Staff Report/Resolution Etc. Authorizing the Execution of a Memorandum of Understanding and Authorizing Participation in the Special District Risk Management

Apologies in advance for any typos, textual goofs, gaffes, and other literary gremlins.

AGENDA ITEM: Resolution of the City Council of the City of Livingston Approving the Form of and Authorizing the Execution of a Memorandum of Understanding and Authorizing Participation in the Special District Risk Management Authority’s Medical Benefits Program.

MEETING DATE: May 25, 2011

PREPARED BY: Victoria Lewis, Interim City Manager

REVIEWED BY: Victoria Lewis, Interim City Manager

RECOMMENDATION:

Adopt Resolution of the City Council of the City of Livingston approving the form of and authorizing the execution of a Memorandum of Understanding and authorizing participation in the Special District Risk Management Authority’s Medical Benefits Program.

BACKGROUND AND DISCUSSION:

It is no secret that insurance costs have been going up across California, impacting all businesses and employees. Looking to find good benefits at a reasonable cost to the City, staff has been in contact with the Special District Risk Management Authority ("Authority") which was formed in 1986 for the purpose of providing risk financing and risk management programs among others. A condition of participation in the Medical Benefits Program ("Program") is a requirement for the City to participate for three (3) full years. The Program is designed to provide an alternative medical benefit solution to all participants of the City including active and retired employees, and eligible dependents. After an initial commitment period, the City may discontinue coverage or change contribution amounts for retirees but the City must contribute at least the minimum percentage required by the eligibility requirements. Premiums and rates are set by the Program’s Committee.

At this time, the City participates in Blue Shield PPOs and HMO as shown on the Health Plan Renewal Rates Chart (Attachment 2) under the heading "Current." Current Blue Shield coverage and costs (orange highlighting) are compared in the chart with an available option for Blue Shield (yellow highlighting) and an available Blue Cross option (green highlighting). Comparisons in the chart include: benefits; monthly rates; annual funding amounts; administration fees; monthly total; annual total; percentage increase;
combined annual total; combined percent increase; and annual savings.

Staff recommends the Council consider selecting the Blue Cross JPA Silver Plan option (green highlighting) as this option will result in a 17.53% to 26.06% decrease in overall costs for the City. The biggest changes for City employees if the Blue Cross JPA Silver Plan is selected are the deductibles (formerly $0 or $250; now $2,000) and per visit co-pays (formerly $10 or $25; now $30 deductible waived).

1

r lhCAL IiVH AU I : –

If Blue Cross JPA Silver option is selected, the City would see an annual savings of between $192,000 and $286,000.

ATTACHMENTS:

1. Resolution 2011-

Exhibit A – Memorandum of Understanding (MOU)

2. Health Plan Renewal Rates Chart

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LIVINGSTON APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION
OF A MEMORANDUM OF UNDERSTANDING AND AUTHORIZING
PARTICIPATION IN THE SPECIAL DISTRICT RISK MANAGEMENT
AUTHORITY’S MEDICAL BENEFITS PROGRAM

WHEREAS, the City of Livingston, a public agency duly organized and existing under and by virtue of the laws of the State of California (the "Entity"), has determined that it is in the best interest and to the advantage of the Entity to participate in Medical Benefits offered by the Special District Risk Management Authority (the "Authority"); and the Entity understands a condition of participation in Medical Benefits is a minimum of 3 full years; and

WHEREAS, Special District Risk Management Authority was formed in 1986 in accordance with the provisions of California Government Code 6500 et seq., for the purpose of providing risk financing and risk management programs; and other coverage protection programs; and

WHEREAS, participation in Special District Risk Management Authority programs requires the Entity to execute and enter into a Memorandum of Understanding (the "MOU"); which states the purpose and participation requirements for Medical Benefits; and

WHEREAS, all acts, conditions and things required by the laws of the State of California to
exist, to have happened and to have been performed precedent to and in connection with the consummation of the transactions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Entity is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such transactions for the purpose, in the manner and upon the terms herein provided.

NOW, THEREFORE, BE IT RESOLVED BY that the City Council of the City of Livingston as follows:

Section 1. Findings. The Entity’s City Council hereby specifically finds and determines that the actions authorized hereby relate to the public affairs of the Entity.

Section 2. Memorandum of Understanding. The Memorandum of Understanding, to be executed and entered into by and between the Entity and the Special District Risk Management Authority, in the form presented at this meeting and on file with the
Entity’s Secretary, is hereby approved. The Entity’s City Council hereby authorizes
and directs the City Manager, for and in the name and on behalf of the Entity, to
execute and deliver to the Authority the Memorandum of Understanding.

Section 3. Program Participation. The Entity’s City Council approves participating for a
minimum of three full years in Special District Risk Management Authority
Medical Benefits.

Section 4

Section 5. Effective Date. This Resolution shall take effect immediately upon its passage.

Section 6. The City Clerk shall certify to the adoption of this Resolution.

Passed and adopted this 25th day of May, 2011, by the following vote:

AYES :

NOES:

ABSENT:
ABSTAIN:

Rodrigo Espinoza, Mayor
of the City of Livingston

ATTEST:

I, hereby certify that the foregoing Resolution was regularly introduced, passed, and adopted at a special meeting of the City Council of the City of Livingston this 25th day of May, 2011.

Antonio Silva, City Clerk

of the City of Livingston

MEMORANDUM OF UNDERSTANDING

This Memorandum of Understanding (hereafter "MEMORANDUM") is entered into by and between the Special District Risk Management Authority (hereafter "SDRMA") and the City of Livingston (hereafter "CITY") who is signatory to this MEMORANDUM.

Recitals

WHEREAS, on August 1, 2006, SDRMA was appointed administrator for the purpose of enrolling small public entities typically having 250 or less employees into the California State Association of Counties ("CSAC") Excess Insurance Authority ("EIA") EIAHealth’s Small Group Medical Benefits Program (hereinafter "PROGRAM").

WHEREAS, the terms and conditions of the PROGRAM as well as benefit coverage, rates, assessments, and premiums are governed by EIAHealth Committee for the PROGRAM (the "COMMITTEE") and not SDRMA.

WHEREAS, CITY desires to enroll and participate in the PROGRAM. NOW THEREFORE, SDRMA and the CITY agree as follows:

1. PURPOSE. CITY is signatory to this MEMORANDUM for the express purpose of enrolling in the PROGRAM.

2. INITIAL COMMITMENT PERIOD. CITY understands and acknowledges that it is required to remain in the PROGRAM for a period of at least three (3) full years as a condition to participation in the PROGRAM (the "INITIAL COMMITMENT PERIOD").

3. ENTRY INTO PROGRAM. CITY shall enroll in the PROGRAM by making application through SDRMA which shall be subject to approval by the PROGRAM’s Underwriter and governing documents and in accordance with applicable eligibility guidelines.

4. MAINTENANCE OF EFFORT. PROGRAM is designed to provide an alternative medical benefit solution to all participants of the CITY including active and retired employees, dependents and public officials. After the INITIAL COMMITMENT PERIOD, CITY may discontinue coverage or change the contribution amount for retirees. However, CITY must contribute at least the minimum percentage required by the eligibility requirements.

5. PREMIUMS. CITY understands that premiums and rates for the PROGRAM are set by the COMMITTEE. CITY will remit monthly premiums based upon rates

Page 1 of 5

catagories of employees

Rates for the CITY and each category of participant will be determined by the COMMITTEE designated for the PROGRAM based upon advice from their consultants and/or a consulting Benefits Actuary and insurance carriers. In addition, SDRMA will add an administrative fee to premiums and rates set by the COMMITTEE for costs associated with administering the PROGRAM. Rates may vary depending upon factors including, but not limited to, demographic characteristics, loss experience of all public entities participating in the PROGRAM and differences in benefits provided (plan design), if any.

a. SDRMA will administrate a billing to CITY each month, with payments due by the date specified by SDRMA. Payments received after the specified date will accrue penalties. Medical benefit premiums are based on a full month. There are no partial months or prorated premiums.

b. CITY must send notification of termination of benefits for a covered employee to the PROGRAM and SDRMA by the 15th of the current month to terminate at the end of the month. Otherwise (i.e. notification after the 15th), termination will be as of the end of the following month.

6. BENEFITS. Benefits provided to CITY participants shall be as set forth in CITY’s Plan Summary for the PROGRAM and as agreed upon between the CITY and its recognized employee organizations as applicable.

7. COVERAGE DOCUMENTS. Except as otherwise provided herein, CSAC-EIAHealth documents outlining the coverage provided, including terms and conditions of coverage, are controlling with respect to the coverage of the PROGRAM.

8. PROGRAM FUNDING. It is the intent of this MEMORANDUM to provide for a fully funded PROGRAM by any or all of the following: pooling risk; purchasing individual stop loss coverage to protect the pool from large claims; and purchasing aggregate stop loss coverage.

9. ASSESSMENTS. Should the PROGRAM not be adequately funded for any reason, pro-rata assessments to the CITY may be utilized to ensure the approved funding level for applicable policy periods. Any assessments, which are deemed necessary to ensure approved funding levels, shall be made upon the determination and approval of the COMMITTEE in accordance the following:

a. Assessments/dividends will be used sparingly. Generally, any over/under funding will be factored into renewal rates.

Page 2 of 5

Paragraph b

c. CITY will be liable for assessments for 12 months following withdrawal from the PROGRAM.

d. Fund equity will be evaluated on a total program-wide basis as opposed to each year standing on its own.

10. WITHDRAWAL. CITY may withdraw after their INITIAL COMMITMENT PERIOD (three (3) full year commitment period) and subject to the following condition; CITY shall notify SDRMA and the PROGRAM in writing of their intent to withdraw at least 180 days prior to their actual coverage renewal date. CITY may rescind its notice of intent to withdraw.

11. LIAISON WITH SDRMA. Each CITY shall maintain staff to act as liaison with the SDRMA and between the CITY and the SDRMA’S designated PROGRAM representative.

12. DISPUTES. Disputes between the parties related to this MEMORANDUM shall be resolved as follows:

a. Mediation Before Litigation. The parties agree that in the event of any dispute by and between them, they shall first attempt to resolve the dispute by way of an informal mediation and if such efforts do not result in a resolution, they may proceed to litigate the claims.

b. Selection of Mediator. The mediation shall be held before a neutral mediator having at least 15 years civil business litigation experience or a retired judge. Within ten (10) days of a demand for mediation, the parties shall attempt to mutually select a neutral and qualified mediator. If the parties agree on the selection of the mediator, the mutually selected mediator shall be appointed for the mediation. If the parties are unable to mutually select a qualified mediator, they shall each select a neutral mediator and the two shall then select the third who shall be designated as the parties’ neutral mediator for the dispute. Any selected mediator who is unable or unwilling to fulfill his duties may be replaced.

c. Time of Mediation. Subject to the mediator’s availability, the parties will make best efforts to have the mediation scheduled and held within 45 days of a demand.

Page 3 of 5

cost of mediation

e. Confidentiality of Mediation Process. The parties agree that the mediation of the dispute will be an effort to compromise disputed claims and that mediation shall be deemed confidential and no statements made at the mediation can be used against them in the event of future litigation.

f. Position Statements. Any party making a demand for mediation shall set forth in their written demand for mediation the factual and legal basis known to them for their claims or dispute and provide copies of any statements, summaries, reports, or documentary information known to them at the time to support their claims, save and except, privileged or confidential information, which may be withheld. Within thirty (30) days after receipt of a demand for mediation, the recipient shall provide a written response to the claims setting forth the factual and legal basis known to them to support the response or affirmative defenses and also provide copies of any statements, summaries, reports, or documentary information known to them at the time to support the response or affirmative defenses, save and except, privileged or confidential information, which may be withheld. Copies of the position statements and information exchanged between the parties under this provision shall be provided to the mediator in advance of the mediation.

g. Failure to Participate in Mediation. Any party who fails to participate in the mediation shall waive their right to collect attorney fees herein.

h. Exclusions From Mediation. The parties agree that any claim for immediate injunctive relief is specifically excluded from the requirements of mediation. The parties further agree that disputes related to coverage under the PROGRAM are excluded from this provision and shall be governed in accordance with CSAC-EIAHealth documents and/or PROGRAM documents.

13. GOVERNING LAW. This MEMORANDUM shall be governed in accordance

with the laws of the State of California.

14. VENUE. Venue for any dispute or enforcement shall be in Sacramento, California.

15. ATTORNEY FEES. The prevailing party in any dispute shall be entitled to an award of reasonable attorney fees.

16. COMPLETE AGREEMENT. This MEMORANDUM together with the related PROGRAM documents constitutes the full and complete agreement of the CITY.

Page 4 of 5

17. SEVERABILITY. Should any provision of this MEMORANDUM be judicially determined to be void or unenforceable, such determination shall not affect any remaining provision.

18. AMENDMENT OF MEMORANDUM. This MEMORANDUM may be amended by the SDRMA Board of Directors and such amendments are subject to approval of CITY’S signatory to this MEMORANDUM. Any CITY who fails or refuses to execute an amendment to this MEMORANDUM shall be deemed to have withdrawn from the PROGRAM on the next annual renewal date.

19. EFFECTIVE DATE. This MEMORANDUM shall become effective upon the signing of this MEMORANDUM by the CITY and Chief Executive Officer or Board President of SDRMA.

20. EXECUTION IN COUNTERPARTS. This MEMORANDUM may be executed in several counterparts, each of which shall be an original, all of which shall constitute but one and the same instrument.

In Witness Whereof, the undersigned have executed the MEMORANDUM as of the date set forth below.

Dated: By:

Special District

Risk Management Authority

Dated: By:

City of Livingston

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