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Home My WebLink About13.F.2. 2012 Employee Medical Insurance-Res. No. 7131 City of Shakopee �� • �' � • Memorandum TO: Mayor and City Council � Mark McNeill, City Administrator ' FROM: Kris Wilson, Assistant City Ad�ninistrator`�� , SUBJECT: 2012 Employee Medical Insurance DATE: October 13, 2011 � Introduction I The City Council is asked to consider two options for einployees' 2012 health insurance and to adopt the City's contribution raYes for 2012. Plan Options The City has received a renewal offer from Medica for our 2012 employee health insurance, as well as an alteinative offer that provides for a change to the plan design in exchange for a cost savings. I �� Optaon #1 The first option is a straight renewal, witl� the same insurance benefits. There would be no i change to the co-pays, deductibles or out-of-pocket maximums that we currently have. If this � option is selected, 2012 would be the third year of an identical plan design for our Traditional � Plan and the sixth year of the identical plan for our High Deductible Plan. If this option is selected, there would be a 13% increase in the monthly premiums for both plans. This is not a surprise as we negotiated a second-year rate cap of 13% when we renewed with Medica last year. The total cost to our group, including costs to the City and to our employees, I would be a$178,000 increase over 2011. Option #2 The second option is the same as the first in regards to the Traditional Plan. The plan design and , features would remain the same and there would be a 13% increase in the monthly premiums. Approximately 25% of our employees are currently enrolled in this plan. However, for the High-Deductible Plan, which approximately 75% of our employees are cun�ently enrolled in, we can have no increase in our monthly premiums if we are willing to alter how the plans works. Currently, the high-deductible plan has a$1,500 deductible for single coverage and $3,000 - ir cti le the deductible for those with two party or fainily coverage. Once you have met yot dedu b, insurance pays for 100% of any bills beyond that point. Essentially the deductible is the out-of- pocket max. ' The option being offered to us by Medica is to retain our current deductible amounts, but go to a design where once the deductible is met there is a 90/10 split of additional medical costs up to an out of pocket maximuin of $2500 for those with single coverage and $5,000 for those wiYh two- party and family coverage. In exchange for making this change, Medica would keep the monthly premiums for the High-Deductible Plan the same far 2012 as they are cun�ently. For this option, the total cost to our group, including costs to the City and to our employees, would be $153,000 less than under option #1. Discussion The City's insurance broker -- Financial Concepts Ina (FCI) — has advised us for at least two years now that we should consider some form of inflationary increase Yo the deductibles or out- of-pocket maximums associated with our High-Deductib]e Plan. The $1500 and $3000 amounts i just don't cover the same portion of the average person or family's medical costs that they did wlien we instituted the plan in January of 2006. This makes the current plan increasingly more expensive to provide. There are several potential benefits to making such a change now by accepting the option offered to us by Medica: 1. There is a significant difference between no increase and a 13% increase, for both our employees that select two-party or family coverage and thereby have a portion ofthe premium deducted fi�om their paycheck, and for the City. The City's portion of the $153,000 to be saved by accepting Option #2 could provide mare flexibility to fimd other personnel-related items. 2. By increasing the out-of-pocket maximum rather than increasing the deductible, we reduce the number of employees that will be impacted since many will not reach that out- of-pocket maximum. Premium savings aze a guaranteed savings realized for each employee, while the impacts of an increase in the out-of-pocket maYimum will vary depending on the consumption of inedical services. 3. The new out-of-pocket maximums of $2500 and $5000 offered imder Option #2, align the High-Deductible Plan more closely with the City's Traditional Plan, which has out- of-pocket maximums of $2750 and $5500. Recommendation Based on the above factors, I recommend that tlie City accept Option #2 for 2012 and offer employees a revised High-Deductible Pian in order to avoid an increase in the monthly premiums. City Contribution Levels For many years, the City has paid 100 percent of the monthly premium for single coverage. 88 percent for 2-party coverage and 72.5 percent for family coverage under the smaller Elect network. An equal dollar amount is contributed toward the premium costs for those selecting the larger Passport network. 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 contributions for both medical and dental insurai�ce iiz 2012. (Please see the attached table for the dollar amounts associated witl� 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 is $1500 for single coverage and $3000 for 2-party and family coverage. Since 2009, the City has made a lump sum contribution equal to 50% of the deductible ($750 for single and $1500 for 2-Party/Family) at the beginning of the year. Staff recommends Yhat the Council approve the same contribution level for 2012. I Recommendation It is staff s recommendation that the Council take the following actions related to group medical insurance for 2012: ' 1. Authorize the appropriaYe officials to enter into a contract with Medica for � continuation of the City's exisYing Traditional Plan and for the revised High- Deductible plai�, at the qtiioted prices for 2011. 2. Set the City's contributions at the levels desceibed, by adopting Resolution #7056. � Relationship to Vision � Providing City employees with competitive medical and dental insurance helps the City attract and retain well-qualified staf£ 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 � Goal E: Deliver effective and efficient public services by a staff of well-trained, caring and professional employees. Requested Action If it concurs, the Council should offer a motion to authorize appropriate officials to enter into � eontracts with Medica for group insurance plans for 2012, at the quoted prices, and offer ' Resolution 7131, A RESOLUTION ADOPTING THE CITY OF SHAKOPEE'S CONTRIBUTION LEVELS FOR �MPLOYEE BENEFITS FOR THE YEAR 2012, and move its adoption. I � Kris Wilson Assistant City Administrator I I -- — - I RESOLUTION NO. 7131 A RESOLUTION ADOPTING THE CITY OF SHAKOPEE'S CONTRIBUTION LEVELS FOR EMPLOYEE INSURANCE BENEFITS FOR THE YEAR 2011 BE IT RESOLV�D BY THE CITY COUNCIL OF THE CITY OF SHAKOPEE, MINNESOTA, that the City's conri'ibution toward group medical and dental insurance for qualified, full-time employees shall be: Sinele Covera�e 2-Party Covera�e Family Covera�e Traditional Plan $550.69 per mo. $969.24 per mo. $1273.20 per mo. High Deductible Plan $451.59 per mo. $794.79 per mo. $1044.05 per mo. HSA Contribution $750.00 per year $1500.00 per year $] 500.00 per year Dental $38.25 per month $38.25 per month $38.25 per month For individuals actively employed by the City on January 1, 2012 and subscribing to the High Ded�ictible Insurance Plan offered by the City, the City's Health Savings Account (HSA) contribution sl�all be made in one lwnp sum on or about January 15, 2012. For employees hired after January 1 as well as those that change their insurance selections inid-year due to a qualifying event, the City contribution shall be pro-rated by month 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 aiid 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, 2012. Adopted in adjourned regular session of the City of Shakopee, Minnesota, held this 18 day of October, 2011. Mayor of the City of Shakopee ATTEST: City Clerk _ _ --- ' i I I Proposed 2012 Health lnsurance Premiums I (Option #1 - no plan changesJ I 2012 Monthly Premiums — High Deductible Plan - ELECT I I Total Premium City Contribution Employee Cost I I Single $510.60 $510.60 $0.00 I 2-Party $1,021.20 $898.66 $122.54 Family $1,628.26 $1,180.49 $447.77 I , I 2012 Monthly Premiums — High Deductible Plan - PASSPORT Total Premium City Contribution Employee Cost Single $555.01 $510.60 $44.41 2-Party $1,110.01 $898.66 $211.35 i Family $1,769.84 $1,180.49 $SS935 I I � 2012 Monthly Premiums — Traditional Plan - ELECT I Total Premium City Contribution Employee Cost I I Single $550.69 $550.69 $0.00 2-Party $1,101.41 $969,24 $132.17 Family $1,756.14 $1,273.20 $482.94 I 2011 Monthly Premiums — Traditional Plan - PASSPORT Total Premium City Contribution Employee Cost I Single $611.88 $550.69 $61.19 ' 2-Party $1,223J9 $969.24 $254.55 I Family $1,951.27 $1,273.20 $678.07 i i i I I I Proposed 2012 Health Insurance Premiums (Options #2 - 90/10 split after deductible on High-Deductible) 1012 Monthly Premiums — High Deducti6le Plan - ELECT Total Premium City Contribution Employee Cost Single $451.59 $451.59 $0.00 2-Party $903.17 $794.79 $108.38 Family $1,440.07 $1,044.05 $396.02 2012 Monthl Premiums — Hi h Deductible Plan - PASSPORT Y 9 Total Premium City Contribution Employee Cost Single $490.86 $451.59 $39.27 I 2-Party $981.72 $794.79 $186.93 Family $1,565.28 $1,044.05 $521.23 2012 Monthly Premiums — Traditional Plan - ELECT Total Premium City Contribution Employee Cost Single $550.69 $550.69 $0.00 2-Party $1,101.41 $969.24 $132.17 Family $1,756.14 $1,273.20 $482.94 2012 Monthly Premiums — Traditional Plan - PASSPORT Total Premium City Contribution Employee Cost Single $611.88 $550.69 $61.19 2-Party $1,223.79 $969.24 $254.55 , Family $1,951.27 $1,273.20 $678.07