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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
From:
Linn Livingston, Director
of Human Resources
Dept:
Human Resources
Subject: RESOLUTION OF THE CITY OF
SAN BERNARDINO AUTHORIZING THE
EXECUTION OF AN AGREEMENT WITH
MERCER HEALTH AND BENEFITS LLC
TO PROVIDE BROKER AND
ADMINISTRATION SERVICES FOR THE
CITY'S EMPLOYEE HEALTH CARE
PROGRAM.
MICC Meeting Date: June 7, 2010
Date:
May 25,2010
Synopsis of Previous Council Action:
On May 3, 2010, Mayor and Common Council authorized the Director of Human
Resources to negotiate the terms of a contract with Mercer Health & Benefits for broker
and administration services.
Recommended Motion:
1. Adopt Resolution.
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Contact person:
Linn Livinaston
Phone:
384-5161
Supporting data attached:
Ward:
Funding Requirernents:
Amount:
$275.000 FY 2010/11
Source: (Acct. No.) 001-092-5502
(Acct. Description) Health & Life Insurance
Finance:
Council Notes:
Agenda Item No. I ~
(P-7-2!J{D
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Staff Report
SUBJECT
Resolution of the City of San Bernardino authorizing the execution of an agreement with Mercer
Health and Benefits, LLC to provide broker and administration services for the City's employee
healthcare program.
BACKGROUND
In July 2007, the Mayor and Common Council authorized an agreement with Mercer health
benefits consultinglbroker and administrative services for a period of three (3) years. Prior to the
conclusion of this agreement, the Human Resources Department went out to bid in February
2010 for these services. In response to the Request for Proposal (RFP), seven (7) firms submitted
proposals. In March 2010, proposals were reviewed by an evaluation committee that short-listed
four (4) firms. Interviews with the four (4) firms were conducted by the evaluation committee on
March 24, 2010:
BB&T John Burnham Insurance
Keenan & Associates
Mercer Health & Benefits
Wells Fargo Insurance Services
Following the interviews, the committee discussed and came to a unanimous consensus to
recommend Mercer as the City of San Bernardino's Administrator for Health Care & Benefits if
financial terms could be negotiated successfully.
On May 3,2010, Mayor and Common Council authorized the Director of Human Resources to
negotiate the terms of the contract with Mercer Health & Benefits for broker and administration
services for the City's health care plans.
Mercer is a wholly-owned subsidiary of Marsh & McLennan Companies, Inc., a Fortune 500
diversified financial services company. Mercer is the largest benefit consulting firm in the
world, yet it delivers local services with experienced and expert staff and has extensive
experience working with public sector employers and labor organizations.
...,.,........
Mercer's health benefits consultinglbroker and administration fees are very competitive. For the
previous three (3) years, Mercer's broker fees were $327,000 annually. As a result of our
negotiations, Mercer has agreed to reduce their cost by approximately 19% for the first year. As
a result, the first year's broker fee will be $275,000; second year $282,500 and third year is
$290,000. These fees are based on basic annual benefits which include consulting services,
administrative on-line services, consolidated.billing services, call center services, communication
services, Section 125 FSA administration, retiree medical, open enrollment and COBRA. In
addition, Mercer is placing a significant amount of their consultinglbroker fees at risk (10%) to
guarantee delivery of the most appropriate and valuable service to the City's satisfaction (as
outlined in Performance Standard Guarantees, attached as Exhibit "B").
Effective July 1, 2010, we are recommending Mercer's services continue as the City's Broker of
Record. Since 2008, Mercer has negotiated with vendors to hold gross cost increases at 2.9%,
5.1 %, and 7.3%, which is significantly below the average trend of 12-13% annually. The Human
Resources Department looks forward to continuing the consistency and continuity of Mercer's
services and anticipates an increased stability to the benefits program.
The Human Resources Department is requesting this agreement be approved to provide Broker
and Administration services for City of San Bernardino beginning July 1, 2010 and continuing
for a period of three (3) years with an option of two (2), one (1) year extension.
FINANCIAL IMPACT
The cost of these services is at $275,000 for FY 2010/11; $282,500 for FY 2011/12; and
$290,000 for FY 2012/13. Pricing is a flat annual fee for services quoted. The City's FY 2010-
11 proposed budget includes funds to cover the anticipated broker fees.
The Water Department participates in the City's Health Care plans and services. The cost share
portion for FY 10/11 to the Water Department is $48,500. This will reduce the City contribution
to $226,500 for FY 10/11.
RECOMMENDATION
1. Adopt Resolution.