a fully-insured structure (i.e., buying commercial insurance for all components of the program), joining an intergovernmental pool, and maintaining our stand-alone, self-funded structure. Our goal was to maintain the quality of medical care provided by the program while trying to reduce costs. Exhibit 1 presents, on an annuali×ext basis, the quotes of the vendors who responded to our marketing efforts. Seven alternatives are shown. Before explaining the details of the alternatives, a discussion is necessary of the difficulties we encountered when we marketed our program. Marketing Difficulties We have been quite pleased with the growth in the participation in the V'dlage's HMO plan. As stated above, 34 single enrollees and 64 famih'es participate in the plan. This is a significant increase fi.om the 24 single enrollees and the 49 families who were partidpating in the plan last year at this time. Nevertheless, our HMO is still a relatively small plan and the risks associated with insuring it are high. You will recall that last year we were not able to obtain quotes for our lIMO plan fi.om any insurer other than HMO Illinois. To make the plan more attractive fi.om a risk standpoint, Pamela Schilf, our medical insurance broker with the Euclid Insurance Agencies, marketed our HMO plan together with our indemnity plan. In doing so, Ms. Schilf asked potential insurers to assume that the indemnity plan would be converted to a fully-insured structure and that a carder could potentially insure both our HMO and indemnity plans. We requested HMO and fully-insured indemnity quotes fi.om Blue Cross/Blue Shield, CIGNA Health Plans, and Rush Prudential. CIGNA and Rush Prudential declined to quote because they could not duplicate the design of'our indemnity plan. Also, CIGNA stated that they would need lead time of six to nine months in order to prepare quotes for both parts of our plans. (A copy of CIGNA's declination letter is attached as Exhibit 4.) Therefore, only the quotes of Blue Cross/Blue Shield are included herein for our HMO plan and the indemnity plan under a fully-insured structure. As alluded to above, Blue Cross/Blue Shield already provides us with HMO coverage through HMO Illinois. Blue Cross/Blue Shield will permit the Village to separate the HMO Illinois quote from their quote for a fully-insured indemnity plan. The Medical Insurance Program Alternatives As will be discussed further below, one of seven alternative configurations may be selected for the Village's Medical Insurance Program in 1998. All alternatives provide for an HMO and an indemnity plan. Medical Insurance Alternatives #1 through #5 would retain the same basic self- insured 'structure of our indemnity plan. Alternative//6 would convert our indemnity plan to a fully-insured structure. Alternative #7 would involve the Village joining the Intergovernmental Personnel Benefit Cooperative (IPBC), a medical and life insurance pool comprised of 32 governmental entities. Given set-up work which would be involved in converting the Village's program under Alternative ~6 or #7, neither of these alternatives could be implemented by January 1, However, Alternative #6 or #7 could be implemented by April 1. As will be further explained below, cost savings can be obtained on a continuing annual basis if the Village joins IPBC (Alternative #7). However, these cost savings can only be realized if the Village remains a member of IPBC beyond the pOint of recouping certain conversion costs. In order to gain an appreciation for the potential costs savings, the basic annual costs of each alternative, setting aside the conversion costs, should be considered first. This view of the alternatives is provided in Exhibit 1. Subsequently, an analysis will be offered which addresses the matter of conversion costs. The discussion which begins below will outline the significant features of the medical insurance alternatives. Each alternative provides for all services required by our HMO and indemnity plans. At the outset, it should be noted thata PPO network is associated with each TPA. The fees of the PPOs are included in the fees of their respective TPA. The annual amounts shown for HMO coverage in Exhibit 1 are projected with the current participation of 34 single enrollees and 64 families. The annual proj~tions for claims administration, stop-loss insurance, self-insured indemnity expense, fully-insured indemnity premiums, and ]?BC indemnity/PPO assessments are based upon the current participation in our indemnity plan of 92 single enrollees and 186 families. Self-insured indemnity expenses are a cost component common to Medical Insurance Alternatives #1 through #5. These are medical expenses which would not be covered by stop-loss insurance if the Village retains the self-insured structura of the indemnity plan. In other words, these are indemnity claims that would be paid directly by the V'fllage. Based upon Ms. Schilf's recommendation, self-insured indemnity expenses are projected to increase 11% in 1998 over the 1997 estimated actual amount. This percentage reflects Ms. Schilf's research on trends in the health care industry. All insurance companies discussed herein have been rated as A- or better by A.M. Best Company, a firm widely recognized for its expertise in analyzing the financial condition of insurance companies. A rating of A- or better indicates that the company is financially secure. For information purposes, the projected costs of our medical insurance program in 1997 are also included in Exhibit 1. Medical Insurance Alternative #1 Medical Insurance Alternative #1 is simply a replication of our current program as adjusted for 1998 fee quotes. · HMO Insurer: HMO Illinois with projected 1998 annual costs of $463,300. Single Monthly Rate. $180.60 Family Monthly Rate $507.27 These rates reflect a 2.4% increase over our 1997 rates. · TPA: I-Iarrington Benefit Services with projected 1998 annual costs of $53,700. Participant Monthly Rate $16.08 This rate reflects a 1.3% increase over our 1997 rate. Generally,. the V'dlage has been satisfied with the service provided by Harrington. We have received only a few complaints fi.om indemnity plan participants concerning claims administration. Upon investigation, we have found that the problems underlying most of the complaints have been the result of participants or health care providers failing to adhere to specified claims submission procedures. In other instances, complaints have resulted when H~nington has partially denied some claims because the fees of the health care provider concerned exceeded "reasonable and customary" standards. These standards are based upon surveys of health care industry pricing and are commonly used in claims administration. They serve to discourage participants from seeking care from providers who charge appreciably above market rates. · PPO Network: Preferred Plan. · Stop-Loss Insurer: Medical Excess, Inc., with projected 1998 annual costs of $183,600. Single Monthly Rate $28.96 Family Monthly Rate $67.90 These are the same rates as those in effect in 1997. · Total projected 1998 annual costs of Medical Insurance Alternative #1: $2,090,500. Medleal Insurance Alternative #2 Medical Insurance Alternative #2 is the same as Medical Insurance Alternative #1 except that the Village would purchase stop-loss insurance from Sun Life. If the Village were to change stop- loss carriers, the effect would be transparent to the employees and retirees. A new stop-loss carder should be engaged if any appreciable savings can be obtained. As stated above, all insurance companies discussed in this memorandum are financially secure. 4 · Stop-Loss Insurer: Sun Life with projected 1998 annual costs of $153,200. Single Monthly Rate $23.03 Family Monthly Rate $ 57.21 The annual cost with Sun Life would be $30,400 (or, 16.6%) lower than with Medical Excess under Alternative #1. · Totalprojeeted 1998 annual costs ofMedical Insurance Alternative/f2: $2,060,100~ Medical Insurance Alternative #3 Medical Insurance Alternative//3 is the same as Medical Insurance Alternative #1 except that the Village would purchase stop-loss insurance from TransG-eneral. · Stop-Loss Insurer: TransGeneral with projected 1998 annual cost of $155,000. Single Monthly Rate $24.41 Family Monthly Rate $57.35 The annual cost with TransGeneral would be $28,600 (or 15.8%) lower than with Medie~ Excess under Alternative #1 but $1,800 (or 1.2%) higher with than Sun Life under Alternative #1. · Total projected 1998 annual costs of Medical Insurance Alternative #3: $2,061,900. Medical Insurance Alternative #4 Medical Insurance Alternative #4 represents a significant change in so far as the Village would change the TPA for its indemnity plan. A change in TPA means that employees, retirees, and their health care providers would have to become accustomed to the claims processing procedures of a new company. Given the inconvenience involved, a TPA should not be changed for only minor savings. · HMO Insurer: HMO Illinois with the same costs indicated in Alternative #1 above. · TPA: Benefits Systems and Services, Inc., (BSSI) with projected 1998 armuai costs of $50,400~ Participant Monthly Rate $15.10 The annual cost with BSSI would be $3,300 (or 0.6%) lower than Harrington under Alternative #1. · PPO Network: Preferred Plan. This is the same network the Village currently has with Hardngton as the TPA. ' · Stop-Loss InSurer: TransGeneral with the same costs indicated in Alternative #3 above. · Total projected 1998 annual costs of Medical Insurance Alternative #4: $2,058,600. Medical Insurance Alternative #$ Like Medical Insurance Alternative g4, Medical Insurance Alternative #5 involves a new TPA for the indemnity plan. · HMO Insurer: HMO Illinois with the same costs indicated in Alternative #1 above. · TPA: United Health Care Administrators COHCA) with projected 1998 annual costs of $63,400. Participant Monthly Rate $18.05 Plus Annual Fee $3,000 The annual cost with UHCA would be $9,700 (or 18.1%) higher than with Harrington under Alternative #1 through #3 and $13,000 (or 25.8%) higher than with BSSI under Alternative ~4. · PPO Network: CCN. CCN's network of health care providers is smaller than that of Preferred Plan. · Stop-Loss Insurer: United Health Care with projected 1998 annual cost of $145,100. Participant Monthly Rate $43.47 The above rate would apply to both single enrollees and families. United Health Care is affiliated with UHCA. The United Health Care quote is inseparable fi.om the UHCA quote for claims administration. Consequently, comparisons with individual stop-loss carders would not be meaningful. · Total projected 1998 annual costs of Medical Insurance Alternative #5: $2,061,700. 6 Metrical Insurance Altdrnative tt6 Medical Insurance Alternative//6 would retain our current Hlvl0 arrangements with HMO Illinois but would fully insure the indemnity plan. Consequently, there would be no separate costs associated with claims administration, stop-loss insurance, and self-insured claims expense. · HMO Insurer: HMO Illinois with the same costs indicated in Alternative #1 above. · Fully-Insured Insurer: Blue Cross/Blue Shield with projected annual costs of $1,389,900. Single Monthly Rate $266.39 Family Monthly Rate $719.25 · Total projected annual costs of Medical Insurance Alternative//6: $2,061,700. Medical Insurance Alternative 117 Medical Insurance Alternative 117 would have the XgtHage join II~BC. With IPBC, we would retain the same HMO carder. With respect to our indemnity plan, benefits would remain unchanged; however, the mechanisms for funding those benefits would change as will be described in a later, separate section of this memorandum. · HMO Insurer: HMO Illinois with projected 1998 annual costs of $449,500. ... Single Monthly Rate $167.06 Family Monthly Rate $496.95 The annual cost of HMO Illinois coverage through IPBC would be $13,800 (or 3.0%) lower than under all other alternatives. Under IPBC's HMO, the Village would be self-insured for the first $50,000 of claims per year per individual. Claims over $50,000 would be covered by a stop-loss policy through Blue Cross/Blue Shield. · TPA: Reliastar. · PPO Network: Private Health Care Systems (PHCS). PHCS is a larger network of health care providers than Preferred Plan, the Village's present PPO network. · Stop-Loss Insurer: Lloyds of London. 7 · IPBC Indemnity/PPO Assessments: Single Monthly Rate $210.10 Family Monthly Rate $589.64 Assessments for 1998 would amount to $1,548,100. · Total projected 1998 annual costs of Medical Insurance Alternative #7: $1,997,600. Interim Medical Insurance Conclusions Based upon the above information, Medical Insurance Alternative #7 (joining IPBC) would be the lowest cost alternative for the Village. Medical Insurance Alternative #2 (retaining the current, self-funded indemnity plan structure except for changing our stop-loss carder to Sun Life) would be the next least expensive option. The difference in costs between Medical Insurance Alternatives #2 and #7, setting aside conversion costs, would be about $40,000 in 1998. This does not take into account an HMO premium rebate which IPBC has declared in each oftbe last three years due to favorable claims expefiance. While not guaranteed every- year, this rebate has averaged 8.5% and would amount to about $40,000 for the Village. If the rebate is considered, Alternative #7 is approximately $80,000 less expensive than Alternative #2. Further Medical Insurance Analysis As stated above, certain conversion costs would be associated with joining IPBC. Exhibit 2 takes these costs into account. The costs shown for Medical Insurance Alternative #2 are the same in Exhibit 2 as they are in Exhibit 1. However, certain adjustments have been made to Alternative #7 in Exhibit 2. First, as indicated above, it would not be possible to actually join IPBC until April. Therefore, the Village would continue to incur the costs of its self-funded indemnity plan until that date. (The period from January 1 through March 31 can be referred to as the "gap period.") Those costs are shown on line #9 through #11 under Alternative #7 in Exhibit 2. Also, the Village would not be receiving the lower HMO Illinois rates until April 1. Thus, HMO premiums on line #8 have been adjusted. Conversely, IPBC indemnity/PPO assessments on line #13 have been decremented appropriately. Other complications arise with indemnity claims which are incurred before April 1 but not paid until after March 31. IPBC would only be responsible for claims which are incurred after March 31. The Village or any insurance which we might pumhase would be responsible for covering claims incurred before April 1 but not paid until after March 31. Such claims are referred to as "mn-out" claims. Lines #15 through #17 in Exhibit 2 reflect these costs. It is assumed that the Village would retain Harrington for claims administration and attempt to extend the current stop- loss insurance policy with Medical Excess for the gap period and a six-month "mn-out" period (April 1 through September 30, 1998). Although Sun Life has quoted lower stop-toss insurance 8 rates than Medical Excess, Ms. Schilf believes that it is unlikely that Sun L'tfe, as a new carder, would be willing to provide coverage to the Village for only nine months. As indicated in the notes to both Exhibits 1 and 2, the I~BC indenmity/PPO assessments include a "terminal reserve." The terminal reserve is used to satisfy the cash flow needs associated with the Village's indemnity claims and to pay mn-out claims should the Village ever deeide to leave IPBC. The terminal reserve of an IPBC member may be adjusted annually as necessary through the assessment rates based upon claims experience. Factored into the IPBC indemnity/PPO assessment rates above is a terminal reserve of $248,100. The terminal reserve earns interest which is directly allocable to the I~BC member. If upon departure from the pool, all of the terminal reserve is not needed by IPBC to pay run-out claims, the reserve is returned to the departing member. Including provisions for both the run-out claims of the current self-funded indemnity plan and the run-out claims associated with departure from I~BC (i~e., the terminal reserve) in the Alternative #7 in Exhibit 2 would effectively cause Alternative #7 to "pay twice" for run-out claims. Therefore, a Subtraction is made on line #I9 of Alternative #7 for the IPBC terminal reserve. The conversion costs associated with Medical Insurance Alternative #7 would add approximately $290,000 to its cost. With conversion costs, the costs of Alternative #7 would be about $250,000 higher than Alternative #2 in 1998. Again, this does not take into account the potential IPBC HMO premium rebate. More About IPBC The Contract and By-Laws of~BC are attached as Exhibit 5 to this memorandum. The Contract and By-Laws call for each member to appoint a representative and alternative to the IPBC Board of Directors. The IPBC Board of Directors is the governing board of the pool. Given the Finance Department's responsibility for the administration of employee benefits for the Village, it would be appropriate that the Director of Finance be appointed the primary representative and the Assistant Director of Finance be appointed as the alternate if the Village joins the pool. A list of the current II~BC members is included as Exhibit 6. Arthur J. Gallagher & Company serves as a consultant to the pool. IPBC's plan year runs from July 1 through June 30~ I~BC was founded in 1980 and the contractual agreement providing for the pool's operations has been renewed by the members every three years. The current contract expires on June 30i 1999. Therefore, if the Village joins IPBC, we would do so at about the midpoint of the current contract. Understanding that the Village has been researching the possibility of joining IPBC, the IPBC Board of Directors has already reviewed the Village's Medical Insurance Program and has tentatively accepted us for membership. 9 The IPBC lIMO rates shown above are guaranteed only until June 30~ 1998. This is becb. use IPBC's HMO stop-loss premium expires on that date. Over the past few years, IPBC has seen the following increases in its HMO rates: 1995/1996 6.0% 1996/1997 4.5% 1997/1998 0.0% The average annual increase over the last three plan years has been 3.5%. This is before the 8.5% ll~BC HMO premium rebate mentioned above. IPBC's indemnity/PPO plan is, to an extent, a self-funded plan. Each member is responsible for the first $10,000 of claims per individual participant per year. Claims between $10,000 and $50,000 are pooled among all members. This has been done to promote rate stability. A stop- loss policy provides coverage for claims in excess of $50,000. The aggregate annual percentage increases in the IPBC indemnlty/PPO assessments since 1995 have been: 1995/1996 12.0% 1996/1997 4.5% 1997/1998 0,0% The average of the above increases is 5.5%. The IPBC indemnity/PPO assessment rates specified above in the description of Medical Insurance Alternative #7 are guaranteed through June 30, 1999. You will recall that the stop-loss premiums for the Village's self-insured indemnity plan increased by 25% in 1997. As indicated under the discussion of Medical Insurance Alternative #1 above, Medical Excess, our current stop-loss carder, has quoted 1998 rates with no increase. However, that was only after extensive negotiations initiated by Ms. Schilf. Initially, Medical Excess quoted rates with a 7% increase. Joining IPBC would require the Village to engage Reliastar as our TPA. To gauge participant satisfaction with Reliastar, we queried administrators of four IPBC members: the Villages of Barrington, Wheeling, and Glendale Heights and the City of Rolling Meadows. All responded with a favorable assessment. To afford a long-term view of IPBC membership, Exhibit 3 is provided. Exhibit 3 projects the costs associated with Medical Insurance Alternatives #2 and #7, disregarding conversion costs, for the eight-year period fi.om July 1, 1998 through June 30, 2006. The costs under both alternatives have been presented on the basis of an IPBC plan year. In Exhibit 3, HMO premiums under Alternative #2 have been projected to increase at the rate of inflation, 3%. Claims administration expenses have been projected to increase 1.5%; this is consistent with the increases we have experienced in the last two years. Annual increases of 13% are projected for stop-loss insurance. We have seen wide variability in stop-loss quotations in the past few years. As stated above, Medical Excess has agreed to a quote with no increase for 1998 but their 1997 quote included a 25% increase. The approximate midpoint between these two 10 quotes, 13%, is a reaSOnable estimate of increases the Village would be likely to confront in future years. Annual increases for serf-insured indemnity expenses ai~cr 1998/1999 are projected to be 11%. This is the same percentage used to project the increase in self-insured indemnity expenses between 1997 and 1998 as was previously discussed. With respect to the projections of Alternative//7 in Exhibit 3, annual ]~BC HMO premium increases are estimated to be 3.5%, the average increase of the last three years. However, if this rate isto be used, a provision must be made for the HMO premium rebate which has averaged 8.5% over the same period. This provision is shown on line//9 of Exhibit 3. As stated above, since 1995, the annual increase in the ll~BC indemnity/PPO assessment has averaged 5.5%. The projections of the IPBC indenmity/PPO assessment in Exhibit 3 have been based upon conservative 8% annual increases. The eight-year projection suggests the cost savings which can be realized by joining IPBC. For the first full plan year, the V'fllage would save about $155,000 before considering conversion costs. In the 2005/2006 plan year, the cost savings could amount to over $800,000. The strength oflPBC is in its size. Currently, almost 3,900 employees and retirees are covered by Ii~BC. If family members are included in the count, it is estimated that IPBC covers about 10,000 individuals~ This gives IPBC significantly greater bargaining power in purchasing stopdoss coverages than we now have as an individual municipality. Furthermore, the pooling ofindenmity risk between $10,000 and $50,000 over a large population serves to mitigate the peaks and valleys in the costs incurred by individual members. . lZinal Medical Insurance Conclusions IPBC clearly has the potential to reduce the cost of medical insurance to the Village. This can be done with no change in the benefits provided by our current Medical Insurance Program. Therefore, the Village should join the pool. It will take approximately two years for the Village to recoup its costs of convert'rog to IPBC. After that point, assuming historical trends extend into the future, increasingly greater benefits of I~BC membership will be seen. Therefore, joining IPBC must be viewed as a long-term commitment. While the current contract expires on June 30, 1999, the Village should expect to continue as a member in the next three-year contact period and perhaps beyond. The Village would need to maintain separate medical insurance during the gap and mn-out periods. The Village could retain Harrington as the indemnity plan TPA and attempt to extend the stop-loss insurance coverage with Medical Excess for these periods. We have not yet been able to determine whether Medical Excess is willing to extend coverage for less than one year. However, Ms. Schilf believes that Lloyds of London, IPBC's stop-loss insurer, may be willing to provide such coverage. Gregg Aleman with Gallagher Benefit Services concurs with this view. Another option would be to purchase a full one-year stop-loss insurance policy to cover gap and mn-out indemnity claims. The objective, of course, would be to obtain the coverage we need for the lowest possible costs. Given the time constraints (these issues must be resolved by January 1, 11 1998) and the fact that we are not certain that Medical Excess;will a~ree to extend stop-loss coverage for only nine months, the staff should be empowered to negotiate coverage for gap and mn-out indemnity claims if necessary. Special arrangements for HMO coverage would not be necessary because HMO Illinois is the sole H/riO provider for ]PBC. These measures amount to implementing Medical Insurance Alternative #1 for the gap and mn-out periods. Life Insurance Coverage Life insurance coverage is a subcomponent of the Medical Insurance Program. Currently, the Village provides $30,000 of life insurance coverage for police officers and firefighters and $10,000 of coverage for other full;time employees. Employees have the option of' purcb, asing additional life insurance up to a maximum of $50,000 including the amount provided by the Village. Exhibit 7 outlines four alternatives for life insurance coverage in 1998 and estimates the cost of life insurance to the Village in 1997. Coverage through Reliastar (Life Insurance Alternative D) is available at the lowest cost through IPBC. Reliastar's rates are 11% lower than the next best quote given by Boston Mutual (Life Insurance Alternative B). Although IPBC's policy with Reliastar for life insurance coverage expires on July 1, 1998, it is unlikely that the quotes for the next policy year will surpass those of Boston Mutual. In addition, IPBC requires that its members purchase at least $5,000 of life insurance coverage per employee from the pool's life insurance carder. During the gap period, the V'dlage should continue coverage with Standard Insurance Company (Life Insurance Alternative A modified for three months' coverage) due to the relative immateriality of the cost involved~ RECOMMENDATION: That the Village Board: 1) Approve the implementation of Medical Insurance Alternative #7 described above. 2) Adopt the resolution attached as Exhibit 8 effecting membership in IPBC. 3) Approve the implementation of Medical Insurance Alternative #1 described above insofar as necessary as to provide for medical insurance coverage for the gap and mn-out periods. If it is not possible to extend the Village's stop-loss coverage with Medical Excess through September 30, 1998, the staff' shall be empowered to negotiate coverage with another, comparable stop-loss medical insurer for the gap and mn-out periods. 4) Approve the implementation of Life Insurance Alternative D outlined in Exhibit 7. 12 ) Approve the implemehtation of Life Insurance Alternative A outlined in Exhibit 7 insofar as necessary to provide for life insurance coverage for the gap period. BRIAN W. CAPUTO attachments c: Ea Finance Commissioner David Strahl, Assistant Village Manager Marilyn Genther, Library Executive Director Carol L. Widmer, Assistant Director of Finance Ea StaffMedical Insurance Committee Member x:\use~putob~urane~m~icalX.9 8reed 13 Exhibit 2 VILLAGE OF MOUNT PROSPECT Comparison of Medical Insurance Program Alternatives Projected 1998 Annual Costs Including Costs Associated With April 1 Conversion to i~BC Lille No. Self-Insured Pro,am IPBC 1 Alternative: 1997 #2 #7 2 IqlvlO Insure. . HMOIL ItMO IL HMOIL 3 TP~ Han'ingtan Hatr~4,ton Reliastar 4 PPO Network: Preferred Plan Preferred Plan PHCS 5 Stx~Loss Insure~. Med. Excess Sun Life Lloyds 6 Fully-Iusused Insurec NA NA NA 7 Cost Compunen~s 1997 #2 #7 8 HMO Premiums $ 429,700 463,300 452,900 9 Claims Administration Expense 53,100 53,700 13,500 10 Stop-Loss Insurance Premiums 187,200 153,200 45,900 11 Self-insured Indemnity Expense 1,230,000 1,365,300 341,300 12 Fully-Insured Inderanity Premiums NA NA NA 13 IPBC Indemnity/PrO Assessments NA NA 1,223,100 * 14 Total Before Run-Out Costs and IPBC Tennianl Res~ve Adjustment 1,900,000 2,035,500 2,076,700 15 Ran-Oat Claims Adminiztration Expense NA NA 26,900 16 Ran-Out S~o-Le~s Insurance Premiums NA NA 91,800 ! 7 Run-Out Self-Insured Indemnity Expense NA NA 341 15 Total Alter Run-Out Costs 1,900,000 2,035,500 2,$36,700 19 Less IPBC TenuLnal Reserve NA NA (248,100) 20 Total Alter Run-Out Costs and IPBC Tenuinal Reserve Adjustment 1,900,000 2,035,500 2,288,600 *Includes full terminal reserve amount of $248,100. HMO rebate is not Included in Alternative #7 above. File~ame: x:Xas~sXcaputob~surox~dical~ggmed2 Dat~ Prepared: 12/10/97 15 Kometh C,. Lante~ Exhibit 4 New Business Manager CIGNA HealthCare October 25, 1997 s~s w. Monroe Suite 1800 Chicago, IL 60661 Telephone (312) 648-2468 Facsimile (31';') 648-3617 VIA FACSIMILE DELIVERY 630.833.1747 Ms. ?amela S. Schilf Assistant Vice Pr~ident Euclid Insurance Agendes 977 Oal~awn Avenue Elmhurst, Illinois 60126 1~: VILLAGE OF MOUi~ PROSPECT Dear Para: Thank you for considering CIGNA HealthCare as a potential partner for the ¥illage of Mount Prospect. Your consideration is greatly appredated. · After an extensive Underwritin§ xeview of the requested plan designs anddaims experience, we have determined that we are unable to issue a proposal that meets the outlined specifications due to the provisions of the Union contraS. Specifically the largest road-blocks include: o We cannot duplicate the plan designs presently in place. They cannot be administered per our systems architecture a~d provider contracting obligations. We can closely approximate the benefit provisions, however, we cannot duplicate them. Given my experience, this is a real issue with Union negotiated benefits. The only time I have been successful in approximating the benefits versus duplicating them has been when we significant lead time (6-9 months) to meet with the Board and Union representatives periodically to discuss the objectives and brain-storm together. That way trust is gained and mis- understandings are minimized/eliminated. This type of dialogue will not occur in order to implement a program smoothly for a January 1, 1998 effective date. o Fragmentation the risk in that their is a separate HMO offered with substantial enrollment will not allow us to offer an insured quote to the PPO only group, Fragmentation dilutes the spread of the risk and you no longer have a cohesive risk pool. If CIGNA HealthCare would · be the exclusive HMO and PPO carrier on an insured basis, we would be able to offer a proposal if we did not have to duplicate the benefits. In this instance, we also must have ample lead time to really review true versus perceived network cross over. Some local HMOs tout the largest network, but they are including providers in Illinois, but that are outside the Chicagoland area. This is a real issue that would have to be discussed in detail with the Union prior to issuing a proposal. · o. ge Pam, I would like to issue a proposal as I am not compensated for declination letters, however, based on my experience, we wlil not be able to write this case due to the above considerations. If we would have the homework done with the Union on the above two issues and any other issues out there, we would be in a much better position. Compiling proposals is a very time-consuming and expensive process, so we want to ensure that we a_re able to meet a prospects bid qualifications prior to issuing them. In light of the above, we respectfully decline to issue a proposal. If it is feasible to begin the discussion process in early 1998, I would gladly work with you and your client to meet their needs. Upon review, please call me if I can be of any additional assistance. Thank you! incer ly, , KGL/nm B~it CONTRACT AND BY-LAWS INTERGOVERNMENTAL PERSONNEL BENEFIT COOPE~ATIVE INDEX Paqe No. 1 ARTICLE I. Definitions and Purpose. 1 Definitions. 3 Purpose. 5 ARTICLE II. Powers and Duties. 6 ARTICLE III. Participation. 7 ARTICLE IV. Commencement of the 1996 Term of the COOPERATIVE. 8 ARTICLE V. Board of Directors. 13 ARTICLE VI. Board of Directors Meetings. 15 ARTICLE VII. Cooperative Officers. 17 ARTICLE VIII. Finances. 23 ARTICLE IX. Plan of Benefits, HMOs and Reduction In CoVerage. 28 ARTICLE X. Excess Insurance. 29 ARTICLE XI. Obligations of Members. 32 ARTICLE XII. Liability of Board of Directors or Offices. 33 ARTICLE XIII. Additional Insurance. 34 ARTICLE XIV. Disputes Over Coverage. 35 ARTICLE XV. Contractual obligation. 36 ARTICLE XVI. Expulsion of Members. 38 ARTICLE XVII. Withdrawal of a Member and Continuation or Termination of the COOPERATIVE. Drafted by ANCEL, GLINK, DIAMOND, COPE & BUSH, P.C. 9/5/96--~OPTION COPY SECOND CONSOLIDATED AMENDMENT TO THE CONTRACT AND BY-LAWS INTERGOVERNMENTAL PERSONNEL BENEFIT COOPERATIVE ARTICLE I. Definitions and Purpose. DEFINITIONS: As used in this agreement, the following terms shall have the meaning hereinafter set out: ADMINISTRATIVE FUND A fund of monies established by the MEMBERS of the Intergovernmental Personnel Benefit Cooperative to pay for the joint administration of the personnel non- salary benefit programs offered by each MEMBER to its employ- ees and officers and turned over for administration to the COOPERATIVE. ADMINISTRATOR ~ An independent contractor of the COOPERATIVE employed to administer the personnel benefit programs of the various MEMBERS of the COOPEP~ATIVE. BENEFIT POOL - A fund of monies established by the MEMBERS of the Intergovernmental Personnel Benefit Cooperative to fund certain benefits granted by the individual MEMBERS to their respective officers and employees and to purchase excess, aggregate, or other insurance. BENEFITS - Non-salary payments made to employees or officers, including but not limited to payments or reimbursements of expenses arising out of an illness or an. accident and life insurance proceeds. The units of local government which participate in the'COOPERATIVE have determined not to purchase 1 insurance coverage for benefit payments below certain high limits but rather to rely upon their pooled financial capabil- ities to pay benefits within the financial obligations of the COOPERATIVE and co purchase some insurance to protect against cacassrophic and certain other benefit claims. COOPERATIVE - The Intergovernmental Personnel Benefit Coopera- tive established pursuant to the Constitution and the statutes of this State by this intergovernmental agreement. HMO POOL o A fund of monies established by the MEMBERS of the Intergovernmental Personnel Benefit Cooperative to fund certain benefits granted by the individual MEMBERS to their respective officers and employees relating to health maitre= nance organizations. INDEM/qITY CASH FLOW ACCOUNT - A fund of monies established by the MEMBERS of the Intergovernmental Personnel Benefit Cooperative to fund needed cash flow in the Benefit Pool. The Board of Directors shall establish, from time-to-time, the funding requirements from the MEMBERS to generally provide at least two (2) months of estimated funding for the Benefit Pool. LISTED ENTITIES Governmental bodies, quasi governmental bodies and non-profit public service entities listed by a MEMBER as having their employees and officers under a benefit program which will be administered along with that of a MEMBER by the COOPERATIVE. 14]~4BERS - The units of local government or intergovernmental agencies established pursuant to an intergovernmental agree- ment composed of units of local government which initially or later enter into this intergovernmental contract for the benefit of their employees and officers along with the employ- ees and officers of other listed entities. Whenever in this agreement the'phrase "units of local government, municipality" or similar phrase is used, it shall also refer to any inter- governmental agency established pursuant to an intergov- ernmental agreement composed of units of local government. TEI{MINAL RESERVES - A fund of monies retained by the Intergov- ernmental Personnel Benefit Cooperative on behalf of MEMBER~ whose fund balances are in excess of all financial require- ments for that MEMBER. .PURPOSE: The Intergovernmental Personnel Benefit Cooperative is a cooperative entity voluntarily established by contracting units of local government as are permitted by Article VII, Section 10 of the 1970 Constitution of the State of Illinois, and the Intergovernmen- tal Cooperation Act and other provisions of law to jointly administer some or all of the personnel benefit programs offered by its MEMBERS to their officers and employees and the officers and employees of other governmental, quasi-governmental and non-profit public service entities with which some or all MEMBERS have 3 separately arranged to list as if such officers and employees were employed by the MEMBER. To the extent provided for in this Contract and By-Laws, and as approved by the Board of Directors , the Intergovernmental Personnel Benefit Cooperative shall provide benefit coverage to the officers or employees of its MEMBERS. The Intergovernmental Personnel Benefit Cooperative shall also carry out such claim reduction and educational programs as shall be authorized by its Board of Directors. The creation of the various funds and pools established in this Contract and By-Laws are not intended by the parties to constitute the transaction of an insurance business within the State of Illinois. The intent of the parties is to separately establish benefit programs and to utilize the Intergov- ernmental Personnel Benefit Cooperative to achieve reduced costs of administration by providing similar services to all MEMBERS of the entity and to require MEMBERS to pay for the costs of such benefits or to share such costs in the manner from time-to-time established by the Board of Directors. 4 9/5/96--~OPTION COPY ARTICLE II. Powers and Duties. The powers of the COOPERATIVE to perform and accomplish the purposes set forth above, within the budgetary limits and proce- dures set forth in these By-Laws, shall be the following: (a) To employ agents, employees and independent contractors, (b) To lease real property and to purchase or lease equip- ment, machinery, or personal property necessary for the carrying out of the purpose of the COOPERATIVE, (c) To carry out educational and other programs relating to health, accident and other claims reductions, (d) To cause the creation of, see to the collection of funds for the administration of the COOPERATIVE (Administrative Fund) and to create the Benefit Pool, (e) To purchase such individual excess, aggregate, group life and other types of insurance approved by the Board of Directors, (f) Solely within the budgetary limits established by the MEMBERS to carry out such other activities as are necessarily implied or required to carry out the purposes of the COOPERATIVE specified in Article I or the specific powers enumerated in Article II. ARTICLE III. Participation The membership of the COOPERATIVE shall consist of those MEMBERS and previously approved listed entities which were MEMBERS of the COOPERATIVE on May 1, 1996, and by May 1, 1996 elected to continue as MEMBERS into the next three-year cycle. Listed entities are other governmental, quasi-governmental and non-profit public service entities which MEMBERS have chosen to include within their membership in the COOPERATIVE. Such listing fulfills a public purpose in that such listed entities have so few employees and officers that they could not bear the risk inherent in offering such benefit programs on their own. In other cases, the MEMBER itself has so few employees that it requires the participation of such other listed entities for the same reason. The MEMBER which lists entities shall, however, be the sole MEMBER of the COOPERA- TIVE and shall be responsible for all costs and duties of member- ship provided herein. The MEMBER may make such arrangement as is desired with the listed entities regarding the manner of payment, sharing of risks and duration of such arrangement. Such arrange- ment is not a part of this Contract and By-Laws. New MEMBERS and their listed entities and the listing of additional entities by existing MEMBERS shall be added to the COOPERATIVE only after a favorable two-thirds (2/3) vote of the entire membership of the Board of Directors and subject to the payment of such sums and under such conditions as the Board shall in each case or from time- to-time establish. 9/5/96--~OPTION COPY ARTICLE IV. Commencement of the 1996 Term of the COOPER3%TIVE. If by May 1, 1996, MEMBERS of the COOPERATIVE, on that date, which provide their respective benefit plans to at least 750 officers and employees have by corporate ordinance or resolution elected to continue as MEMBERS into the next three-year cycle, then the COOPERATIVE shall continue in existence and the terms of this Second Consolidated Amendment to the Contract and By-Laws of the Intergovernmental Personnel Benefit Cooperative shall take effect commencing on July 1, 1996. If this Second Consolidated Amendment is approved, the terms of the First Consolidated Amendment, as they exist on June 30, 1996, shall be applicable to any event which occurred prior to June 30, 1996, and which is not otherwise dealt with in the Second Consolidated Amendment. 7 9/5/96--~OPTION COPY ARTICLE V. Board of Directors. (a) There is hereby established a Board of Directors of the COOPERATIVE. Each MEMBER unit of local government shall, by majority vote of its governing board, elect one (1) person to represent that body on the Board of Directors. The MEMBER may also select an alternate representative to serve when the initial representative is unable to carry out his duties~ The person and alternate selected need not be an elected official of the MEMBER. During the last quarter of the fiscal year, including the fiscal year which ends on June 30, 1996, or at its first meeting of each subsequent fiscal year, the Board of Director shall elect from the Board one (1) person to serve as Chairman of the Board and one (1) person to serve as Vice Chairman of the Board for terms of one (1) or two (2) fiscal years,. The Board of Directors may from time-to- time establish other officers of the Board and may elect a person from the Board to serve in any of such offices. The Board may fill any vacancies which may occur in such offices until the end of the term. (b) The Board of Directors shall determine the general policy of the COOPERATIVE which policy shall be followed by all officers, agents, employees and independent contractors employed by the COOPERATI¥~. It shall have the responsi- bility for (1) Hiring of COOPERATIVE officers, agents, 9/s/9~.-m0PT=0~ copy non-clerical employees and independent contractors, (2) Setting of compensation for all persons, firms and corporations employed by the COOPERATIVE, (3) Setting of fidelity bonding requirements for employees or other persons, (4) Approval of amendments to the By-Laws, (5) Approval of the acceptance of new MEMBERS and listed entities, (6) Approval of educational and other programs relating to claim reduction, (7) Approval of monthly and supplementary payments to the Administrative Fund and the Benefit Insurance Pool, including that portion of the cost of excess or other types of insurance attributable to each MEMBER, (8) Any other matters not assigned to another committee, officer, independent contractor, or agent. (c) Each MEMBER shall be entitled to one (1) vote on the Board of Directors. Such vote may be cast only by the designated representative of the MEMBER or in the Director's absence by an alternate selected by the MEMBER in the same manner as specified for the selection of the principal representative. No proxy votes or absentee votes shall be permitted, but in the absence of a quorum, not more than two (2) Directors may participate in a meeting by telephonic means. If more than two (2) Directors request to participate by telephonic means, a random method shall be used by the person who will be 9/5/~6--~OPTION COPY presiding at the meeting to choose the Directors to be selected. Voting shall be conducted by voice vote unless on~ (1) or more MEMBERS of the Board of Directors shall request a roll call vote; provided, however, that any vote to authorize the expenditure of Funds or which requires a greater than a majority vote for passage, shall be by roll call. (d) The representative selected by the MEMBER shall serve for a one fiscal year term commencing at the beginning of each fiscal year and until his successor has been selected. The representative chosen by the MEMBER may be removed by the majority vote of the corporate authorities of the MEMBER during the period of this term. In the event that a vacancy occurs in the representative or alternate representative selected by the corporate authorities of a MEMBER, that body shall appoint a successor. The failure of a MEMBER to select a represen- tative or his failure to participate shall not affect the responsibilities or duties of a MEMBER under this contract. (e) The Board of Directors may establish rules governing its own conduct and procedure not inconsistent with the By- Laws. (f) A quorum shall consist of a majority of the MEMBERS of the Board of Directors. Except as provided in Subsection 10 9~/~6--~OPT~ON COPY (g) herein, or elsewhere in these By-Laws, a simple majority of a quorum shall be sufficient to pass upon all matters. A greater vote than a majority of a quorum shall be required to approve the following matters: (i) Such matters as the Board of Directors shall estab- lish within its rules as requiring for passage a vote greater than a majority of a quorum; provided, however, that such a rule can only be established by a greater than majority vote at least equal to the greater than majority percentage within the proposed rule, (ii) The admission of a new MEMBER or a listed entity and the expulsion of a MEMBER shall require the two~.thirds (2/3) vote of the entire membership of the Board of Directors, (iii) Any amendment of these By-Laws except as provided in Subsection (iv) below, shall require the two- thirds (2/3) vote of the entire membership of the Board of Directors, (iv) The amendment of these By-Laws to require mandatory membership in the COOPERATIVE for more than a three-year term shall require the favorable vote of the governing board of each MEMBER evidenced by a resolution or ordinance. 11 9zs!9~--~0pT~0~ coPY (v) The adoption of procedures regarding administration of an application for benefits shall require the two-thirds (2/3) vote of the entire membership of the Board of Directors. (vi) The approval of payments of all kinds into the Benefit Pool and the allocation of those payments among MEMBERS shall require the vote of sixty percent (60%) of the entire membership of the Board of Directors. (h) No one serving on the Board of Directors shall receive any salary or other payment from the COOPERATIVE and any salary, compensation, payment or expenses for such representative, shall be paid by each MEMBER separate from this Contract. Provided, however, that in the event the person chosen as Treasurer is a member of the Board of Directors, that person ma~'receive such compensation as is established from time-to-time by the Board of Directors. In addition, the Chairman of the Board, Treasurer and such other officers as may be selected from time-to-time may submit to the Board of Directors for their approval reimbursement of expenses incurred in the pursuit of their position as officers of the COOPERATIVE. The reimbursement for such expenses shall include amounts advanced on behalf of the COOPERATIVE either by the officer himself or by a MEMBER of the COOPERATIVE. 12 ARTICLE VI. Board of Directors Meetings. (a) Regular meetings of the Board of Directors shall be held at least four (4) times a year. The dates of regular meetings of the Board shall be established at the beginning of each fiscal year. Any item of business may be considered at a regular meeting. At least two (2) meetings must be held during the first half of the fiscal year and at least two (2) meetings must be held during the second half of the fiscal year. Special meetings of the Board of Directors may be called by its Chairman, or by any two (2) Directors. Ten (10) days written notice of regular or special meetings shall be given to the official representatives of each MEMBER government and an agenda specifying the subject of any special meeting shall accompany such notice. Business conducted at special meetings shall be limited to those items Speci~ fied in the agenda. (b) The time, date and location of regular and special meetings of the Board of Directors shall be determined by the Chairman of the Board of Directors or by the conven- ing authority. (c) To the extent not contrary to these By-Laws, and except as modified by the Board of Directors, Roberts Rules of Order, latest edition, shall govern all meetings of the Board of Directors. M%nutes of all regular and special 13 meetings of the Board of Directors shall be sent to all MEMBERS of the Board of Directors. 14 9/5/96--ADOPTION COPY ARTICLE VII. Cooperative Officers. (a) In addition to the Chairman and ViCe Chairman, the officers of the COOPERATIVE shall consist of a Treasurer and such other offices as are established from time-to- time by the Board of Directors. All officers shall be appointed by the Board of Directors. (b) The Treasurer shall: 1. Have charge and custody of and be responsible for all funds and securities of the COOPERATIVE; re- ceive and give all receipts for monies due and payable to the COOPERATIVE from any source whatso- ever; deposit all such monies in the name of the COOPERATIVE in such banks, savings and loan associ- ations or other depositories as shall be selected by the Board of Directors; keep the financial re- cords of the COOPERATIVE and invest the funds of the COOPERATIVE as are not immediately required in such securities as the Board of Directors shall specifically or generally select from time-to-time. Provided, however, that all investments of COOPERA- TIVE funds shall be made only in those securities which may be purchased by Illinois non-home rule communities under the statutory provisions of Illinois law. 2. In general, perform all the duties incident to the office of Treasurer and such other duties as from time-to-time may be assigned to him by the Bcncfit Administrator or the Board of Directors. (c) In the absence of the Treasurer, or in the event of the inability or refusal of such officers to act, the Chairman of the Board of Directors may temporarily perform the duties of the Treasurer and, when so acting, shall have all of the powers of and be subject to all of the restrictions upon the Treasurer. A new Treasurer 15 9/5/96--~OPTION COPY shall be selected at the next regular or special meeting of the Board of Directors. (d) The COOPERATIVE shall purchase a blanket fidelity bond in an amount to be established by the Board of Directors to assure the 'fidelity of all officers, directors, and employees of the COOPERATIVE who shall have the authority to receive or authorize by their signature or order the payment of COOPERATIVE funds. Additional fidelity and similar coverages may be procured by the COOPERATIVE from time-to-time. (e) The Board may select a financial institution to carry out some or all of the functions which would otherwise be assigned to a Treasurer and may select a management company o~ agent to carry out some or all of the func- tions which would otherwise be assigned to an Adminis- trator. 16 9/5/96--ADOPTION COPY ARTICLE VIII. Finances. A. Runout Claims--Pre-July 1, 1996. The administration and financing of the claims and the handling of the final accounting of a MEMBER, which leaves the COOPERATIVE in 1996 shall take place in accordance with the Contract and By-Laws in effect on January 1,1996. For MEMBERS which remain in the COOPERATIVE after July, 1996, a final accounting of the funds owed to or owing from the MEMBERS from the operations of the COOPERATIVE to July 1, 1996, shall be accomplished so that any surpluses or deficits due or owing from the MEMBERS shall be paid in twenty-four (24) monthly payments beginning sixty (60) days after the approval of the audit'of the COOPERATIVE for the prior fiscal year. The Board of Directors may make or require interim payments based upon earlier audited figures, but the total payment made or due shall reflect final audit figures for the fiscal year ending June 30, 1996. During the fiscal year which commences July 1, 1996, the Board of Directors may vote to utilize surplus funds of the COOPERATIVE to assist in providing cash flow for operations but all then- current and immediately past MEMBERS shall be responsible for the payment of any sums due the COOPERATIVE promptly upon a demand made in accordance with Article XVII. If any MEMBER should be delin- quent in such payments then, during the period that such funds are outstanding,payments to MEMBERS owed funds shall be proportionally reduced rather than requiring other MEMBERS to contribute addition- 17 al funds on behalf of the delinquent MEMBER, or former MEMBER. MEMBERS receiving payments may elect to utilize such funds to pay current or future obligations to the COOPERATIVE or ask that they be held in a terminal reserve fund. Amounts placed in a terminal reserve fund may be withdrawn by a MEMBER in accordance with Article VIII-G. B. Administrative Fund.. The cost of the administration of the COOPERATIVE shall be borne by each of its MEMBERS in direct proportion to the number of employees and officers of the MEMBER and listed entities whose benefit programs are to be administered by the COOPERATIVE as compared to the total number of such persons served by the COOPERA- TIVE. Whenever payments to the Administrative Fund shall be based upon an estimate, the MEMBER shall promptly receive a refund or pay a deficiency when final figures become available. The Administra- tive Fund shall pay all of the administrative costs of the COOPERATIVE. C. The Benefit Pool. Payments into the Benefit Pool will be developed and adminis- tered in the following manner: 1. Before the start of each fiscal year, the Adminis- trator will determine on the basis of financial data the amount of total payments from all MEMBERS necessary to fund anticipated benefit payments and the cost of excess or other insurance. 2. The Administrator will also recommend how this total amount of anticipated expenses should be 18 divided among the MEMBERS. The charges to be made to the MEMBERS shall be determined~by a vote of the Board of Directors which shall, in establishing such sums due, treat all similarly situated MEMBERS in an equal manner. Such a vote must receive the concurrence of at least sixty percent (60%) of the MEMBERS 3. The Board of Directors may, each fiscal year, choose an allOcation of the payments int© the Benefit Pool whereby some or all of the costs are divided among the MEMBERS based upon general in- creases or decreases in the total costs of the COOPERATIVE without regard to the claims made against individual MEMBERS or it may eledt to grant debits or credits based upon the individual plans offered by the MEMBERS or the level of claims. Debits or credits may be expressed through the use 'of a banding formula. Such a vote must receive the concurrence of at least sixty percent (60%) of the MEMBERS. 4. In the event that the Board of Directors shall fait to approve the charges or allocations by the requi- site vote, the charges and allocations for next year of any three-year cycle shall, until and unless modified, be based upon the prior year's allocations with charges increased by ten percent .... (Z0%). 5. The Administrator, upon approval of the Board of Directors, will purchase individual excess insur- ance. The Administrator shall also purchase such other insurance coverage as may be approved by the Board of Directors. 6. without regard to any other provision contained within this Article VIII, the Board of Directors may establish charges to be paid by the MEMBERS for life insurance benefits to be based upon total pooling of the experience of all MEMBERS with each MEMBER paying the same cost per employee for such life insurance coverage. The time at which a determination regarding the amounts due for such life insurance coverage and the manner in which such amounts shall be paid shall be the same as that established for other payments into the Bene- fit Pool. The Board of Directors may also estab- lish a program to.provide dental benefits to MEM- BERS which wish such coverage. 19 D. Indemnity Cash Flow Account. Commencing July 1, 1996, the Board of Directors shall establish an indemnity cash flow account. Each MEMBER shall make payments into that account equal to some percentage set by the Board of Directors of the payments that MEMBER has made into the Benefit Pool. The Board of Directors shall determine the manner in which each MEMBER'S obligation to make payments into the indemnity cash flow account is established to assure that an adequate balance for the payment of claims remains in that account at all times. The Board of Directors may establish a method whereby automatic withdrawals from Terminal Reserves are utilized to fund deficits in the indemnity cash flow account. The Board of Directors shal~ determine whether the indemnity cash flow account shall be treated as a single fund which can be utilized for the payment of the claims of any MEMBER or whether each MEMBER shall be obligated to maintain its own individual account. If separate accounts are maintained, MEMBERS may be individually required to make up deficiencies in their accounts. The establishment of payments into this account must receive the concurrence of at least sixty percent (60%) of the MEMBERS. E. General Fiscal Matters. The Board of Directors shall provide to the MEMBERS an annual audit of the financial affairs of the COOPERATIVE to be made by a certified public accountant at the end of each fiscal year in accordance with generally accepted auditing principals. 20 9/5/~6--~OPTION COPY F. SuHDlementary Payments. If, during any year, the funds on hand in the Benefit Pool, HMO Pool or the Administrative Fund are not sufficient to pay benefits or administrative expenses, the Board of Directors shall require supplementary payments. The increased payments shall be computed utilizing the same method under which payments were made for the year in question and except for payments into the Adminis- trative Fund where payments shall be made by all MEMBERS, they shall only be due from MEMBERS which were entitled to receive benefits from the fund which required Supplementary Payments. If a MEMBER withdraws all employees and officers from a fund where Supplementary Payments are due, a determination shall be made by the Board of Directors as to the amount of Supplementary Payments due from that MEMBER arising from its prior participation in that · fund. G. ReQuired Payments. During any fiscal year, a MEMBER shall only be required to make payments into the Benefit Pool and HMO Pool for those officers and employees within those covered classes established at the beginning of the fiscal year who are from time-to-time employed by the MEMBER or its listed entities. Unless the administrative costs of the COOPERATIVE can be proportionally reduced, however, a MEMBER shall be required to make payments into the Administrative Fund for at least 50% of the number of covered employees and officers which 21 it (not including its listed entities) employed at the beginning of the fiscal year. H. Terminal Reserves. During any fiscal year, a MEMBER may withdraw from the COOPEP~ATIVE any amount of terminal reserves provided that there shall be deducted from that payment any amounts owed by the MEMBER to the COOPERATIVE and then due and payable. Payment shall be made within thirty (30) days of a written request. I. Debit/Credit. The Board of Directors may establish a formula in which MEMBERS may gain credits or suffer debits based upon the manner in which the experience of the MEMBER differs from estimated pai~ claims. Any debits or credits arising out of a claim year shall be due or be paid within the period of time established by the Board of Directors. 22 ~/5/96--~0PT~0~ c0P¥ ARTICLE IX. Plan of Benefits, HMOs and Reductions In Coveraqe. MEMBERS may change the Plan of Benefits provided at any time, but shall notify the Chairman of the Board of the COOPERATIVE and the Administrator at least thirty (30) days prior to the intended effective date of such change; and such change shall be subject to a redetermination on an actuarial basis of the payments due the COOPERATIVE. The Administrator shall make a determination as to the amount of the increased or reduced payment required in light of the change in the Plan of Benefits. If the MEMBER should dispute the amount of the redetermination, a final decision regarding such amount shall be made by the Board of Directors. In the event that the Administrator should determine that the proposed change in the Plan of Benefits provides a level or type of coverage, the cost of which cannot be actuarially determined or which would provide an excessive risk to the COOPERATIVE, or is inconsistent with the aggregate, excess or other insurance purchased by the COOPERATIVE or would otherwise not be in the best interest of the COOPERATIVE, the Administrator shall present that opinion and the reasons supporting that opinion in writing to the MEMBER requesting the change and to the Chairman. The change in the Plan of Benefits shall not come into effect as a change under the COOPERATIVE'S Plan of Benefits unless the decision of the Administrator shall be overturned by the Executive Committee or the Board of Directors. The MEMBER may institute the change, but shall be financially responsible for the administration and payment of such benefits. 23 9/5/96--ADOPTION COPY The COOPERATIVE may offer to its MEMBERS participation in an HMO Pool separate from the Benefit Pool to fund the costs of providing HMO services to the officers and employees of the participating MEMBERS. Accounting for funds in this Pool, including surplus or deficit amounts, shall be separate from the BENEFIT POOL. For any fiscal year if the Board of Directors of the COOPERATIVE votes to provide an HMO Pool for the fiscal year, all MEMBERS offering }{MO benefits to their officers and employees, and wishing to offer the COOPERATIVE'S HMO Pool, shall only offer the Plan of Benefits of the COOPERATIVE'S HMO Pool. Provided, however, that any officer or employee (holdover employee) who received HMO benefits on July 1, 1994, from an HMO program other than that offered by the COOPERATIVE may, at the option of the MEMBER continue to receive benefits from that HMO. Other than to a holdover employee, no MEMBER offering the COOPERATIVE HMO coverage after July 1, 1994, shall offer an HMO Plan of Benefits for its officers and employees other than the HMO Plan of Benefits offered by the COOPERATIVE. An HMO Plan of Benefits shall mean any plan which provides benefits to partici- pants through a restriction on the doctors who provide services, an absence of substantial deductible or co-payments and an absence of or simplified claim forms. An HMO Plan of Benefits may be offered by the COOPERATIVE either through joint purchase or pooling. The rates for the HMO Plan of Benefits offered by the COOPER3~TIVE for the specific plans of its MEMBERS shall be 24 established by the Board of Directors, which sh~ll establish an average annual rate percentage change for the HMO Pool as a whole, and may then, through the use of a banding f0rmula,, establish bands of no more than 10 percentage points more or less than the average annual price adjustment for those MEMBERS~hose claims experience has been above or below the average. ~. Under two (2) circumstances, the Administrator~may recommend that an individual MEMBER or MEMBERS be individually..ra%ed Where the actual paid claims, incurred by a MEMBER during two (2) or more years of a three (3) year cycle, were both in the h.ighest or both in the lowest bands, or where it is discovered that claim history material submitted by a MEMBER was improperly stated, that MEMBER or MEMBERS ]nay be individually rated and may be required to contribute to the HMO Pool a sum no more than 100% greater or lesser than the..~mount which would be payable ha~that MEMBER or MEMBERS been rated with the group as a w~ole. S~ch individual rating shall carry into another cycle until such time as the paid Claims of the MEMBER have deClined for a year so that the MEMBER would be entitled to be rated with the group as a ~hole. If, for any year or years, the Board of Directors should determine that there are surplus funds within the HMO Pool which can be distributed to the MEMBERS without harming the fiscal integrity of the HMO Pool, those surplus funds shall be distributed to all existing and prior MEMBERS of the COOPERATIVE (who validly withdrew) who made contributions into the HMO Pool in the propor- 25 +~ t'hose contributions were made. A de.i:ermination as to ~unds shall be distributed to the 'emaining MEMBERS ........... shall be made from time-to-tim.~ by the Board of in accordance with the By-Laws, elects to ~-:~,~ COOPERATIVE, or if it has no officers or receive the HMO Plan of Benefits for the next :~lall be the obligation of that iEMBER.to pay all officers and employees for HMO ~ ~rvices under the ~.~.~ ~,.,. ~'~'med prior to the commencement o~ that next fiscal ~ ~nitted and processed before the , nd of that fiscal ~xty (60) days after 5he approval of the audit of the the prior fiscal year, a final accounting of funds ~ail take place. If a MEMBER wh ~h has offered an efits shall have no officers or employees receiving ±n a subsequent fiscal year, or i~ that MEMBER has ~n from the COOPERATIVE, then ths~ MEMBER shall be percentage of any surplus fun.' within the HMO .~ent of surplus funds or the receipt of amounts ~m the MEMBER shall be carried out in accordance - ~,~ns of Article XVII. ~t that ~rMO coverage is no longe~ offered by the ~y surplus funds remaining shall, after audit, be 26 9/5/96--~O~ION COPY distributed to the MEMBERS (except for expelled MEMBERS) in the proportion in which they contributed funds to the HMO Pool. If the number of employees or officers of the MEMBERS eligible to receive some portion of the scope of covered benefits should decline or where for some other reason the Administrator is concerned about the ability of a specific fund to cover potential claims, the matter shall be brought to the attention of the Board of Directors. The Board of Directors may determine that the coverage shall no longer be offered or its scope or amount of coverage shall be prospectively reduced. A decision to make such a reduction shall not become effective for at least sixty (60) days after the vote of the Board. 27 ARTICLE X. Excess Insurance. The COOPERATIVE may purchase excess insurance from a company approved by the Department of Insurance to write such coverage in Illinois. 28 ARTICLE XI. Obligations of Members. The obligations of MEMBERS of the COOPERATIVE shall be as follows: (a) To appropriate for, where necessary to levy for and to promptly pay all monthly and supplementary or other payments to the Administrative Fund and the Benefit Pool at such times and in such amounts as shall be established by the Board of Directors within the scope of this agreement. Any delinquent payments shall be paid with a penalty which shall, for the period of non-payment, be equivalent to the prime rate of interest on the date of delinquency charged by the bank in Illinois with th% largest assets or the highest interest rate allowed by statute to be paid by an Illinois non-home rule municipality whichever is greater. In the event that the COOPERATIVE shall be required to expend · funds for administrative, legal or other costs brought about by the failure of a MEMBER to pay sums owed the COOPERATIVE, such amounts expended shall be added to the sums due the COOPERATIVE and shall be payable by the MEMBER. In the event that a MEMBER of the COOPERATIVE should sue the COOPERATIVE or any of its MEMBERS or officers regarding an interpretation of this Contract and By-Laws, an action taken by the Board of Directors or officers or any other matter arising out of its membership in the COOPEP~ATIVE, 29 9/5/96'-~OPTION COPY and should not be the prevailing party in that suit, it shall, as part of its contractual obligation to this COOPEP~ATIVE, pay the reasonable attorneys' fees and other costs and expenses expended by the COOPERATIVE in defend- ing against that suit. (b) To select a person to serve on the Board of Directors and to select an alternate representative. (c) To allow the COOPERATIVE reasonable access to all facilities of the MEMBER and all records including but not limited to financial records which relate to the purpose and powers of the COOPER3tTIVE. (d) To furnish full cooperation with the COOPERATIVE's attorneys, claims adjusters, the Administrator and any agent, employee, officer or independent contractor of the COOPERATIVE relating to the purpose and powers of the COOPERATIVE. (e) To furnish the COOPERATIVE with a copy of revisions to its written benefit program at least thirty (30) days prior to the effective date of such change. (f) To report to the COOPERATIVE as promptly as possible all claims made to it within its benefit program as adminis- tered by the COOPERATIVE. (g) To follow those procedures regarding the administration of and application for benefits adopted by the Board of Directors which do not reduce the level of benefits 30 c0P¥ contained within any MEMBER's individual benefit program. For example, large case management and frequency and amount of claim submissions. The adoption of such procedures shall require the two-thirds (2/3) vote of the entire membership of the Board of Directors. 31 9/5/96--~OPTION COPY ARTICLE XII. Liability of Board of Directors or Officers. The MEMBERS of the Board of Directors or officers of the COOPEP~ATIVE should use ordinary care and reasonable diligence in the exercise of their power and in the performance of their duties hereunder; they shall not be liable for any mistake of judgment or other action made, taken or omitted by them in good faith; nor for any action taken or omitted by any agent, employee or independent contractor selected with reasonable care; nor for loss incurred through investment of COOPERATIVE funds, or failure to invest. No director shall be liable for any action taken or omitted by any other Director. No Director shall be required to give a bond or other security to guarantee the faithful performance of their duties hereunder. The Administrative Fund shall be used to defend and hold harmless any Director or officer for actions taken by the Board or performed by the Director within the scope of his authority. The COOPERATIVE may purchase insurance providing similar coverage for such Directors or officers. 32 9/5/96--ADO~ION COPY ARTICLE XIII. Additional Insurance. The COOPERATIVE through the distribution of the minutes of the Board of Directors or through other means shall inform all MEMBERS of the scope and amount of excess insurance in force from time-to- time. Membership in the COOPERATIVE shall not preclude any MEMBER from purchasing any excess insurance coverage above those amounts or different from that purchased by the COOPERATIVE. The COOPERA- TIVE shall, where requested, make its facilities available to advise MEMBERS of the types of additional or different employee benefits or excess insurance coverage available to units of local government. The COOPERATIVE may also create and administer programs to pay dental or other claims. All funds for the operation of such programs shall be accounted for separately and the financial obligations arising from such programs shall only be the responsi- bility of MEMBERS which participate. 33 9/5/96--~OPTION COPY ARTICLE XIV. Disputes Over Coverage. In the event that a MEMBER should dispute whether an employee or officer of the MEMBER or a listed entity is~entitled to payments from the Benefit Pool, that MEMBER shall, in writing, direct the COOPERATIVE not to pay any further amounts arising from such claim after the date of the receipt of the written direction. When so directed, the COOPERATIVE shall not pay such ~laim unless the MEMBER's order is withdrawn. Provided, however, that the MEMBER shall defend and hold harmless the COOPERATIVE against any costs or damages which the COOPERATIVE shall incur in acting on the direction of the MEMBER. In the event that an officer or employee or other perso~ claiming benefits from a MEMBER or the MEMBER itself should contes5 the decision of the Board of Directors, which declines to pay a benefit in whole or in part, the decision of the Board of Directors shall be final in the absence of fraud. The COOPERATIVE shall have no financial responsibility if a company which provides insurance for benefit claims refuses or is unable to pay such claims. In the absence of action by the Board of Directors to recover such funds from the Company the MEMBER affected may pursue the matter at its expense. 34 9/5/96--ADOPTION COPY ARTICLE XV. Contractual Obligation. This document shall constitute a contract among those units of local government which become MEMBERS of the COOPERATIVE. The obligations and responsibilities of the MEMBERS set forth herein including the obligation to take no action inconsistent with this Contract and By-Laws as originally written or validly amended shall remain a continuing obligation and responsibility of the MEMBER. The terms of this contract may be enforced in a court of law either by the COOPERATIVE itself or by any of its MEMBERS. The consider- ation for the duties herewith imposed upon the MEMBERS to take certain actions and to refrain from certain other actions shall be based upon the mutual promises and agreements of the MEMBERS set forth herein and the advantage gained by MEMBERS in anticipated reduction of administrative costs for the processing of personnel benefits. Provided, however, that the financial obligations of a MEMBER are limited to that agreed to herein or such additional obligations as may come about through amendments to these By-Laws. The obligations under this Second Consolidated Amendment shall commence on July 1, 1996. 35 9/5/96--~OPTION COPY ARTICLE XVI. Expulsion of Members. By the vote of two-thirds (2/3) of the entire remaining membership of the Board of Directors, any MEMBER may be expelled. Such expulsion, which shall take effect in the manner set out below, may be carried out for one or more of the following reasons: (a) Failure to make any payments due to the COOPERATIVE, (b) Failure to furnish, full cooperation with the COOPERATIVE's attorneys, claims adjusters, Administrator and any agent, employee, officer or independent contrac- tor of the COOPERATIVE relating to the purpose and powers of the COOPERATIVE, (c) Failure to carry out any obligation of a MEMBER which impairs the ability of the COOPERATIVE to carry out its purpose and powers. No MEMBER may be expelled except after notice from the COOPERATIVE of the alleged failure along with a reasonable opportunity of not less than fifteen (15) days to cure the alleged failure. The MEMBER, within that 15 day period, may request a hearing before the Board before any decision is made as to whether the expulsion shall take place. The Board shall set the date for a hearing which shall not be less than fifteen (15) days after the expiration of the time to cure has passed. The Board may appoint a hearing officer to conduct such hearing and make a recommendation to the Board based upon findings of fact. If the Board conducts the hearing itself, it may make a decision at the close of the hearing. A decision by 36 9/5/96--~OPTION COPY ~ the Board to expel a MEMBER after notice and hearing and a failure to cure the alleged defect shall be final unless the Board shall be found by a court to have committed a gross abuse of discretion. After expulsion, the former MEMBER shall continue to be fully obligated for any payment tO the Administrative Fund and the Benefit Pool which was created during the term of its membership along with any other unfulfilled obligation as if it were still a MEMBER of the COOPERATIVE. The obligation of the COOPERATIVE to administer the claims filed under the benefit program of the expelled MEMBER shall cease thirty (30) days after the date of expulsion, provided that the MEMBER is not in financial arrears to the COOPERATIVE. After expulsion, the COOPERATIVE or its Administrator may agree by contract to administer the claims of the expelled MEMBER using funds furnished by the expelled MEMBER. 37 9/5/96~-ADOPTION COPY ~ ARTICLE XVII. Withdrawal of a Member and Continuation or Termination of the COOPERATIVE. All MEMBERS of the COOPERATIVE shall be obligated to continue as MEMBERS during a three-year membership cycle. The first three- year membership cycle under the Second Consolidated amendment to the Contract and By-Laws shall commence on July 1, 1996. The obligation of a MEMBER during each cycle in which it is a MEMBER shall include continuing participation with regard to all classes of officers and employees of the MEMBER, not including its listed entities, established as being entitled to benefits at the commencement of each three-year cycle. Provided, however, that upon a two-thirds (2/3) affirmative vote of the entire membership of the Board of Directors, any MEMBER may be relieved of continuin~ participation with regard to a particular class or classes of officers and employees of the MEMBER. In addition, a MEMBER shall only be require~ to provide continuing participation for those persons within such classes of officers and employees as are actually employed or working for the MEMBER. In order to continue as a MEMBER of the COOPERATIVE into the three-year cycle commencing on July 1, 1999, and for each three- year cycle thereafter, the governing Board of each MEMBER must, at least sixty (60) days before the commencement date, pass an ordinance or resolution agreeing to continue as a MEMBER for the new three-year term. Failure to pass a timely ordinance or resolution shall constitute a withdrawal; provided, however, that by the majority vote of the entire continuing MEMBERS, the 38 withdrawal may be canceled and the MEMBER, at its request, may be reinstated. If a MEMBER should withdraw from the COOPERATIVE, no benefit claims of the MEMBER shall be processed or paid by the COOPERATIVE after the close of the fiscal year in which withdrawal takes place, unless the withdrawing MEMBER shall enter into a contract with the COOPERATIVE or the Administrator to provide such services using funds furnished by the withdrawing MEMBER~ Pending claims and other records relating to the withdrawing MEMBER shall be turned over to that MEMBER in a prompt manner. Within sixty (60) days after the approval of the audit of the COOPERATIVE for the prior fiscal year, a final accounting of funds owed or owing shall take place. Such accounting shall include all funds of the COOPERATIVE. If the amount owed to or owing from the withdrawing MEMBER shall be $25,000 or less, the party owing such funds shall make payment within ninety (90) days after the final accounting. If the amount owed to or owing from the withdrawing MEMBER shall be over $25,000, the party owing such funds may pay such funds owed in no less than 13 equal monthly payments with interest at the highest amount lawfully payable by a non-home rule Illinois municipality at the date the final accounting is estab- lished. Interest shall only be paid on amounts owed and the amount owed can be paid sooner. If the withdrawal of MEMBERS prior to the start of any three- year cycle shall reduce the number of covered employees and 39 9/5/96~-~OPTION COPY officers of the remaining MEMBERS, and any new MEMBERS legally committed to membership for the next three-year cycle, to less than 750 persons, the COOPERATIVE shall, except, for winding up its affairs, cease its operations at the end of the then-concluding fiscal year. In that case, the Board of Directors shall continue to meet on such a schedule as shall be necessary to carry out the winding Up of the affairs of the COOPERATIVE. If, during any fiscal year, the number of covered employees and officers should, through the withdrawal or expulsion of listed entities or attri- tion, be reduced to below 500 persons, any MEMBER may call a special meeting to discuss the feasibility of continuing the COOPEP_ATIVE in operation until the close of that fiscal year. Ail withdrawing MEMBERS shall remain fully obligated for their portion of all expenses of and claims against the COOPERATIVE -incurred during the period of their membership. If any MEMBER should file a suit against the COOPERATIVE questioning the validity of the Contract and By-Laws document, or should raise the validity of this document in a suit by the COOPEP~ATIVE and the validity of the Contract and By-Laws document is sustained, that MEMBER shall pay for the full legal and defense costs of the COOPERATIVE in that suit. 40 VILLAGE OF MOUNT PROSPECT FINANCE DEPARTMENT INTEROffICE MEMORANDUM TO: VILLAGE MANAGEK MICHAEL E. JANONIS DATE: DECEMBER 11, 1997 SUBJECT: EXCESS WORKERS' COMPENSATION nqSURANCE FOR 1998 THROUGH 2000 PURPOSE: To obtain the Village Board's approval of the purchase of excess workers' compensation insurance for the V'fllage. BACKGROUND: The V'dlage is serf-insured in its Workers' Compensation Insurance Program. Currently, the Village directly pays workers' compensation claims up to $350,000. However, to mitigate the risk of very large claims, the Village has purchased a workers' compensation insurance policy to cover claims in excess of $350,000. ($350,000 may be viewed as a "deductible.") The policy provides coverage up to the maximum workers' compensation awards allowable under state statutes for established classes of injuries. Our current two-year excess workers' compensation policy with Illinois National Insurance Company expires on December 31, 1997. This policy is brokered by I & H Marsh & McLennan of Illinois, Inc. DISCUSSION: Bill Leinheiser, the Village's property and casualty insurance consultant with Risk Resources, solicited proposals for excess workers' compensation coverage from two brokers: J & H and the Hobbs Group. In his solicitation, Mr. Leinheiser asked the brokers to provide quotes with two- or three-year rate guarantees if possible. He also asked that the brokers quote rates assuming that the Village would consider lowering its deductible to $250,000 if economically beneficial. A summary of the proposals received is attached as an exhibit to this memorandum. J & H and the Hobbs Group both offered quotes from two insurance companies. Each of the companies proposed by J & H quoted based upon a $350,000 and a $250,000 deductible. The two ompanies proposed by the Hobbs Group only quoted based upon a $250,000 deductible. This yielded six alternatives. All proposing insurance companies have been granted the rating of "A" or better by A.M. Best Company, a gum widely recognized for its expertise in analyzing the financial condition of insurance companies. Such ratings indicate that the companies are financially secure. Workers' compensation insurance rates are quoted per $100 of covered payroll. The Village's covered payroll in 1998 will be approximately $15.3 million. To provide a clearer view of the potential costs of the various proposals, the rate quotes have been extended over the estimated 1998 covered payroll on line with the caption of"Premium" in the exhibit. The low quote was offered by USF&G through the Hobbs Group for a policy with a $250,000 deductible and would cost a projected $23,771 in 1998 (Alternative #5). The USF&G rate is guaranteed for three years as long as the Village has no claims which invoke the coverage of the policy. No other insurance company was willing to offer a multi-year rate guarantee. The next lowest quote was from Illinois National through J & H for a policy with a $350,000 deductible and would cost a projected $25,751 in 1998 (Alternative #2). Thus, the Village could obtain $100,000 more of coverage for about $2,000 less annually by accepting the proposal of USF&G. As a point of information, even if the Village accepts the proposal of USF&G, we still have the option of soliciting proposals for excess workers' compensation insurance for 1999 and 2000 at a later date whether or not we meet the conditions for USF&G's rate guarantee. If the Village accepts USF&G's proposal, staff will continue to monitor the conditions in the workers' compensation insurance market and solicit proposals for those years again if market conditions become significantly more favorable. RECOMMENDATION: That the Village Board accept the proposal of USF&G through the Hobbs Group for excess workers' compensation insurance for 1998 through 2000 (Alternative #5). BRIAN W. CAPUTO attachment c: David Strahl, Assistant Village Manager Carol L. Widmer, Assistant Director of Finance x:~er~cap~tob~anc\worlccomp~ggexc.~ss VILLAGE OF MOUNT PROSPECT FINANCE DEPARTMENT INTEROFFICE M~MOP,~JqDUM TO: VILLAGE MA_NAGER MICHAEL E. JANONIS ~.~.~ FROM: DIRECTOK 'INASC ?. DATE: DECEMBER 11, 1997 SUBJECT: PROPERTY INSURANCE FOR 1998 THROUGH 2000 PURPOSE: To obtain the Village Board's approval of the purchase of propcr~y insurance for the Village. BACKGROUND: The Village's one-year property insurance policy with Ark-wright Mutual Insurance Company will expire on December 31, 1997. This policy has a $25,000 deductible and is brokered by the Hobbs Group. Our coverage under the policy extends to Village land, buildings, and building contents. In addition, the policy provides $9 million of tax interruption insurance for the Randhurst Shopping Center. For the 1997 policy, the Village paid a premium of $28,440. DISCUSSION: Bill Leinheiser, the Village's property and casualty insurance consultant with Risk Resources, solicited proposals for property insurance from two brokers: the Hobbs Group and J&H Marsh & McLennan. In his solicitation, Mr~ Lcinhciser asked the brokers to offer quotes for coverage comparable to ~-at currently in place. Furthermore, he asked that quotes include two- or three- year rate guarantees it'possible. In response to Mr. l.,cinheiser's solicitation, we received the quotes shown below. The indicated annual premiums reflect all brokerage fees. All of the insurance companies listed have been granted a rating of "A+" or better by A.M. Best Company, a firm widely recognized for its expertise in analyzing the financial condition of insurance companies. Such ratings indicate that the companies are fman(uflly secure. Annual Broker Insurer Premium Hobbs Group Arkwright Mutual $33,910 J & H St. Paul Fire & Marine $:25,273 . J & H ~Chubb & SOns $32,400 St. Paul Marine & Fire Insurance Company proposed the lowest premium and offered a three- year rate guarantee. The guarantee is in effect as long as the V'fllage does not incur a property Claim valUed at more than 40% of the annual premium (i.e., $10,110); Neither Arkwright Mutual nor Chubb would give a multi-year rate guarantee. As a point of information, even if the V'fllage accepts the proposal of St. paul, we still have the option of soliciting proposals for property insurance for 1999 and 2000 at a later date whether or not we meet the conditions for St. Paul's rate guarantee. If the Village accepts St. Paul's proposal, staff will continue to monitor the conditions in the property insurance market and solicit proposals for those years again if market conditions become significantly more favorable. RECOMMENDATION: That the V'dlage Board accept the proposal of St. Paul Fire & Marine Insurance Company through J & H Marsh & McLennan for property insurance for 1998 through 2000. BRIAN W. CAPUTO c: David Strahl, Assistant V'fllage Manager Carol L. Widmer, Assistant Director of Finance 2 VILLAGE OF MOUNT PROSPECT FINANCE DEPARTMENT INTEROFFICE MEMORANDUM TO: VILLAGE MANAGEK MICHAEL E. SANONIS ' ~ ~ i~ FROM: DIRECTOR OF FINANCE DATE: DECEMBER 10, 1997 SUBIECT: WORKERS' COMPENSATION THIRD-PARTY ADMINISTRATIVE SERVICES FOR 1998 THROUGH 2000 PURPOSE: To obtain the V'dla~e Board's approval of a third-party admini~rator (TPA) for the Xrdlage's Workers' Compensation Insurance Program. BACKGROUND: The V'fllage'is serf-insured in its Workers' Compensation Insurance Program. To assist in the adrninistratio~ of claims the V'dlage has coui~acted for the services of a TPA in the past. For the last two years, Custard Claims Mana.~oement, Inc., has been our TPA. Our current one-year contract with the fu'm expires on December 31, 1997. DISCUSSION: Bill Leinheiser, the Xrdlage's property and casualty insurance consultant with Risk Resources, solicited proposals fi.om firms who could potentially provide workers' compensation third-party administration services in the future. Because we have been satisfied with the service provided by Custard over the past two years, a proposal fi.om that firm was accepted. Mr. Leinheiser also accepted proposals fi.om GAB Robins and Martin Boyer Company, Inc. Based upon his past experience with other clients, Mr. Leinheiser endorsed both GAB and Martin Boyer as effective workers' compensation administrators. To provide stability in the provision of workers' compensation third-party zdministrative services to the V'dlage, we asked the proposing firms to quote their rates with a three-year rate guarantee. A summary of the proposals is attached as an exhibit to this memorandunr We received three- year rate guarantees fi.om Custard and Martin Boyer. However, GAB would commit to only one year. here are two types of workers' compensation claims: medical-only and indemnityl As the label suggests, medical-only claims involve only the payment of medical exPenses. Indemnity claims may involve the payment of medical benefits but they also require the payment of actual workers' comPensation to the injured employee. In general, the handling of an indemnity claim entails more work. You will note that the exhibit reflects fee quotes for the handling of nm-out claims. These quotes Pertain to open claims that would be transferred from the incumbent TPA to a now TPA if the V'fllage chooses to engage a new TPA. Because Custard is the incumbent, run-out quotes do not apply. The exhibit includes one- and three-year ~ost projections under the alternative proposals. On average, the V'fllage has about 10 medical-only claims and 10 indemnity claims annually. The cost projections assume this activity and an estimated 20 run-out claims. The cost projections indicate that Martin Boyer would provide the best value. For a one-year contract, their fees would be about $5,000 lower than those of GAB and $1;000 lower, than those of Custard. The more s~onlncant savings coma with Martin Boyer aider ti~ nm-out costs have been absorbed in the first year of a contract. For a three-year contract, Martin Boyer would charge $13,000 less than Custard. RECOMMENDATION: That the V'fliage Board approve the engagement of Martin Boyer Company, Inc., to provide workers' compensation third-party administrative services to the V'dlase from January 1, I998 through December 31, 2000. BRIAN W. CAPUTO attachment c: David Strabl, Assistant Village Manager Carol L. Widmer, Assistant Director of Finance VILL&GE OF MOUNT PROSPECT Comparison ofWorker~' Compensatio~ TPA Alternatives 1998 1997: Alternative #1: Alternative g2: Alternative #3 Custard Custard GAB Boyer Quotes: lea Medical-Only Claim $75 $220 $102 $80 ' Ha New Indemnity Claim $500 $220 $560 $470 Ha Run-Out Claim NA NA $425 $125 1st Yr. $75 Later Yrs. Annual Admlni~ti alJoll Fee $3,000 None $1,000 $500 One-Time Run-Out Admln. Fee NA NA None $2,500 Minimum Anhual Fee None $12,000 None None Three-Year Rate Guarantee NA Yes No Yes Projected Co, ts: OneYear $8,750 * $12,000 *+ $16,120 $11,000 Three Years NA $36,000 *+ NA $23,000 *Run-out costs do not apply to an incumbent TPA and, therefore, are not included. +Based upon estlm~ted claims activity, the minimum annual fee would apply. D~e ~ 12710/~7 3