Focus Area: Exceptional Services
Staff Contact: Erin Vader/Leslie Fortney
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title:
title
Confirm selection of Aetna for network, medical, and pharmacy claims administration for 2027 through 2031.
Body
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recommended motion:
I move to approve the letter of understanding with Aetna to provide the products, programs, and services outlined in the LOU for the years 2027 through 2031 for total fees not to exceed the financial terms outlined in the LOU, and additionally authorize staff to finalize the terms of a Master Services Agreement based on the LOU, subject to ratification by the Council if the total fees exceed the approved amount or there is a change in material terms.
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Summary:
Lockton Companies, the City’s benefits consultant, was engaged in early 2026 to conduct a marketing process for the City’s health plan and pharmacy benefit management services (PBM). The objectives of this vendor search was to identify a health management organization who is the best partner to:
• explore possible financial discounts and administrative savings
• utilize progressive resources and tools to assist the City’s population in making the most informed decisions about their health
• effectively manage overall plan costs to the City.
Proposals were received from all major carriers. Based upon Lockton’s analysis of financials and the capabilities proposed in the responses, the City determined Aetna’s proposal is competitive financially and delivers the best results in the following areas:
• Wellness and disease management solutions with member-centric and personalized experiences to drive health improvements strategically
• Robust selection of additional programs (16) available to the City at a flat fee of $1.70 PEPM (roughly $21,603) for all programs.
• Inclusion of both a broad and narrow provider network with improvements to network discounts and access for plan participants
• Highly rated customer service solutions improving the plan participant and plan administrator experiences
• Seamless integration of claims data with the City’s wellness programming, preventing manual steps and confusion for plan participants
• Dedicated public sector solutions team with local account support
• Stronger performance guarantees that ensure plan performance meets stated service and discounts, putting more than $300,000 in fees at risk
• Strong commitment to investing in local communities where Aetna does business, including $250,000 in Olathe small business investments in 2025.
Clarifying details of the financial advantages and network comparison are also outlined below:
• Aetna’s financial proposal provides an estimated year one net savings of $674,471 for medical and pharmacy combined, which is a 3.2% savings in year one compared to Cigna’s projected 1.73% net savings.
• Aetna’s proposal includes a one-year administrative credit worth $225,000 in addition to a wellness credit of $200,000 in year one, and $125,000 annually in years two through five.
• Based upon recent claims submission data, Aetna’s network provides for 98.4% of facilities and physicians to be paid as In-Network, compared to Cigna’s 97.7%, ensuring minimal disruption to plan participants.
Both Lockton and City staff believe this proposal is representative of current market conditions and reflects the City’s commitment to employee wellbeing, financial stewardship, and proactive claim and risk management.
Staff recommends approval of the letter of understanding with Aetna, authorizing staff to finalize the terms of a Master Services Agreement based on the LOU, subject to ratification by the Council if the total fees exceed the approved amount or there is a change in material terms. The MSA for administrative services for the health and prescription program would be valid through December 31, 2031.
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Financial Information:
|
|
2027 Aetna |
2027 Cigna |
Aetna Variance to Incumbent |
|
Estimated Administrative Fees |
$655,503 |
$413,086 |
$242,417 |
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|
|
|
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Total Mature Claims less Rebates |
$20,089,284 |
$20,367,553 |
($278,269) |
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|
|
|
|
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Total Credits |
($425,000) |
($150,000) |
($275,000) |
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|
|
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|
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Estimated Total Costs |
$20,319,787 |
$20,630,639 |
($310,852) |
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Attachment(s):
A. Medical and RX financial proposal - 5 year LOU
B. Bid Summary of Financial & Network Comparison