Rael & Letson: Benefit Cost Estimates (health)

	HEALTH & WELFARE SERVICES
	PENSION SERVICES
	RETIREE MEDICAL REPORTING

BENEFIT COST ESTIMATES: An Example of the Rael & Letson Approach

Issue: Following the detailed assessment of the benefit plans available to participants of the Fund, the Board of Trustees voted to submit a number of the benefits to competitive bid. The bidders were asked to provide quotes for alternative levels of coverage that would preserve the basic structure of the plan while controlling costs. The Trustees wanted to know how much the benefit alternatives would save and if the changes would still satisfy the needs of the membership.

Process: Some of the benefit alternatives the carriers were asked to quote reflected changes that had become industry standards. Other benefits were self-funded by the Trust; the cost of these benefit modifications was based on the actual experience of the plan. The analysis of bids for insured benefits, coupled with the estimated savings from changes to the self-insured benefits was compiled. Consideration was given to other insurance vehicles and to the acceptance of benefit changes by the membership.

Outcome: Some of the vendors were replaced with vendors that provided the same or better level of benefits than the current providers. In some cases, the Board was able to work with the current vendor to reach a more acceptable insuring arrangement that would mitigate future rate increases. A determination was made as to which benefit changes would be most acceptable to the membership. The contracts with carriers were designed to benefit the plan.