The URL can be used to link to this page

Home My WebLink AboutAUGUST 03, 2007 WKSHP MINCITY OF VIRGINIA BEACH A COMMUNITY FOR A LIFETIME COUNCIL MAFUX A(I: }'F.R4 E. !)HIsRNDOXF, AI-Large F7CL•'tilAl'OR LOL//ti R. JUNES, Ravside - Disrn~l a ~V/I./JlL1~ R. DeSTIsPH. Af-/.arRe H.4RXY F.. DI1:7EL, Armp.ccille - D~slricr 1 ROBIiKT,If. l)i'F.R, ('~~~ren~ille-Ih.rtricl l BARHAR,-I .bl. HE~~'LLY, Pru~res.v Anne Di.c~rir~ ' RI:HA S. ,~1c(7.A.'V.4N, Ro.re Hall - Uismct 3 JOH.V ~i. I`HNIN, Beach District h IZON A. L'ILI.`Ih'('!: f:4, A~-l.nrge XO.1EA4ARF IPlI tiON, .4t-Lnrg~~ ,/.-IA/F_:ti /.. {i'OO}), I.~ in~harrn -Drslnci 5 JA,b1L:~ R. tiPORIi, Ci(ti' hfanager I.ESI.IG l,. l.Il.l,F.'Y. ('+ry At~orney RI/7'H HOIXiES FK.4SF.R, MM('. ('uv Clerk SPECIAL CITY COUNCIL WORKSHOP 03 August 2007 C177' HAI.l. BU/l.D/N(7 I 2a0/ CO(lR7N0(!tiF. DRf I 7i ~7RGINIA BEACH, V/RGI~~'/A 23d568005 PHONE: (757J 385-d303 FAX.• (757)385-5669 E ,11AIL: Ctycncl~vbgov. co~ 1:00 PM Suite 2, Convention Center I. BRIEFING ON STAFF RECOMMENDATIONS re HEALTHCARE II. QUESTIONS, DISCUSSION, CITY COiJNCIL DIRECTION NOTE: Staff recommendation was sent in the July 27, 2007, City Council package; however, copies will be available at the Workshop. -1- M I N U T E S VIRGINIA BEACH CITY COUNCIL Virginia Beach, Virginia August 3, 2007 Mayor Meyera E. Oberndorf called to order the SPECIAL WORKSHOP SESSION of the VIRGINIA BEACH CITY COUNCIL Suite II, Virginia Beach Convention Center, 1000 19`" Street, on Friday, August 3, 2007 at 1: 00 P.M. Council Members Present: Harry E. Diezel, Robert M. Dyer, Barbara M. Henley, Vice Mayor Louis R. Jones, Reba S. McClanan, Mayor Meyera E. Oberndorf, Rosemary Wilson and James L. Wood Council Members Absent: William R. "Bill " DeSteph John E. Zlhrin [Entered: 1:10 P.M.J Ron A. Villanueva [Entered: 1:25 P.M.J August 3, 2007 -2- ITEM # 56665 "THE HONORABLE MEMBERS OF CITY COUNCIL In accordance with the Virginia Beach Ciry Code Section 2-21, and by the authority vested in me as Mayor of the Ciry of Virginia Beach, I hereby call a SPECIAL WORKSHOP SESSION of the VIRGINIA BEACH CITY COUNCIL on Friday, August 3, 2007, 1: 00 P.M., Suite II, Virginia Beach Convention Center, 100019`h Street for the following purpose: Discussion re City Employees Health Care Plan (January 2008) The public is invited to attend and observe. Sincerely, Meyera E. Oberndorf Mayor " ITEM # 56666 Council Lady McClanan expressed concern re the scheduling of the City Council Retreat. Meetings should not be scheduled if all Members of Ciry Council cannot be present. Mayor Oberndorf advised , because of Lyle Sumek's wife being hospitalized, the Retreat was rescheduled. There has been confusion concerning the Employee Benefits Review Task Force and action oJ City Council. A member of City Council had suggested as today had been scheduled for the Retreat, a Workshop be scheduled re an open and complete discussion involving Health Care recommendations. The Employee Benefits Review Task Force recommendations have not been accepted by the City Council. Council Members Henley and Wilson advised they would be unable to attend a Retreat on August 10, and 11, 2007, and would appreciate rescheduling. Council Members Henley and Wilson appreciate the scheduling of this Workshop Session to enable discussion of the Health Care recommendations. Vice Mayor Jones advised confusion arose as the Retreat was scheduled during City Council's vacation Vice Mayor Jones returned from his vacation to attend the Retreat, which was then rescheduled. Vice Mayor Jones has another commitment on August Tenth. The City Manager and Ciry Clerk shall contact the Ciry Council re dates available and subjects for the City Council Retreat. August 3, 2007 4IJ ~ ~ ~ :.~ _,~,~_~~~ * f 2 9 ~' ~ 2~~9~~5 OF .;.4. ~~ _._ `ONS 0~ ~'2 • ~UR NAS MEYERAE.OBERNDORF MavoR City of Virginia Beach VBgOV.COm August 2, 2007 THE HONORABLE MEMBERS OF CITY COUNCIL MUNICIPALCENTER BUILDING 1 2401 COURTHOUSE DRIVE VIRGINIA BEACH, VA 23456-9000 (757)385-4581 FAX (757) 385-5699 MOBERNDO~VBGOV.COM In accordance with the Virginia Beach City Code Section 2-21, and by the authoriry vested in me as Mayor of the City of Virginia Beach, I hereby call a SPECIAL WORKSHOP SESSION of the VIRGINIA BEACH CITY COUNCIL on Friday, August 3, 2007, 1:00 P.M., Suite II, Virginia Beach Convention Center, 1000 19`" Street for the following purpose: Discussion re City Employees Health Care Plan (January 2008) The public is invited to attend and observe. Sincerely, ~-~ -~~~.. ~ ~e 'era~Oberndor Y .f Mayor cc: Mayor and Members ofCiry Council James K. Spore, City Manager Leslie L. Lilley, City Attorney Ruth Hodges Fraser, MMC, Ciry Clerk Charles W. Meyer, Chief Operating O~cer Susan Walston, Chief of Staff David Hansen, Chief of Finance and Technology Steve Herbert, Chief Development O~cer Diane Roche, Assistant to the Ciry Manager for Communications and Media Relations .~ ~~C~~~ ~~.,{..~ _~ City of Virgirzia Beach . ~~. - < --- - 2 2o~99~s N~ e~ ~z ~ OF ~~R NA.~~O MEYERA E.OBERNDORF MAVOR August 2, 2007 THE HONORABLE MEMBERS OF CITYCOUNCIL VBgOV.COm MUNICIPAL CENTER BUILDING 1 2401 COURTHOUSE DRIVE VIRGINIA BEACH, VA 23456-9000 (75~ 385-4581 FAX(757)385-5699 MOBERNDO@VBGOV.COM In accordance with the Virginia Beach Ciry Code Section 2-21, and by the authoriry vested in me as Mayor of the Ciry of Virginia Beach, I hereby call a SPECIAL WORKSHOP SESSION of the VIRGINIA BEACH CITY COUNCIL on Friday, August 3, 2007, 1:00 P.M., Suite II, Virginia Beach Conventiou Center, 1000 19`" Street for the following purpose: Discussion re City Employees Health Care Plan (January 2008) The public is invited to attend and observe. Sincerely, ~ , ~~. ~~ ~,~;~~~ ~~~~ Meyera E. Oberndorf Mayor Virginia Beach City Council Received Notice William R. "Bill " DeSteph Councilman Harry E. Diezel Councilman Robert M. Dyer ~~~ Councilwoman Barbara M. Henley ~~ " - T/ice Mayor Louis R. Jones ~~ Councilwoman Reba S. McClanan Councilman John E. Uhrin Councilman Ron A. Villanueva Councilwoman Rosemary Wilson ~/J~/ Councilman James L. Wood -3- CITYMANAGER BRIEFING HEALTH CARE RECOMMENDATIONS ITEM # 56667 The Ciry Manager referenced the Member Advisory Meeting with City employees yesterday afternoon, August 2, 2007, with approximately seventy (70) employees. The staff has listened to feedback from employees, retirees and citizens. Recommendations of the Employees Benefits Review Task Force have been reviewed and additional options developed. City Council requested additional information as soon as possible re the short term recommendations on the Health Care Plan Year 2008. In 2000, the cost of combined health care (City and Schools) was $38-MILLION. In 2007, these costs are approximately $100-MILLION, a 163% increase in a 7 year time frame. Thus, health care is becoming a much morc important part of the City's budget. These costs for just the Ciry Health Care in 2000 were ~11.7- MILLION and by 2007 had increased to $31.8-MILLION, a 172% increase. Although, indirectly related the pressure on the tcrxpayers is a factor. Changes in the healthcare industry have been dramatic. Many private sector employers have stopped providing health care because of this cost. The staff must make sure the City's plans and benefits are not "out of bounds" with those of the private sector. June 30, 2008, is the deadline for reporting the full unfunded liability re benefits (including Health Care). The "Open Enrollment " period will begin early this Fall. The City Manager introduced the Benefits Executive Committee: City of Virginia Beach Susan D. Walston Chief of StaJf David Hansen Chief of Finance and Technology Fagan Stackhouse Director - Human Resources Catheryn Whitesell Director - Management Services Patricia Phillips Director - Finance Virginia Beach City Public Schools Ferrell E. Hanzaker ChieJ Financial Officer John Mirra Assistant Superintendent - Human Resources Sandy Cohen Director - Business Services The City Manager recognized Linda Matkins, Benefits Coordinator - Consolidated Benefits O~ce, which serves both City and Schools Robert Shleh, Chair - Employee Benefits Review Task and Kenneth Jeffries, Consultant, Mercer Health and Benefits. The recommendations are responsive in that they impact annual City costs and the GASB 45 actuarial liability. The recommendations will increase costs to employees and retirees and, unfortunately, will have greater impact on those with lower salaries and income. August 3, 2007 -4- CITYMANAGER BRIEFING HEALTH CARE RECOMMENDATIONS ITEM # 56667 (Continued) Susan Walston, Co-Chair, Benefits Executive Committee, and Chief of Staff, advised the intent is to outline the Healthcare Updates and City Staff Recomrreendations in the "short term": Plan Year 2008 and "longer term" 2009 and beyond. Plan Year 2006 Results ^ Increase in costs from 2005: ^ Actual 4. S%, Projected 10.3 % ^ Unit cost increase 8.S%, utilization decrease 4% ^ Plan design changes were effective in moderating the overa[l trend ^ Pharmacy - Increased copay for 2nd tier - Introduced co-insurance 3rd and 4th tier ^ Diagnostic Imaging - Increased copay Plan Year 2007 Trends (through May 2007) ^ Increase in costs from 2006 ^ New projection 6% or less - original projection 11 % ^ Additional plan design changes in 2007 ^ Emergency Room ^ Introduced co-insurance ~ PCP and Specialist Visits ^ Increased copays ^ Infertility Services ^ Capped coverage ^ Chiropractic Care ^ Added coverage GASB 45 Update ^ Favorable experience in 2006 and 2007 projected to reduce Retiree Health Care liability ^ Recomrriend a new evaluation this fall August 3, 2007 -5- CITY MANAGER'S BRIEFING HEALTH CARE RECOMMENDATIONS ITEM # 56667 (Continued)I ~^ ~~ ~~ :~ ~~~~ . v~.~ ~~ ~ ~.7r.~~~i~ t~~ ~pC~~.te~ Cumn~ EsNmated GASB 45 Valuation GASB 45 YaluaNon Funded Stahcs (data through (datn througF annru~.~ June 30, Z006) May 31, 2007J Reduction ~~'~'~. n Ciry Schools Total ~'" u;.: City Scboals ~~Total ,~p y;~. City Schools . Totd/. ~.i' AcmarialAccruedLiability ~^: E87.9 Ell2.7 5200.6 579.1 5101.4 SI80.5 ~. "' E8.8 Ell.3 S7A.1 ~ t AnnualRequiredConvibudon N~; $12.0 $16.7 $28.7 " m'' 510.8 $15A E25.8 ~' $12 $1.7 $2.9 i p~ Expected 2007 Costs (budgered) $3.5 $62 59.7 ' E3.1 $5.6 E8.7 $0.4 $0.6 E1.0 Cash Flow Increase (additional funds required) 58.5 510.5 E19.0 $7.7 $9.4 E17.1 b0.8 $1.1 51.9 Plan Year 2008 Vendor Selections ^ Medical (TPA - Self Insured) Optima Health ^ Dental (Fully Insured) Metlife (New Vendor) ^ Stop Loss Insurance HCC Life Staff Recommendations Plan Year 2008 ^ Eliminate `free"premium for single subscriber coverage ^ Decrease City/Schools contribution by SJ% from the $5,750 approved in the budget to $5,400. (This is a 3.3 % increase from the 2007 level of $5,225). ^ Increases Emp[oyee/Retiree costs ^ Premiums ^ Out ojpocket mazimums ~ Co-insurance for additional services ^ Decrease Emp[oyee/Retiree costs ^ Annual Wellness exam ^ Preventive Care ^ Continue equal City/Schools contribution to all eligible employees and retirees. ^ Direct savings in budgeted funds for health care toward a prudent reserve of $4 million ($2 million each for City and Schools) in the Health Fund and, if available, to consider putting toward funding the Annual Required Contribution for GASB. ^ Impact of Recommendations ^ Reduces City/Schools budgeted health care costs and health plan costs ^ Reduces the implicit subsidy ^ Incorporates some Task Force recommendations O Increases costs to Employee/Retirees August 3, 2007 -6- CITY MANAGER'S BRIEFING HEALTH CARE RECOMMENDATIONS ITEM # 56667 (Continued) ^ w ~~ ` ~ Flan Year 2048 Re~ommendatio~s ~~~s , ' ~ ~ S~ . .2007 CurreM Plan - ia~a ': , Recommendatlon Employer Contnbution °\ ~ 55,225 ` ~ ;` ^'m ~~ ~~ ~ ~ ~` ~ G Employee Premium for Single Subscnber Coverage ' ~ SO ' '?: N i .; s 59 HMO Plan~~Design None =~" ~^e Deductible Out of Pocket Mau per calendar year ;^ . . : 51,500 memGer /53,000 famfl , E2, :. - 52,ODO/53,500 ~~~~ PnmaryCarePhysician ', 32f1co a 1100°hcoinsurance i:. - ! -'~ '~. S20/~~ Annual Wellness Exam ; ~'. S2UcoPa N009.coinw~ronce : i ~~°~ .. Specialist ' :.f40co~a /100%coinwrance . ~~~" 34~100% Pre~enti~e Care ~ '~. S20 co a 1100'kcoinaurance ~ '~~? 1~°~ Outpatient Surgery , ~'~. 5100 co Y/t00So coinaurance ", 51~~ EmergencyRoom ~ ! S700co a /90Y.coinwrance • '~. ~~ S100I90% .. Inpatient ~'~. 5250~co a/ 1WN.coinwrons:e : . S~ S~~' ~ Dependent Age 25 `, ' " .: 23 : .: 23 Fina ncial~lmpact ~ S3 S7.OM • City/Schools SaWngs - , Employee/Retiree Premium Increase 1p~ (except single subscriber co~,erege) - ~."SUbscriberOnly5%savin9sol$22Mbasetlon2007premumrate . ..... ...... ..... ... ... .. _.. .... .. ....~ Mrs. Walston advised re the Employee Premium for Single Subscriber Coverage, currently this is zero employee contribution for the HMO. The Task Force recommended five (5%) percent and the Ciry staff also recommends at least 5% of the premium set be borne by the subscriber. This figure is not "costed out" in the bottom line figures. Based on this year and a premium rate at the HMO single subscriber rate of $5,225, equated to another $2.2-MILLION savings (2007 premium rate). Mrs. Walston advised recommendations for these savings will be detailed. The Ciry/Schools Savings are projected to be $7.0- MILLION and the employee/retiree premium increase (except single subscriber coverage) will probably increase ten (10%) percent. Council Lady McClanan requested the amount of cost savings for each individual item be depicted on the Plan Year 2008 Recommendations Chart. Example Hospital (Inpatient) Bill $100,000 Optima Negotiated Rate $ 80,000 Co-Insurance at 10% $ 8,000 Minus $250 copay $ 7,750 Maximum out-of-pocket per year $ 2,000 Member Cost $ 2,000 or less Per Year 2009 and Beyond Recommendations ^ Research, analyze, and propose means to: - Reduce the GASB 45 actuarial liability - Maintain adequate and competitive coverage for employees - Introduce additional choices to employees for coverage - Set appropriate rates and means of supporting health care for all employees - Address retiree coverage - Address dependent coverage August 3, 2007 ~- CITY MANAGER'S BRIEFING HEALTH CARE RECOMMENDATIONS ITEM # 56667 (Continued) Timeline of Actions ^ Finalize Plan Year 2008 in August for Open Enrollment this Fall ^ Conduct a new GASB 45 Valuation this Fall ^ Provide City Council and School Board with options for P[an Year 2009 and beyond by the end of December ^ Include funding requirements in the FY 2009 budget process in February for decision in May 2008 ^ Provide opportunity for employee, retiree, and public input ^ Develop GASB 45 liability funding policy in Spring 2008 ^ Discuss funding vehicle options in Spring 2008 ^ Report GASB 45 Annual Required Contribution on financial statement for fiscal year ending June 30, 2008 Councilman Wood advised there should be incentives for employees not to utilize sick leave unless truly ill. On his health plan, he cannot receive anything but generic drugs unless his physician determines there is a medical necessiry and a specific brand must be utilized or if there is not a generic available for a new drug. Ken Jeffries Consultant, Mercer Health and Benefits, believes the mandatory generic option is available through Optima, but will have to confirm. Linda Matkins, Benefits Coordinator - Consolidated Benefits ~ce, advised concerning infertility services, there is a cap and the coverage is up to approximately $2,000. Removing infertility coverage was examined several years ago; however, the impact of the actual infertility treatment was only approximately $100, 000. Information relative the cost saving on dependent age change will be provided. The plan is not determined on whether the dependent is a student. The plan covers up to the age of twenty-five (25). Mrs. Walston advised the GASB 45 evaluation is a"snapshot" in time; and, based on the current plan design (projected 2008) and the current census, covers all existing employees and current Retirees as well as the probabilities of whether they remain with the Ciry until retirement. The cost of the actuarial study is approximately $6, 000. Under GASB, The evaluation must be performed at least every two (2) years. If significant changes are made, the Cily would request to redo the evaluation. Vice Mayor Jones expressed concern. In the past, the Ciry Council informed the employee 100% of the single subscriber plan would be paid. Vice Mayor Jones requested the staff review the concept of utilizing this S% (to be charged the single subscriber employee) be utilized for the employee's family health care premium rather than taking this benefit from the employee. Vice Mayor Jones requested the actual impact. Re Retirees, Vice Mayor Jones requested the cost and whether it is equitable to the employees retiring who have served twenty (20) years under public safery and twenty-five in other Ciry positions, to pay in terms of premium towards individuals who have not served these years. An employee could have served under the Virginia Retirement System for twenry (20) years in another locality and then come to work for the City of Virginia Beach and retire after ftve (5) years and still receive supplements for the single and dependent health benefits. To his knowledge, there is nothing on the books creating these employees as Retirees. This has been done administratively, This did not seem equitable to the remainder of the City employees. The cost shall be provided. August 3, 2007 -8- CITY MANAGER'S BRIEFING HEALTH CARE RECOMMENDATIONS ITEM # 56667 (Continued) Mrs. Walston advised there is not a recommendation to correct or address this issue in 2008. The recommendation to utiliae any of the savings would be to keep in the health care fund and increase the existing reserve to $4-MILLION ($2-MILLION - City, $2-MILLION - Schools). Any findings beyond that could be directed toward the annual required contribution re GASB. In terms of the GASB liability, the City is projected to be over $8-MILLION. Vice Mayor Jones believes Health Savings Accounts (HSAs) should be examined in the long term. These wouldprovide the employee flexibility and the opportunity to accumulate funds to cover their health care in retirement (after the age of Medicare - 65). HSAs can provide, particularly for the younger employees, an opportuniry to accumulate a significant amount of money to be utilized not only for themselves, but spouses, as well as it could remain in their estate. Although, Vice Mayor Jones realized this would not be possible this year, the City needs to price out an insured plan versus the self-insured plan. Vice Mayor Jones advised the cost of dependent health care could also be significant. Vice Mayor Jones requested the cost be provided for this dependent health care (not including students in high school and college). Council Lady Henley also requested this information. Council Lady McClanan concurred with Vice Mayor Jones inquiries and requested copies of the aforementioned information. Mrs. Walston advised, when the City went to self-insured in 2000, over $1-MILLIONper year was saved. This will be re-evaluated to determine if this is still the case. Council Lady McClanan requested Municipal Reference to provide all news articles re health care in the Region. Mrs. Walston advised in order to be on the City's Health Plan, during retirement, the employee and dependents must have been on the Health Plan at the time of retirement. If the Health Plan is dropped by a Retiree, they may not go back on the Ciry's Health Plan. Ken Jeffries advised the savings estimated, re the GASB chart, are based solely on the favorable experience you have seen at the end of 2006 and for the first `half of 2007. These have nothing to do with any plan changes. The City Manager advised the staff is suggesting the City Council make the decision on the 2008 Plan Deign and then in the Fall, the study be re-evaluated, reflecting the impact. Council Lady Henley requested a concise explanation of the Ciry's beneftts be provided. Councilman Diezel advised a one page summary of benefits was provided to the Employee Benefits Review Tas/ Force by Fagan Stackhouse, Director of Human Resources. The Ciry Manager advised the one page summary and complete booklet re Ciry benefits shall be provided. Mayor Oberndorf advised the Health Savings Account sounds very promising particularly for young hires. Young employees will possibly hold eleven (11) d~erent positions in their lifetime and will not have the luxury of working for one corporation until retirement. It is the Mayor's understanding the HSA can be taken, without loss, from one corporation to the next. August 3, 2007 -9- CITY MANAGER'S BRIEFING HEALTH CARE RECOMMENDATIONS ITEM # 56667 (Continued) Mrs. Walston advised plastic surgery is not covered, unless it is medically required. The elective procedures coved by the City will be detailed. Mrs. Walston advised the Benefits Executive Committee meets with Optima quarterly. All City data and utilization is presented. The trends and tracking are reviewed. Those trends are utilized by Mercer Health and Benefits to identify higher utilization or the actual disease experienced by members and their dependents as well as increasing incidents and costs. This data shall be provided to City Council. Councilman Wood advised some employee groups have presented recommendations. Councilman Wood also requested a comprehensive review of all benefits, not just healthcare. Mrs. Walston requested Councilman Wood provide copies to assure she has all recommendations. The information requested shall be provided to Ciry Council by August 14, 2007. Councilman Diezel expressed concern re the two (2) Task Forces, Employees Benefits Review Task Force and Blue Ribbon Tax, Fee and Spending Task Force, are reviewing the same issues. Vice Mayor Jones suggested Ciry staff provide more information to City Council on health care no later than August 14, 2007, and a Public Hearing will be held at the August 21, 2007, Formal Session and action will be taken by City Council, probably on August 28, 2007. BY CONSENSUS, the SPECIAL WORKSHOP of August 3, 2007, was ADJOURNED on 3:35 P.M. August 3, 2007