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During the renewal process, the Committee members shared the concern that the comprehensive 100% coverage plan had a loss ratio of 129%. This means that the cost of medical services provided to employees in this plan exceeded the premiums being paid by 29%. This results when an employee receives relatively "free" medical insurance, and therefore has no incentive to manage why, when, or where they seek medical attention. Consequently, the healthcare provider will look to recoup these losses through significant premium increases the following year. It is a never-ending spiral. By contrast, when employees are in an 80% coverage plan, they now have an incentive to manage their health care usage, and premiums will not escalate so rapidly. Thus, staff recommends that the City still allow the 100% Plan, but the City should not fund — any City contribution increase to that plan. Employees will have to pay the full cost of the premium increase for the 100% plan in 2006 if they want to remain with that plan. _ Also in order to reduce the cost increase for all plans the committee recommends some other plan changes. These include: adding a 3 tier prescription co-pay; increasing the deductible amounts on the high deductible plan; and adding a Health Reimbursement Account (HRA) to the 80120 plan 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 consumer driven in their health care purchases. The City and staff alike has been struggling for a number of years with substantial increases in the cost of providing group health insurance to its employees. Staff feels the recommendations will reduce the cost of health care premiums while offering a way for employees to have sufficient funds to pay the deductible if necessary and carry coverage only for the number of members in their family. The Benefits and Wellness Committee supports the proposed changes noted above. With these proposed changes, Medica is willing to provide coverage at an overall cost that is only 3.1% higher than what the City is paying in 2005. Citv Contributions Back�round: We have consistently over the years maintained a philosophy of paying 100% of the premium for medical and dental insurance for the single plan. This is also a trend in the S�a�ton 5 group. Staff recommends continuing to do this with one change. The last several years the City has managed to maintain approximately the same out of pocket costs for the families by absorbing the majority of the increases and by adding the single plus one tier in 2004; those individuals actually saw a decrease in their out of pocket costs. In 2004 Council began moving to a more equal contribution per employee, regardless of the employee's family status and lifestyle choices. Some small steps have been taken toward equalization. It was also found through a survey conducted in August that the majority of staff that participated in the survey wanted equalization as well. Therefore, the committee in looking at current plan design as well as future struggles to keep premiums affordable yet minimize potential deductible risks as much as possible the staff recommends approving the following 2006 monthly cafeteria contribution levels: �