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HomeMy WebLinkAbout10-29-07 Item 4G, Employee Health Insurance ~ ~HILLS Request for Council Action Prepared By: Dept.: Council Mtg. Date: Final Action Needed By: Sue Iverson Finance ~- Agenda Item: 4.G. October 29, 2007 _9C!C;beii9;2QQ.7=-- ,-.-". ......... .. --- -Sudg"eted" Amounf-........... "~------- Actual Amount: --- Funding Source: _____ __.... ........ NlA NlA leg~1l~1f~<<[QnTIH~q~j~~liR~Hmlill';;1llill~11flIt____......................______________.__...................___.______________..."......"........_______________...._.................._____________________........................_____________.._..."..........___________________..."........._______________.._......................._____________.._.... iMotion to approve pairing the Co-Pay option with the HSA option and changing our FSA administration from Acclaim to SelectAccounti [effective January 1, 2008. . 'Motion to approve a City contribution for 2008 of $648 per month, per employee. ! Motion to direct staff to have the City's insurance brokers prepare the necessary documents and authorize the City Administrator to sign and! !exe~~~~..c:tI.!"~C)~~~ents. __. ........"."___________............ ..... .....".. ________ ............ ""_____ __._............ _~___________n. ...... ."..".~_"____ _.._._... ... ..."_________ ........".".""________ ..............._______ . !:~~~~~~~=:~~~~~~~::f~!t~:pa-y..oPtion"-aricfi~i"s.A..pian~-chiin.gin"g-o-ur--FSA..~iam-in-istrati.c)"n".from--Acc"j'aim-To--s-eIect'Accoiint~...ai.-(fs-etthl'g.! !the 2008 employer contribution per employee at $648 per month. This will result in an increase of 5.4% for medical coverage to the City eveni Ithough there Was a premium increase of 7%. Furthermore, there will be additional savings resulting froin the FSA administration change. ' X Sue Iverson, 2008 Health Insurance Benefit Options No.: No.: 386 , : l:;11~1l1t:t:llr I~ Recommendation: Recommendation: I Other: ~ELffanir~lli~lfcau:~A~JJi\timf};mlli"~TJ!5imftgSil....."."___________........................"._________..................."..."___________nn__........"..........""__."___________..............."_~______________......."..."".".."_________......"...."."..."____________...............,,"___"__________........"........__________..........."."__"____ i This option keeps the annual increase to the City in 2008 over 2007 at 5.6% even though the premium increases were 7%. Additional ' savings will be made through changing our FSA benefits administration. Future savings may be attained as employees opt to change from the Co-Pay plan to the HSA. None. ~ r7\~ HILLS MEMORANDUM DATE: October 24, 2007 4.G. TO: Honorable Mayor and City Council Michelle Wolfe, City Administrator FROM: Sue Iverson, Finance Director ~ SUBJECT: 2008 Health Insurance Benefit Options Background: During the May 21, 2007 work session, Staff and Council discussed the City contribution toward health insurance and directed staff to pursue other options, such as an HSA plan. Council directed staff to set the City contribution using the following formula: Taking the lower cost plan (Deductible plan), 50% of the increase in the family premium will be added to the current contribution of$615. (New contribution for 2008 is $648) Discussion: Current renewal Based on our experience, the Co-op has given us their lowest increase of 7%. This will apply to both of our current plans. Our brokers did a market comparison to see if the market was competitive with similar plan designs currently offered. The market comparison showed that the City of Arden Hills' current rates were competitive and after discussion with City staff, it was decided that there was not enough potential saving to proceed with going to market. HSA and VEBA Options Staff asked our brokers to price out and obtain quotes on HSA and VEBA plans per City Council direction. Since these plans are structured differently and have a savings account attached them, staff feels that a transition to these plans will be necessary to give time educate employees on these options. If we implement one of these plans, staff recommends that it pairs it with one of the current plans to offer employees a choice and give them time to compare these plans. Our broker has confirmed that we may offer either the HSA or VEBA with one of our current plans. A HSA may take contributions from either the employer or employee, while a VEBA may only take contributions from the employer. Currently, the excess flex dollars not used for insurance by those taking single coverage are put into an ICMA retirement account. This has posed some problems according to regulations and is not allowed, we have been looking into options to correct this. An HSA or VEBA would correct this problem as all of the contributions would be deposited into the health savings account. If the City were to provide this option, staff would recommend that only those participating in the HSA or 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.