HomeMy WebLinkAbout4.D.2. 2015 Health Insurance Renewal & Post Employment HCPS Contribution Consent Business 4. D. 2.
SHAKOPEE
TO: Mayor and City Council
Mark McNeill, City Administrator
FROM: Kris Wilson, Assistant City Administrator
DATE: 09/16/2014
SUBJECT: 2015 Health Insurance Renewal &Post-Employment HCSP Contribution (E)
Action Sought
The Council is asked to authorize the appropriate officials to enter into contracts with Medica, set
the employer contribution rates for employees' 2015 health insurance options and authorize an
increase in the employer contribution to employees' post-employment health care savings plans.
Background--Health Insurance
The City currently offers employees health insurance through Medica and has for many years.
There are two plans to choose from, and within each plan there are three options of provider
networks. The City recently received the good news from Medica that they will renew our
existing plans for 2015 at lower rates than we are paying this year.
These lower rates are the result of a combination of good usage numbers on the part of the City's
plan members and a realigning of rate structures on Medica's part. The rate reductions range
from a-2.2%to a-12.9%, depending on the plan, and are estimated to result in a combined
savings of$52,665 to the City and its employees.
For many years, the City's policy has been to pay 100% of the monthly premium cost for single
coverage, 88% of the cost for 2-Party coverage and 72.5% of the cost for family coverage, under
the less expensive Elect and Essential networks. Those employees desiring the larger,
more-expensive Passport network receive the same dollar amount contribution from the City and
are then individually responsible for the added costs associated with the larger network. Applied
to the 2015 rates proposed by Medica, this leads to the employer/employee split outlined on
Attachment A.
Additionally, since 2008, the City has contributed 50% of the cost of the annual deductible on the
high deductible plan to a Health Savings Account(HSA) for employees selecting this plan. This
equals $750 for those selecting single coverage and$1500 for those with 2-party or family
coverage.
Recommendation --Health Insurance
I recommend that the City accept Medica's renewal offer and authorize continuation of the City's
long-standing contribution levels for calendar year 2015.
Background -- Post-Employment Health Care Savings Plans (HCSP)
For many years, the City has also offered a post-employment HCSP benefit as a means of helping
employees save for future medical costs. Since January 1, 2005 this plan has been with the
Minnesota State Retirement System and the City has contributed$25 per employee per month.
Employees also contribute a percentage of their bi-weekly earnings and the payout of some
vacation and sick leave is also deposited into these accounts upon resignation or retirement. The
great advantage of these HCSP accounts is that money can go in and be withdrawn tax free, as
long as the funds are used to pay qualifying medical expenses.
Employee contributions are set as a percentage of earnings, therefore the dollar amounts being
deposited have increased over the years along with wages. However, the City's contribution has
remained flat at $25 per month for the past ten years.
Recommendation --Post-Employment Health Care Savings Plans (HCSP)
Given the savings the City will realize from our health insurance renewal and the number of years
the City's contribution has remained flat, it is my recommendation that the City contribution to
benefit-eligible employees' post-employment HCSP accounts be increased to $35 per employee
per month, effective January 1, 2015.
Budget Impact
When preparing the preliminary budget for 2015, staff estimated and budgeted for an 8% increase
in health insurance costs. That amount can now be removed from the budget or allocated to
another priority.
Not only will the City not have to increase its budget for health insurance costs in 2015, but it can
actually expect to save approximately $43,000. The recommended increase in the City's
contribution to post-employment health care savings plans will cost approximately $17,000. This
still results in a net savings of$26,000 to the City.
Relationship to Vision
Providing a competitive benefits package helps the City attract and retain well-qualified staff.
This contributes to Goal E: Deliver effective and efficient public services by a staff of
well-trained, caring and professional employees.
Requested Action
If the Council concurs, it should offer a motion to authorize the appropriate officials to enter into
contracts with Medica for calendar year 2015 and authorize the continuation of current employer
contribution percentages for 2015 employee health insurance.
The Council should also offer a motion to increase the City contribution to benefits-eligible
employees' post-employment health care savings plans from $25 to $35 per employee per month,
effective January 1, 2015.
Attachments: Attachment A
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