RPVCCA_CC_SR_2012_11_07_H_Employee_Health_InsuranceMEMORANDUM
TO:
DATE:
FROM:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
STEVEN LARSON,INTERIM HUMAN RESOURCES MANAGE~
NOVEMBER 7,2012
SUBJECT:EMPLOYEE HEALTH INSURANCE PREMIUMS FOR 2013
REVIEW~D:CAROLYN LEHR,CITY MANAGER 09----
'J!'
RECOMMENDATION:
Adopt Resolution No.2012-, a Resolution of the City Council of the City of Rancho
Palos Verdes amending the City's maximum monthly contribution amounts for employee
health insurance premiums for calendar year 2013.
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 health insurance premiums effective January 1,
2013.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.
BACKGROUND:
Since 1974,the City has paid the monthly health insurance premiums for its full-time
employees.The City has also paid for half of an employee's dependent coverage since
1979.In the current health benefits package,the City pays the full cost of the full-time
employees 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 cots of medical care by using Health Care Savings Accounts (HSA),the HSA
Plan option was initiated in 2008 to give employees 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
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Topic:Employee Health Insurance Premiums for 2013
Date:November 7,2012
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dependents,and funding the full amount of the participant's deductible.For 2013,the
deductible remains at $3000 for the Employee Only and $6000 for the Employee+1 and the
Family (3 or more).
The City's total budgeted amount for employee insurance costs in FY12-13 is $863,100.
This amount includes medical,dental,vision,employee assistance program (EAP), life and
long term disability insurance.For comparison,the total actual amount in FY1 0-11 was
$702,478 and in FY11-12 was $749,899.
Council Employee Compensation Subcommittee
The Council subcommittee met on October 18th and reviewed the proposed increases.They
directed staff to place this item on the agenda recommending continuing with the same
practice of paying the employee share and fifty percent of dependents costs.
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.
In the 2013 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 ($3000 for individuals and $6000 for families).Thirty-eight
(38)employees selected the HSA Plan for the 2012 calendar year.This is an increase from
thirty-three (33)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 medical inflation for calendar year 2012 is 10.0%.Blue Shield initially came forward
with a proposed 10.4%increase in premiums for 2013.Subsequent negotiations lowered the
cost to a final renewal of 5%premium increases in 2013 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 6.7%increase for 2013.The City was able in 2010 to
secure through negotiations a 4-year rate guarantee on the Vision Plan.The Employee
Assistance Program rates drops by 4.6%.In the aggregate,staff estimates the 2013
premium increases,based upon current enrollment statistics,will increase the City's costs in
calendar year 2013 by $36,354 (5.28%).
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Topic:Employee Health Insurance Premiums for 2013
Date:November 7,2012
Page 3
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,that rate will adjust to
$276.00 per month.
ADDITIONAL INFORMATION:
The City also provides employees with Life and AD&D insurance,and a Long Term Disability
Plan.For 2013,the Life and AD&D Insurance plan will renew with an 11.7%premium
increase and the Long Term Disability plan will renew with an 8.7%increase.
FISCAL IMPACT:
Overall,the City will pay higher premiums for the health insuranc~....b~nefits in the next
calendar year.However,it is difficult to estimate the actual cosrat this time.This is a result
of being half way through the 2012-2013 Fiscal Year before the increase takes effect on
January 1,2013.Additionally,the open enrollment period,which will end approximately by
the end of November,will see some employees change their plans due to personal
circumstances or changes.Those choices will have an impact on the amount of premiums
paid by the City in 2013.
Attachment:
Draft Resolution No.2012-
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RESOLUTION NO.2012-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES,AMENDING THE CITY CONTRIBUTION RATES FOR EMPLOYEE
BENFIT PREMIUMS FOR FULL-TIME EMPLOYEES AND ACTIVE CITY
COUNCIL PERSONS FOR CALENDAR YEAR 2013 AND RESCINDING
RESOLUTION NO.2011-84
WHEREAS,on October 18,2011 the City Council adopted Resolution No.2011-
84 establishing maximum insurance rates for employee benefit premiums;and,
WHEREAS,the increase in health insurance premiums in 2013 would exceed
the maximum contribution caps established in 2012;and,
WHEREAS,the City desires to continue to provide certain contributions to its
active full-time employees and City council persons for h:al!h"benefits.
NOW,THEREFORE THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES DOES HEREBY FIND,DETERMINE AND RESOLVE AS FOLLOWS:
Sectibn 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
Employee Only
Two Party
Family
Full-time Employee/Councilmember
Maximum Contribution per Month
HMO HSA PPO
$617.14 $655.10 $992.66
$920.54 $969.61 $1,471.46
$1,116.06 $1,184.42 $1,791.92
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 4: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 5: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 $276 per month.
Section 6: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 7:The City Manager or his/her designee,is authorized to adopt rules
and procedures for the implementation of the Resolution.
Section 8:Resolution No.2011-84 is hereby rescinded and replaced by this
Resolution.
PASSED,APPROVED and ADOPTED this i h day of November 2012.
Mayor
Attest:
City Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )55
CITY OF RANCHO PALOS VERDES )
I,Carla Morreale, City Clerk of the City of Rancho Palos Verdes,hereby
certify that the above Resolution No.2012-_was duly and regularly passed and
adopted by the said City Council at a regular meeting thereof held on November
7,2012.
City Clerk
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