19970520 CC SR Selection of Medical and Dental Insurance Providers and other Miscellaneous Benefits Provider MEMORANDUM RANCHO PALOS VERDES
TO: HONORABLE MAYOR AND CITY COUNCIL
FROM: ASSISTANT CITY MANAGER
DATE MAY 20, 1997
SUBJECT: SELECTION OF MEDICAL AND DENTAL INSURANCE PROVIDERS
AND PROVIDER FOR OTHER MISCELLANEOUS BENEFITS
RECOMMENDATION:
Adopt the three attached Resolutions providing medical insurance coverage from the
Public Employee Retirement System (PERS) and establishing City contribution
amounts for employee insurance premiums.
BACKGROUND AND ANALYSIS:
For the past several years the City's health, dental, life, and other insurance benefits
have been provided for through a joint arrangement with several cities through the
Southern California Joint Powers Insurance Authority (SCJPIA). HCM Benefits, Inc.
(HCM) was the broker used by SCJPIA for coordination of the program. In February
1997 the participating SCJPIA cities were notified by HCM that the health insurance
premiums through Prudential Insurance were likely to increase substantially. This was
primarily the result of two factors. First, only 7 percent of the SCJPIA cities eligible
employees were actually enrolled through SCJPIA. The other 93 percent were
employees of cities that were contracting independently for their main health insurance
coverage. In some cases it appeared that some cities were using the SCJPIA pool for
only certain employee groups (such as part time employees). HCM notified the
participating SCJPIA cities that this adverse selection would result in significantly
increased insurance rates or discontinuation of coverage. HCM noted that each city
could obtain similar insurance at a rate lower that would be offered by Prudential.
In March the City asked HCM to conduct a "marketing" of our insurance needs. HCM
contacted twelve large insurance carriers. Ten companies provided quotations. HCM
provided the City with an analysis of the four carriers who offered competitive quotes.
These carriers included Prudential, Pacificare, CareAmerica, and the Health Insurance
Plan of California (HIPC). The City also obtained a quotation from PERS. After an
analysis of the benefits offered by the five companies, two companies were eliminated
from further consideration. CareAmerica's benefits were not competitive with the other
companies, and Prudential refused to offer coverage for active City Council members.
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City management met with interested employees on two occasions to solicit their input
into the process of selecting our benefits provider. The employees preferred a plan
which would allow the greatest flexibility of choice of services and doctors. The two
plans offering the most choice include the HIPC and PERS plans. Both of these plans
offer each employee a choice of several HMO plans and two preferred provider plans.
Staffs fiscal analysis suggests that each of these two plans will cost slightly less than
the old cost of the Prudential plan previously offered through SCJPIA. The cost of both
the HIPC and PERS plans are projected to be significantly lower than the increased
costs that would have been charged by Prudential. The employee meetings also
indicated a desire to replace an existing wellness program with a vision care program.
The cost of each programs is approximately the same. Dental insurance will be
provided by Delta Dental in conjunction with the HCM Municipal Agency pool.
City management and staff believe that PERS is the preferable choice for health
insurance benefits. PERS provides health insurance to many California agencies. It is
an established system with a very large member base. Staff believes that this will
result in a stable program with significant power in negotiating favorable insurance
rates. The HIPC plan is relatively new and has little history. The stability of the PERS
program is a benefit to our employees. The projected costs of the HIPC and PERS
plans are almost identical. Since PERS only offers medical insurance, other benefits
including dental insurance, vision insurance, life, etc. will be provided for through the
HCM Municipal Agency pool.
The selection of the PERS plan requires the adoption of two Resolutions. One
resolution establishes the minimum required contribution rates from the City for active
employees and for retired employees. The minimum rate for active employees is $16
per month. The minimum rate for inactive employees is $1 per month, but will increase
by 5% annually until it reaches $16 per month. The City currently has only eleven
retired employees, some of which may choose to purchase insurance through PERS.
The second Resolution allows for City Council members to be eligible for PERS health
benefits. Since City Council members are not members of the PERS retirement
system, they must be enrolled as a "non-PERS" agency. The City's contribution rates
are the same as are outlined above for active City employees, $16 for active and $1 for
inactive Council members. Some retired Council people may be eligible for coverage,
as specified in the attached Resolution, but will have to pay the premium differential on
their own.
In addition to the two PERS Resolutions, the third Resolution establishes the additional
amounts that the City will contribute for insurance benefits for active full-time
employees and City Council members. The Resolution also states that inactive
(retired) employees are not eligible for an additional contribution. Therefore, if they
wish to choose coverage, they will have to pay for the difference between the total
premium amount and the $1 City contribution. An active part time employee who elects
coverage will also have to pay the premium difference.
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ALTERNATIVES:
The main alternative is to choose a different benefits provider.
FISCAL IMPACT:
Staffs analysis indicates that there will be no adverse fiscal impact from changing the
health benefits provider to PERS and the other benefits to the HCM municipalities pool.
Respectfully Submitted: Reviewed:
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Brent D. Mattingly Paul D. Busse
Assistant City Manager City Manager