Loading...
HomeMy WebLinkAboutAgenda Statement 1985/04/09 Item 17 COUNCIL AGENDA STATEMENT Item 17 Meeting Date 4/9/85 ITEM TITLE: Resolution //9 Authorizing amendments in employee benefit plans to accomiiIodate an increase in the Travelers health insurance premium and appropriating necessary funds SUBMITTED BY: Director of Personnel REVIEWED BY: City Manager.', (4/5ths Vote: Yes No ) During negotiations with the Travelers Insurance Company, at the beginning of 1984-85, the City was successful in reducing a requested rate increase from 105% to 80%. In return for the reduced premium, however, the Travelers Insurance Company was willing to guarantee the 80% rate increase only through March 3, 1985. The Travelers Company has notified the City that as of March 3rd an additional 19% increase in premiums was necessary to continue coverage. It should be pointed out that over the past two years or more paid claims have exceeded premiums. The recent 80% increase closed most of the premium/paid claims gap, but paid claims still exceed premiums by 8%. This is the condition that has led to the requests for increases in premiums. RECOMMENDATION: To assure continuity of health care coverage for employees at the lowest possible rate, the following recommendations are made: 1 ) Authorize City payment of the 19% increase for each employee for the period 3/3/85 to 6/30/85. 2) Authorize staff to prepare a Request for Proposal (REP) for soliciting bids on health insurance, BOARDS/COMMISSIONS RECOMMENDATION: Not applicable. DISCUSSION: The increase in rates is attributable to higher usage (almost double) of the plan by employees as well as the increased costs of health care nationwide. Medicare restraints on payments have caused hospitals and doctors to shift costs to private payers such as the City. While the City is making attempts to hold down costs through education of employees and efforts at cost containment, the Travelers are attempting to return to a situation where premiums are greater (or at least as great) as paid claims. All these forces impact the benefit plan enjoyed by City employees. ,::,.?" i Page 2, Item 17 Meeting Date 4/9/85 The current benefit levels for employees were set based on the Travelers rates in effect between July 1 , 1984 and March 2, 1985. The requested 19% increase means that the flexible benefit plan (market basket) amounts will not cover the new higher rate. To avoid changing the negotiated flexible benefit plan amounts, it is being recommended that the City pay the increased premiums directly. The question of paying increased rates for our Travelers Health Plan is impacted by the fact that the City is bound by extended contracts to make these payments for the Police Officers Association and the Firefighters Association (AFL/CIO Local 2180) . The current contracts will run through June 1986 for Police and June 1987 for Fire. The additional cost for the increase in premiums rates for Police and Fire is $34,718. The cost for all other employees/groups is $33,219. Equity suggests equal treatment for all employees, at least through the end of 1985 fiscal year. The question of bidding our policy to try for better rates potentially is complicated by the extended contracts. If either Police or Fire chose to hold the City to the contract for them, and any increased costs for these groups would have to be borne by the City. In deciding whether or not to go to bid, a study of health plan costs for the cities in San Diego County with fully insured health plans was conducted. It shows that the average monthly cost is $86.53 per employee. With the 19% increase, the rate for Chula Vista will be $72.35 per employee. This is the second lowest insured rate paid by any city in San Diego County. A chart showing the specific rates paid by various cities is attached. Although there are some differences between the plans, the $100 deductible and 80/20% co-payment schedule is fairly standard. Most plans provide a semi-private room, as does Chula Vista. Many, however, pay 100% for surgery while Chula Vista pays 80% until the employee has experienced a $500 out-of-pocket maximum. In addition to the survey mentioned above, the City has been working since June 1984 on the implementation of a Preferred Provider Organization (PPO). This is a plan in which negotiated health care rates hold down costs. Initially, Travelers was unwilling to cooperate, although just recently under pressure from the City, Travelers has agreed to use a PPO. Costs can be controlled only with the cooperation of all the parties, and Travelers' agreement greatly enhances the chance that escalating costs can be held in check if in fact they are the successful bidder in the process we are proposing to you. Although our rates for health insurance are low and there is the complication of the multi-year public safety MOUs, it should be useful to go out to bid on future coverage. If the proper package could be negotiated, Police and Fire may be willing to change carriers. Only by going to bid will the City be able to explore this option and be confident that the best package available for the dollars spent is in place. \ Page 3, Item 17 Meeting Date 4/9/3b Even if Police and Fire employees were unwilling to consider changes, a new plan theoretically could be selected for the remaining employees, however, this probably would not lead to cost savings, because a smaller pool of people represents a greater risk to insurance companies, hence higher premiums. Previous analysis of the usage patterns for the various groups indicate that there is no significant difference in the number or cost of health care claims that can be attributed to membership in Police, Fire or other groups. What might appear to be a higher rate of injury and illness in the Police and Fire is frequently covered by Workers' Compensation and thus the cost associated with these accidents and injures do not impact the Travelers Health Plan. FISCAL IMPACT: The total fiscal impact of accepting the 19% increase is $67,936.84 for the remainder of fiscal 84/85. SAT/mjf WPC 0249K O HEALTH BENEFITS COST Monthly Cost 2 or More City Per Employee 1 Dependent Dependents Name of Insurance Agency Carlsbad $78.50 $179.39 $277.24 Crown Life Chula Vista $60.80 $176.45 $176.45 Travelers Coronado' $74.52 Cal Western Del Mar $132.52 $263.88 $263.88 Blue Cross El Cajon $76.94 $216.86 $216.86 Aetna Imperial Beach $90.51 $113.99 $188.56 Cal Western Lemon Grove $80.00 $82.00 $129.00 First Farwest National City $87.08 $73.20 $134.26 Travelers Poway $104.34 $179.08 $179.08 Conn. General Life San Diego County $106.51 $192.84 $266.70 Aetna San Marcos $69.97 $139.54 $139.54 Prudential Santee2 $79.31 Aetna Vista: Mgt & General $94.34 $127.40 $127.40 Aetna Fire3 $76.06 $119.47 $119.47 Aetna Total Average Cost $86.53 $155.35 $184.87 Chula Vista plus 19% proposed increase $72.35 $209.98 $209.98 'Coronado employees have a cafeteria plan. There is $100.00 to use per month (employee pays) for selected coverage. If there is any left over it can go towards dependent coverage. There is no set amount for dependent coverage. 2Santee: The amount of dependent coverage varies by employee 3Vista: Health insurance for Fire Fighters does not include dental coverage.