CC SR 20151006 G -Employee and Council Member Health Ins PremiumsCITY OF kiRANCHO PALOS VERDES
MEMORANDUM
TO: HONORABLE MAYOR & CITY COUNCIL MEMBERS
FROM: SEAN M. ROBINSON, HUMAN RESOURCES MANAGER
DATE: OCTOBER 6, 2015
SUBJECT: EMPLOYEE AND COUNCIL MEMBER HEALTH
INSURANCE PREMIUMS FOR 2016
REVIEWED: DOUG WILLMORE, CITY MANAGERV_
RECOMMENDATION
Adopt Resolution No. 2015- , a Resolution of the City Council of the City of Rancho Palos
Verdes amending the City's maximum monthly contribution amounts for employee and City
Council health insurance premiums for calendar year 2016.
FISCAL IMPACT
Budgeted Amount: $ 1,051,137
Additional Appropriation: $ 0
Account Number(s): 685-1015-499-21-00
EXECUTIVE SUMMARY
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 increases and other
considerations. These considerations are necessary to provide competitive benefits
package for employees and to attract, motivate, and retain the best talent work force.
Staff is requesting that the City Council adjust the 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 effective December 1, 2015. The
increase is due to several increase premium factors and Health Care Reform updates.
As you may be aware, beginning January 1, 2016, Health Care Reform has re -defined the
definition of large groups. In the past, a large group was considered 50 or more
employees. As of January 1, 2016, however, a large group will now be defined as 100+
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Employee and Council Member Health Insurance Premiums for 2016
October 6, 2015
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employees. This means that under the new definition the City will not fit the large group
and not be eligible for the group rates. We would be reclassified and moved to a member -
level, meaning each employee would have a different monthly premium depending on
several factors such as age and number of dependents. In effort to avoid the member -
level coverage, Blue Shield has offered an early renewal option that would be effective
December 1, 2015 and maintain the group rate. Our hope is that during 2016, the
definition of large group will be repealed and we will be able to continue to participate with
the group rate model.
BACKGROUND:
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 of Rancho Palos Verdes
has a total of 62 authorized full-time employees. The City is dedicated to providing
responsive and excellent service to our 42,000 residents. We do this by providing
attractive benefits to:
1) Retain and attract employees;
2) Support and promote workplace productivity
3) Providing a range of comprehensive benefits to fit their unique circumstances
needs; and
4) Aligning incentives and balancing interests such that needed benefits are
provided at a cost that is reasonable to employees and to the City relative to
its overall financial capacity.
The City's total budgeted amount for employee and Council Member insurance costs in
FY15-16 is $1,051,137. 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 1 actual amounts for previous
years are:
Budgeted 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
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Employee and Council Member Health Insurance Premiums for 2016
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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
and has done a wonderful job for the City minimizing rate increases.
DISCUSSION
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 2016 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. Forty-four (44) employees selected the HSA Plan for
2015. This is an increase from the 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 discussed in the Executive Summary, Health Care Reform continues to play a role in
medical inflation along with rising cost and usage of specialty drugs, health care claims and
medical claims. Maniaci Insurance Services Inc. worked diligently at negotiating with Blue
Shield the premium rates. The initial rates that Blue Shield came in with was a 9.8%
increase. Staff is pleased to report that Maniaci negotiated that rate down to a 5% rate
increase for our three health plans (HMO, PPO, and HSA) beginning on December 1, 2015
through calendar year 2016.
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 and in 2014 the rate was $289.00 per month. In 2015, the rate was
$304 per month. In 2016, this rate will increase to $319 per month.
Based upon the FY 15-16 budget, the City will continue to fund the HSA at the same level it
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Employee and Council Member Health Insurance Premiums for 2016
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has in years past, $3,000 for Employee Only and $6,000 for Employee +1 and the Family.
Council Employee Compensation Subcommittee
The City Council Employee Compensation Subcommittee, comprised of Mayor Pro Tem
Brooks and Councilman Duhovic, was informed on September 15, 2015 of the proposed
medical increase. The Subcommittee concurred with Staff to place this item on the October
6, 2015 agenda, recommending continuing with all of the same practices as the City has in
the past, and advising adoption of the 5% increase on the medical plans.
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 renewal rates will remain at its current rate with 0% rate increase while
the PPO Plan will have a rate increase of 2.9%.
Council may recall in 2014, the City was able to negotiate a 2 -year rate guarantee with
MES; therefore the City will have no rate increase for 2016.
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. Principal Financial Group is imposing a 15% rate
increase for the Long Term Disability plan for 2016 and the Basic Life with AD&D will 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, with the cost of both fully borne by the
employees, will see no premium increase.
CONCLUSION:
Staff recommends the approval of Resolution No. 2015- , establishing the 2016 calendar
year maximum contribution for employee and Council Member health insurance premiums.
Staff is confident that the recommendation is fiscally sound and responsible in effort to
ensure the continuation of practices the City has set in the past.
The City has tested the 2016 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.
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Employee and Council Member Health Insurance Premiums for 2016
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Attachments:
- Draft Resolution No. 2015- Amending the City's maximum monthly contribution
amounts for employee and Council Member health insurance premiums.(Page 6)
- City Council Policy Number 19 (Page 9)
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RESOLUTION NO. 2015-
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 2016 AND RESCINDING AND
REPLACING RESOLUTION NO. 2014- 67
WHEREAS, on September 30, 2014, the City Council adopted Resolution No.
2014-63 establishing maximum City contributions towards employee health
insurance premiums for FY 2015; and,
WHEREAS, the City has been advised of an increase in employee health
insurance premiums for calendar year 2016 which will exceed the current
maximum City contributions towards employee health insurance premiums
established for FY 2015; 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:
Insurance Status
Full-time Employee/Councilmember
Maximum Contribution
per Month
HMO
HSA
PPO
Employee Only
$710.92
$754.83
$1,145.62
Two Party
$1,060.58
$1,117.34
$1,698.33
Family
$1,285.01
$1,364.01
$2,067.40
Al
•
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.
Section 4: If a full-time employee or City Council member can provide proof of
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 $319
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. 2014-63 is hereby rescinded and replaced by this
Resolution.
PASSED, APPROVED and ADOPTED this 6t" day of October 2015.
Mayor
Attest:
City Clerk
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STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )SS
CITY OF RANCHO PALOS VERDES )
I, Carla Morreale, City Clerk of the City of Rancho Palos Verdes, hereby
certify that the above Resolution No. 2014- was duly and regularly passed and
adopted by the said City Council at a regular meeting thereof held on October 6,
2015.
City Clerk
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.
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