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Home My WebLink About13.E.1. 2007 Medical and Dental Insurance Renewals-Res. No. 6520 City of Shakopee 13. E, I, Memorandum TO: Mayor and City Council Mark McNeill, City Administrator FROM: Kris Wilson, Assistant City Administrator SUBJECT: 2007 Medical and Dental Insurance Renewals DATE: October 13,2006 Introduction The City Council is asked to consider quotes received from both Medica and Delta Dental for renewal of the City's medical and dental insurance for 2007. The Council is also asked to adopt the City's contribution rates for 2007. Background Medical Insurance After reviewing usage reports for the first part of the year that suggested we might receive favorable renewal rates on the City's group health insurance, the City's insurance broker, John Korby, requested an early renewal from our current insurance carrier - Medica. The 2007 rates quoted to us by Medica reflect a 2.8% percent decrease over 2006 for the same two plan options currently offered to employees. The attached table lists the premium amounts for both 2006 and 2007. The two plan options include a fairly traditional plan that requires modest co-pays for doctor visits and prescriptions, and provides 80 percent coverage for hospitalization, and a high- deductible plan that would be combined with a Health Savings Account. Currently, slightly more than 80 percent of our employees have selected the high-deductible plan, which was new for 2006. The coverage offered by these two plans in 2007 would be very similar to what is currently provided, with the exception of out-of-network services, which will be covered to a lesser extent in 2007. According to Mr. Korby this is an industry-wide trend that is not specific to either Medica or the City of Shakopee. 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 4% increase for 2007. 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 2007. (Please see the attached table for the dollar amounts associated with these percentages.) Lastly, there is the issue ofthe City's contribution to Health Savings Accounts 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 same deductible amounts as 2006. In 2006, the City deposited $1250 for those with single coverage and $2500 for those with 2- party and family coverage into a Health Savings Account (HSA) to help employees cover the cost ofthe deductible. At the time these contribution levels were approved by the City Council, it was understood that these dollar amounts would decline over the course ofthree years until the City was contributing 50 percent of the cost of the deductible in 2008. Therefore, it is recommended that in 2007 the City contribute $1000 to the HSA accounts of those employees selecting single coverage and $2000 to those selecting 2-party and family coverage. For those actively employed by the City on January 1, 2007, the City's contributions would be made in one lump sum at the beginning of the 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 HSA's up to the total dollar value of the deductible. Additionally, employees will carry-over any money remaining in their HSA accounts at the end of 2006. 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, given the reduction in medical insurance premiums and modest increase in dental premiums, Finance Director Gregg V oxland advises that the proposed City contribution levels can be funded within the proposed 2007 budget. Recommendation It is staff's recommendation that the City take the following actions related to group medical and dental insurance for 2007: 1. Authorize the appropriate staff to enter into contracts with Medica and Delta Dental for the renewal of group insurance for 2007, at the quoted prices. 2. Set the City's contributions at the levels listed above, by adopting Resolution 6520. 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 oftheir families; which allow1) 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 Ifit 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 2007, at the quoted prices, and offer Resolution 6520, A RESOLUTION ADOPTING THE CITY OF SHAKOPEE'S CONTRIBUTION LEVELS FOR EMPLOYEE BENEFITS FOR THE YEAR 2007, and move its adoption. ~s~~ Assistant City Administrator Monthly Insurance Premiums 2006 2007 Monthly Premium City Employee Monthly Premium City Employee Dental Single $30.65 $30.65 0 $31.90 $31.90 0 2-Party $65.35 $30.65 $ 34.70 $67.95 $31.90 $ 36.05 Family $93.20 $30.65 $ 62.55 $96.95 $31.90 $ 65.05 MS 200-15 Single $ 347.19 $347.19 0 $ 337.47 $337.47 0 2-Party $ 694.40 $611.07 $ 83.33 $ 674.96 $593.96 $ 81.00 Family $1107.19 $802.71 $304.48 $1076.19 $780.24 $295.95 Hi2h Deductible/HSA Single $302.23 $302.23 0 $293.77 $293.77 0 2-Party $604.46 $531.92 $ 72.54 $587.54 $517.04 $ 70.50 Family $963.79 $698.75 $265.04 $936.80 $679.18 $257.62 Annual HSA Contribution * for employees selecting the High Deductible Insurance Plan Deductible 2006 City Contribution 2007 City Contribution 2008 City Contribution (recommended) (anticipated) Single $1500 $1250 $1000 $ 750 2-Party $3000 $2500 $2000 $1500 Family $3000 $2500 $2000 $1500 RESOLUTION NO. 6520 A RESOLUTION ADOPTING THE CITY OF SHAKOPEE'S CONTRIBUTION LEVELS FOR EMPLOYEE BENEFITS FOR THE YEAR 2007 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-Partv Coverage Family Coverage (MS) 200-15 $337.47 $593.96 $780.24 Choice Select HAS $293.77 $517.04 $679.18 $1500 -100% HSA Contribution $1000 $2000 $2000 Dental $31.90 $31.90 $31.90 For individuals actively employed by the City on January 1, 2007 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, 2007. 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 tenninated effective January 1, 2007. Adopted in adjourned regular session of the City of Shako pee, Minnesota, held this 1 ih day of October,' 2006. Mayor ofthe City of Shakopee ATTEST: City Clerk