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Home My WebLink About3.D. 2009 Employee Insurance Benefits - D 6 ..: City of Shako pee MEMORANDUM TO: Mayor and City Council Mark McNeill, City Administrator FROM: Kris Wilson, Assistant City Administrator SUBJECT: 2009 Employee Insurance Benefits DATE: November 5, 2008 Introduction The Council is asked to approve the benefits package to be offered to benefits-eligible City employees for 2009 and set the City's contribution levels. Background Health Insurance The City currently offers employees their choice oftwo insurance plans from Medica. For 2008, approximately 75% of our employees have selected the high deductible plan with a Health Savings Account (HSA) and the other 25% have selected the more traditional plan, with a $300 deductible and $15 co-pays. The renewal offer from Medica to continue offering these same two plans in 2009 is a 29% increase in the monthly premium. This renewal is based on an analysis of the premium dollars Medica is receiving from us per member per month versus the amounts being paid out in claims per member per month; and on the number oflargeclait,ns our group experienced from July 1, 2007 to June 30, 2008. Anticipating a tight budget climate and the potential for increasing insurance premiums, the City convened an Employee Health Insurance Committee back in July to explore and provide feedback on various options. Based on feedback from the Committee, we asked our insurance broker, John Korby of Nesbitt Agencies, Inc., to not only request a renewal from Medica, but to also put our business out for bid with other insurance carriers. Unfortunately, of the four other carriers approached, only one submitted a bid. That bid is from Health Partners and reflects a 25% increase in our premiums over the current year, but for a different combination of coverages and benefits than what we are currently offering. The Employee Committee recently met to review the renewal offer from Medica as well as the competing offer from Health Partners. It was the consensus of the committee that the offer from Health Partners was not enough of a cost savings to justify switching carriers. Therefore, the discussion focused on adjustments that could be made to our Medica plans to reduce the cost. The Committee explored several options, including increasing deductibles andco:-pays, switching to a smaller network of providers, and adjusting the City's contribution schedule. Continuing with the status quo and accepting Medica's 29% renewal offer will create a $69,000 shortfall in the 2009 budget. Therefore, some changes have to be made. Based on the feedback of the Employee Committee and conversations with our insurance broker, department heads and City Administrator, I am recommending the following changes to the City's health insurance offerings for 2009: 1. The City should continue offering two plans - a high-deductible plan with a Health Savings Account (HSA) and a more traditional co-pay plan. However, employees will have to pay larger out of pocket costs in order to control the cost of the monthly premium. For the traditional plan it is recommended that the deductible be increased to $500 per individual! $1500 per family and that the co-pay for office visits be increased from $15 to $25. For the high deductible plan it is recommended that the City reduce its contribution to the Health Savings Account to 50% of the deductible, which amounts to $750 for the year for those selecting single coverage and $1500 for the year for those selecting two-party or family coverage. 2. The City currently offers just one provider network - the Choice network. This is Medica's largest network. To save money, the City should offer both the Choice and the Elect network. Employees would have their choice between the two, but the City's contribution toward the monthly premium would be based on the smaller and lower-cost Elect network. Employees wanting to maintain the option of going to any provider in the larger Choice network would have to pay the difference in the premium themselves. For 2009 it is recommended that the City continue to pay 100% ofthe cost of the monthly premium for those selecting single coverage, 88% of the monthly premium for two-party coverage and 72.5% for family coverage - assuming the employee enrolls in the Elect network, as discussed above. Depending on our experience rating and renewal offers for next year, it is possible that these contribution percentages may have to change for 2010. The combination of these changes will bring our employee health insurance costs into line with the amount budgeted for 2009. Dental Insurance The renewal offer for our current dental insurance from Delta Dental is a 4% increase for 2009. The City's contribution toward the cost of dental insurance has traditionally been 100% ofthe price of single coverage and the same dollar amount for those selecting 2-party or family coverage. We can afford this increase within the funds budgeted for 2009 and still have a surplus of approximately $7,500. Therefore staff is recommending no change to our offerings or contribution structure for dental insurance. Life and Long- Term Disability Insurance The City provides $25,000 in life insurance coverage for all benefits-eligible employees and long-term disability insurance that takes effect after 180 days. We have been offered a one-year renewal with no change in terms or rates. The recommendation is to continue with these benefits as IS. Requested Action: If the Council Concurs, it should offer Resolution 6834, a resolution adopting the City of Shakopee's contribution levels for employee benefits for the year 2009, and move its adoption. 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C ~ ;:, 0 . ,,0 :Qui' ev 0 .- N Can "'Ci/). I ~ fa ~i/). ,-I bl)- 1-0 .- 0 ::J: an i/). - RESOLUTION NO. 6834 A RESOLUTION ADOPTING THE CITY OF SHAKOPEE'S CONTRIBUTION LEVELS FOR EMPLOYEE BENEFITS FOR THE YEAR 2009 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 Traditional Plan $410.28 $722.12 $948.58 ($500 ded. I $25 co-pay) High Deductible Plan $384.72 $677.11 $889.46 HSA Contribution $750.00 $1500.00 $1500.00 Dental $35.00 $35.00 $35.00 For individuals actively employed by the City on January 1, 2009 and eligible for a City contribution to their Health Savings Account (HSA), the City's contribution shall be made in one lump sum on or about January 15, 2009. 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 contribution 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, 2009. Adopted in adjourned regular session of the City of Shakopee, Minnesota, held this 5th day of November, 2008. Mayor of the City of Shakopee ATTEST: City Clerk