LETTER AGREEMENTT s - r '.
Esther LaPointe
Contractual Agreement tJnit Manager
CIGNA HealthCare
January 6, 2010
Allen Del Prete
City of Clearwater
100 S. Myrtle Avenue
Clearwater, FL 33756
CIGNA HealthCare
Routing 132CAIJ
900 Cottage Grove Road
Hartford, C'f 06152
'Telephone 860.226.5984
Facsimile 860.730.3944
Esther. lapointegeigna. com
Connecticut General Life Insurance Company "Connecticut General") Policy Number: 3331468
- Florida
Dear Mr. Del Prete:
The purpose of this letter agreement ("Agreement") is to:
(1) Describe the administration of the Shared Returns Minimum Premium (.Minimum Premium)
program (also know as the Cash Management Program or "CMP") as a part of the experience-rating
process applicable to your Connecticut General group insurance account;
(2) Establish a formula for determining the Supplemental Premium;
(3) Establish your claim liability obligations and identify a limit on the amount by which your
maximum monthly claim liability may decrease below the preceding month's maximum monthly
claim liability in order to ensure adequate program account funding in the event of a decreasing
number of insured lives; and
(4) Establish the tax indemnification and escheat indemnification arrangements relative to your
Connecticut General group insurance policy.
Unless otherwise noted, terms not defined herein are as defined in the Minimum Premium (CMP)
Administrative Agreement and are hereby incorporated into this Agreement. CIGNA HealthCare
refers to various operating subsidiaries of CIGNA Corporation. The minimum premium program is
insured by Connecticut General Life Insurance Company.
Program Overview
CIGNA HealthCare's minimum premium program is designed to offer customers an alternative way to
fund their group healthcare policy ("Policy") premium. By funding premium through CIGNA
Health.Care's minimum premium program, you will enjoy a cash flow advantage and premium tax
savings that you would not normally enjoy under most traditional payment arrangements. While the
minimum premium program affects the timing of your funding obligations, it is not intended to
materially alter the total amounts that would otherwise be paid as premium to CIGNA ,HealthCare over
the life of the Policy other than as a result of the premium tax savings.
Proud National Sponsor of the March of Dimes WalkAmerica°... the Walk that Saves Babies
"CIGNA" and "CIGNA HealthCare" refer to various opera ling subsidiaries of CIG14A Coi porn li on. Products and services are provided by these operating
subsidiaries and not by CIGNA Corporation. These operating subsidiaries i.ncludc Connecticut General Life Insurance Company, Tel-Drug, Inc. and its affiliates,
CIGNA Behavioral Health, Inc., Intracorp, and HMO or service company subsidiaries of CIGNA Health Corporation and CIGNA Dental Health, Inc. In Arizona,
HMO plans are offered by CIGNA Health Cate of Arizona, Inc. In Califomia, HMO plans are offered by CIGNA HealthCare of California, Inc. In Connecticut, LIMO
plans are offered by CIGNA HealthCare of Connecticut, Inc. In Virginia, HMO plan' art offered by CIGNA HealthCare Mid-Atlantic, Inc. In North Carolina, HMO
plans are offered by CIGNA HealthCare of North Carolina, Inc. All other medical plans in these states are insured or administered by Connecticut General Life
Insurance Company.
', 1 .
City of Clearwater
January 6, 2010
Page 2
1. Descriution of Minimum Premium as a Part of the Experience-Rating Process
All CIGNA HealthCare experience-rated group insurance policies included in your group account will
be treated as one experience-rated program. Following the end of a policy year, CIGNA HealthCare
will complete an underwriting settlement for that policy period to determine whether there is a margin,
a deficit and/or any unused bank account liability on the account. "Deficit" shall mean the excess of
claim payments, including changes in reserve liability, premium taxes, claim handling and any
administrative expense over premium and premium equivalents (as determined by Connecticut
General). "Margin" shall mean any excess of premium over claim payments and premium equivalents
(as determined by Connecticut General), changes in reserve liability, premium taxes, claim handling
and any administrative expenses. "Unused Bank Account Liability" a/k/a "Bank Account Margin"
shall be equal to the maximum yearly claim liability (See Section 3 below) less the total yearly claim
payments issued from your Minimum Premium benefit payment account and funded by you.
The Deficit for each policy period, in an amount not exceeding 13.13% of the premium and premium
equivalents (as determined by Connecticut General) for the policy period, shall carry forward from one
policy period to the next and accumulate until such accumulated Deficit is paid, in full. Additionally,
Deficits will accumulate interest at an annual rate established by CIGNA HealthCare in accordance
with CIGNA HealthCare's standard actuarial and underwriting policies and procedures.
To the extent the policy period generates a Deficit or an accumulated Deficit exists, CIGNA
HealthCare will look to offset such Deficit by any available Margins. Accordingly, Deficits under any
one policy may be offset by Margins under any other experience-rated group insurance policy. To the
extent that Deficits cannot be recovered from Margins, if any, on non-Minimum Premium policies, but
Unused Bank Account Liability exists on your Minimum Premium policy, you will pay the lesser of-
]) such Deficit; or 2) the Unused Bank Account Liability on your minimum premium policy.
Your failure to make the payment set forth above on the next premium due date following our written
demand will result in automatic termination of your Minimum Premium Administrative Agreement
and of the group insurance policy to which the Minimum Premium Administrative Agreement applies,
subject to the grace period provisions of that policy.
2. Formula for Determining the-Supplemental Premium Amount
A Supplemental Premium shall be due on each monthly premium due date. Payment of each such
Supplemental Premium will be waived contemporaneously by CIGNA HealthCare (the "Waiver") with
a subsequent monthly Supplemental Premium becoming due. CIGNA HealthCare may tenninate the
Waiver under the same circumstances it may terminate the Rider. Upon termination of the Minimum
Premium Administrative Agreement, the Supplemental Premium outstanding at termination will be
payable on the date of such termination.
City of Clearwater
January 6, 2010
Page 3
The amount of Supplemental Premium due on each monthly premium due date shall be calculated in
accordance with the following formula:
(a) The sum of the Maximum Monthly Payments, as described in Section 4 below; LESS
(b) the total of payments issued from your Minimum Premium account and fundable by
you in accordance with the provisions of the Minimum Premium Administrative
Agreement; LESS
(c) that portion of the Supplemental Premium, if any, which is held by CIGNA
HealthCare.
The Supplemental Premium formula and any amounts contained therein may be changed by CIGNA
HealthCare, as permitlcd by the Minimum Premium Administrative Agreement, by delivering to you a
written notice (the "Notice"), which Notice may be delivered together with a premium rate
change/renewal notice, or separately, specifying the new Supplemental Premium amount and the date
on which the new Supplemental Premium amount is to become effective. If the Notice is delivered
together with a premium rate change/renewal notice, the effective date of the Notice shall coincide
with the premium rate change/renewal, unless otherwise stated in the Notice. You must notify CIGNA
HealthCare within ten (10) business days of receipt of the Notice if any discrepancy exists with the
amount, the terms, or any conditions contained therein. Absent notification within (10) business days
of receipt of the Notice, the Notice and all terms contained therein will be deemed accepted by you.
The Supplemental Premium due CIGNA HealthCare may be used by CIGNA HealthCare at its
discretion for purposes including, but not limited to, the funding of incurred but unreported claims, the
expenses of administering such claims, premium taxes, risk charges and the recovery of Deficits.
3. Treatment of Excess Supplemental Premium Payments.
In the event that you shall have paid to Connecticut General an amount that is greater than the
Supplemental Premium amount required for the then current policy year, Connecticut General shall
continue to retain such amount unless you request in writing the return of such excess. Upon
termination of the Minimum Premium Administrative Agreement, any such excess shall be credited
against the remaining Supplemental Premium amount that you are required to pay to Connecticut
General. If no additional amount is required to be paid by you upon termination of the Minimum
Premium Administrative Agreement, such excess shall be returned to you.
4. Maximum Monthly Policyholder Claim (Bank Account) Liability Amount
The limits on your monthly claim liability shall be the greater of (a) the Maximum Monthly Payment
as that term is defined in the Minimum Premium Administrative Agreement or (b) 95% of the
Maximum Monthly Payment for the immediately preceding Policy Month.
First Year Maximum Monthly Payment
Because Plan Benefit Payments issued against the Program Account for the initial twelve month period
of coverage are likely to be less than those for subsequent twelve month periods of coverage, you will
be obligated to fund your Minimum Premium Benefit Payment Account only up to the percentage of
the First Year Maximum Monthly Payment set forth below. This is in addition to the Residual
Premium due monthly. This shall not affect the calculation of the Supplemental Premium as set forth
above. Beginning with the thirteenth month after your policy is effective you will be obligated to fund
your Minimum Premium Benefit Payment Account up to the Maximum Monthly Policyholder Claim
Liability Amount.
City of Clearwater
January 6, 2010
Page 4
Maximum
Residual Monthly First Year Maximum
Premium Policyholder Claim Monthly Policyholder
Product (Expenses) Liability Amount Claim Liability Amount
OAPIN & CG Pharmacy
Plus - Base 7.1% 92.9% 80.3%
OAPIN & CG Pharmacy
Plus - Co a 7.1% 92.9% 80.4%
OAP & CG Pharmacy
Plus - POS 7.1% 92.9% 80.4%
Costs of Collection
If any sums due under the Policy, as amended by the Minimum Premium Administrative Agreement,
and/or under this Agreement are not received on the date due, then, in addition to such sums, you will
pay CIGNA Healthcare interest at a rate equivalent to the Prime Rate set by the ten largest commercial
lending institutions in the United States (as reported in the Wall Street Journal, or, in the event the
Wall Street Journal ceases publication, a similar publication) and any and all attorneys' fees and costs
which CIGNA Healthcare may incur in connection with the collection of these sums.
Effective Date of This Agreement
This Agreement shall be effective on January 1, 2010 ("Effective Date"). Any modification of the
Policy, the Minimum Premium Administrative Agreement or this Agreement must be evidenced by a
writing, signed by an authorized underwriting representative of CIGNA HealthCare, and this
Agreement supersedes any prior agreements or representations regarding the subjects set forth in this
Agreement.
5. Additional Notices
Tax Indemnification Arrangements
While it presently appears that, except in California, CIGNA HealthCare should not be liable for state
premium taxes or any other taxes based upon or related to the benefits funded and paid by you through
the claim payment bank account pursuant to this plan, the matter is not free from doubt. However,
CIGNA HealthCare will administer your plan on the assumption that, except in California, no such tax
liability pertains, subject to the following conditions:
1. CIGNA HealthCare reserves the right to respond to requests by governmental agencies for
information directly or indirectly relating to its calculation of tax liability or to the remittance or non-
remittance of taxes, based upon or related to benefits funded pursuant to the Minimum Premium
Program. In making such disclosures, we will not identify you or your plan by name unless required to
do so.
2. In the event that the nonpayment of state premium taxes or any other taxes based upon or
related to the benefits funded by its customers is challenged by any authority and/or an assessment is
levied against CIGNA HealthCare for or on account of any such taxes, CIGNA HealthCare reserves to
itself, in its sole and absolute discretion, the options to remit, pay, settle and/or to resist such challenge
or assessment in any lawful manner and to whatever extent it deems prudent or appropriate in the
circumstances.
City of Clearwater
January 6, 2010
Page 5
3. Upon demand, you will reimburse CIGNA Healthcare for any and all amounts which CIGNA
HealthCare is required or elects to remit or pay pursuant to Paragraph 2 above, relating to or arising
from benefits funded and paid by you or on behalf of you under your benefit plan, whether such
benefits were paid from your funds or from CIGNA HealthCare's funds, and you will indemnify
CIGNA HealthCare and hold it harmless from liability from all such amounts, including any interest
and penalties assessed by any governmental authority, any amounts paid by CIGNA HealthCare in
settlement of any such challenge or assessment, and any and all such amounts which are attributed or
apportioned to your plan by CIGNA HealthCare. The terms of this paragraph shall survive the
termination of the group insurance policy, the Minimum Premium Administrative Agreement and this
Agreement.
Although CIGNA HealthCare retains the unencumbered authority and right to determine its response
to any challenge of its nonpayment of premium or other taxes related to or based upon benefit plans
similar to yours, CIGNA HealthCare will endeavor to keep you informed of any such challenge (and of
CIGNA HealthCare's response to it) which could result in a charge back or liability to you under the
provisions of this Agreement.
Escheat Indemnification Arrangements
CIGNA HealthCare's administration of your plan does not include performing obligations, if any,
under state escheat or unclaimed property laws. It is your responsibility to determine the extent to
which these laws may apply to the plan and to comply with such laws. In addition:
1. CIGNA HealthCare reserves the right to respond to requests by or on behalf of governmental
agencies for information directly or indirectly relating to the calculation of escheat or unclaimed
property obligations based upon or related to benefits funded pursuant to the Minimum Premium
Program. In making such disclosures, we will not identify you or your plan by name unless required to
do so.
2. In the event that the non-remittance of abandoned or unclaimed property based upon or related
to the benefits funded by its customers is challenged by any authority and/or an assessment is levied
against CIGNA HealthCare for or on account of any such property, CIGNA HealthCare reserves to
itself, in its sole and absolute discretion, the options to remit, pay, settle and/or to resist such challenge
or assessment in any lawful manner and to whatever extent it deems prudent or appropriate in the
circumstances.
3. Upon demand, you will reimburse CIGNA HealthCare for any and all amounts which CIGNA
HealthCare is required or elects to remit or pay pursuant to Paragraph 2 above, relating to or arising
from benefits funded and paid by you or on behalf of you under your benefit plan, whether such
benefits were paid from your funds or from CIGNA HealthCare's funds, and you will indemnify
CIGNA HealthCare and hold it harmless from liability from all such amounts, including any interest
and penalties assessed by or on behalf of any governmental authority, any amounts paid by CIGNA
HealthCare in settlement of any such challenge or assessment, and any and all such amounts which are
attributed or apportioned to your plan by CIGNA HealthCare.
Although CIGNA HealthCare retains the unencumbered authority and right to determine its response
to any challenge of its non-remittance of property under escheat or unclaimed property laws related to
or based upon benefit plans similar to yours, CIGNA HealthCare will endeavor to keep you informed
of any such challenge (and of CIGNA HealthCare's response to it) which could result in a charge back
or liability to you under the provisions of this Agreement. The terms of this paragraph shall survive
the termination of the group insurance policy, the Minimum Premium Administrative Agreement and
this Agreement.
City of Clearwater
January 6, 2010
Page 6
Acceptance
If the terms of this Agreement are acceptable to you, please countersign below and return to the
undersigned by the Effective Date of this Agreement. Failure to countersign and return this
Agreement to the undersigned by said date shall be evidence that the parties hereto have failed to reach
an agreement on a material term and may result in no employee benefit coverage being provided on or
after the Effective Date.
Very truly yours,
CIGNA HealthCare (insured and administered by Connecticut General Life Insurance Company)
By: z&'Q1?-
Name: sther LaPointe
Title: Contractual Agreement Unit Manager
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Accepted by: CITY OF CLEARWATER
By:
Name: Margaret Simmons
Title: Finance Director
Executed this 7-M day of 3aAo" in the year 2,01 0
ggtPR • •uBf,?, CAROL A. BARD
* * MY COMMISSION t DD 550285
EXPIRES: June 25,200
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