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though a 10% increase is significant, we had feared a much larger increase and the trend is about 11%. Hi�h Deductible/Health ��'i��ar.�e�t 4�enitat — Option �dlti�� The City, like all employers, has been struggling for a number of years with substantial increases in the cost of providing group health insurance to its employees. Staff has been exploring and implementing ways to reduce the cost of health care premiums by offering a high deductible plan while offering a way for employees to have sufficient funds to pay the deductible if necessary and carry coverage only for the number of inembers in their family. In June 2002 the IRS clarified Section 501 (c) (9) of the Internal Revenue Code. The clarifications made trust accounts an attractive vehicle for allowing employees to save money to use if confronted with major medical expenses. This is attractive because it offers employees the opportunity to manage their own health care costs and to save for future costs within a group insurance program. This account would partner with the post employment health plan that the City put into place in 2004. While the post employment health plan is used once the employee is no longer employed with the City the health reimbursement account is used while the employee is still employed and after if funds still exist available after departure. Put simply, the Employer pays money into the trust account (CafeteriaPlan Money). The employee is not required to pay taxes on these earnings. The trust belongs to the employee. It is tax sheltered and the money can be invested by the employee much as a 457 deferred compensation plan can be invested. Also like the 457 employees would pay all investment management fees from their accounts. The employee may use the funds in the account only for medical expenses for him/herself or his/l�er spouse or dependents. The funds are not taxed when they are withdrawn for medical expenses. Under a plan the Employer is required to provide the funds. The employee sees a savings in the cost of the health insurance premium but takes on more risk through the deductible. If the employee does not use the funds in a calendar year, helshe is permitted to keep the funds in his/her account which rollover from year to year. Over the years, the fund accumulates tax- free. If the employee leaves employment, he/she continues to own the account and to be able spend down the account by using it for medical expenses. After review with the Benefits and Wellness Committee the committee supports the request to add this plan option to the City health package. Citv Contributions Background: 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 the trend in the Stanton 5 group. Staff recommends continuing to do this. The last two years the City has managed to maintain approximately the same out of pocket costs for the families in the plan by absorbing the increases and by adding the single plus one tier in 2004; those that moved to that plan actually saw a decrease in their out of pocket costs. �