RPVCCA_CC_SR_2011_10_18_H_Employee_Health_Insurance_Premiums_For_2012MEMORANDUM
TO:
FROM:
DATE:
HONORABLE MAYOR AND MEMBERS OF THE C~I......-.....~
ERIC MAUSSER,HUMAN RESOURCEScMl!§~:i!I:J~
OCTOBER 18,2011
SUBJECT:EMPLOYEE HEALTH INSURANCE PREMIUMS FOR 2012
REVIEWED:CAROLYN LEHR,CITY MANAGER~
RECOMMENDATION:
Adopt Resolution No.2011-,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 2012.
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 1,2012.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.
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Subject:Employee Health Insurance Premiums 2012
Date:10/18/2011
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 dependents,and funding the full amount of the participant's deductible.The
deductible in 2012 remains at $3000 for the Employee Only and $6000 for the
Employee+1 and the Family (3 or more).
The City's total health insurance costs for FY 10-11 were $702,478.The total budgeted
amount for FY 11-12 is $769,000.
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 2012 plan year,employees may select for 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-three (33)employees selected the HSA Plan for the 2011 calendar year.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 2011 is 10.0%.Blue Shield initially came
forward with a proposed 9.9%increase in premiums for 2012.Subsequent negotiations
lowered the cost to a final renewal of 5%premium increases in 2012 for the three
health plans.
The ancillary insurance coverage consists of Dental,Vision,Life &AD&D,Long Term
Disability,Employee Assistance Program,Voluntary Life Insurance,Legal Services
Plan and Pet Insurance Plan.The Dental PPO Plan will renew with a 5%increase for
2012.For the remainder of the ancillary insurance,we were able last year to secure
through negotiations a 2-year rate guarantee for the Dental HMO,a 4-year rate
guarantee on the Vision Plan,a 2-year rate guarantee on the Long Term Disability,and
W:\Forms\1st draft Insurance Premiums 2012.doc
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Subject:Employee Health Insurance Premiums 2012
Date:10/18/2011
a 2-year rate guarantee on the Employee Assistance Program.Accordingly,there are
no increases for these plans for calendar year 2012.The Legal Services Plan and Pet
Insurance Plans will renew with no increase for calendar 2012.We estimate that the
multi-year rate guarantees for the other insurances provided the City with an
approximate annual savings of $26,376.
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 2011,this rate was
$249.00 per month for full-time employees and City Council Members.In 2012 that rate
will adjust to $263.00 per month.
FISCAL IMPACT:
The City will overall pay higher premiums for the health insurance benefits in the next
calendar year.However,it is difficult to estimate the actual cost at this time.This is a
result of being half way through the 2011-2012 Fiscal Year before the increase takes
effect on January 1,2012.Additionally,the open enrollment period,which will end
approximately the second week 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 2012.
Attachments:
Draft Resolution No.2011-
W:\Forms\1st draft Insurance Premiums 2012.doc H-3
RESOLUTION NO.2011-
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 2012 AND RESCINDING
RESOLUTION NO.2010-102.
WHEREAS,on November 16,2010 the City Council adopted Resolution No.
2010-102 establishing maximum insurance rates for employee benefit
premiums;and,
WHEREAS,the increase in health insurance premiums in 2012 would exceed
the maximum contribution caps established in 2011;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 or PPO HSA
Employee Only
Two Party
Family
$943.74
$1399.59
$1704.62
$592.76
$921.65
$1125.96
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 $263 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.2010-102 is hereby rescinded and replaced by this
Resolution.
PASSED,APPROVED and ADOPTED this 18th day of October 2011.
Mayor
Attest:
City Clerk
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.2011-__was duly and regularly
passed and adopted by the said City Council at a regular meeting thereof held on
October 18,2011.
City Clerk
Resolution No.2011-_
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