CC 20161101 G Health Insurance Premiums for 2017RANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 11/01/2016
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA DESCRIPTION:
Consideration of possible action regarding Employee and Councilmember Health
Insurance Premiums for 2017
RECOMMENDED COUNCIL ACTION:
(1) Adopt Resolution No. 2016- , a Resolution of the City Council of the City of
Rancho Palos Verdes regarding the City's maximum monthly contribution amounts
for employee and City Council health insurance premiums for calendar year 2017.
FISCAL IMPACT: The budgeted amount for calendar year 2017 assumed a 10%
increase in health insurance rates, but the small group health insurance rates did
not vary too greatly from that which is currently in effect. Thus, the current
budgeted amount of $1,067,800 is more than adequate and no additional
appropriations will be required. Consequently, there is no need to change the
City's maximum monthly contributions for employee and City Council health
insurance premiums for calendar year 2017. The City may realize a cost savings
of $18,126.24 if the same medical plans and levels of coverage are maintained.
Amount Budgeted: $1,067,800
Additional Appropriation: N/A
Account Number(s): Finance will allocate the cost according to
Budget Program''
ORIGINATED BY: Mary Bradley, Human Resources Manager
REVIEWED BY: Gabriella Yap, Deputy City Manager
APPROVED BY: Doug Willmore, City Managervi
ATTACHED SUPPORTING DOCUMENTS:
A. Draft Resolution No. 2016 - Establishing the City's maximum monthly
contribution amounts for employee and Council Member health insurance
premiums for calendar year 2017 (page A-1)
B. City Council Policy Number 19 (page B-1)
BACKGROUND AND DISCUSSION
Annually, the City reviews its health insurance plans for the purposes of analyzing
utilization trends, carrier -proposed premium increases, and any necessary adjustments
for the following Plan Year. This report provides information and Staff recommendations
on the selection of health plan providers, proposed premium rate changes and other
considerations.
1
Staff is requesting that, for calendar year 2017, the City Council maintain the same
maximum contribution caps for the employee and City Council Member health plan
provider's (i.e. medical, dental, vision, EAP, LTD, Life with AD&D) insurance premiums
that it adopted December 1, 2015. This request is due to the fact that there were no
changes in premiums for ancillary benefits (dental, vision, EAP, LTD, Life with AD&D) and
only minor changes in premiums to medical benefits.
The City's total budgeted amount for employee and Council Member insurance costs in
FY16-17 is $1,067,800. This amount includes medical, dental, vision, the Employee
Assistance Program (EAP), life with accidental death and disability (AD&D), and long term
disability insurance. For comparison, the total budgeted / actual amounts for previous
years are:
Budaeted Actual
FY 10-11
$636,800
$702,478
FY 11-12
$718,600
$749,899
FY 12-13
$840,500
$770,497
FY 13-14
$888,100
$817,143
FY 14-15
$995,100
$1,012,052
FY 15-16
$1,051,137
pending
FY 16-17
$1,067,800
The City uses Maniaci Insurance Services Inc., an insurance brokerage, to act as the
City's agent in negotiating the best rates for the City. Each year, Maniaci Insurance
Services, Inc. conducts an analysis of the premium renewals and goes out to bid on behalf
of the City. The City maintains the tradition of providing the full premium cost of health
benefits package, which includes medical, dental, and vision insurance for full-time City
employees' and any participating Council Members. The City also pays 50% of the
medical, dental, and vision insurance benefits for eligible dependents. The City's open
enrollment period will begin November 4, 2016, and close November 16, 2016.
Beginning January 1, 2016, Health Care Reform re -defined the definition of large groups.
from 50+ employees to 100+ employees. This means that under the new definition, the
City does not fit the definition for large group and is no longer eligible for the large group
rates. The City must now purchase insurance using small group rates, and under the
small group rating plan, each employee would have a different monthly premium. The
premiums are based on several factors such as age and number of dependents.
Staff recommends continuing to utilize composite rates, rather than individual rates, for
each level of coverage offered for each medical plan. This means that all employees,
regardless of their age and number of dependents would receive the same deduction for
the same level of coverage selected if it was for the same medical plan. These composite
rates were provided by our benefits broker, Maniaci Insurance Services, using a small
group premium modeling tool. However, it should be noted that the City will still be billed
for the small group rates associated with each employee, based on their age and number
2
of dependents, so the actual cost may vary depending on the demographics of our
workforce.
Health Insurance Premiums
When necessary, the City Council adopts a Resolution establishing maximum
contribution rates for health care insurance for the coming calendar year. The "maximum
contribution rate" is the maximum amount the City will pay in total health insurance
premiums per employee, per month. In the past, this amount was derived by adding up
premium costs of the most expensive medical, dental, and vision health plans offered by
the City, with the medical insurance premium making up the largest percentage of the
total contribution rate. The City has used the most expensive plans to establish the
contribution rate in order to allow participants the maximum amount of choice in selecting
their health benefits. However, not everyone chooses the most expensive plans. For
example, employees with dependents tend to choose the lower-cost plans because they
share the cost of dependent coverage.
In the 2017 plan year, employees may select from three Blue Shield medical plans: a
HMO Plan, a traditional PPO Plan with a $250 deductible, or a HSA PPO Plan with a high
deductible pre -funded by the City. Thirty-nine (39) employees selected the HSA Plan for
2016, a decrease from forty-four (44) employees in 2015. It was forty-two (42) employees
in 2014, forty (40) in 2013, and thirty-eight (38) in 2012. This plan design has a positive
effect on the City's efforts to incentivize participants to be wise consumers of their
healthcare services, and thereby impact future premium increases.
As in the past, full-time employees and City Council Members who can provide proof of
medical coverage that is generally comparable to the City's medical coverage, can decline
the medical coverage offered by the City and be reimbursed a flat amount each month
equivalent to 50% of the lowest medical insurance premium. In 2012, this rate was
$263.00 per month for full-time employees and City Council Members. In 2013, the rate
was $276.00 per month; in 2014 the rate was $289.00 per month. In 2015, the rate was
$304 per month and $319 per month for 2016. In 2017, this rate will increase to $346 per
month.
Based upon the FY 16-17 budget, the City will continue to fund the HSA at the same level
it has in years past, $3,000 for Employee Only and $6,000 for Employee +1 and the
Family.
Ancillary Insurance Coverage
The City's ancillary insurance coverage consists of dental, vision care, employee
assistance (EAP), long term disability and life with accidental death and disability (AD&D).
The Dental HMO and PPO renewal rates will remain at its current rate with 0% rate.
9
This year, the City was able to negotiate a 2 -year rate guarantee with MES; therefore the
City will have no rate increase for 2017.
The Holman Group (EAP) will provide the City with a rate increase pass for the renewal
year.
The City also provides employees with Life and AD&D insurance and a Long Term
Disability Plan. Last year, the City received a rate increase pass on these lines of
coverage for accepting the plan design change to the exclusive provider organization
(EPO) provision of the Dental PPO Plan. There is a 0% rate increase from Principal
Financial Group for the Long Term Disability plan for 2017 and the Basic Life with AD&D
will also see 0% rate increase.
Supplemental Benefits
In addition to the above benefits, the City also provides as an optional benefit to
employees, Legal Access and VPI Pet Insurance. The cost of both these benefits is fully
borne by the employees and will see no premium increase.
CONCLUSION
Staff recommends the approval of Resolution No. 2016- , establishing the 2017 calendar
year maximum contribution for employee and Council Member health insurance
premiums. The City has tested the 2017 medical plans for compliance with the Health
Care Reform requirements and staff is pleased to report that the City has passed both
the Affordability and Actuarial Value Tests.
El
RESOLUTION NO. 2016-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES, INCREASING THE CITY'S MAXIMUM MONTHLY CONTRIBUTION
AMOUNTS FOR EMPLOYEE AND COUNCIL MEMBER HEALTH INSURANCE
PREMIUMS FOR CALENDAR YEAR 2017 AND RESCINDING AND REPLACING
RESOLUTION NO. 2015-94.
WHEREAS, on October 6, 2015, the City Council adopted Resolution No. 2015-94
establishing maximum City contributions towards employee health insurance premiums
for FY 2016; and,
WHEREAS, the City has been advised an increase in employee health insurance
premiums for calendar year 2017 is not anticipated and, as such, the current maximum
City contributions towards employee health insurance premiums established for FY 2016
are adequate for FY 2017; and,
WHEREAS, the City desires to sufficiently contribute to employee health insurance
premiums by providing sufficient maximum City contributions towards same for its active
full-time employees and City Council persons.
NOW, THEREFORE THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES
DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS:
Section 1: The City's contribution for each full-time employee or active City Council person
shall have a maximum amount which may be applied toward the full cost of the active full-
time employee's or active council person's medical, dental, vision and mental health
benefits, and pay up to 50% of the cost of medical, dental, vision and mental health
benefits for eligible dependents, subject to the maximum amounts for these insurance
coverages as specified below:
Full-time Employee / Councilmember
Insurance Status Maximum Contribution per Month
HMO PPO HSA
Employee Only $710.92 $1,145.62 $754.83
Two Party $1,060.58 $1,698.33 $1,117.34
Family $1,285.01 $2,067.40 $1,364.01
Section 2: The City will pay towards the participant's deductible in the HSA Plan $3,000
for Employee Only and $6,000 for Employee + 1 and Family (3 or more).
Section 3: Any amounts remaining between the necessary contributions required and the
maximum amounts specified in Section 1 of this Resolution are not to be paid to the active
full-time employee or active City Council person, as applicable.
Resolution No. 2016 -
Page 1 of 2
A-1
Section 4: If a full-time employee or City Council member can provide proof of group
medical coverage that is generally similar to the City's medical coverage, and declines the
medical coverage offered by the City, the City will make a cash -in -lieu payment to the
opting out full-time employee or City Council member of $346 per month under the City's
cafeteria plan as governed by Section 125 of the Internal Revenue Code.
Section 5: The City shall pay the full cost for each active full-time employee's life insurance
premium, accidental death & dismemberment premium and long term disability premium.
The City shall pay the full cost for each active City Council member's life insurance
premium.
Section 6: The Health Savings Account will be funded semi-annually in accordance with
Rancho Palos Verdes Employee Association's Memorandum of Understanding as may be
modified from time to time.
Section 7: The City Manager or his/her designee, is authorized to adopt rules and
procedures for the implementation of this Resolution.
Section 8: Resolution No. 2015-94 is hereby rescinded and replaced by this Resolution.
PASSED, APPROVED and ADOPTED this 1 sl day of November 2016.
/s/ Ken Dyda
Mayor
Attest:
/s/ Teri Takaoka
Interim City Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss
CITY OF RANCHO PALOS VERDES )
I, Teri Takaoka, Interim City Clerk of the City of Rancho Palos Verdes, hereby
certify that the above Resolution No. 2016-_ was duly and regularly passed and
adopted by the said City Council at a regular meeting thereof held on November 1, 2016.
City Clerk
Resolution No. 2016 -
Page 2 of 2
A-2
CITY COUNCIL POLICY
NUMBER: 19
DATE ADOPTED/AMENDED: 10/02/90
SUBJECT: Life/Medical/Dental/EAP/Vision Care Coverage for City Council
POLICY:
It shall be the policy of the City Council that the City shall pay the full medical,
dental, EAP and vision premiums for Council members who elect to be covered
under the City's health plan.
In addition, the City shall pay one half of the medical, dental, EAP and vision
premiums associated with adding family members of the City Council to the
City's health plan.
Finally, the City shall pay the monthly premium on a $50,000 life insurance policy
to be held by the City's insurance carrier on each Council member. Family
members of the City Council or employees are not eligible for life insurance
coverage under the City's life insurance policy.
BACKGROUND:
The City Council recognized the need to establish the criteria in which Council
members may elect coverage under the City's health benefits plan.
M