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HomeMy WebLinkAbout10/28/2013________________________________________________________________ S:\Council Committees\2013\Personnel\October\October 28 Agenda Summary Report.docx Page 1 ST:al B A K E R S F I E L D City Council members: /s/ Steve Teglia Ken Weir, Chair Steve Teglia, Assistant to the City Manager Terry Maxwell Harold Hanson SPECIAL MEETING OF THE PERSONNEL COMMITTEE Monday, October 28, 2013 12:00 p.m. City Hall North – Conference Room A 1600 Truxtun Avenue Bakersfield, CA 93301 AGENDA SUMMARY REPORT Meeting called to order at 12:00 p.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 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, Bill Descary, Sandra and BCARE: Descary, Margaret Ursin, Brian Eidenshial, Pam McCarthy Others present: Johnny Wu, Robert Mitchell, Tom Morrison: Segal Company Billy Owens, SEIU – Blue and White Representative Todd Dickson, BPOA Representative Kevin Johnson, Fire Supervisors Representative Marlene Valdez, SEIU Steven Gonzales and Megan Arriaga, Bakersfield College Maribeya Munoz, CSUB Members of the media ________________________________________________________________ S:\Council Committees\2013\Personnel\October\October 28 Agenda Summary Report.docx Page 2 ST:al 2. ADOPTION OF JULY 12, 2013 AGENDA SUMMARY REPORT Adopted as submitted 3. PUBLIC STATEMENTS None 4. NEW BUSINESS A. Discussion and recommendation regarding 2014 Health Care Plan renewals Assistant to the City Manager Teglia reported that The Segal Company has been working on the City’s behalf on the rate renewal process for the 2014 plan year, which included meeting directly with the insurance companies. The information shared by the plan providers has not been positive. On October 16, 2013, a meeting was held with the Insurance Committee whereby the rate information was presented, along with suggested recommendations to reduce the cost impacts. All plan rate changes will include a 4% fee attributable to required taxes and fees under the Affordable Care Act (ACA). Tom Morrison with The Segal Company provided an overview of the information that was distributed, which included the current state of renewal offers; the driver behind the large increases requested by Anthem Blue Cross for the Active PPO plan; and potential plan changes and recommendations to reduce the increases proposed by the plan providers. The Anthem Blue Cross PPO plan has the largest enrollment from active and retired employees. The rate increase originally proposed for active employees enrolled in the Anthem PPO plan was 35%. Through negotiations with Anthem Blue Cross, that number was reduced to 28.3%. The reason behind the large increase is an increase in utilization and continued usage of out-of-network providers. For retirees enrolled in the PPO plan, Anthem proposed a decrease of -2.63%. There is a requested rate increase of 11% for the Anthem HMO plan for active employees. This HMO is not offered to retirees. There is a proposed rate decrease of -5.46% for those enrolled in the Senior Secure plan from Anthem. It was noted that the amounts paid by the City and a retiree is based upon a number of factors, such as years of service and the relative rate of the lowest cost HMO plan for active employees, which is Kaiser. The proposed rate increase for the Kaiser HMO plan for active employees is 8.6%. The proposed rate increase for retirees covered by this plan is 16.2%. ________________________________________________________________ S:\Council Committees\2013\Personnel\October\October 28 Agenda Summary Report.docx Page 3 ST:al The proposed rate increase for Kaiser’s Senior Advantage plan is 4.8%. This is the Medicare replacement plan. There is a proposed rate decrease for the dental plan provided by Pacific Union Dental of -2%, and there is a proposed increase of 1.3% for the PPO dental plan provided by MetLife. There is a proposed rate increase of 16% by Optum, which provides mental health benefits through United Healthcare. There is a proposed rate increase of 4.1% for the Employee Assistance Program (EAP), which is provided by the City at no cost to the employee. The vision plan was negotiated as a multi-year agreement, so, therefore, there is no proposed rate change at this time. Federal regulations provide that insurance companies cannot retain more than 15% of premiums collected, as administrative costs and profit, so the remaining 85% is considered a loss. During the 2013 plan year, the loss ratio for Anthem Blue Cross far exceeded 85%, due to the unusually high benefit utilization rate by active employees for medical and prescription purposes. Committee member Hanson asked what the fee would have been if an employee who had used an out-of-network provider had used an in-network provider. Mr. Morrison said it would have been one-third of the amount actually paid. Whenever there is an excess in the PPO plan, the amount is kept in a reserve, and it is then refunded to the City to be used at its discretion. In recent years, this amount has been used to fund retiree medical obligations. This year, there are no excess funds. There is a provision in the law that if an employer maintains the same relative percentage of contributions between it and its employees, such as the 80/20 split between the City and its employees, or does not reduce benefits by more than an allowable percentage plus an amount for medical inflation, the employer can retain what is called “grandfathered” status under ACA. The status is awarded by plan, not by employer; so if there are changes to one plan and not another, the first may lose its grandfathered status, while the second may not. Once the total annual out-of-pocket fees are paid, the plan pays 100% of all remaining charges. For in-network charges, the maximum paid by an employee is $1,500; and for out-of-network charges, the maximum is $4,500. Meetings were held with Anthem Blue Cross to propose plan modifications that might reduce the cost increases, such as:  Increasing the deductible from $350 per year to $750 per year. o This option reduced the rate increase by 5.26%. ________________________________________________________________ S:\Council Committees\2013\Personnel\October\October 28 Agenda Summary Report.docx Page 4 ST:al  Eliminating all out-of-network benefits, except for emergency room charges. o This option reduced the rate increase by 3.3%.  Converting the HMO plan to one that is exclusive to one provider. o This option raised the rate increase.  Varying benefits of care by hospital. o This option reduced the rate increase by 11.8%; however, it set up a tier system for the hospitals. Two local hospitals are considered Tier 1, but most employees use those hospitals that are classified as Tier 2, and those require larger co-payments. This option also lowered the amount paid on covered charges. It was determined that this option was not viable when comparing the reduction in benefits to the rate reduction. The Segal Company suggested the following modifications:  Increase the in-network deductible from $350 to $750;  Increase the out-of-network deductible from $750 to $1,000;  Increase in-network maximum out-of-pocket expense from $1,500 to $2,000;  Increase out-of-network maximum out-of-pocket expense from $4,500 to $10,000;  Lower the in-network coinsurance percentage from 90% to 80%;  Move mental health benefits from United Healthcare into the Anthem PPO contract, which will reduce the rate increase proposed for mental health benefits by 50%; and  Limiting plans offered to employees hired after January 1, 2014 to only the HMO plans. Based on historical data, it would take approximately 16 years to completely replace the active employee complement, during which time the City would realize a $10 - $12 million savings. The result of the recommendations would be a reduction in the PPO plan rate increases from 28.6% to 15.2%. It would also mean a reduction in the amount paid by the City towards retiree medical costs. Contained within the information provided by The Segal Company is a list of items that impact grandfathered versus non-grandfathered plans. Non-grandfathered plans will have to adopt some items that are to be provided at no cost to the employee. Assistant to the City Manager Teglia reported that all of the information was provided to the Insurance Committee on October 16, 2013, and the result was a unanimous consensus that no adjustments were to be recommended at this time. ________________________________________________________________ S:\Council Committees\2013\Personnel\October\October 28 Agenda Summary Report.docx Page 5 ST:al City Manager Tandy reported that a rate increase assumption is always factored in to the upcoming fiscal year’s budget. The assumed increase was 5%; however, it is clearly understood that the proposed rate increases are well in excess of that amount. Committee member Hanson asked what the City contributed towards health benefits in 2013. Finance Director Smith said that the General Fund impact was $11 million; but when all funds are factored in, the total was approximately $13 million. Committee member Hanson asked what the increase cost to the City would be if no plan changes were made, and the answer was $2.4 million. Assistant to the City Manager Teglia said that if the recommended modifications were made, that amount would be reduced to $1.5 million. Committee member Hanson stated that the City has to do something to reduce costs. In order for the City to continue to be successful in all operational aspects, expenses must be contained and sacrifices must be made. He recommended that staff move forward with Segal’s recommendations. Committee member Maxwell agreed with Committee member Hanson, and stated that the City Council has to make decisions based on what can and cannot be afforded. If something is not done now, long-term costs will continue to increase, so the Segal recommendations must be strongly considered. Committee Chair Weir asked if the plan would still be considered rich, even if the plan modifications were instituted, compared with other public entities. Mr. Morrison said that it is. Committee Chair Weir noted that many private employees would see the increase in deductible from $350 to $750 as a good deal. He asked if the increase to out-of- network, out-of-pocket costs would be enough of a deterrent. Mr. Morrison said that it would cause an employee to reconsider using an out-of- network provider, unless there was a catastrophic circumstance involved. A suggestion was made to eliminate the benefit entirely; however, that only reduced the total rate by 3%. Committee Chair Weir asked about the impact. Mr. Morrison responded that the biggest impact is the total out-of-pocket expense increases to $10,000. Insurance Committee, Retiree Alternate Member Pam McCarthy asked about the Medicare Part D benefit. ________________________________________________________________ S:\Council Committees\2013\Personnel\October\October 28 Agenda Summary Report.docx Page 6 ST:al Mr. Morrison said that the information provided pertained to private for-profit corporations that will now have to pay taxes on any federal subsidy received. As the City of Bakersfield is a non-profit entity, the provision does not apply. City Manager Tandy provided, as background, information related to the process for insurance rate renewals. The City has a Memorandum of Understanding (MOU) with each collective bargaining unit. Contained within those MOU’s are provisions requiring that any health plan changes be presented to them for discussion, by way of the Insurance Committee. Should the bargaining groups reject any proposed plan modifications, the City Council’s only alternative is to declare unilateral conditions. Another issue to consider is that open enrollment is typically held prior to January. In order for that to take place, the plans must be legally established and under contract so that employees will know what is available to them and what the costs are. Because of the complexities of the rate increase, what would have normally been completed during the summer has been delayed while the consultant worked to lower costs. This has resulted in a short time frame in which to complete the process this year. Committee Chair Weir asked what direction staff was looking for. Assistant to the City Manager Teglia responded that staff wanted to get a sense of the Committee’s direction based on the information from Segal. The recommendations provided by the Personnel Committee will now be taken back to the Insurance Committee to determine if a common ground could be reached. Insurance Committee, Fire Representative Kevin Johnson reported that there is some interest in closing the gap by using future COLA raises in order to retain the current plan benefits. Committee Chair Weir asked for comparison information related to plan benefits and costs to entities outside of City of Bakersfield, and that the information be provided to the full Council. Assistant to the City Manager Teglia said that an e-mail would be sent in order to provide the information expeditiously. 3. COMMITTEE COMMENTS None 4. ADJOURNMENT The meeting was adjourned at 1:06 p.m.