RPVCCA_CC_SR_2014_09_30_03_Employee_&_Council_Health_Ins_Premiums_2015CrrYOF RANCHO PALOS VERDES
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
HONORABLE MAYOR & CITY COUNCIL MEMBERS
SEAN M. ROBINSON, HUMAN RESOURCES MANA~
SEPTEMBER 30, 2014 f:!7
EMPLOYEE AND COUNCIL MEMBER HEAL TH
INSURANCE PREMIUMS FOR 2015
CAROLYNN PETRU, ACTING CITY MANAGE~
RECOMMENDATION
Adopt Resolution No. 2014-, 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 2015.
EXECUTIVE SUMMARY
Prior to the end of each calendar year, the City reviews its health insurance plans for the
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 City Council Member health
insurance premiums effective January 1, 2015. 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 2015. The Employee Compensation
Subcommittee was informed of the medical 5% rate increase and concurred that the
medical rate the City achieved was in the best interests of the City and its employees. The
total percentage increase in premiums for medical, dental, vision and all ancillary lines of
coverage will increase 5.4% in 2015. In addition, staff is recommending the bi-annual
funding of the HSA deductible in accordance with the adopted MOU. The City's open
enrollment period will begin on November 3, 2014 and close on November 14, 2014.
BACKGROUND:
Since 1974, the City has paid the monthly health insurance premiums for its full-time
employees, and since 1991 for Council Members. Since 1979 for employees and 1991 for
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Employee and Council Member Health Insurance Premiums for 2015
September 30, 2014
Page 2 of 5
Council Members, the City has also paid for half of dependent coverages. In the current
health benefits package, the City pays the full cost of the full-time employees' and any
participating Council Members' medical, dental, and vision insurance benefits. The City
also pays up to 50% of the cost of the 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 (HSAs), 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 participants' medical, dental, and vision benefits, 50% of the premiums
for eligible dependents, and funding the full amount of the participants' deductible. For
2015, the deductible amount remains at $2,600 for the Employee I Council Member Only
option, and $5,200 for the Employee I Council Member+1 and the Family option (3 or
more). The City will continue to fund the HSA at the same levels it has 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
FY14-15 is $995, 100. This amount includes medical, dental, vision, the Employee
Assistance Program (EAP), life, Accidental Death and Disability (AD&D), and long term
disability insurance. For comparison, the total budgeted I actual amounts for previous
years are:
B d t d u 1ge e At I c ua
FY10-11 $636,800 $702,478
FY11-12 $718,600 $749,899
FY12-13 $840,500 $770,497
FY13-14 $888,100 $817, 143
FY14-15 $995, 100
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.
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Employee and Council Member Health Insurance Premiums for 2015
September 30, 2014
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In the 2015 plan year, employees may select from three Blue Shield medical plans: a 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-two (42) employees selected the HSA Plan for
2014. This is an increase from the forty (40) employees who selected the HSA Plan forthe
2013 calendar year, and is an increase from the thirty-eight (38) employees 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.
Trends in medical inflation for calendar year 2015 reflect an approximate increase of 8% -
14%. Blue Shield initially came forward with a proposed 13.9% increase in premiums for
2015. Subsequent. negotiations lowered the cost to a final renewal of 5% premium
increas~s in calendar year 2015 for the three health plans (HMO, PPO, and HSA).
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, this rate will
increase to $304 per month.
Council Employee Compensation Subcommittee
The Council Employee Compensation Subcommittee, comprised of Mayor Duhovic and
Councilwoman Brooks, was informed on September 2, 2014 of the proposed medical
increase. The Subcommittee concurred with Staff to place this item on the September 30,
2014 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.
Health Care Savings Account Deductible
One aspect of the City's benefits program Staff recommends be addressed is the delivery
of the HSA funds. Within the last several fiscal years, the City experienced unprecedented
turnover in staffing. From the beginning of calendar year 2014 (January) through June,
2014, the City was unable to recover HSA funding from several employees having left the
City's employment. This resulted in an unavoidable financial loss to the City in the amount
of approximately $7,000. This was due primarily to two factors: 1. the entire HSA funding
is deposited the first week of the calendar year; and 2. there is no legal means for the City
to compel former employees to surrender the HSA funds once deposited into their
individual HSA account.
Staff recommends the Council approve a process whereby the HSA funds are delivered bi-
annually (approximately January and April 1st, in accordance with the adopted MOU), such
that employees leaving the City prior to the second installment of the calendar year will not
be unnecessarily fully funded in their HSA accounts.
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Employee and Council Member Health Insurance Premiums for 2015
September 30, 2014
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Ancillary Insurance Coverage
The City's ancillary insurance coverage consists of dental, vision care, employee
assistance program (EAP), long term disability and life.
The Dental HMO is being renewed with a 0% rate increase, and the PPO Plan will renew
with a 0% increase for 2015 with the acceptance of the plan design change in the exclusive
provider organization (EPO). Council may recall that last year the City accepted the plan
design change in the exclusive provider organization (EPO) provision of the Dental PPO
Plan, which changed the design from a 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 that plan design change in the EPO, Principal Financial
Group "rate froze" all other ancillary lines of coverage (dental, AD&D, life, and LTD) to the
2013 rate. Principal Financial Group is proposing to change the plan design of the 10% co-
pay for basic services and a 40% co-pay for major services to 20% co-pay for basic
services and a 50% co-pay for major services. Additionally, they are proposing a $25
increase to the individual deductible. All the proposed changes to the plan design for the
EPO mirror what the current levels of the HMO and PPO. 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 2014 rate.
Council may recall that the City was able in 2010 to secure a 4-year rate guarantee on the
vision plan through MES Vision. Due to the expiration of the rate guarantee, the City had
to go out to bid on the vision plan. The results of the bid proposals showed an increase of
our current premiums. MES Vision submitted the most favorable proposal, with a 47.2%
increase with a 2-year rate guarantee. That proposal mirrors our current vision coverage.
Other carriers who submitted proposals showed increases of 184.9% and 139.5% off our
current plan and had a 4-year rate guarantee.
The City was able in 2012 to secure through negotiations a 2-year rate guarantee for the
Employee Assistance Program (EAP); therefore there in no increase to the EAP for 2015.
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 2015.
The City has tested the 2015 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 2015
September 30, 2014
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FISCAL IMPACT:
Although initial health insurance rates came in at 13.9% for 2015, the City will only pay
5% more in higher premiums for the health insurance benefits for the next calendar
year. Staff estimates the total 2015 premium increases, including medical, dental,
vision and all ancillary lines of coverage, based upon current enrollment statistics, will
increase the City's costs by approximately $34,000 (5.40%). These favorable rates
were 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 3, 2014 and close November 14, 2014 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
2014-2015 Fiscal Year before the increase takes effect on January 1, 2015. 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 on the amount of
premiums paid by the City in 2015. In addition, funding the HSA deductible bi-annually
will also help reduce costs encountered in recent years due to staff turnover.
Attachments:
Draft Resolution No. 2014-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. 2014-
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 2015 AND RESCINDING RESOLUTION
NO. 2013-67
WHEREAS, on October 29, 2013 the City Council adopted Resolution No. 2013-
67 establishing maximum insurance rates for employee benefit premiums in
2014; and,
WHEREAS, the increase in health insurance premiums in 2015 would exceed
the maximum contribution caps established in 2014; 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 $679.00 $720.82 $1,093.00
Two Party $1,012.78 $1,066.87 $1,620.18
Family $1,227.36 $1,302.59 $1,972.50
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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 $304 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. 2013-67 is hereby rescinded and replaced by this
Resolution.
PASSED, APPROVED and ADOPTED this 3Qth day of September 2014.
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. 2014-_ was duly and regularly passed and
adopted by the said City Council at a regular meeting thereof held on September
30, 2014.
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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