Board of Directors Regular Meeting Agenda


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Meeting Date: 03/21/2019  

SUBJECT MATTER:
Receive, consider and act upon Consulting and Brokerage Services for Employee Health and Welfare Benefits (C-2019-0036A); 
FISCAL IMPACT:
Significant based on annual cost of employee benefits
BACKGROUND:
The Woodlands Township uses the services of an employee benefits consulting firm to provide comprehensive employee benefits consulting and insurance brokerage services to support its Human Resources department.  The firm reviews insurance vendors and negotiates premiums at least annually, provides a recommended course of action and cost estimate for providing competitive and cost effective insurance to employees, provides assistance in plan design and management and coordinates all plan operational issues.  The firm also provides benefits administration, guidance and support to the Human Resources Department and employees, and ensures the Township complies with the Patient Protection and Affordable Care Act and all legal requirements in the area of employee benefits.
 
The Township has used the firm, Gallagher Benefits Services since 2009 to perform these duties.  While the Township is not required to competitively bid these professional services, a Request for Qualifications process occurred in 2013 and again in 2016, and Gallagher was the selected firm each time.  The current consulting agreement between Gallagher and the Township expires April 30, 2019.


Gallagher receives commissions from the insurance vendors and fully discloses these commissions to te Township annually.  The current agreement defines the annual cost of contracted third-party benefits to be $130,000 per year.  The current agreement further states that should commissions fall short of $130,000, the Township is not obligated to pay the difference.  Commissions paid to Gallagher for the past three years were:
 
                                                        2016          $118,632
                                                        2017          $120,368
                                                        2018          $124,569


Gallagher has continued to provide outstanding service to Township employees by providing comprehensive employee benefits, and to Township Human Resources by providing compliance expertise and plan administration.  Key cost containment measures achieved over the preceding three years include: 
  • The Township has realized an average annual trend of 2.1% DECREASE in health care costs since 2016, while the national trend for this same period ranged from 6 – 7% INCREASE.  In 2019, medical insurance costs did not increase for either the Township or employees over 2018 costs.
  • In 2019, the Township’s self-funded dental plan is projected to experience a 0% increase to the 2018 budget, holding dental premiums flat.
  • Gallagher Benefit Services marketed non-medical benefits (life, short and long-term disability) in 2016 and negotiated a flat renewal continuing the 30% rate reduction the Township received in 2014 for an additional three years.
  • For 2019, the Township’s stop loss insurance was marketed and through aggressive negotiations and a change in carrier, these rates were reduced by 9.9%.
Gallagher has offered to amend the current Consulting Agreement and extend the initial fee guarantee from three years to five years resulting in extending the current contract an additional two years to April 30, 2021.
 
Staff recommends the Board consider accepting the amendment to the Consulting Agreement based on Gallagher’s proven record of containing employee benefits costs and providing outstanding employee benefits consulting and brokerage services to the Township.  Should the Board decide not to approve the amendment, staff will issue a Request for Qualifications for these services.
 
RECOMMENDATION:
Board to determine action.
Attachments
Gallagher Consulting Agreement Amendment


    

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