HomeMy WebLinkAbout10.D.1. Renew 2013 Employee Medical Insurance 1O.D.1.
City of Shakopee
Memorandum
TO: Mayor and City Council
Mark McNeill, City Administrator
FROM: Kris Wilson, Assistant City Administrator
SUBJECT: 2013 Employee Medical Insurance
DATE: September 27, 2012
Action Sought
The City Council is asked to authorize the appropriate officials to enter into contracts with
Medica and set the City contribution rates for 2013 employee health insurance offerings.
Background
The City currently offers employees health insurance through Medica. There are two plans to
choose from, and within each plan there are two provider networks. Medica has offered to
continue our existing plans for 2013 at a 5% increase in premiums for both plans.
In comparison, last year the City was offered a renewal with a 13% increase in premiums. This
was accepted for the Traditional Plan. However, an increase in employees' out -of- pocket costs
was adopted in order to keep monthly premiums flat for the High Deductible Plan.
The proposed rates for 2013 are as follows:
High Deductible Plan
ELECT NETWORK PASSPORT NETWORK
2012 2013 2012 2013
Single $451.59 $474.34 $490.86 $515.59
2 -Party $903.17 $948.67 $981.72 $1,031.18
Family $1,440.07 $1,512.62 $1,565.28 $1,644.14
Traditional Plan
ELECT NETWORK PASSPORT NETWORK
2012 2013 2012 2013
Single $550.69 $578.43 $611.88 $642.71
2 -Party $1,101.41 $1,156.90 $1,223.79 $1,285.44
Family $1,756.14 $1,844.61 $1,951.27 $2,049.58
For many years, the City's policy has been to contribute 100% of the monthly premium cost for
single coverage, 88% of the cost for 2 -party coverage and 72.5% of the cost of family coverage
under the less- expensive Elect network. Those employees desiring the larger, more - expensive
Passport network receive the same dollar amount contribution from the City and are then
responsible for the added costs associated with larger network themselves. If continued for
2013, this would lead to the following employer / employee split of monthly premiums:
High Deductible Plan -- Proposed Monthly Premiums
Elect Network Passport Network
Total Employer Employee Total Employer Employee
Single $474.34 $474.34 $0.00 $515.59 $474.34 $41.25
2 -Party $948.67 $834.83 $113.84 $1,031.18 $834.83 $196.35
Family $1,512.62 $1,096.65 $415.97 $1,644.14 $1,096.65 $547.49
Traditional Plan -- Proposed Monthly Premiums
Elect Network Passport Network
Total Employer Employee Total Employer Employee
Single $550.69 $550.69 $0.00 $611.88 $550.69 $61.19
2 -Party $1,101.41 $969.24 $132.17 $1,223.79 $969.24 $254.55
Family $1,756.14 $1,273.20 $482.94 $1,951.27 $1,273.20 $678.07
Recommendation
Given what the City has experienced for rate increases in the past, a 5% increase is fairly modest
and makes it possible to offer our employees a stable benefit plan for 2013, without any further
increase to out -of- pocket costs. Also, after evaluating the renewal offer with the City's broker at
Financial Concepts, he and I are in agreement that we are unlikely to get lower rates from
competing companies, given our claims history. Therefore I recommend that the City accept the
renewal offer from Medica, continue the City's traditional contribution levels and schedule the
annual open enrollment period for Nov. 1 — 16, 2012.
I also recommend that the Council authorize continuation of the current contribution levels
toward employee Health Savings Accounts. These assist employees on the High Deductible Plan
with a portion of the cost of that deductible. We have offered Health Savings Accounts since
2006 and since 2008 the City's contribution rate has been set at 50% of the deductible amount,
which amounts to $750 per year for those with single coverage and $1500 per year for those with
2 -party or family coverage.
Annual Employer HSA
Deductible Contribution
Single $1,500 $750
2 -Party $3,000 $1,500
Family $3,000 $1,500
Budget Impact
The City and its employees pay a combined total of approximately $1.4 million per year to
Medica for health insurance; covering approximately 250 individuals (employees + family
members). If the recommended renewal is accepted, the total additional cost to the group
(employer and employee combined) is expected to be approximately $70,000. This cost will be
shared between the City and employees and may vary somewhat based on the selections made by
employees during open enrollment. Sufficient funds were included in the preliminary 2013
budget to pay for a 5% increase in health insurance costs.
There are no major provisions of the federal health care reform act going into effect for 2013.
However, 2014 will be a year of significant change, especially as it relates to the many
temporary, part-time and seasonal employees that we currently do not offer insurance to. Staff is
following the issues closely and will bring additional information forward to Council prior to the
budget process for 2014.
Other Benefits
In addition to health insurance, the City also offers dental, life and long -term disability insurance
to employees. The life and long -term disability policies are currently mid -way through a two -
year contract and therefore will not require Council action until next year. We have not received
the renewal offer from Delta Dental yet. That will be brought forward at a future Council
meeting for approval. Past history suggests we can expect an increase between 2.5% and 3.5%
and little or no change to the covered benefits.
Relationship to Visioning
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
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 employee health insurance plans for 2013 at a 5% increase over 2012
rates.
s Wilson
ssistant City Administrator