Consider a Resolution to Approve the 2013 Non-Union Health Insurance Contributions and Non-Union Cost of Living Adjustments

The City currently employs 65 employees, of which 63 employees are benefit eligible. Of the 63 benefit eligible employees, 21 are non-union and 42 are union. This case is specific to the City’s 21 non-union employees; as of this writing the union contracts have not been settled.

Health & Life Insurance -- 2013:
January 2013 marks the beginning of the City’s second year with Blue Cross and Blue Shield and Hartford Life. The City changed health insurance carriers in 2012 from HealthPartners to Blue Cross and Blue Shield as part of the Local Government Information Systems Consortium (LOGIS). The City benefited by joining the LOGIS group in many ways, as follows: gaining the opportunity to join a larger group, tiered plan options which included single, single plus children, single plus spouse, and family (as compared to only single and family plan options in previous years); options for higher deductible plans; four years of rate caps as follows: 8 1/2% in 2013, 10% in 2014, 11% in 2015, and 12% in 2016--which are not contingent upon a service contract, two networks for employees to choose from based on their healthcare needs, 100% coverage (in most plans) after the deductible is satisfied, less expensive basic life insurance and approximately $500.00 contribution per year toward the OPEP GASB Statement No. 45 valuation fee. 

The 2013 health insurance rates increased to the capped amount of 8.5% and the life insurance rates remained unchanged.

The proposed City health insurance contributions are within the budgeted amount and are the same contributions that have been proposed (but not settled on) with all other employee groups (AFSCME, LELS-Patrol and LELS-Sergeants).

See attachments for additional detail.

Option to Waive Health Insurance:
Prior to 2002, City employees that showed proof of other health insurance coverage were given the option to waive health insurance in exchange for $290 per month as wages.   However, due to the City’s desire to reach enrollment of at least 50 employees (to obtain Large Group Status) this option was no longer offered after January 1, 2002.  Conversely, as a result of joining the LOGIS group, the City’s enrollment is now pooled with many other cities and counties. Undoubtedly, there are employees that are currently double covered and would like the option to waive coverage in exchange for a cash benefit (credit in lieu of coverage). The LOGIS membership agreement provides a formula for calculating the maximum credit in lieu of coverage allowed; in our case that amount is $295.75 per month.

There are currently 12 employees grandfathered in and receiving the $290 benefit and 1 employee that waives health insurance coverage, but is not eligible for the $290 benefit.

Staff contacted Yvonne Johnson of Gallagher Benefit Services (the City's benefit Broker) and received confirmation that offering this option in no way jeopardizes the City as long as we remain with LOGIS (as planned through at least 2016).  Even so, if the City were to reinstate the waiving benefit, the City may want to require new participants to agree to the following terms in order to safeguard against any unforeseeable negative impacts to the City:

1) All new participants (those that receive credit in lieu of coverage on or after 2013), would enroll or return to the City’s health plan if the City were to face losing large group status (50+ employees enrolled) at any time in the future

2) If the City were to face any financial detriments as a result of offering credit in lieu of coverage, including but not limited to the loss of rate caps currently guaranteed through 2016; fines, penalties, or expenses associated with the upcoming Health Care Reform Act or any other unforeseen expense to the City

3) All participants provide the City with proof of other health insurance coverage

Lastly, to simplify the administration of the waiving benefit, the City may want to consider paying one rate of $295.00 (a whole number divisible by 2 for payroll purposes) versus having 2 different rates ($290.00 and $295.00).

Non-Union Cost of Living Adjustment (COLA) -- 2013:
The purpose of the COLA is to ensure that purchasing power is not eroded by inflation.  For purposes of demonstration only, the following text was obtained from the Social Security Administration (SSA) as it relates to Social Security Income COLA calculations.   The cost of living adjustment is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year.  If there is no increase, there can be no COLA.  The SSA calculated the COLA for January 2013 to be 1.7%.  This information has been provided as supporting documentation only and does not imply that the City relies on the SSA for budgeting purposes, or otherwise - see attachment for details.  

The City budgeted for a 1% cost of living adjustment for all employee groups in 2013. For information purposes, a 10-year COLA history is listed below:

2012 2% for all employee groups, with the exception of Department Heads at 1%
2011 Zero % for all employee groups
2010 Zero % for all employee groups
2003 to 2009 3% each year for all employee groups

Health Plan Type/Tier	ACCORD Premium	City Contribution to Premium	Employee Cost for Accord Network	City Contribution to VEBA	Total City Contribution
Single Plans (Per Month)
BCBS 100% $30.00 co-pay	$858.00	$517.14	$340.86	NA	$517.14
BCBS $1500 Ded. Plan w/VEBA	$728.00	$600.00	$128.00	$130.00	$730.00
BCBS $2500 Ded. Plan w/VEBA	$671.00	$600.00	$71.00	$130.00	$730.00
BCBS $4000 Ded. Plan w/VEBA	$591.50	$591.50	$0.00	$155.00	$746.50
Employee + Children Plans (Per Month)
BCBS 100% $30.00 co-pay	$1,716.50	$831.56	$884.94	NA	$831.56
BCBS $1500/$3000 Ded. Plan w/VEBA	$1,456.00	$935.00	$521.00	$160.00	$1,095.00
BCBS $2500/$5000 Ded. Plan w/VEBA	$1,341.50	$935.00	$406.50	$160.00	$1,095.00
BCBS $4000/8000 Ded. Plan w/VEBA	$1,183.00	$935.00	$248.00	$160.00	$1,095.00
Employee + Spouse Plans (Per Month)
BCBS 100% $30.00 co-pay	$1,802.00	$831.56	$970.44	NA	$831.56
BCBS $1500/$3000 Ded. Plan w/VEBA	$1,529.50	$857.00	$672.50	$160.00	$1,017.00
BCBS $2500/$5000 Ded. Plan w/VEBA	$1,409.00	$857.00	$552.00	$160.00	$1,017.00
BCBS $4000/8000 Ded. Plan w/VEBA	$1,242.50	$857.00	$385.50	$160.00	$1,017.00
Family Plans (Per Month)
BCBS 100% $30.00 co-pay	$2,232.00	$831.56	$1,400.44	NA	$831.56
BCBS $1500/$3000 Ded. Plan w/VEBA	$1,893.50	$1,101.00	$792.50	$192.00	$1,293.00
BCBS $2500/$5000 Ded. Plan w/VEBA	$1,744.50	$1,101.00	$643.50	$192.00	$1,293.00
BCBS $4000/8000 Ded. Plan w/VEBA	$1,538.50	$1,101.00	$437.50	$192.00	$1,293.00
**The City’s 2013 VEBA contribution includes the $4.30 monthly claims fee.

Consider approving some, but not all of the recommendations listed below.  Such as: 

Approving an increase to health insurance, but not reinstating the waiving benefit or a combination thereof
Approving a cost of living adjustment, but not the proposed health insurance increase
Approving another combination of options - as per discussion during the Personnel Committee meeting

Pros:  Possible near-term monetary savings to the city

Cons: 1) Opposes the approved budget -- the City strives to accurately budget the personnel costs associated with the next budget cycle and the City Council approves the budgets based on discussion during the budgeting process,  2) may prolong the negotiations process with the unions, 3) lowers the value of employees' total compensation.

To approve resolution XX-XX-XXX, which upon City Council approval, will authorize the above listed non-union city health insurance contributions, the option to waive health insurance in exchange for a cash benefit and to increase the non-union wage scale by one percent (1%).

Funding for both city contributions to health insurance and cost of living adjustment are included in the 2013 general and enterprise fund budget.

Motion to recommend City Council adopt a resolution . . . (based on discussion)