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HomeMy WebLinkAbout07/12/2013________________________________________________________________ S:\Council Committees\2013\Personnel\July\July 12 Agenda Summary Report.docx Page 1 ST:al B A K E R S F I E L D City Council members: /s/ Alan Tandy Ken Weir, Chair Alan Tandy, City Manager Terry Maxwell Harold Hanson SPECIAL MEETING OF THE PERSONNEL COMMITTEE Friday, July 12, 2013 11:00 a.m. City Hall North – Conference Room A 1600 Truxtun Avenue Bakersfield, CA 93301 AGENDA SUMMARY REPORT Meeting called to order at 11:00 a.m. 1. ROLL CALL Committee members: Councilmember Ken Weir, Chair Councilmember Terry Maxwell Councilmember Harold Hanson City staff: Alan Tandy, City Manager Steven Teglia, Assistant to the City Manager Rhonda Smiley, Assistant to the City Manager/PIO Chris Huot, Admin. Analyst, City Manager’s Office Nelson Smith, Finance Director Virginia Gennaro, City Attorney Christi Tenter, Human Resources Manager Ginger Rubin, Benefits Technician Retired employees Fred Baugher, Florn Core, Tim Taylor, Margaret Ursin a and BCARE: Others present: Johnny Wu, Robert Mitchell, Tom Morrison: Segal Company Members of the media ________________________________________________________________ S:\Council Committees\2013\Personnel\July\July 12 Agenda Summary Report.docx Page 2 ST:al 2. ADOPTION OF OCTOBER 12, 2012 AGENDA SUMMARY REPORT Adopted as submitted 3. PUBLIC STATEMENTS None 4. NEW BUSINESS A. Update regarding the implementation of the Affordable Care Act Assistant to the City Manager Teglia provided some background, explaining that City staff has worked with the healthcare consultants, Segal Company, to ensure that all of the requirements are met in preparation of the 2014 plan year. The Insurance Committee received the same presentation last month. It is believed that the City is well prepared and in compliance with all conditions of the Affordable Care Act, which goes into effect January 1, 2014. Tom Morrison, Robert Mitchell and Johnny Wu with Segal Company gave a summary of the information contained within the handout that was provided to meeting attendees. This information included a calendar of implementation and all compliance issues, and an overview of fees that will be added to the cost of providing benefits to City employees. The fees include:  A health insurance provider fee, which applies to all fully-insured businesses. This is an excise tax that is estimated at 1.5% - 3.5% of the total premiums. It was reported that the City’s plans are well below the thresholds that would trigger an excise tax. By January, 2018, if a plan costs more than $10,200 for single coverage, which is $850 per month, or $27,500 for a family, the excess of these amounts would be paid by the employer at a rate of $0.40 on the dollar. Neither dental nor vision coverage is included in this edict; however, flexible spending accounts are.  A comparative effectiveness fee, which is designated to research the effectiveness of treatments and medications. This fee went into effect in 2012 at $1 per person, and increased to $2 per person in 2013. The cost will continue to rise, based on a formula determined by medical inflation, until 2019.  Transitional re-insurance fee, which equates to $5.25 per person, per month, or $63 per year. It is expected that this fee will decline over the subsequent three years, and then sunset. ________________________________________________________________ S:\Council Committees\2013\Personnel\July\July 12 Agenda Summary Report.docx Page 3 ST:al These fees will add approximately 4.5% to the City’s costs to provide insurance, and are to be used for various state and federal programs. City Manager Tandy noted that the re-insurance fee is actually a buried tax to cover the subsidy portion of the program. Committee Chair Weir confirmed that there is nothing to prevent the state legislature from adding additional fees in the future. Tom Morrison of Segal Company reported that California passed legislation that provides for the continuance of the exchange, even if the federal law is repealed. In October, 2013, all employees, whether full- or part-time, must be notified of the existence of the exchange, known as Covered California. Segal Company is working closely with staff to customize a notice to include specific information necessary for each individual to make their decision, and contact information, should there be questions or concerns. The website is www.coveredca.com. Employees will be able to go online prior to January 1, 2014 and input their personal information to determine what it might cost if they were to purchase insurance from the exchange, or if they are eligible for a subsidy. If an employer’s plan does not meet the minimum requirements of the law, the employee might be eligible for a subsidy, if their income is below a certain level. After careful review by Segal Company and City staff, it has been determined that all of the City’s plans are more affordable, beneficial, and cost effective than the highest ranked coverage offered through Covered California. For those entities that do not offer affordable coverage at a minimum value, a penalty will be assessed; however, that penalty will not be implemented until 2015. After a thorough review, Segal Company, in coordination with City staff, has determined that the City has no exposure to any penalties. Medicaid will be expanded in California to 133% of the poverty level. Anyone whose income falls below that mark will be placed on Medicaid, and therefore, they will not be eligible to purchase insurance from Covered California. In 2017, if each state legislature resolves to do so, the exchange can be opened up to large employers. At that point, the City could, at its discretion, offer plans through the exchange rather than to contract directly with each healthcare provider. ________________________________________________________________ S:\Council Committees\2013\Personnel\July\July 12 Agenda Summary Report.docx Page 4 ST:al Committee member Maxwell noted that Kaiser has already created a program following the model on which the comparative effectiveness fee is based. He asked why businesses would be charged the fee under this circumstance. Mr. Morrison said that Kaiser is currently lobbying in Sacramento for treatment based on an individual, rather than groups; however, the preference of the California legislature is to shift California to a single-payer model, if no federal legislation prevents it. The same method of projections is used for the retiree plans, which pose a potential excise tax exposure in 2018. To mitigate that possibility, the retiree plans may need to be made less expensive by virtue of plan size to keep them below the cost thresholds. The Affordable Care Act mandate applies only to active full-time employees, which is defined as someone who works an average of 130 hours or more per month. Plans that are offered to full-time employees must be affordable as defined under the law, which is what the employee pays for the least expensive plan, and which does not exceed 9.5% of wages paid to them that are taxable under federally taxable wages. Employees cannot be asked to wait more than 90 days before they are eligible for coverage. Open enrollment starts in October, 2013. Retired City employees may get better rates through the exchange. The regulations were recently clarified to note that retirees, who may or may not have access to City coverage, can qualify for the federal subsidy under the exchange if their household income falls within the framework, being less than 400% of the federal poverty level. Committee member Maxwell asked what the cost would be to the City if funds are given directly to an employee. Mr. Morrison said that it would cost the City approximately $0.40 for each dollar, which includes matching federal taxes plus the pension contribution rate. Additionally, the City would be exposed to a penalty because there is no exemption to subsidize someone, when 95% of employees are being covered. Should an employee be given the funds to purchase their own insurance through the exchange, those funds will be taxable and pensionable to the employee. Mr. Morrison then reported on the renewal rates for existing plan in 2014. Anthem Blue Cross and Kaiser rates will increase by a minimum of 3.5% to 4%, based upon the Affordable Care Act fees that they have to pay. Anthem Blue Cross rates for active employees will realistically increase by the high teens, due to increased utilization during the last 12 months by active employees who participate in the PPO plan. Anthem Blue Cross HMO rates will probably increase by the same amount as Kaiser. The information provided to the Committee by Segal Company included a schedule for the process. ________________________________________________________________ S:\Council Committees\2013\Personnel\July\July 12 Agenda Summary Report.docx Page 5 ST:al City Manager Tandy confirmed that Segal Company will come back to the Committee and provide lower cost alternatives. Committee member Maxwell asked if the unions would provide assistance by explaining any changes to the plans to their membership. Human Resources Manager Tenter responded that the Insurance Committee is made up of members from the different bargaining groups, and they are instrumental in explaining and providing information to their respective groups. City Manager Tandy noted that the Insurance Committee is very protective of their members; and as a general rule, are reluctant to approve any benefit reductions. Assistant to the City Manager Teglia gave an overview of the process related to healthcare rate renewals, which includes one or more meetings between the healthcare consultant and the Insurance Committee, and then providing the same presentation to the Personnel Committee. City Manager Tandy noted that individuals representing City retirees also participate in the meetings with the Insurance Committee, and they are also very wary of rate increases and/or benefit reductions. Assistant to the City Manager Teglia added that they are not voting members of the Committee. 3. COMMITTEE COMMENTS None 4. ADJOURNMENT The meeting was adjourned at 1:06 p.m.