Focus Area: Exceptional Services/Risk Management
Staff Contact: Erin Vader; Leslie Fortney
Subject: Consideration of award of contract to Cigna for the health and prescription stop-loss insurance program.
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Consideration of award of contract to Cigna to provide stop loss insurance for the self-funded City health and prescription program.
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Summary:
The City of Olathe purchases individual stop loss coverage on an annual basis. This coverage is fully insured and provides financial protection to the City for individuals whose claims exceed the specific deductible of $200,000. In addition to the specific deductible, the City of Olathe also purchases an aggregating specific deductible of $150,000 that must be satisfied before reimbursements are paid to the City. The $150,000 aggregating specific deductible can be satisfied by one or several individuals with large claims that exceed the specific deductible. An aggregating specific deductible allows the plan to pay a reduced premium in return for assuming an additional amount ($150k) of claims liability.
The City’s healthcare broker, Lockton, solicited bids from providers of stop-loss coverage for the City’s self-funded health and prescription program. Seven (7) proposals were received, including a renewal bid from the incumbent provider, Cigna. Three (3) vendors declined to quote. Cigna has proposed a 38% increase to the stop-loss premiums effective 1/1/2026 with an estimated annual premium of $2,544,108. Lockton recommends acceptance of the Cigna proposal and that the individual stop loss limit remain at $200,000 with an aggregating specific deductible of $150,000 on a paid contract basis. By placing stop loss with Cigna, the City will continue to experience simultaneous stop loss reimbursements under the bundled stop loss arrangement by having medical administration, pharmacy, and stop loss with one vendor.
Both Lockton and City staff believe this renewal is representative of current market conditions and reflects the City’s commitment to loss control and proactive claim and risk management.
Staff recommends award of contract to Cigna for the health and prescription stop loss insurance program through December 31, 2026.
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Financial Impact:
Adequate funds are contained in the Risk Management fund.
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Action Needed:
Award of contract to Cigna to provide stop loss insurance for the City of Olathe Health and Prescription Program through December 31, 2026.
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Attachment(s):
Summary of Marketing Results
Cigna Agreement