10-29-07 Item 4G, Employee Health Insurance

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Memo City Council 2008 Health Insurance Benefit Options 2 VEBA account would receive the benefit and the Co-Pay (or Deductible) plan single coverage participants would forfeit the excess dollars of City contribution over actual premium cost (this would provide a possible incentive to get participants to switch to this plan and solve our legal problem). Staff has done an analysis on pairing up the plans and the impact on employees using their current contributions for health, dental and Flex spending accounts. The City cost in these analysis was done using the contribution as it would be ifno changes were made, thus impacting the budget by 5.4% over last year based on 2007 elections for health coverage by employees. When comparing the HSA and VEBA plans, the HSA has the most favorable impact and least exposure to participants. As an added incentive to move toward this plan, the Council may wish to increase their contribution to those that choose the HSA. This could be done using a lump sum extra contribution, for example $100, $500, etc. Choosing HSA does have implications of additional exposure with increased deductibles. Staff has done an analysis of this additional exposure. Most employees have limited impact and those that have a greater impact would still be able to choose the Co-pay plan. The analysis also showed that those with the most additional exposure were not currently contributing additional funds toward flexible spending accounts and they would have the opportunity to contribute more dollars into their HSA. The additional exposure is noted because of the higher deductible, but extra contributions are allowed. Please remember these are savings accounts and the balances accumulate if not used. Many times the employee may not incur the full deductible and these savings accounts also encourage them to be more prudent in their spending and health care choices Staff has analyzed and determined that the Co-Pay option and the HSA option seem to be the optimal choice. The City contribution was constant on all plans analyzed, but the HSA seems to offer more advantages to the employees, thus providing more incentive. The majority of our participants are currently in the Co-Pay plan, thus the reason to pick this over the Deductible option. Flex Savinl!s Account Options Staff also reviewed our current Flexible Spending Accounts (FSA) for health care and dependent care expenses. In comparing our current vendor Acclaim with other options, SelectAccount (offered through Blue Cross) will provide us with additional cost savings. SelectAccount will also provide more benefits to participants and provide additional savings on the HSA option (HSA fees would be waived if stacked with the FSA). Recommended Action: A motion to approve pairing the Co-Pay option with the HSA option and changing our FSA administration from Acclaim to SelectAccount effective January 1, 2008. A motion to approve a City contribution for 2008 of $648 per month, per employee. This will result in a 5.4% increase for medical coverage even though there is premium increase of 7%. Furthermore, there will be additional cost savings for the FSA administration. A motion to direct staff to have the City's insurance brokers prepare the necessary documents, and authorize the City Administrator to sign and execute all documents.