HomeMy WebLinkAbout061008 Employee Health CoverageChanges to Health Care
Coverage for Active & Retired
City Employees
Plan Year 2009
June 10, 2008
1. “That City employees who retire (or have retired) before age 65 with at least 25 years of
service with the City or combined years of services with the City, Schools and/or a state agency
whose employees are covered by the City’s healthcare plan, as well as those who retire on a
work-related disability compensable under the Workers Compensation Act before age 65 with
at least 5 years of services with any combination of the above-listed employers, shall receive
the same coverage that is provided to City employees, until theyreach age 65.”
Retirees continue to receive City contribution equal
?
to amount given to employees and can access
employee plans
Blended rate (employees and retirees) to be used for
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HMO subscriber only premium
Staff to determine whether to use blended rate to set
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PPO and Basic PPO subscriber only premiums
Retiree POS plan can continue to be offered
?
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2. “That all current and future retirees may take advantage of the spousal
and/or eligible dependent coverage, provided that the retiree pays the full
actual cost of such coverage.”
All City retirees, regardless of service time,
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will pay the full cost of coverage for
spouse/dependents
Schools retirees with prescribed service time
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will pay based on Schools plan to reduce
implicit subsidy/liability instituted in Plan Year
2007
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2. (cont’d)
City Financial Impact
Annual Cost Reduction
$1.02M
GASB (funded) Liability Reduction
$12.4M
ARC (funded) Reduction
$1.5M
Retiree Impact based on 2008 HMO Rates
(rounded)
TierMonthlyAnnual
Retiree + Child
$78 + $114 = $192$941 + $1,357 = $2,298
Retiree + Children
$370 -$41 = $329$4,441 -$489 = $3,952
Retiree + Spouse
$261 + $380 = $641$3,135 + $4,556 = $7,691
Retiree + Family
$501 + $324 = $825$6,009 + $3,886 = $9,895
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3. “That the premium charged for single subscriber HMO coverage for retirees who retire from the
City with at least 25 combined years of services with the City, Schools, and/or a state agency
whose employees are covered by the City’s healthcare plan, as well as those who retire on a work-
related disability compensable under the Workers Compensation Act before age 65 with at least 5
years of service with any combination of the above-listed employers, shall be the same premium
for single subscriber HMO coverage that was in effect on the date that the employee retired.”
Current City retirees and City employees who retire
?
in 2009 will have the subscriber only rate frozen at
the 2009 rate
Future City retirees will have the subscriber only rate
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frozen at the amount charged in the year of
retirement
Guaranteed rates reduce future flexibility to impact
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GASB liability
Schools is not freezing subscriber only rates for
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retirees
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3. (cont’d)
We currently exceed the number of VRS allowable premium deductions
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(25), therefore the number of retirees that are prevented from having
their premiums deducted from their pension checks will increase.Out of
66 premium rates, the Benefits Office handles 41 manually, with retirees
making payments by check.
City Financial Impact
Annual Cost Increase
$0.1M
GASB (funded) Liability Increase
$0.9M
ARC (funded) Increase
$0.1M
Retiree/Employee Impact
•
Retirees will have stable health care premiums, unless cover
spouse/dependents
•At some point, retirees will pay less than active employees
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4. “That City employees who retire (or have retired) before age 65 with less
than 25 years of service shall be allowed to receive the same coverage as
employees, including spousal and dependant coverage, until they reach age
65, but such retirees shall pay the full actual costs of such coverage, both for
themselves and for their spouse and eligible dependents.”
Change instituted in Plan Year 2008
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City Financial Impact (2008)
Annual Cost Reduction
$0.1M
GASB (funded) Reduction
$2.6M
ARC (funded) Reduction
$0.3M
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5. “That City Council supports retaining the self-insured health care plan.”
Staff will continue to monitor and keep City
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Council informed
At time of reauthorization of current contract,
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staff will evaluate whether to put out RFP
requesting responses on both self-insured
and fully insured plans
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6. “That it shall be the policy of the City Council that all currentemployees and future retirees
shall contribute to the cost of their health care coverage. Theemployee and retiree contribution
shall be set by the City Council with a recommendation from the City Manager based on the
experience of the plan, the City’s annual contribution amount, and the remaining premium cost.
For the 2009 plan year, current employees, and employees who retire during calendar year 2009,
shall pay a premium of $25 per month for single subscriber coverage in the HMO plan.”
Schools has approved $10 per month for HMO subscriber only
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coverage for employees (Annual Cost Reduction = $0.7M)
City Financial Impact
Annual Cost Reduction
$1.0M
GASB (funded) Liability Reduction
$1.4M
ARC (funded) Reduction
$0.2M
Employee/Retiree Impact
•
City employees will pay more than Schools employees
•
City retirees with prescribed service time will continue to have
premiums less than Schools retirees with same service time,
but some receive VRS Health Care Credit
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7. “That City Council will establish a deductible for all health care plans in order to
assist in controlling long term costs by engaging employees in consumer based
decisions. For the 2009 plan year, Council hereby establishes adeductible of
$100 per individual and $200 per family within the HMO plan, subject to the
maximum out-of-pocket expense for an individual of $1,500 and of $3,000 for a
family.”
The Benefits Executive Committee (BEC) met June 4 and
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began the rate setting process by reviewing 2008 1 st Quarter
experience
Deductible will be included in 2009 plans and rates
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City and Schools Financial Impact
Annual Cost Reduction
$1.2M
GASB (funded) Liability Reduction
$1.9M
ARC (funded) Reduction
$0.2M
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8. “That beginning in plan year 2010, the City shall offer to its employees a
high deductible health plan with a health savings account.”
BEC has on work plan
?
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9. “That City Council supports the current consolidated health insurance plan with
City and School employees and retirees and directs the City Manager to work with
the Superintendent of Schools and the Consolidated Benefits Executive
Committee.”
Coordinated process will continue
?
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10. “The Internal Auditor is directed to provide for an actuarial evaluation of retiree
health care costs annually.”
City Auditor indicates allocation of audit resources will be
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required to coordinate with Mercer for review of most recent
actuarial valuation
Liability was reduced due to significantly improved experience
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trend and changes in:
Plan Design (i.e. introduction of co-insurance, higher co-pays)
–
Premium Costs (i.e. higher City contribution, higher employee
–
premiums, reduction of implicit subsidy to Schools retirees,
charge to retirees with less than prescribed years of service for
full cost of spouse/dependents
Eligibility (lowered age for dependents: City 25? 23, Schools
–
25? 24)
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10. (cont’d)
•Actuarial valuation decreased between October 2006
and December 2007 valuations
20062007
GASB (funded) Liability
$200.6M$157M
ARC (funded)
$28.7M$19.5M
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11. “That the Internal Auditor is directed to conduct an audit of health care claims
by an independent outside firm.”
City Auditor indicates allocation of audit resources will be
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required for RFP process and to oversee independent
auditing firm.
City Auditor has joined RFP Committee for 2007 Claims
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Audit.
Timeline for Committee
June 19, 2008Next Meeting
June -July 2008Advertise
July 2008Responses Due
August –October 2008Conduct Audit
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12. “That this resolution shall supersede the health care resolution adopted by
the City Council on December 15, 1992.”
Total Financial Impact
CityCity/Schools Schools Total
Deductible Employee
Only
($10/mo)
Annual Cost $1.92 M$1.2M$0.7M$3.82M
Reduction
GASB (funded) $12.9M$1.9M-$14.8M
Liability Reduction
ARC (funded) $1.6M$0.2M-$1.8M
Reduction
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