PORT OF SEATTLE

MEMORANDUM

COMMISSION AGENDA

Item No.

Date of Meeting

January 25, 2011

DATE: January 14, 2011

TO: Tay Yoshitani, Chief Executive Officer

FROM: Tammy Woodard, Sr. Manager, Total Compensation

SUBJECT: Dental Claims Administration Services for the Port Sponsored Self-Funded Dental Plan

Beginning in 2012.

AMOUNT OF THIS REQUEST: Not to exceed $650,000.

SOURCE OF FUNDS: General Funds

ESTIMATED WORKERS EMPLOYED: ½ to 2

REQUESTED ACTION:

Request authorization for the Chief Executive Officer (CEO) to execute a contract for dental claims

administration services related to the self-funded Port sponsored dental plan. The contract will have a

maximum value of $650,000 and a maximum term of five years. The Port plans to enter into an initial

agreement for three years with an option for two one-year extensions. The Port requires this

agreement to manage the Port sponsored self-funded medical plan.

SYNOPSIS:

The Port was authorized by Resolution No. 3636, on May 11, 2010 to adopt a self-funded model for

the Port sponsored medical (not including the Group Health plan) and dental plans effective January 1,

2011 and the State of Washington approved the Port’s request for self-funded status in December

2010. Previously the Port sponsored medical and dental plans were fully insured. The move to self-

funding was a cost containment measure that resulted in a 2011 cost increase of 4.6% rather than 7.2%.

This savings came from eliminating the premium tax as well as overhead and/or profit portions of the

fully insured premium.

In order to sponsor a self-funded dental plan, the Port must retain the services of a claims administrator

to receive, review, process, and pay dental claims under the plan. For 2011, the Commission exempted

dental services from competition on May 11 2010, and authorized the CEO to execute an agreement

for these services with Washington Dental Services (WDS), the company that previously provided

insured dental benefits to eligible Port employees. This permitted the Port to implement the self-

funded plan in 2011 rather than waiting until 2012 and also permitted the Port to make the transition

from fully insured to self-funded nearly seamless to employees. The competition exemption was for

one year only and Port staff is now planning to utilize the standard competitive procurement process to

select a claims administrator to provide these services beginning in 2012.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

January 14, 2011

Page 2 of 3

SCOPE OF WORK:

The claims administrator will review claims, determine what is covered under the specific plan the

employee elects, determine the employee’s share of covered costs, prepare “explanation of benefits”

documents for employees, and pay the Port’s portion of the claims to providers. The claims

administrator will notify the Port a weekly basis of the value of claims processed the prior week and

the Port will transfer funds required to pay the week’s claims to the claims administrator. The claims

administrator will maintain a provider network and negotiate discounts on standard fees that will

benefit the Port and covered employees. The claims administrator will also maintain enrollment data

to support their work based on information provided by the Port, and provide claims reports to the Port

on a regular basis.

The scope of work will be flexible enough to allow changes the Port may wish to make to plan design

options (deductibles, copays, coinsurance, and annual maximums) and to maintain compliance with

health care regulations.

SOURCE OF FUNDS:

The fees under this agreement will be a flat dollar amount per month for each employee covered by the

Port sponsored self-funded plans. We are not certain how employee staffing levels may change over

the term of the contract, and whether union groups may negotiate to participate in the Port-sponsored

plans or cease current participation. Because of this we must estimate the total cost of the agreement.

We estimate that the cost of the contract for the full five years will not exceed $650,000.

The funds to pay the fees in this agreement are included in the monthly cost for the self-funded plans

(premiums) and these amounts are included in the Port’s benefit budget each year.

STRATEGIC OBJECTIVES:

Be a high performance organization: Seeking to maintain benefit costs at affordable level while

providing a competitive benefit package supports the Port’s retention and attraction of skilled and

engaged staff necessary for the Port to be a high performing organization. Ensuring that our dental

benefits comply with federal and state regulations also supports the objective of being a high

performance organization.

PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:

January 5, 2010, Staff briefing regarding conversion of the Port sponsored medical and dental plans to

a self-funded model.

January 12, 2010, Commission authorization for the CEO to enter into a contract with a benefits

consulting firm to assist Port staff convert the Port sponsored medical and dental plans to self-funded

plans as well as to assist in managing insured and self-funded benefit plans.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

January 14, 2011

Page 3 of 3

April 27, 2010, Staff briefing providing an update on the work related to converting the Port sponsored

medical and dental plans to a self-funded model.

May 4, 2010, First Reading of Resolution No. 3636 adopting a self-funded model for the Port