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committee of city employees. The Benefits and Wellness Committee was asked to gather ideas for cost savings from their respective groups. Staff also worked with Medica and Financial Concepts (our benefits broker) and negotiated the renewal dow�7 to a 33.2% increase by moving into one of Medica's standard plans for ease of their administration. During the renewal process, the Committee members shared the concern that the comprehensive 100% coverage plan had claims to premium ratio of 226%. This means that the cost of inedical services provided to employees in this plan exceeded the premiums being paid l�y 126% which in this plan would result in more than doubling the premium. The Committee discussed that year after year this plan which has 35 employees in it is supplemented by all other staff and that it can no longer be sustained. This 100% plan is conducive to this expensive because the employee sees no incentive to manage expenses in how, when, or where they seEk medical attention. Staff on this plan is in a spiral that they pay the most in premiums for this plan and want to get their moneys worth so they use it. Consequently, the healthcare provider will look to recoup these losses through significant premium increases the following year. It is a never-ending spiral. Thus, staff recommends that the City discontinues the 100% Plan as a choice. For those that still wish to continue this type of coverage they may opt out of the City's plan and purchase it on their own. By contrast, when employees are in an 80% coverage plan or a high deductible plan, they now have an incentive to manage their health care usage, and thus the premiums will not escalate so rapidly. This coupled with a health reimbursement account funded with City contributions which allows tl�e employee choices in spending while providing incentive to save, and I�elp with managing out of pockets expenses. Also in order to reduce the cost increase for the remaining plans the committee recommends 4 plan design changes. These include: increasing the co-pay for the 3 tier prescription co- pay to $15145170 for generaclbrandlnon-�flrmulary; increasing the office visit co-pay on the from $30 to $45; increasing the deductible amounts on the 80120 plan from $750 to $1000 and on the High Deductible plan from $1,200 to $2,500; and increase the out of pocket maximums to better fit with Medica's standard plans. The City would also increasing the contribution amounts to the Health Reimbursement Account (HRA) to help offset the higher deductible and out of pocket maximums to better protect staff willing to take on more potential risk and to utilize the Cities budgeted dollars by providing a means for staff to move more toward cansum�risin in their health care purchases. I have included the final renewal worksheet (Exhibit A) for your review and comparison. The City and staff alike has been struggling for a number of years with substantial increases in the cost of providing group health insurance coverage. Staff feels the recommendations will reduce the cost of increases to the health care premiums while offering a way for employees to fund payment of the deductible if necessary. The Benefits and Wellness Committee supports the proposed changes noted above. With these proposed changes, Medica is willing to provide coverage at an overall premium cost that is 6.8% higher than what the City is paying in 2007. Staff will however, be taking on a much greater risk and will need to change behaviors in order to not be in the same place in 2009. Education will be the focus for the Benefits and Wellness Committee in 2008. Open enrollment is scheduled to begin on in early November. � i