CC SR 20171017 E - New Health Insurance RatesRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 10/17/2017
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA DESCRIPTION:
Consideration of possible action regarding Health Insurance Premiums for 2018.
RECOMMENDED COUNCIL ACTION:
(1) Adopt Resolution No. 2017-, 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 2018 AND RESCINDING AND REPLACING RESOLUTION NO. 2016-51.
FISCAL IMPACT: The budgeted amount for calendar year 2018 assumed a 3.6%
increase in health insurance rates, but the small group health insurance rates did not
vary too greatly from those that are currently in effect. Although the health insurance
rates increased by 5.50% ($45,495.72), the City's cost is anticipated to only increase by
$35,327.04 (4.53%), for a total cost of $814,880.76. Thus, the current budgeted
amount of $1,106,300 is more than adequate, and no additional appropriations will be
required. However, the City's maximum monthly contributions for employee and City
Council health insurance premiums for calendar year 2018 do need to be adjusted to
reflect the rate increases.
Amount Budgeted: $1,106,300
Additional Appropriation: N/A
Account Number(s): Finance will allocate the cost according to Budget
Program
ORIGINATED BY:
Mary Ortiz Bradley, Human Resources Manages
REVIEWED BY:
Gabriella Yap, Deputy City Manager '.,
APPROVED BY:
Doug Willmore, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Draft resolution No. 2017-_ (page A-1)
B. City Council Policy No. 19 (page B-1)
BACKGROUND AND DISCUSSION:
Annually, the City reviews its health insurance plans and carrier -proposed premium
increases, and any necessary adjustments for the following Plan Year. Staff is
requesting that the City Council approve the increase to the maximum contribution
amounts for employee and City Council Member health insurance premiums due to the
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5.8% increase in premiums for medical benefits and slight increases in dental and other
ancillary benefit premiums.
The City provides the full premium cost of the 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. For part-time employees who are considered "full-time
employees" (as defined by the Affordable Care Act), the City provides the full premium
cost for medical insurance and 50% of the cost for dependent coverage. The City's
total budgeted amount for employee and Council Member insurance costs in FY17-18
is $1,106,300, which includes medical, dental vision, the Employee Assistance Program
(EAP), life with accidental death and disability (AD&D), and long-term disability (LTD)
insurance.
Maniaci Insurance Services, Inc. (Maniaci), an insurance brokerage, acts as the City's
agent in negotiating the best rates for the City. Each year Maniaci conducts an analysis
of the premium renewals and goes out to bid on behalf of the City. This year, Maniaci
was not able to obtain quotes from other medical insurance carriers to compare with the
City's medical plans prior to the City's scheduled Open Enrollment Period because the
new small group rates were not yet available. The rates for 2018 are expected to be
published by October 31, 2017. Staff will be bringing a future staff report with
recommendations related to selection of benefit providers and options available to the
City after these rates and other health plan information are received and analyzed.
As an employer with fewer than 100 employees, the City must purchase insurance
using small -group rates, where employees are assigned different monthly premiums
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 and Council
Members, 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 Maniaci 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 of
dependents, so the actual cost may vary depending on the demographics of the City's
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 highest level of medical, dental, and vision health plans
offered by the City to allow participants the maximum amount of choice in selecting
their health benefits. However, not everyone chooses the most expensive plans. For
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example, employees with dependents tend to choose the lower-cost plans because
they share the cost of dependent coverage.
In the 2018 plan year, employees may select from three Blue Shield medical plans: a
HMO Plan, a traditional PPO Plan with a $250 deductible, or a Health Savings Account
(HSA) PPO Plan with a high deductible pre -funded by the City. Forty-six (46)
employees selected the HSA Plan for 2017, an increase from thirty-nine (39) in 2016.
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. Based upon the FY17-18 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.
Maniaci's benefit renewal presentation to Staff indicated the Blue Shield medical plans
would increase by a combined total of $45,495.72 annually (5.8%). This would break
down as follows: 17.68% increase for the HMO Platinum plan ($21,705.24), 1.53%
increase for the PPO Gold plan ($332.76), and a 3.67% increase to the PPO+HSA
Silver plan ($23,457.72). In addition, Maniaci informed the City that Blue Shield would
discontinue the PPO Gold (250/30) plan and replace it with the PPO Gold (450/30)
plan, resulting in a change in deductibles from $250 to $450.
As in the past, full-time employees and City Council Members who can provide proof of
comparable 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 2017, the rate was $336 per month; in 2018 the rate will
increase to $353 per month.
Ancillary Insurance Coverage
The City's ancillary insurance coverage consists of dental, vision care, employee
assistance program (EAP), long term disability and life with accidental death and
disability (AD&D).
The Dental HMO renewal rate will remain at its current rate, with a 0% increase,
because the City is in the middle of a 3 -year rate guarantee. This rate guarantee
expires December 31, 2018. The Dental POS renewal rates will have an annual
increase of $1,718.76 (2.6%).
The MES vision plan renewal rate will remain at its current rate, with a 0% increase,
because the City is in the middle of a 2 -year rate guarantee. This rate guarantee
expires December 31, 2018.
The Holman Group (EAP) will provide the City with a rate increase pass for the renewal
year; this means there will not be a rate increase.
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The plans through Principal Financial Group for Long Term Disability and Basic Life
with AD&D will both have rate increases of $1,546.80 (5.0%) and $2,583.96 (9.78°/x)
respectively.
Supplemental Benefits
In addition to the above benefits, the City also provides as optional benefits to
employees: AFLAC accident, cancer and disability coverage; Legal Access; and VPI
Pet Insurance. The cost of these benefits is fully borne by the employees and will see
no premium increase.
CONCLUSION
Staff recommends the approval of Resolution No. 2017-_, establishing the 2018
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. 2017-
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
2018 AND RESCINDING AND REPLACING RESOLUTION NO. 2016-51.
WHEREAS, on November 1, 2016, the City Council adopted Resolution No. 2016-51
establishing maximum City contributions towards employee health insurance premiums
for FY 2017; and,
WHEREAS, the City has been advised of an increase in employee health insurance
premiums for calendar year 2018 which will exceed the current maximum City
contributions towards employee health insurance premiums established 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. However, for part-time employees that are considered "full-
time employees," as defined by the Affordable Care Act, the maximum amount may only
be applied to toward the full cost of the medical premium and up to 50% of the cost for
medical dependent coverage.
Insurance Status
Full-time Employee / Councilmember
Maximum Contribution per Month
HMO HSA PPO
Employee Only $801.81
Two Party $1,175.40
Family $1,408.64
$779.75
$1,163.70
$1,409.00
$1,273.25
$1,792.38
$2,202.96
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.
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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 $353 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. 2016-51 is hereby rescinded and replaced by this Resolution.
PASSED, APPROVED and ADOPTED this 17th day of October 2017.
Mayor
Attest:
City Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss
CITY OF RANCHO PALOS VERDES )
I, Emily Colborn, City Clerk of the City of Rancho Palos Verdes, hereby certify
that the above Resolution No. 2017- was duly and regularly passed and adopted by
the said City Council at a regular meeting thereof held on October 17, 2017.
City Clerk
Resolution No. 2017 -
Page 2 of 2
A-2
CITY COUNCIL POLICY
NUMBER: 19
DATE ADOPTED/AMENDED: 10/02/90
SUBJECT: Life/Medical/Dental/EAPNision 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.
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