November 22, 2005
SUBJECT: Renewal of Dental Insurance Contract for Calendar Year 2006
REPORT IN BRIEF
This report recommends the renewal of the existing contract between the City of Sunnyvale and Delta Dental for the provision of the Dental Preferred Provided Organization Plan (DPPO) for one calendar year and the Dental Health Maintenance Organization Plan (DHMO) for two years to be effective January 1, 2006. The new rate increase is 3.4% for both plans.
BACKGROUND
As part of its employee benefit package, the City of Sunnyvale provides regular employees and City Council with dental insurance benefits through the Delta Carrier under these two different plans with the exception of those employees represented by the Public Safety Officers Association (PSOA) and Communication Officers Association (COA). The City provides payment to an alternative dental plan for PSOA and COA employees through their respective Associations.
EXISTING POLICY
7.3 Legislative Management Sub-element
Goal 7.3D.1a: Maintain a competitive pay and benefits package for employees.
The current Memoranda of Understanding for SEA and SEIU and Salary Resolution contain provisions to provide this benefit.
DISCUSSION
The City is a participant in a large public employer pool, which consists of multiple public agencies throughout Northern California. Driver Alliant, the City’s insurance broker for dental coverage, negotiated this rate increase with Delta Dental based upon the total pool’s experience as well as anticipated industry increases. Due to the fact that the City belongs to a pool, Delta is unable to provide a multiyear contract for the DPPO plan. The entire pool’s experience needs to be evaluated on an annual basis. The fact that the City belongs to a pool already provides 15% to 18% in savings as opposed to the City being evaluated on its own experience. The broker will continue to pursue the possibility of a multiyear or a rate cap option in the future for the DPPO plan.
The City is entering only its third year with Delta. The broker, Driver Alliant has explored other providers for the City and has found that Delta offers the most cost effective options. In addition, the continuous change of providers creates services disruption for employees and their families.
FISCAL IMPACT
The total fiscal impact for this projected expenditure of $19, 605 is budgeted in the Employee Benefits Fund for Fiscal Year 2005/2006.
PUBLIC CONTACT
Public Contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.
ALTERNATIVES
1. Approve the contract renewal with Delta Dental DPPO for one calendar year with the proposed 3.4% rate increase and a 3.4% rate increase for two years same guaranteed rate for the DHMO plan.
2. Do not approve the contract renewal with Delta Dental and seek other alternatives.
RECOMMENDATION
Staff recommends alternative #1: Approve the contract renewal with Delta Dental DPPO for one calendar year with the proposed 3.4% rate increase and a 3.4% rate increase for two years same guaranteed rate for the DHMO plan.
Reviewed by:
Erwin Young, Director of Human Resources
Prepared by: Myriam Castaneda, Human Resources Supervisor
Approved by:
Amy Chan
City Manager