Agenda 03/24/2009 - Laserfiche WebLink

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February 24,2009 Human Resources Manager, Iris Read, presented the following information to Council regarding the employee health insurance options: Update on Employee Health Insurance--City Council Meeting-Feb. 24,2009 This is a follow-up to questions raised by City Council during the work session last week. I) Of the 122 employees with salaries of less than $25,000 annually, how many employees are enrolled in the health care benefits? Currently, 93 employees are enrolled in one of the two plans: (63 school employees and 30 city employees). Only four of the 93 employees cover their dependents. Of the twenty-nine that are not on our health care plan: (II) are covered under a spouse's plan (6) are covered under an individual policy (12) do not have coverage A total of 39 City (non-school) employees have waived coverage, most are covered under their spouse's plan. Last time we discussed a way to assist the lower-income employee in meeting their out-of-pocket deductible. One alternative is to provide the $720 or $1200 Health Savings upfront for a specific group of employees, such as those making less than $25,000 annually; there would be no increase in cost. Instead of depositing the $60 (for employees only covering themselves) or $100 (for those with dependent coverage) each month into the savings account, the total annual amount would be deposited. ($455,520 has been built into the cost of the High Deductible Health Plan to self-fund the Health Savings Account). Would the deposit be a one-time up-front allocation or continue into subsequent years? The employee owns the money in the Health Savings Account. Should he or she leave our employ prior to the end of the twelve months, the full amount $720 or $1200 belongs to the employee. 2) What options might be considered to assist retirees with the cost of their coverage or help meet the $3,000 out of pocket expense? A. Increase the City's contribution toward the premium. For eligible individuals, the City currently contributes $195 per month. Under the proposed Iligh Deductible Plan, retirees who have the current HMO will save about $15 each month but will pay $29 more if they are in the PPO. For each additional $5.00, and based on the current number of retirees in the plan, the annual cost would be $6,960. Current annual cost is $271,440, based on 116 retirees in the plan. The annual cost at $200 per retiree = $278,400. B. Offer a Health Insurance Credit to those employees who are not already receiving such a reimbursement. The benefit is tax-free and provides eligible retirees with a reimbursement to help with the cost of the retirees' individual or employer-sponsored health insurance or Medicare Part B or Part D premiums. The credit is added to the retiree's monthly retirement benefit. The dollar amount is set annually by the Cieneral Assembly. About 50% of our retirees receive the benefit. Applicable City and School Employees who qualify and who have the required] 5 years of service credit and retire under the Virginia Retirement System include: I. Teachers - Receive $4.00 per each year of VRS service - no maximum credit per month 2. Constitutional officers or employees of a local constitutional officer, general registrar or employee of a general registrar, and local social service employees - Receive $1.50 per each year of VRS service with a monthly maximum cap of $45.00. For example, a teacher who retires after 30 years of service could receive $120 each month to help ofTset the cost of their health care; for other eligible retirees, the maximum monthly cap is $45.00. The reimbursement amount cannot exceed the actual cost of the premium. Local governments C,ill also elect, via resolution, to provide the Health Care Credit to employees currently not eligible for the health care credit at a reimbursement of $1.50 per month for each year of VRS service once they have reached the 15-year minimum. Of the 116 retirees currently on the plan, 59 or 51 % arc not digible for the Health Care Credit or II School employees and 48 City employees. The maximum monthly credit would be $45.00. The estimated annual cost would be $79,000 or 0.63% of payroll, which is above and beyond the current VRS employer contribution rate of 19.59%, and the decision to provide the credit is irrevocable. C. Make a contribution into a Ilcalth Rcimbursement or Hcalth Savings Account. For example. a deposit of $720 for the employee only or $1200 with dependent coverage would be placed in a Savings Account (which the retiree would own) OR reimburse the retiree's out-of~pocket expenses ($1.000 to $2,(00) via a Reimbursement Account (which the City owns). As of today, the benefits consultants were unable to obtain individualized data from Southem Health on those employees or retirees who had met their $3,000 out-of~pocket maximum as this information is protected under the HIP AA (Health Insurance Portability and Accountability Act). However. it was estimated that the percent of retirees who meet the out-of~pocket could be as high as 40%. compared to active employees at 22.5%. Under the consultant's proposal, $150.000 would be set aside to reimburse active employees under the Health Reimbursement arrangement. D. Contribute a flat amount into a Health Savings Account equal to the $45 per month what the employee could receive under the Health Care Credit. For example. for a 30 year employee who would receive $1.50 for each year of VRS service each month equals $540 per year. Cost would be $540 for each of the 59 employees who do not receivc the credit = $31,860; OR, $41,760 if you used the $4.00 per VRS year of service for the School retiree currently not receiving the credit. E. For future retirees, we are investigating whether or not unused sick or vacation paid prior to retirement which could be made in a lump sum contribution into the employee's Health Savings Account. However. there are complex requirements under Section 125 Cafeteria Plan IRS guidelines. We will investigate this option further before making a recommendation. F. One final option. but one that is not recommended, is to consider the other alternative health plans that were received through thc proposal process. Vou will recall that during their presentation. the consultants offered three separate approaches to health care benefits for next fiscal year. The least aggressive approach allowed for coverage similar to that available in our current plan with Southern Health. The second strategy was to offer a moderate plan adjustment with includes a similar $500 deductible PPO coupled with a $3000 deductible with a Health Saving Account provision. Both of these options delay the inevitable, reduce the