HomeMy WebLinkAbout13.E.1. 2008 Medical and Dental Insurance Renewals
City of Shakopee I~. E. t
Memorandum
TO: Mayor and City Council
Mark McNeill, City Administrator
FROM: Kris Wilson, Assistant City Administrato~
SUBJECT: 2008 Medical and Dental Insurance Renewals
DATE: November 1,2007
Introduction
The City Council is asked to consider quotes received from both Medica and Delta Dental for
renewal ofthe City's medical and dental insurance for 2008. The Council is also asked to adopt
the City's contribution rates for 2008.
Background
Medical Insurance
Medica has offered the City the option to renew our health insurance offerings for another year,
with a premium increase of 8-1 0%, depending on the exact plans selected.
The City currently offers employees two medical insurance options - a high deductible plan
combined with a health savings account and a more traditional plan with a $200 deductible, $15
co-pays for office visits and a two-tier prescription plan. Medica's initial offer was to renew the
high deductible plan in its current form and replace the $200 deductible / 2-tier prescription drug
plan with a $300 deductible / 3-tier prescription drug plan. Hoping to keep the same offerings
we currently have, John Korby, the city's insurance broker, persuaded Medica to offer us a
renewal on the $200 deductible plan. However, if we select this plan, we face a 10 percent
premium increase for both plans instead ofthe 8 percent increase we would experience if we
agree to move to the $300 deductible plan.
The $300 deductible plan that is being offered to us is very similar to the current $200 plan. The
only difference, beside the increase in deductible, is that the new plan includes a three-tier
prescription drug plan, rather than the two-tier plan we currently have. The three-tier structure
will result in a slight reduction in costs for individuals taking generic formulary drugs, but an
increase for those taking brand name formulary or non- formulary drugs. The co-pay for office
visits would continue to be $15, and services such as preventative care, office visits and
prescription drugs would still not be subject to the deductible.
Currently, only 20-25% of our employees are on the $200 deductible plan. Asking all employees
to pay higher premiums to avoid a $100 increase in the deductible for those selecting the
traditional insurance plan doesn't seem to be the best course. Therefore, I am recommending
that City continue to offer the current high-deductible plan and replace the $200 deductible / 2-
tier prescription plan with the $300 deductible / 3-tier prescription plan.
The attached table lists our current premium amounts and the premiums for both 2008 options.
Dental Insurance
The City has also received a renewal quote for dental insurance from our current provider -
Delta Dental. They are offering us a renewal at a 5.5 percent increase for 2008. These rates are
also presented in the attached table.
City Contribution Levels
The City has typically paid 100 percent of the monthly premium for employees selecting single
medical coverage, 88 percent for 2-party coverage and 72.5 percent for family coverage. For
dental insurance, the City has traditionally paid 100 percent of the monthly premium for
employees selecting single coverage and contributed an equal dollar amount toward the cost of
2-Party and Family coverage. Staff is recommending that the Council approve the same level of
City contribution for both medical and dental insurance in 2008. (Please see the attached table
for the dollar amounts associated with these percentages.)
Lastly, there is the issue of the City's contribution to Health Savings Accounts (HSA) for those
employees selecting the high-deductible medical plan. Under this plan, the out-of-pocket
deductible that must be met before the insurance company pays any charges would be $1500 for
single coverage and $3000 for 2-party and family coverage. These are the s.ame deductible
amounts as 2007.
When the City first began offering a high deductible insurance plan it was proposed that the
City's contribution to employees' HSAs would start out high and then step down over the course
of three years. So in 2006, the City deposited $1250 for those with single coverage and $2500
for those with 2-party and family coverage. In 2007, those amounts were reduced to $1000 for
single coverage and $2000 for 2-party and family coverage. It was then planned that the City's
contribution would go down to $750 and $1500 in 2008 (50% ofthe respective deductibles) and
level out there for the foreseeable future.
At this time, staff is recommending a different approach for 2008. The experience or usage
reports that we receive from Medica show that the high deductible plan is helping to control our
medical costs and therefore keeping our premium increases at a lower level than they would
otherwise be. Therefore, it is in the City's interest to continue to make the high deductible plan
an attractive option for employees. In order to accomplish this, staff is recommending that the
City not reduce its HSA contribution amounts for 2008, but keep them level at the 2007 rates for
at least another year.
For those actively employed by the City on January 1, 2008, the City's contributions would be
made in one lump sum at the beginning ofthe year. For employees staring mid-year or
experiencing a qualifying event that allows them to change their insurance selections, it is
recommended the City contribution be pro-rated and deposited at the time the employee becomes
eligible for insurance or upon the effective date of the change.
Employees will again have the option of making pre-tax contributions to their own HSAs and
will carry-over any money remaining in their HSA accounts from previous years.
Budget Impact
Until we have conducted open enrollment and know which plan options and coverage levels
(single, 2-party or family) each employee has selected, it is impossible to determine the exact
cost of the City's contributions. However, Finance Director Gregg V oxland advises that the
proposed City contribution levels can be funded within the proposed 2008 budget.
Recommendation
It is staff s recommendation that the City take the following actions related to group medical and
dental insurance for 2008:
1. Authorize the appropriate staff to enter into a contract with Medica for the high-
deductible plan and the $300 deductible / 3-tier presecription plan at the quoted price
for 2008.
2. Authorize the appropriate staff to enter into a contract with Delta Dental to continue
the City's existing dental offerings at the quoted prices for 2008.
3. Set the City's contributions at the levels described, by adopting Resolution 6693.
Relationship to Vision
Providing City employees with competitive medical and dental insurance helps the City attract
and retain well-qualified staff. It also allows staff to more easily meet their own medical needs
and those of their families; which allows employees to focus on their work. This contributes to a
high quality oflife (Goal B) and a vibrant, resilient and stable City (Goal D).
Requested Action
If it concurs, the Council should offer a motion to authorize appropriate staff to enter into
contracts with Medica and Delta Dental for the renewal of group insurance plans for 2008, at the
quoted prices, and offer Resolution 6693, A RESOLUTION ADOPTING THE CITY OF
SHAKOPEE'S CONTRIBUTION LEVELS FOR EMPLOYEE BENEFITS FOR THE YEAR
2008, and move its adoption.
Kris Wilson
Assistant City Administrator
Monthly Insurance Premiums for 2008
Current Premiums (2007)
Monthly City Employee
$200 Deductible Premium Contribution Contribution
Single $337.47 $337.47 0
2-Party $674.96 $593.96 $81.00
Family $1,076.19 $780.24 $295.95
Hieh Deductible/HSA
Single $293.77 $293.77 0
2- Party $587.54 $517.04 $70.50
Family $936.80 $679.18 $257.62
Option 1 for 2008 - keeps existing plans, 10% premium increase
Monthly City Employee
$200 Deductible Premium Contribution Contribution
Single $371.22 $371.22 $0.00
2- Party $742.46 $653.36 $89.09
Family $1,183.81 $858.26 $325.55
Hieh Deductible/HSA
Single $323.15 $323.15 $0.00
2-Party $646.29 $568.74 $77.56
Family $1,030.48 $747.10 $283.38
Option 2 for 2008 (recommended) -- change in traditional plan, 8% premium increase
Monthly City Employee
$300 Deductible Premium Contribution Contribution
Single $364.47 $364.47 $0.00
2-Party $728.96 $641.48 $87.47
Family $1,162.29 $842.66 $319.63
Hieh Deductible/HSA
Single $317.27 $317.27 $0.00
2-Party $634.54 $558.40 $76.15
Family $1,011.74 $733.51 $278.23
Dental Premiums
Monthly Premium City Contribution Employee Contribution
2007 2008 2007 2008 2007 2008
Single $31.90 $33.65 $31.90 $33.65 0 0
2-Party $67.95 $71.70 $31.90 $33.65 $36.05 $38.05
Family $96.95 $102.30 $31.90 $33.65 $65.05 $68.65
HSA Contribution
2006 2007 2008 (proposed)
Single $1,250 $1,000 $1,000
2-Party $2,500 $2,000 $2,000
Family $2,500 $2,000 $2,000
RESOLUTION NO. 6693
A RESOLUTION ADOPTING THE CITY OF SHAKOPEE'S CONTRIBUTION
LEVELS FOR EMPLOYEE BENEFITS FOR THE YEAR 2008
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SHAKOPEE,
MINNESOTA, that the City's contribution toward group medical and dental insurance
for qualified, full-time employees shall be:
Single Coverage 2-Party Coverage Family Coverage
(MS) 300-15 $364.47 $641.48 $842.66
Choice Select HSA $317.27 $558.40 $733.51
$1500 -100%
HSA Contribution $1000 $2000 $2000
Dental $33.65 $33.65 $33.65
For individuals actively employed by the City on January 1, 2008 and eligible for a City
contribution to their Health Savings Account, the City's contribution shall be made in one
lump sum on or about January 1, 2008. For employees hired after January 1 or those
experiencing a qualifying event that allows them to change their insurance selections
mid-year, the City contribution shall be pro-rated and deposited at the time the employee
becomes eligible for insurance or upon the effective date of the change.
The City's contribq.tion for eligible part-time employees shall be pro-rated based on the.
above contribution levels and the number of hours per week worked.
BE IT FURTHER RESOLVED, that all Resolutions in conflict with this
resolution are hereby repealed and terminated effective January 1, 2008.
Adopted in regular session of the City of Shakopee, Minnesota, held this 7th day
of November, 2007.
Mayor of the City of Shakopee
ATTEST:
City Clerk
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2008 Medical & Dental Insurance
Medical Insurance
o Provided through Medica
o Option for Single, 2-party or Family
coverage
o Employees have 2 plans to choose
from
o 8 to 100/0 increase in premiums for
2008 - depend i ng on offeri ngs
#1: High Deductible Plan
o Offered by the City since 2006 - no
changes to plan design this year
o $1500 deductible for single and
$3000 deductible for 2-party &
family
o Health Savings Accounts used to
help fund the deductible
o Good experience ratings on this
plan so far
#1: High Deductible Plan
Monthly Premiums (8% increase)
Single Single
$293.77 $317.27
2-Party 2-party
$587.54 $634.54
Family Family
$936.80 $1,011.74
#2: Traditional Plan
2007 2008
o $200 deductible o $300 deductible
o 2- Tier Prescription o 3- Tier Prescription
Plan -- $11 / $26 Plan -- $10/$25/$50
o $15 office visit co-pay o $15 office visit co-pay
o Insurance pays 800/0 o Insurance pays 800/0
of hospital costs of hospital costs
#2: Traditional Plan
Monthly Premiums (8% increase)
Single Single
$337.47 $364.47
2-Party 2-party
$674.96 $728.96
Family Family
$1076.19 $1162.29
Health Savings Accounts (HSA)
o For employees enrolling in the High
Deductible Plan
o Tax-free means of setting aside
money to meet the deductible
o Employer and employee
contributions
o Unspent funds roll-over from one
year to the next
City Contribution to HSAs
2006 2007 2008
(recommended)
Single $1250 $1000 $1000
2-party & $2500 $2000 $2000
Family
Dental Insurance
o Offered through Delta Dental
o Choice of single, 2-party or family
coverage
o 2 plans offered - same as last year
o 5.50/0 increase in monthly premiums
Dental Insurance
Monthly Premiums
Single Single
$31.90 $33.65
2-party 2-Part'i
$67.95 $71.70
Family Family
$96.95 $102.30
City Contributions
" I
I n
1000/0 of the cost of single
880/0 of 2-Party
72.50/0 of Family
n ~
Cost of single coverage