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HomeMy WebLinkAbout8.A. Enter Agreement for Insurance Brokerage Services 8.A. City of Shakopee MEMORANDUM TO: Mayor and City Council Mark McNeill, City Administrator FROM: Kris Wilson, Assistant City Administrator SUBJECT: Authorization to Enter into an Agreement for Insurance Brokerage Services DATE: August 7, 2009 Introduction The City Council is asked to authorize the appropriate individuals to enter into a contract with Financial Concepts, Inc. for consulting and brokerage services related to employee insurance benefits. Background The City currently works with the insurance firm Nesbit Agencies regarding medical and dental insurance for benefits-eligible employees. Nesbit Agencies assists the City in selecting which plans to offer to employees, negotiating annual premium increases, resolving conflicts that arise with the insurance company throughout the year, etc. In return, Nesbit Agencies is paid a commission by both Medica and Delta Dental, which is factored into our insurance premiums. In 2008, Nesbit Agencies earned $18,161.72 in commissions on the City of Shako pee's accounts. Based on the premium increases we experienced between 2008 and 2009, we estimate this number will increase to approximately $19,950 for 2009. Similarly, the City purchases life and long-term disability insurance for employees with the assistance of National Insurance Services (NIS). In an effort to ensure that we are doing everything possible to both control the City's health care costs and continue to provide competitive benefits for our employees, a Request for Proposals (RFP) for insurance brokers was issued earlier this summer. A total of eight responses were received, including proposals from both Nesbit Agencies and National Insurance Services. A panel consisting of the City Administrator, Finance Director, Assistant City Administrator and HR Technician interviewed three of the responding firms. Based on the written proposals, in- person interviews and reference checks, staff is recommending that the City contract with Financial Concepts, Inc. of Plymouth, Minnesota to serve as our Agent of Record for medical, dental, life and long-term disability insurance. Financial Concepts was founded in 1983 in Plymouth, Minnesota and currently has a staff of more than 30 people. In 1996 they became part of National Financial Partners (NFP), a publicly traded company, but they continue to be locally managed. They currently work for 14 metro- area cities, including Lakeville, Inver Grove Heights, Roseville, and Cottage Grove. Staff is recommending Financial Concepts because of their experience working with cities, the fact that they provide a comprehensive set of services at a clearly listed flat fee, and because of the specific examples they could provide regarding how they've helped their current clients analyze and then act on claims data to control costs and impact future increases. After meeting with the two individuals who would be our primary contacts, we believe they will also be able to develop a good rapport with our employees. Lastly, the references we spoke to had very positive things to say about their experience working with Financial Concepts. Budget Impact With the switch to Financial Concepts, the City would move away from paying on a commission basis and instead pay Financial Concepts directly on a flat fee basis. Our insurance policies for 2010 would then be written with no commission built in. (For the remainder of2009, Financial Concepts would simply assume the existing commissions currently being paid to Nesbit Agencies and NIS.) The flat fee charged by Financial Concepts for 2010 would be $21,000. Annual increases would be agreed upon between the City and Financial Concepts for subsequent years; however they would not be tied to the increases in our insurance premiums as they are under a commission basis. Relationship to Vision Receiving solid advice and representation relative to our employee benefits contributes to goal E: a financially strong City. Requested Action If the Council concurs, it is asked to offer a motion to authorize the appropriate officials to enter into a contract with Financial Concepts, Inc., for consulting and brokerage services related to employee insurance benefits, at a cost not to exceed $21,000 for calendar year 2010.