RPVCCA_CC_SR_2013_10_29_01_Employee_&_Council_Member_Health_Insurance_Premiums_For_2014CrTYOF
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SEAN M. ROBINSON, HUMAN RESOURCES MANAGE~
OCTOBER 29, 2013
EMPLOYEE AND COUNCIL MEMBER HEAL TH INSURANCE
PREMIUMS FOR 2014
CAROLYN LEHR, CITY MANAGER~
RECOMMENDATION:
Adopt Resolution No. 2013-, a Resolution of the City Council of the City of Rancho
Palos Verdes amending the City's maximum monthly contribution amounts for
employee and Council Member health insurance premiums for calendar year 2014.
EXECUTIVE SUMMARY:
Prior to the end of each calendar year, the City reviews its health insurance plans for
purposes of analyzing utilization trends, carrier-proposed premium increases and any
necessary adjustments to control present and future costs. These considerations are
balanced with the need to provide a competitive benefits package for employees in
order to attract, motivate and retain the best talent. Staff is requesting that the City
Council adjust the maximum contribution caps for employee and Council Member
health insurance premiums effective January 1, 2014. The requested increase is due
to the fact that premium costs of the existing medical plans are scheduled to increase
5% in the HMO Plan, PPO Plan and the HSA Plan. The 5% increase is far less in
comparison to the 13.9% medical industry standard rate increase for 2014. The
Employee Compensation Subcommittee was informed of the medical 5% rate increase
and concurred fully that the medical rate the City achieved was in the best interest of
the City and its employees. The City's open enrollment period will begin November 11,
2013 and close November 27, 2013.
BACKGROUND:
Since 1974, the City has paid the monthly health insurance premiums for its full-time
employees and 1991 for Council Members. The City has also paid for half of an
employee's dependent coverage since 1979 and 1991 for Council Member's. In the
current health benefits package, the City pays the full cost of the full-time employees
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Employee and Council Member Health Insurance Premiums for 2014
October 29, 2013
Page 2
and any participating Council Member's medical, dental and vision insurance benefits.
The City also pays up to 50% of the cost of medical, dental, and vision insurance
benefits for eligible dependents.
As more employers began moving towards partnering with their employees to reduce
the escalating costs of medical care by using Health Care Savings Accounts (HSA), the
HSA Plan option was initiated in 2008 to give employees and Council Members greater
control and incentive to manage their health care costs. Under this approach, the City is
paying the full cost of the participant's medical, dental and vision benefits, and 50% of
the premiums for eligible dependents, and funding the full amount of the participant's
deductible. For 2014, the deductible remains at $2,600 for the Employee Only and
$5,200 for the Employee+1 and the Family (3 or more). The City will continue to fund
the HSA at the same levels they have in years past; $3,000 for Employee Only and
$6,000 for Employee+1 and the Family (3 or more).
The City's total budgeted amount for employee and Council Member insurance costs in
FY13-14 is $888,100. This amount includes medical, dental, vision, employee
assistance program (EAP), life, AD&D and long term disability insurance. For
comparison, the total budgeted I actual amounts for previous years are:
B d t d u 1Qee At I c ua
FY 10-11 $636,800 $702,478
FY 11-12 $718,600 $749,899
FY 12-13 $840,500 $770,497
Council Employee Compensation Subcommittee
The Council Employee Compensation Subcommittee had a conference call on October
21, 2013 to review the proposed increases. They concurred with staff to place this item
on the October 29, 2013 agenda recommending continuing with the all same practices
as the City has in the past with the 5% increase on the medical plans.
DISCUSSION:
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.
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Employee and Council Member Health Insurance Premiums for 2014
October 29, 2013
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In the 2014 plan year, employees may select from three Blue Shield medical plans: an
HMO Plan, a traditional PPO Plan with a $250 deductible, or an HSA PPO Plan with a
high-deductible pre-funded by the City. Forty (40) employees selected the HSA Plan
for 2013. This is an increase from the thirty-eight (38) employees who selected the
HSA Plan for the 2012 calendar year and is an increase from thirty-three (33)
employees in 2011. This plan design has a positive effect on the City's efforts to
incentivize participants to be wise consumers of healthcare services and thereby impact
future premium increases.
Trend in medical inflation for calendar year 2014 is 13.9%. Blue Shield initially came
forward with a proposed 13.9% increase in premiums for 2014. Subsequent
negotiations lowered the cost to a final renewal of 5% premium increases in 2014 for
the three health plans (HMO, PPO and HSA). The City's ancillary insurance coverage
consists. of Dental, Vision and the Employee Assistance Program. The Dental HMO is
being renewed with a 0% rate increase and the PPO Plan will renew with a 0% increase
for 2014 with the acceptance of the plan design change for the exclusive provider
organization (EPO). The plan design change goes from 0% co-pay paid by the patient
for both basic and major services to the patient paying a 10% co-pay for basic services
and a 40% co-pay for major services. By accepting this plan design change, Principal
Financial Group, will "rate freeze" all other ancillary lines of coverage (dental, AD&D, life
and LTD) to the 2013 rate. The City was able in 2010 to secure through negotiations a
4-year rate guarantee on the Vision Plan. The City was able in 2012 to secure through
negotiations a 2-year rate guarantee for the Employee Assistance Program. In the
aggregate, staff estimates the 2014 premium increases, based upon current enrollment
statistics, will increase the City's costs in calendar year 2014 by $33,262 (5.00%).
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 will adjust to $289.00 per month.
ADDITIONAL INFORMATION:
The City also provides employees with Life and AD&D insurance and a Long Term
Disability Plan. As noted above, by accepting the plan design change from the
Principal Financial Group, the PPO dental, Life and AD&D Insurance Plan and the Long
Term Disability plan will renew with a 0% increase for 2014.
Staff would also like to inform the Council that we have tested the 2014 medical plans
for the Health Care Reform requirements and the City has passed both the Affordability
and Actuarial Value Tests. Although these tests have been pushed ahead to January
2015, staff has been attentive to the requirements and proactively managing them.
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Employee and Council Member Health Insurance Premiums for 2014
October 29, 2013
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FISCAL IMPACT:
Although initial health insurance rates came in at 13.9% for 2014, the City will only pay
5% more in higher premiums for the health insurance benefits for the next calendar
year. This favorable rate was attained by staff working with Maniaci Insurance Services
and the negotiations between Maniaci Insurance Services and the various health care
providers. The City's open enrollment period will begin November 11, 2013 and close
November 27, 2013 and we will see some employees change their plans due to
personal circumstances. It is difficult to estimate the actual cost at this time as a result
of being half way through the 2013-2014 Fiscal Year before the increase takes effect on
January 1, 2014. However, if the migration continues towards the HSA, the City will see
additional savings. The choices employees and Council Members make will have an
impact qn the amount of premiums paid by the City in 2014.
Attachments:
Draft Resolution No. 2013-Amending the City's maximum monthly contribution
amounts for employee and Council Member health insurance premiums.
-City Council Policy Number 19
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RESOLUTION NO. 2013-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES, AMENDING THE CITY'S MAXIMUM MONTHLY CONTRIBUTION
AMOUNTS FOR EMPLOYEE AND COUNCIL MEMBER HEAL TH INSURANCE
PREMIUMS FOR CALENDAR YEAR 2014 AND RESCINDING RESOLUTION
NO. 2012-81
WHEREAS, on November 7, 2012 the City Council adopted Resolution No.
2012-81 establishing maximum insurance rates for employee benefit premiums;
and,
WHEREAS, the increase in health insurance premiums in 2014 would exceed
the maximum contribution caps established in 2013; and,
WHEREAS, the City desires to continue to provide certain contributions to its
active full-time employees and City council persons for health benefits.
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 $644.69 $684.55 $1,038.98
Two Party $961.87 $1,013.39 $1,540.33
Family $1,165.65 $1,237.33 $1,875.31
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Section 2: The City will pay towards the participant's deductible in the HSA Plan
$3000 for Employee Only and $6000 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 reimburse the full-
time employee or City Council member $289 per month.
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 City Manager or his/her designee, is authorized to adopt rules
and procedures for the implementation of the Resolution.
Section 7: Resolution No. 2012-81 is hereby rescinded and replaced by this
Resolution.
PASSED, APPROVED and ADOPTED this 29th day of October 2013.
Mayor
Attest:
City Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss
CITY OF RANCHO PALOS VERDES )
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I, Carla Morreale, City Clerk of the City of Rancho Palos Verdes, hereby
certify that the above Resolution No. 2013-_ was duly and regularly passed and
adopted by the said City Council at a regular meeting thereof held on October 29,
2013.
City Clerk
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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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