Exhibit 1 - Agenda Information Sheet1
City of Denton
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AGENDA INFORMATION SHEET
DEPARTMENT: Materials Management
CM: Todd Hileman
DATE: October 16, 2018
SUBJECT
Consider adoption of an ordinance of the City of Denton, Texas, a Texas home-rule municipal corporation,
authorizing the City Manager to execute an Administration of Post-65 Retiree Medicare Supplement
contract with Labor First, LLC, for the City of Denton; providing for the expenditure of funds therefor; and
providing an effective date (RFP 6807- awarded to Labor First, LLC, for three (3) years, with the option
for two (2) additional one (1) year extensions, in a total not-to-exceed amount of $2,440,000 for all years).
The actual cost will be determined by the number of retirees electing coverage. This is a pass through cost
that is paid for by the retiree, except for a city subsidy based on the years of service.
RFP INFORMATION /BACKGROUND
As part of the City’s comprehensive benefits program, City employees are able to elect retiree health
insurance and remain on the City’s self-funded health plan. Once a retiree reaches 65 years of age, and
become Medicare eligible, we transition them to a fully-insured Medicare Supplement health plan that
includes provisions to cover services not covered by Medicare, including a prescription plan (Group
Medicare Part D plan).
Since the retiree pays for the cost of the Medicare-Supplement plan (except for a City subsidy based on
years of service as detailed below) this change saves the City money in health claims and reduces any
potential GASB 75 liability the City may have.
Group Administrative Concepts (GAC) currently administers the plan through a retiree medical plan offered
by The Hartford. The Hartford has been the retiree medical plan carrier since January 1, 2010, and no plan
benefits changes have been made since implementation to the base plan or to the Group Medicare Part D
plan (prescription drugs). There have been changes to the Carrier/Pharmacy Benefit Manager (PBM) as
listed:
1/1/2010 to 12/31/2014 – Fully insured by SilverScript Insurance Company, with CVS Caremark
as the PBM.
1/1/2015 to 12/31/2016 – Fully insured by United American Insurance Company with CVS
Caremark as the PBM.
1/1/2017 to present – Fully insured by Medco/Companion Life Insurance Company with Express
Scripts as the PBM.
As stated above, the premiums for the Medicare Supplement plan are paid by retirees, except for a City paid
subsidy based on years of service:
City Hall
215 E. McKinney Street
Denton, Texas
www.cityofdenton.com
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Years of Service City Paid Subsidy per Month
Less than 5 years $40
5 to 9 years $80
10 to 14 years $120
15 to 19 years $160
20+ years $200
So while the one-year estimated cost of the Labor First, LLC plan is $444,015, the City’s portion will only
be approximately $201,120. A five percent annual contingency amount was added to cover new enrollments
for new retirees who are over the age of 65 or current retirees who turn 65. The contingency will allow
approximately three to four new retirees per year.
The City’s contract with GAC expires on December 31, 2018. Through Request for Proposal (RFP) 6807,
the City sought proposals from qualified firms to manage the Post-65 Retiree Medicare Supplement plan
beginning January 1, 2019.
Requests for Proposals was sent to 102 prospective suppliers of this item. In addition, specifications were
placed on the Materials Management website for prospective suppliers to download and advertised in the
local newspaper. Seven (7) proposals were received and evaluated based upon published criteria including
compliance with specifications, probable performance and price. The seven (7) proposals were reviewed
and scored by an evaluation team that included representatives from the City’s Employee Insurance
Committee (EIC), and staff members from Human Resources and Purchasing. McGriff, Seibels & Williams
(MSW), the City’s Employee Benefits consultant, was also included in the evaluation process.
As shown in Exhibit 2, the evaluation team ranked Labor First, LLC, as the proposal that provided the best
overall value for the City, and for our over-65 retirees. The main differentiator between Labor First and
GAC was the Tier 5 Specialty Drug benefit.
Labor First’s price represents a 16% savings compared to the price charged by our current Post-65 Retiree
Medicare Supplement administrator.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
GAC was originally awarded the Post-65 Retiree Medicare Supplement contract through the Public
Employee Benefits Alliance (PEBA)’s Purchasing Cooperative on January 1, 2010.
RECOMMENDATION
Staff recommends awarding a contract to Labor First, LLC, for the administration of the City’s Post-65
Retiree Medicare Supplement program. In staff’s opinion, the proposal from Labor First represents the best
overall value for the City.
PRINCIPAL PLACE OF BUSINESS
Labor First, LLC
Mount Laurel, New Jersey
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ESTIMATED SCHEDULE OF PROJECT
Services under this contract will begin January 1, 2019. The initial contract will be three (3) years with
options to renew for an additional two (2) one-year periods.
FISCAL INFORMATION
The costs associated with the administration of the Post-65 Retiree Medicare Supplement plan are funded
from account 850500.6728. The budgeted amount for this item is $524,000.
STRATEGIC PLAN RELATIONSHIP
The City of Denton’s Strategic Plan is an action-oriented road map that will help the City achieve its vision.
The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence;
Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and
Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this
specific City Council agenda item contributes most directly to the following KFA and goal:
Related Key Focus Area: Organizational Excellence
Related Goal: 1.2 Develop a high-performance work force
EXHIBITS
Exhibit 1: Agenda Information Sheet
Exhibit 2: Evaluation Ranking Sheet
Exhibit 3: Ordinance and Contract
Respectfully submitted:
Lori Hewell, 940-349-7100
Purchasing Manager
For information concerning this acquisition, contact: Scott Payne, Risk Manager, 940-349-7836