Resolution No. 77121
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RESOLUTION NO. 7712
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION OF
AMENDMENT NO. 13 TO ADMINISTRATIVE SERVICES
AGREEMENT (GUSI-2RO4 AND GUSI-2RO5) BY AND BETWEEN
THE CITY OF VERNON AND UNITED OF OMAHA LIFE
INSURANCE COMPANY
WHEREAS, the City of Vernon has agreements with United of
Omaha Life Insurance Company ("Omaha,,) for administering the City's
employee health care plan; and
WHEREAS, Omaha has submitted a new Amendment No. 13 to the
Administrative Services Agreement of September 1, 1989 (GUSI-2RO4 and
GUSI-2RO5), effective January 1, 2000, (1) amending provisions 5.1.1
and 5.1.2 to increase the administration fees paid by the City to Omaha
in connection with the City's medical and dental programs; (2) amending
provision 5.2.4 to increase the Mutually Preferred PPO Access Fee to
$2.25 per employee medical exposure per month; and (3) amending
provision 5.2.5 to increase the Utilization Management Fee to $2.40 per
employee medical exposure per month; and
WHEREAS, after proposals were sought, received and reviewed,
it was determined that the City's current medical and dental program
was the most cost effective available and Omaha provided the most
efficient, cost-effective program available for the City; and
WHEREAS, on February 20, 2001, the Finance Committee approved',
the recommendation of Bruce V. Malkenhorst, Director of Finance, dated
February 14, 2001, that the City ratify the proposal submitted by
United of Omaha Life Insurance Company and execute an Amendment 13 to
the United of Omaha Administrative Services Agreement of September 1,
1989.
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WHEREAS, the City Council of the City of Vernon has
determined that, pursuant to the provisions of Subsection (a) of
Section 2.27 of the Vernon City Code, it is in the public interest and
necessity to amend the Administrative Services Agreement with Omaha.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City of Vernon hereby
approves the Amendment No. 13 with Omaha, a copy of which is attached
hereto as Exhibit "A" and made a part hereof.
SECTION 3: The City Council of the City of Vernon hereby
authorizes the Mayor and the City Clerk to execute said Amendment for,
and on behalf of, the City of Vernon.
SECTION 4: The City Council -of the City of Vernon hereby
directs the City Clerk, or his designee, to send one fully executed
Amendment to:
Peter H. Cobo Insurance Agency, Inc.
P.O. Box 97
San Dimas, CA 91773
- 2 -
1 SECTION 5: The City Clerk of the City of Vernon shall certify
2 to the passage of this resolution, and thereupon and thereafter the
3 same shall be in full force and effect.
4 APPROVED AND ADOPTED this 21't day of February, 2001.
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'LrJ
EONIS C. MA BURG, M yor
7 ATTEST: -
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9 BRUCE V. MALKENHORST, City Clerk
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1 STATE OF CALIFORNIA )
ss
2 COUNTY OF LOS ANGELES )
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4 I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
5 hereby certify that the foregoing Resolution, being Resolution No.
6 7712,,was duly adopted by the City Council of the City of Vernon at a
7 regular meeting of the City Council duly held on Wednesday,
8 February 21, 2001, and thereafter was duly signed by the Mayor of the
9 City of Vernon.
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BRUCE V. MALKENHORST, City Clerk
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EXHIBIT
0
s
k ,
AMENDMENT NO. 13
TO
ADMINISTRATIVE SERVICES AGREEMENT
(GUST - 2R04 AND GUSI - 2R05)
Effective January 1, 2000, this Amendment No. 13 to the Administrative Services Agreement of
September 1, 1989 between City of Vernon (Employer) and United of Omaha Life Insurance Company (the
"Company") is, made a part of such Agreement and is subject to the provisions of the Agreement not in conflict
with the provisions of this Amendment.
Employer and the Company mutually agree that Provisions 5.1.1, 5.1.2, 5.2.4 and 5.2.5 are deleted from the
Agreement and the following is substituted:
- 5.1.1 7.0% of the face amounts of all medical plan benefit account checks issued each month by
the company.
5.1.2 7.3% of the face amounts of all dental plan benefit account checks issued each month by the
company.
5.2.4 Mutually Preferred PPO Access Fee of $2.25 per employee medical exposure per month.
5.2.5 Utilization Management Fee of $2.40 per employee medical exposure per month.
CITY OF VERNON
By
Title
Date
UNITED QF OMAHA LIFE
INSU CE COMPANY
By '
Vice President
Title
Date
SUPPORTING
DOCUMENTS
■
FACSIMILE. GUARDIAN' TRANSMISSION
Los Angels District Group Office
11601 Wilshire Blvd., Suite 300 Stephen M. Laine
Los Angeles, CA 90025
Voice Phone: (310) 473-3399 Sales Representative
General Fax: (310) 312-3371 Jeffrey H. Sawyer
Sean T. Turner
Rodney Balbuena
FROM: Name: MARSHA VANZIE
Fax Number:
Voice Number: 310-473-3399 ext. 227
TO: Name: PETER H. C060
Company: PETER COBO INSURANCE
Fax Number: 19095990146
Voice Phone:
MESSAGES:
RE: CITY OF VERNON
DECLINE LETTER FOR THE ABOVE COMPANY TO FOLLOW
PLEASE CALL IF YOU HAVE ANY QUESTIONS
MARSHA X227
Date and time of transmission: Wednesday, April 19, 2000 10:00:04 AM
Number of pages including this cover sheet: 02`
The Guardlan
Life Insurance Company of America '
EST 1860
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C
HEL ..iskASSOCIAT'IBS
2755 U6041 Street! Suitt 250
Costa Mesa, CA 92626
To: Susan Fax; 909-599-0146
From: Helena Epperson Date: 3/27/00
Re: City of Vernon Pages: 3
CC:
0 UW9 0 For RW W M PAm commons 0 ftm Rat M Pbm PACYOW
Nolee:
Good Morning Susan,
Attached please find 2 carrier declines for the above mentioned. I'm waiting for
o-&. _- ~moro response.
Plem call with questions. r 7 f
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afP..'C..„ '�is�,':�"��'E!;'�C:���1'Ir:�%��":�:��!.�4'.:..•` ���f.1 "!i�;:,.s'i•'.'•ri:. :�t�!:
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CITY COUNCIL
LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator / City Clerk
FAX (323) 581-7924
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
April 25, 2001
Peter H. Cobo Insurance Agency, Inc.
P.O. Box 97
San Dimas, CA 91773
Re: Amendment No. 13
Dear Mr. Cobo:
EDUARDO OLIVO
City Attorney
FAX: (562) 927-8722
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 588-2761
KENNETH J. DeDARIO
Director of Municipal Utilities
FAX: (323) 583-1983
STEVEN E. PARKER
Fire Chief
FAX: (323) 581-1385
BRUCE W. OLSON
Police Chief
FAX: (323) 583-5236
Transmitted herewith is an original and fully executed Amendment No. 13
to the Administration Services Agreement (GUSI - 2R04 and GUSI - 2R05)
approved at the Vernon City Council Meeting held February 21, 2001.
If there any questions regarding this matter, please call Joan Francone
at 323/583-8811 ext. 322.
Very ruly yours,
is J. 0 sc
Chief De uty City Clerk
GJO:ng
cc: Joan Francone
Resolution No. 7712
File Agreement No. 01-020
OFFICE OF THE CITY ADMINISTRATOR/CITY CLERK
INTER -OFFICE MEMORANDUM
DATE: March 19, 2001
TO: Joan Francone
Risk Manager/Personnel Assistant
FROM: Gloria Oros hief Deputy City Clerk
RE: Resolution No. 7712
Transmitted herewith is Resolution No. 7712 approved and
adopted by City Council at their meeting held March 7, 2001
approving and authorizing Amendment No. 13 to
Administrative Services Agreement By and Between the City
of Vernon and United of Omaha.
GJO:ng
CC: Resolution No. 7712
CITY ADMINISTRATOR/CITY CLERK'S OFFICE
INTER -OFFICE MEMORANDUM
DATE: February 21, 2001
TO: Joan Francone,
Personnel Asst./Risk Manager
AOM: Bruce V. Malkenhorst
City Administrator/City Clerk
SUBJECT: Adjustment in Medical/Dental Insurance Fees
Dear Joan:
Your memo dated February 13, 2001 regarding an amendment to the
United of Omaha medical/dental insurance agreement for an
increase in fees has me perplexed. How can you be asking for
this to be effective January 2000, thirteen months later? In
reviewing the attachments to your memo this was being reviewed
since April of last year & then, according to a letter from
Peter Cobo's office, submitted to you in October of last year.
Why did it take until February 2001 to come before me? If we
have been paying these fees since last year on what
councilmanic action were the payments made?
Please respond in writing with your comments and findings.
Thank you.
/gjo
CITY COUNCIL
LE44IS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. `BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator / City Clerk
FAX (323) 581-7924
Finance Committee
City of Vernon
Honorable Members:
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
February 14, 2001
EDUARDO OLIVO
City Attorney
FAX: (562) 927-8722
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 588-2761
KENNETH J. DeDARIO
Director of Municipal Utilities
FAX: (323) 583--1983
DAVE TELFORD
Fire Chief
FAX: (323) 581-1385
BRUCE W. OLSON
Police Chief
FAX: (323) 583-5236
At the end of the year 2000 proposals were sought for medical/dental
coverage to ensure that the City was providing the most cost-effective
programs available in the market.
The results of the bidding process are as follows:
• Guardian Life Insurance Company of America - Declined quotes
based on their rates not being competitive at this time.
• Total Risk Partners, Inc., - declined quotes. Underwriting
rules require a minimum participation level of 60% in the
employers, self -funded plan when an HMO is offered.
• The Hartford - declined quotes due to the high deductible
requested.
• HCC Benefits Corp., - declined quotes due to that the overall
age of the group exceeds their underwriting guidelines.
Our current provider will continue to provide coverage and
United of Omaha submitted the following proposal based on a monthly
basis:
Section From To
Claims Paid Medical 6.5% 7.0%
Claims Paid Dental 6.5% 7.3%
1
United of Omaha/Medical and Dental Coverage
February 14, 2001
Page 2
Section From To
Access Fee $2.00 per employee $2.25 per employee
Utilization Management $2.00 per employee $2.40 per employee
It is hereby recommended that the proposal be accepted effective
January 1, 200/i and an amendment to the present agreement be approved.
00 Very truly yours,
Bruce V. Malkenhorst
Director of Finance
BVM/ng
MEMORANDUM
RISK MANAGEMENT/PERSONNEL
TO: Bruce V. Malkenhorst, City Administrator
FROM: Joan Francone, Risk Manager/Personnel Assistant
DATE: February 13, 2001
SUBJECT: UNITED OF OMAHA - RENEWAL AMENDMENT 13
During the 2000 contract negotiations for medical/dental renewal, I requested the City's program
go out for bid. The purpose was to test the market to assure the City's program was the most
cost effective available.
The bidding process was conducted by Peter H. Cobo Insurance Agency, Inc.
The results of the process are as follows:
• Guardian Life Insurance Company of America — declined to quote as rates would not be
competitive at this time.
• Total Risk Partners, Inc. declined to quote. Underwriting rules require a minimum
participation level of 60% in the employers' self -funded plan when an HMO is offered.
• The Hartford declined to quote due to the high deductible requested.
• HCC Benefits Corp. declined to quote. The overall age of the group exceeds their
underwriting guidelines.
After reviewing the results, United of Omaha was determined to provide the most efficient, cost-
effective program available for the City.
Amendment 13, effective, January 1, .2000, includes the following changes to United of Omaha
Group Policies GUSI-2R04 (Medical) and GUSI-2R05 (Dental):
Section From
5.1.1 Claims Paid Medical 6.5% per mo
5.1.2 Claims Paid Dental 6.5% per mo
5.2.4 Access Fee $2.00 per employee/
per month
5.2.5 Utilization Management $2.00 per employee/
per month
To
7.0% per mo.
7.3% per mo.
$2.25 per employee/
per month
$2.40 per employee/
per month
It is recommended that Council adopt Amendment 13 to the United of Omaha Contract, GUSI-
2R04 and GUSI-2R05 as stated above.
JF/fs
Enclosures
PETER H. COBO INSURANCE AGENCY, INC.
PLANNED EMPLOYEE BENEFIT PROGRAMS LICense # 0598204
PETER H. COW, CLU P.O. Box 97, SAN Dimes, CALIFOR.NIA 91773 (626) 331-0865 FAx (909) 599-0146
October 24, 2000
Ms. Joan Francone
Risk Manager
City of Vernon
4305 S. Santa Fe
Vernon, CA 90058
Re: Bidding Process
Dear Joan:
I.
Enclosed.. please find a copy of the report we prepared in ril of this year regarding the Self
Funded Medical plan that was put out to bid earlier this year. My records show that the original
was sent to you, I apologize that you did not receive it. I am looking forward to reviewing this
information with you when we meet for lunch on October 31.
Should you have any questions, I will be very happy to answer them.
Sincerely,
Susan G. Church
Peter H. Cobo Insurance Agency, Inc.
PETER H. COBO- IN SURANCE AGENCY, INC.'
PLANNED EMPLOYEE BENEFIT PROGRAMS License # OSW2D4
PETER H. Coso, CLU P.Q. Box 97,,SAN Dmus, CALIFoRNIa 91773 (626) 331-0865 Fax (909) 599-0146
April 26, 2000
Ms. Joan Francone
Risk Manager
City of Vernon
4305 S. Santa Fe
Vernon, CA 90058
Re: Bidding Process
Dear Joan:
This is to inform you of the results that we obtained when we put the City's Self -Funded PPO
medical plan out to bid. Please be advised that we contacted, through a TPA, a number of the
major life insurance companies that underwrite Specific and Aggregate Stop loss insurance. On
the attached letters are listed the reasons the carriers declined to underwrite the Specific and
Aggregate stop loss coverage for the City.
According to Helena Epperson, Regional Marketing Director, Heller Associates, a leading Third
Party Administrator, as recently as two years ago the reinsurance market (specifically
companies willing to write Specific and Aggregate stop loss insurance) under bid the real cost
of this coverage in order to obtain a larger market share and abandoned sound underwriting
principles. The trend was to "buy" any business to in order to gain a larger market share. In
doing this, carriers and Managing General Underwriters (companies that have underwriting
authority for many Life Insurance Companies), continually offered rates and factors far below
manual underwriting requirements. Therefore, the market started experiencing a plethora of
specific and aggregate claims which translated into unprofitable business and losses. As a
result of these excess losses, either the insurance companies discontinued underwriting this
business or established very stringent underwriting requirements. As a result, insurance
companies are no longer writing business that is off their manual rates and now decline
potential new business if all underwriting requirements are not met.
Joan, on the. attached letters are listed the new stringent underwriting requirements. You will
note they have declined to write the City's Specific and Aggregate insurance due to the high
HMO penetration, the overall age of the group and the high deductible requested.
In addition, due to the many mergers of insurance companies and the losses that have been
incurred, the number of carriers has drastically shrunk. Mutual companies have de-mutualized
and have become Stock companies and their stock is now traded on the Stock Market.
Therefore, in order for the officers of the company to survive, profits must be made in order to
pay their stockholders dividends.
Medical inflation for the past several years has returned to the double digit numbers
experienced during the 1980's. The thinking of most insurance sages today, is that it is
necessary to increase premium payments in order to assure quality treatment and care by the
doctors and by the hospitals. This is evident by the recent public notice that PIERS has made
that it is willing to focus on improving care and treatment by paying substantial premium
increases rather than ' constantly forcing the carriers to reduce premiums which has affected
quality of patient care.
Joan, we are continuing to "scour" the marketplace in order to find the City a financially sound
and competent carrier that will provide the City the best possible coverage with the most
reasonable premium rates. We will keep you posted of the results of our continuing search.
Should you have any questions, I will be very happy to answer them.
Sincerely,
Susan G. Church
Peter H. Cobo Insurance Agency, Inc.
Subj: The Reinsurance Market
Date: 4/19/0011:48:56 AM Pacific Daylight Time
From: helena@hellertpa.com (Helena Epperson)
Reply -to: helena@hellertpa.com
To: coboins@aol.com
CC: Phil@HELLER.HellerAssociates.com (Phil Steffensen)
Good Morning Susan,
Per our conversation last evening about today's reinsurance
environment, I thought I would offer the following, in my
opinion.
Two to four years ago, the reinsurance market was oblivious
to an ominous trend. The trend was to buy business to
gain market share. In doing this, carriers and MGU's
continually offend rates and factors far below manual
underwriting requirements. Hence, the
started experiencing a barouc specific and aggregate
claims. The losses translated into unprofitable business
and the Reinsures dropped the excess loss carvers, making
them unable to write additional business.
In today's market, the excess loss carriers have Bound new
reinsures and are again writing new business, however,
the information required to write new business is under
extreme scrutiny. Both the excess loss carriers and the
reinsures are no longer writing far off manual and decline
potential new business frequently if all underwriting
requirements are not met.
Call if you have questions, call.
Headers
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Reply To: <helena@hellertpa.com>
From: "Helena Epperson" <helena@hellertpa.com>
To: <coboins@aol.com>
Cc: "Phil Steffensen" <Phil@HELLER HellerAssociates.com>
Subject: The Reinsurance Market
Date: Wed, 19 Apr 200011:43:58 -0700
Message-ID:<81862FD4BA1AD3118A280050049EAAA6055B5C@s3k.heller.com>
MIME Version: 1.0
Content -Type: tee t/piain;
Wednesday, April 19, 2000 America Online: Coboins page: 1
troll 599 9146 Pe9Q 4/ 4
MAR. Z4.Z000 31S'PM HCC DEWFIT5 %4 241-0181 M0,341 P.i
HCC Benefits Comoration
$pporocm Mach 24, 2000
Haller Axooiatea
2755 Ustol Street
gait+ �50
COO Moak CA Z626
RE: City of Vernon, CA
Dear Helaas:
T'b$nk you far the submbl&m on the abovo reforancad group, Please be &wised that for the Mlow
retl8 m fisted below we will not be We to provide 4 quotation for Exaem Loss coverage.
0 The overall age of the group exceeds our uud&vdting guldebas.
SOM that we quid of be more WPM is thin situation. Wo look forward to assisting you with fat=
W fWft prospects.
If You have MY questions, please do not hesitate to call.
Sinoesely, .
Rudy I3�t
Undecwdter
650 Town ceriw Ddvt, Suite ISM v Catm Moil, CA 92626 • F= 714-24141$1 • Pho" $00-872-3634
A Sabd" 61ROC imm" tiwfts , Inc.
1
�sn� �p .nc�. r.cn „»,,,, rt�r-br-aa a9 r1iPM rroM f1454979529909. 599 0146 4
003 03/27/2000.... 10;14:32 '
Tap,
HixTFa�.n
March 21, 2000
Ms. Helena Bpp&Um
Flallor Auociatca
V7A PAX: (714) 349.4816
Re: =, nF VRRNON
Door IIolarm,
Thank you for your request for proposal err the Above referaneed.
Urtfortumbly, I em unable to provide a quote. The Haztfad had previously made the decision wt to quote
this risk due to the high deduoirble requested. yurthorxmore, I am unable to scoommodate the retrc+"JO
dktive date of I/1J00.
We approoiate this opportrulity to quote with you and Hello,''. Should you have tom' questions or concems
raaard 4 this der"S'OM I hope you will feel flee to OMW me at (R6C0 843-6342.
Best regards,
)gnat Davis, CBBS
Underwriter
The Hartford
oo: Usady Cope, Regional Director The Hartford
{
Senc by.nt��tn HSaw Rpr-04-00 04111rn from 7145497082*909 599 0146 Pa9e 2,1 q
{
MAR, 27, 2000 11:25AM K 5890 P, 1
TOTAL RISK PARTNERS, INC.
(949) 222-21151(949) 222-1004 (FAX)
FAX TRANSMITTAL
Date: March 27, 2000
To: Helena Epperson
Of: Hal lor Associates
At: 1-714-549-4816
Number of pages, Including this page: 1
From: Jim Colwell
Group Underwriting
Re: City of Vernon, California
Thank you for your request for quotation on this group.
Unfortunately, we will be unable to Issue a quotation as our
underwriflng rugs require a minimum participation level of
60% In the employer's seiffiunded plan when an HMO Is
offered.
We regret not being of help this time, but look forward to working
with you on another account.
Helena, should you have any questions regarding the above
please do not hesitate to contact me.
cc: Eton Fabish, TRP-GA
y
GUARDIAN"
Los Angela Distrkt Group Office
11601 Wilshire Blvd.
suite 300
Los Angeles, CA 90025
310/413-33"
Stephen M. Lake
M-V1
Jeffrey H. 5swyer
Sala R4weremawlve
Sean T. Turner
Sala Rwaen&tive
Re: Mpower
Dear Peter Cobo Insurance
Thank you for the census data submitted with your request for a group quote. Unfortunately our
underwriting department will not permit us to quote at this time for the following reason(s):
[ ] Age Factor -% of the employees are age _ or older
[ ] Prior claims experience
[ XX ] Our rates would not be competitive at this time
[ ] HMO not available
[ ] Ineligible industry
[ Other:
Thank you for your interest in THE GL:ARDIAN. We hope we can be of service to you in the future
Sincerely,
Sean Turner
Guardian Life Insurance Company of America
April 19, 2000
e