Loading...
HomeMy WebLinkAbout2005 ADMINISTRATIVE REPORT MEETING DATE: November 9, 2005 AGENDA SECTION: Reports i ITEM: I TO: Honorable Mayor and ,City Council APPROVED FROM: Alan Christensen, Assistant City Manager DEPARTMENT HEAD DATE: November 4, 2005 CITY A'I'rORNEY CITY MANAGER SUBJECT: Personnel Committee RePOrt on Health Insurance Plan Changes and Medicare Part D RECOMMENDATION: The Personnel Committee recommends approve report and implement recommendations within the report. BACKGROUND: ~ Health Insurance Plan Chanqes This item appeared on the City Council agenda of October 26th and was postponed to provide for an additional Insurance Committee and Personnel Committee meetings. After discussion at the City Council meeting on October 26, 2005, staff understood that there were two primary issues of concern between the employee bargaining groups and the City. The first is the out- of-pocket maximum of $5,000 per individual, which was recommended by the Personnel Committee. The employee bargaining groups felt that maximum was too high and could have potential to have a devastating financial impact on a family if more than one family member were to sustain serious injury or illness in year. The second issue is the City's concern that structural plan design changes should be implemented as incentives for employees to use less expensive health care options such in-network doctors, outpatient surgeries, and urgent care facilities. To address these concerns, City staff melded elements of the Personnel Committee Majority Report and the Insurance Committee offer into. a Compromise Proposal. In it staff proposed that the individual out-of-pocket maximum (stop-loss) in the PPO plans be reduced from $5,000 (recommended in the majority report) to $3,000. The reduction addresses the employees' concerns about financial impacts on large family. Staff also proposed to improve the PPO plan by reducing the in-network maximum to $1,000 per individual, which is lower than the current level of $1,600. The cost of this proposal without additional changes requested by the Insurance Committee is $66,674 in excess of budget. C:U::)OCUME~ l~alawrenc~LOCALS~ l\TempU-lealth Care Reports Admin 110905.doc AC:al ADMINISTRATIVE REPORT Page 2 The City's Compromise Proposal is outlined below, including the cost in relation to our City's budget: Personnel Insurance Compromise Plan Change Items Majority Report Committee Proposal HMO Office Visit Co-Pay $15 $20 $20 Hospital Co-Pay $250 $0 $250 Emergency Co-Pay $100 $100 $100 PPO Co-insurance In/Out of Network 90%/60% 100%/80% 90%/60% In/out of Network, $1,600 in $2,000 in $1,000 in Individual Out of Pocket $5,000 out $2,000 out $3,000 out Maximum $250 $0 $250 Hospital Co-Pay $100 $100 $100 Emergency Co-Pay $250 $250 $250 Individual Deductible Blue Cross Dental Prosthodontic Service 60% 80% 80% (crowns, bridges, dentures) Cost of Plan Changes Compared to City Budget (47,658) (408,309) (66,674) Per City Council direction, the Insurance Committee met again on November 1,2005, to discuss health plan changes. The above Compromise Proposal was offered. After considerable discussion and many questions regarding a number of different plan.options, the Insurance Committee stated they would agree to the Compromise Proposal with one caveat. They asked for consideration of a family maximum out-of-pocket in the PPO program. Both HMO plans have family maximum limits, but the Blue Cross PPO has only an individual maximum. The employee groups argued that larger families could be exposed to devastating out-of'pocket costs if in-network doctors were not available. With a 3-member family maximum in place, a family would be covered 100% after their out-of-pocket maximum of $9,000 was met. This assumes that all three members experienced serious emergency or injury within one year and were treated out-of-network. In response, the City offered to increase the offer by $33,326 to pay for the cost of a family cap, which would result in a total of $100,000 cost over budget. The City would absorb the additional cost. Buck Consultants confirmed that the family cap is a common feature in today's health care market. Blue Cross is researching the cost of a 3 or 4-member family cap and if it could be purchased with $33,326, but it will be several days for a final rate to be obtained. The Personnel Committee met on November 3, 2005, during which the employee group representatives in attendance agreed to accept the City's prop6sal as follows: 1) Plan changes outlined in the Compromise Proposal, which are incentives to use in-network providers and to make less expensive health care choices. ADMINISTRATIVE REPORT 2) Add family cap to the out of pocket maximum in the PPO, including a 3 or. 4-member family cap in an amount not to exceed the $100,000 figure offered; 3) Explore a relationship with the Heart Hospital, which is out of the Blue Cross PPO network, to provide emergency services to the City Of Bakersfield at the "in-network" rate. The Personnel Committee voted unanimously to forward the above proposal to the City Council for approval. Members of the Insurance Committee who were in attendance indicated they would vote in favor of the proposal. The entire Insurance Committee will meet on November 7, 2005, to ratify it. MEDICARE PART D AND RELATED CHANGES: In addition to the above mentioned changes, additional modifications to the health plans need to be made due to Medicare Part D prescription drug coverage, which was added to Medicare by the .Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This coverage will become available on January 1. 2006. MMA gives employers who provide retiree health coverage several options for offering prescription drug coverage to their Medicare-eligible retirees, including- Continuing their current plans and applying for the 28% Federal subsidy for qualifying enrollees' allowable prescription drug costs · Providing coverage that "wraps around" the Medicare Part D prescription drug benefit · Contracting with a national or regional preScription drug plan (PDP). The Personnel Committee has studied the various options, considered recommendations from the Insurance Committee (a meet and confer committee) and from Buck Consultants, the City's health care consultants and are. recommending the following actions: · Because both Kaiser Senior Advantage and Blue Cross Senior Secure intend to be a Medicare Advantage PDP, take advantage of this option which will be financially advantageous for both retirees in those programs and the City for these two plans. · Blue Cross PPO and HMO intend to offer a wraparound benefit plan, which will require a separate policy for the retirees. Currently the Blue Cross HMO plan blends the rates for actives and retirees. This change will require an unblending of the rates. This would be in concert in regard to retiree medical coverage and GASB 43/45 reporting requirements. It is recommended for the plan year 2006, the City elect the option to seek the subscription drug subsidy from the Federal Government and take advantage of the wrap around coverage. This option can be changed in the future. · As the unblending of the rates will cause a substantial premium increase for retirees, it is recommended to develop a phase in plan to separate the rates for the active and retirees. The exact amount of the HMO retiree "subsidy" will be determined after the rates for the 2006 plan year are received. It is anticipated that the increase in rates will be phased in, 20% per year for five years. However, any "subsidy" will decrease incrementally and will completely cease after 5 years. · It is recommended that an actuarial study be done to determine the Ci.ty's unfunded liability under GASB 43/45 reporting requirements for medical benefits. C:~)OCU ME~ l~alawrenc~.OCALS~ l\Temp~Health Care Reports Admin 110905.doc AC:al Health Insurance Plans Costs No Plan Majority · Minority Insurance Committee Changes Report Report Recommendation Current Cost $ 15,887,991 $ 15,887,991 $ 15,887,991 $ 15,887,991 Projected Cost $ 18 12~.~.~.z.1 776 $ 17 16z.~_~2 373' $ 17 3~26 973 $ 17 648 223 Increase $ 2,233,785 $ 1,274,382 $ 1,438,982 $ 1,760,232 CityShare of Increased Cost $ 1,639,710 $ 925,166 $ 1,045,884 $ 1,285,817 One time cost due to phasing $ 64,000 $ 1,109,884 City Costs compared to majority report $ 714,544 $ 184,718 $ 360,651 Cost compared to Budget $ (762,202) $ (47,658) $ (232,376) $ (408,309) 10/26/2005 11:47 ' PPOfln and Out-of-Network Coverage Scenarios Current PPO · 80% to 100% coverage provided o 80% is often accepted by provider · $1,600 individual out-of pocket maximum for choosing an in-network $1,600 individual out-of pocket maximum for choosing an out-of-network · Out-of-pocket includes: o Deductibles o Employee share of coinsurance (the 20% not covered by insurance) · There is currently no incentive to stay in-network, which is less costly service · Worst case: Medical expenses would be covered at 80% to a maximum 6f $1,600 out-of- pocket for each individual. Family of 4 could be responsible for up to $6,400 if all family members met maximums ($1,600 each). Maiorit¥ and Minority Report PPO · 90% coverage in-network, 60% coverage out-of-network o 60% would mean more out-of-pocket Costs if out-of-network is chosen · $1,600 individual out-of-pocket maximum for choosing an in-network provider · $5,000 individual out-of pocket maximum for choosing an out-of-network provider · More savings because in-network offers higher percentage paid less out-of-pocket .. · Choice determines out-of-pocket exposure: o If in-network provider is chosen, 90% coverage provided ($1,600 max. applies) o If no in-network provider, 90% coverage or as if in-network ($1,600 max..applies) (~ If an emergency occurs, 90% coverage ($5,000 max. applies) · Worse-case: Medical expenses would be covered at 90% to a maximum of $5,000 out-of-' pocket for each individual. Family of 4 could be responsible for up to $20,000 if all family members met maximums ($5,000 each). Insurance Committee'Report PPO · 80% to 100% coverage provided for in or out-of network o 80% is often accepted by provider · $2,000 individual out-of pocket maximum for choosing an in-network provider · $2,000 individual out-of pocket maximum for choosing an out-of-network provider · This alternative is the'same as current system but with higher limits · There is no incentive to use less costly, in-network service · Worst case: Medical expenses would be covered at 80% to a maximum of $2,000 out-of- pocket for each individual. Family of 4 could be responsible for up to $8,000 if all family members met maximums ($2,000 each). Created on 10/26/2005 1:08 PM C:\Documents and Settings\achriste\Desktop\PPO Scenarios.doc Health Insurance Plan Changes Majority Insurance Compromise HMO Plans Current Report Committee $1,000/$3,000 Office Visit Co-Pay $10 $15 $20 $20 Hospital Co-Pay $0 $250 $0 $250 Emergency Room Co-Pay $25/$50 $100 $100 $100 PPO Plans Co-Insurance In/Out 80-100% 90%/60% 80-100% 90%/60% of Network In and Out of Network, Out of $1,600 in $1,600' in $2,000 in $1,000 in Pocket Maximum $i ,600 in $5,000 out $2,000 out $3,000 out Hospitat Co-Pay $0 $250 $0 $250 Emergency Room Co-Pay $0 $100 $100 $100 Individual Deductible $200 $250 $250 $250 Blue Cross Dental Prosthodontic Service 80% 60% 80% 80% Cost Compared to Budget (762,202) (47,658) (408,309) (66,674) · 11/3/200510:58 AM C:\Documents and Settings\achriste\Desktop\med rates comparison.xls '~ CITy, OF BAKERSFIELD Medical Benefits for City Employees and Retirees California Care Kaiser Permanente Fee For Service Lifetime Maximum None None $5,000,000 Deductible I Individual None None $200.00 Two Party None None $400.00 Family None None $600.00 Carryover Provision None None Yes (last 3 months of calendar year) Common Accident Yes Stop Loss Limit I $ 500 copay max single $1,500 copay max single . After Blue Cross pays $1,000 copay max two party .. $1,600; $1,500 copay max family $ 3,000 copay max family plan pays 100% IH°spitel I INPATIENT Room and board and all Prudent Buyer. 100% medically necessary services, No charge No charge Non Prudent Buyer. 80% including general nursing care (all care must be referred by (all care must be referred by Non-contracting: 25% penalty services, operating and special Pdmary Care Provider and Primary Care Provider and plus $500 deductible room fees, diagnostic x-ray authorized by your facility) authorized by Medical Group) per admission and laboratory services Non-Prudent Buyer. $500 deductible OUTPATIENT No charge $10.00 co-pay Physicians, Surgeons & Assistants (all care must be referred by Prudent Buyer. 100% Anesthesiology, Surgical room fee, Primary Care Provider and Non Prudent Buyer. 80% Radiation and Chemotherapy authorized by your facility) Additional $500 deductible treatment, renal dialysis for Non-Prudent Buyer *Non-certification penalty: * 25% penalty plus $250 deductible if precertiflcation is not obtained prior to admission I Physician Care I Prudent Buyer. Office/Home Visits $10.00 copay $10.00 copay · 80% of negotiated fee Non: 80% of allowable fee Hospital No charge Prudent Buyer:. 100% Outpatient surgical center Non Prudent Buyer: 80% There is an ambuloatory surgical center Prudent Buyer. 100% deductible of $500 if you use a non- participationg provider Non Prudent Buyer: 80% Allergy Testing/Treatment No charge No charge 80% Immunization-Influenza No charge (if approved by No charge Prudent Buyer. 100% Medical Group) Non Prudent Buyer:. 80% Well Child Care $10.00 copay (no charge for $10.00 copay Prudent Buyer. 100% (including immunizations) immunizations) Non Prudent Buyer:. 80% (Up to age 19) Wellness (annual physical exam, $10.00 copay $10.00 copay $50.00 copay, no deductible papsmear, mammogrem, pro~tste exam) (subscriber and spouse only) These charts are informational only, please consult you benefits booklets or brochures for specifics details. B A K E R S F I E L D Harold Hanson, Chair Zack Scrivner Jacqule Sullivan Staff: Carroll Hayden SPECIAL MEETING NOTICE PERSONNEL COMMri'rEE of the City Council - City of Bakersfield Thursday, November 3, 2005 11:00 a.m. City Manager's Conference Room, Suite 201 Second Floor, City Hall, 1501 Truxtun Avenue, Bakersfield, CA AGENDA 1. ROLL CALL 2. ADOPT OCTOBER 4, 2005 AGENDA SUMMARY REPORT 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Review and Committee recommendation on Health Plan design changes - Hayden 5. COMMI'R'EE COMMENTS 6. ADJOURNMENT S:~,C~05 Personner~P05nov03agen.doc October 28, 2005 Re: Health Plan - Personnel Committee Jean, At the Council meeting of October 26th, a Personnel Committee meeting was called. This had to be convened in time to prepare an administrative report for the November 9th Council meeting. To keep you informed, this is what has taken place: · The agenda was drafted and approved by Alan Tandy and Alan Christensen. · I pulled up the agenda summary report from the October 4th meeting and gave them to Alan Christensen to review and revise. · When the changes were made, it was saved with a different name so that you could differentiate between the two. · A copy was made and stamped "DRAFT." Packet copies were made from this copy. · Attached are the pages Alan Christensen revised; the "ORIGINAL" signed report, and the "DRAFT" copy. · Packets were assembled and distributed to. Mayor and Council, Alan Tandy, Alan Christensen, John Stinson, Carroll Hayden, Ginger Rubin, Ginny Gennaro, and Nelson Smith. There was also a packet labeled "Public Packet" delivered to the Clerk's office. · The agenda was taken to the Clerk's office for posting, both on the board and on the internet. · The agenda was faxed to the media, etc. The confirmation is attached. · The agenda was e-mailed to Department Heads, Mike Turnipseed of Kern Tax, and Tim Beck and Mike Schionning of Mellon. · Margaret Ursin was called. · Alan Christensen set an Insurance Committee meeting for Tuesday, November 1st at 2:30 p.m. As I have not worked on a committee in a while, I referred to your instructions, which were very helpful. Amber  B A K ERSFIELD Harold Hanson, Chair Staff: Carroll Hayden Zack Scrivner For: Alan Tandy, City Manager Jacquie Sullivan AGENDA SUMMARY REPORT SPECIAL MEETING · PERSONNEL COMMITTEE Tuesday, October 4, 2005 - 11:00 a.m. City Manager's Conference Room, Suite 201 Second Floor, City Hall, 1501 Truxtun Avenue, Bakersfield, CA 1. ROLL CALL Called to Order at 11:03 a.m. Present: Councilmembers Harold Hanson, Chair; and Zack Scrivner Councilmember Jacquie Sullivan arrived at 11:05 a.m. 2. ADOPT JUNE 13, 2005 AGENDA SUMMARY REPORT Adopted as submitted. (Committee Member Sullivan absent) 3, PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Review of final Health Plan rate increases City Manager Alan Tandy spoke regarding previous Personnel Committee meetings held earlier this year. At that time Buck had preliminary figures from Blue Cross and was anticipating their premium rates would increase approximately 9% overall for 2006. Buck has informed the City that premium increases are going to be higher than projected. Some coverage is being increased 17% and 18%, but the overall increase in premiums for 2006 is going to be 14%. The action the Personnel Committee took on June 13th to make health plan design changes to reduce the anticipated insurance premium increases by approximately $620,000 was based on the 9% increase. Staff is proposing additional plan design changes to reduce the additional 5% projected increase in premiums. After this Committee meeting, the health plan changes will need to go back to formal meet and confer with the bargaining representatives. A date has not been set as yet, but the time frame is very short to get their information before the Council. Because of the required noticing and open enrollment period for employees, the Health Plans need to be on the October 26th Council agenda. Agenda Summary Report Page 2 Personnel Committee Meeting October 4, 2005 B. Review and Committee recommendation on Health Plan design changes Committee Member Scrivner wanted to restate the action recommended by the Personnel Committee at its June 13th meeting to deal with the 9% increase. At that time the Committee voted to recommend the City pay for 5% of the increase and to reduce the other 4% increase in premiums, make the following adjustments to the Health Plans: HMO Plans · Increase office visit copay from $10 to $t5 · Add $250 per admission hospital copayment .,/' · Increase emergency room copayment ~ to ich would be waived if admitted to the hospital) PPO Plan · Change coinsurance in-network from 80-100% (depending on type of service) to 90%, and 60% for out-of-network · Increase out-of-network out-of-pocket maximum from $1,600 to $5,000 · Add $250 per admission hospital copayment · Add $5',','~emergency room ~I0.~/' copayment Blue Cross Dental Plan Change prosthodontic service from 80% to 60% Committee Member Scrivner asked for staff's recommendation to reduce the unexpected additional 5% health plan increase in premiums. The additional 5% increase will raise premiums and leave the budget out of balance by $168,376, assuming the Personnel Committee's recommendations at the June 13th meeting to deal with the 9% increase in premiums are adopted by the Council. Staff recommended: 1) a change to the individual deductible from $200 to $250 to save $131,600 in premium increases; and 2) increase emergency room visits from $75 to $100 to save an additional $26,500 in premium increases. Committee Member Sullivan was in agreement with staff's recommendation to make additional plan changes to reduce the additional 5% increase in premiums. It was noted that the Employee Insurance Committee was not in agreement with any plan changes to reduce the 9% projected premium increases when the Personnel Committee met in May and June of this year. Committee Member Scrivner explained if no action is taken to reduce the 14% increase, premiums will increase $2.23 million for 2006. For active employees the City pays 80% of the premiums and the employees pay 20%. The retirees pay different amounts depending on coverage and years of service, but pay an average share of 27%. Agenda Summary Report Page 3 Personnel Committee Meeting October 4, 2005 Committee Chair Hanson opened the floor to allow statements and questions by the employee representatives in attendance. Chuck Waide, CCAPE, expressed that he cannot speak on the recommendation until the health plan premium rate increases go back to meet and confer. Mike Turnipseed, Kern Tax, spoke regarding cafeteria plans and letting employees decide how their individual total compensation package is spent. Committee Member Scrivner made a motion the Committee approve and forward staff's recommendation to increase the individual deductible from $200 to $250 and increase the emergency reom visits from $75 to $100 to reduce the unexpected additional 5% increase in premiums, in addition to the health plan design changes the Personnel Committee recommended at its June 13th meeting to reduce the 9% increase in premiums. Committee Members Scrivner and Sullivan voted: Aye. Committee Chair Hanson voted: Nay. Committee Chair Hanson stated he has met with staff regarding budgeting and the cost of premium increases for the Health Insurance Plans and met with representatives of the bargaining units. In order to promote good relations, he proposed that if the bargaining units buy into his proposal, he will go back to Council with a minority recommendation; however, if they do not, he will vote for the Personnel Committee majority recommendation. The cost of his recommended proposal would be 2-tenths of 1% of the General Fund. Committee Chair Hanson proposed the following: If the bargaining units agree to the original plan adjustments made by the Personnel Committee to reduce the 9% increase in premiums, he will make the following recommendations to the Council: 1. Delay the following plan changes to the HMO Plans to calendar year 2007 · The $250 per admisSion hospital copayment; an~ .~~ · The increa m -'--- se e ergency room copayment ,,,~,,, 2. Delay the following plan changes to the PPO Plan to calendar year 2007 · The $250 per admission hospital copayment; and · Th~gency room copayment; and 3. In addition, he will recommend that there be no other health plan changes to reduce the unexpected additional 5% increase in premiums for 2006. Committee Chair Hanson stated this proposal, cumulatively, would cost the City ~~L~~ $296,350 in 2006. / Agenda Summary Report Page 4 Personnel Committee Meeting October 4, 2005 Staff was requested to prepare a Majority and Minority Report for Council consideration. Committee Chair Hanson will review the Minority Report with staff before it is submitted to Council. 5. COMMITTEE COMMENTS 6. ADJOURNMENT The meeting was adjourned at 12:15 p.m. Attendees: City Manager Alan Tandy; Assistant City Manager Alan Christensen; Assistant City Manager John Stinson; City Attorney Ginny Gennaro; Human Resources Manager Carroll Hayden; Finance Director Nelson Smith; Fire Chief Ron Fraze; Deputy Fire Chief Gary Hutton; Police Captain Tim Taylor; Scott Monroe and Paul Smith, Fire Department; Bill Ware, Police Department; City Clerk Pam McCarthy; Ginger Rubin, Human Resources Benefits; Chuck Waide and Pete Rodriguez, SEIU-CCAPE; and Mike Turnipseed, Kern Tax cc: Honorable Mayor and City Council S:~AC\05PersonnelCommitteeP05octO4sum mary.doc Agenda Summary Report Page 2 Personnel Committee Meeting October 4, 2005 B. Review and Committee recommendation on Health Plan design changes Committee Member Scrivner wanted to restate the action recommended by the Personnel Committee at its June 13th meeting to deal with the 9% increase. At that time the Committee voted to recommend the City pay for 5% of the increase and to reduce the other 4% increase in premiums, make the following adjustments to the Health Plans: HMO Plans · Increase office visit copay from $10 to $15 · Add $250 per admission hospital copayment · Increase emergency room copayment to $100 (which would be waived if admitted to the hospital) PPO Plan · Change coinsurance in-network from 80-100% (depending on type of service) to 90%, and 60% for out-of-network · Increase out-of-network out-of-pocket maximum from $1,600 to $5,000 · Add $250 per admission hospital copayment · Add $100 emergency room copayment Blue Cross Dental Plan Change prosthodontic service from 80% to 60% Committee Member Scrivner asked for staff's recommendation to reduce the unexpected additional 5% health plan increase in premiums. The additional 5% increase will raise premiums and leave the budget out of balance by $168,376, assuming the Personnel Committee's recommendations at the June 13th meeting to deal with the 9% increase in premiums are adopted by the Council. ttlmmend~a chang~ indi~al ~rom $~0 t~ 3! ,~'l~n p~mium~(dr~ases~add~..ea~(~ e/l~ner~~s o e · . Committee Member Sullivan was in agreement with staff's recommendation to make additional plan changes to reduce the additional 5% increase in premiums. It was noted that the Employee Insurance Committee was not in agreement with any plan changes to reduce the 9% projected premium increases when the Personnel Committee met in May and June of this year. Committee Member ScriVner explained if no action is taken to reduce the 14% increase, premiums will increase $2.23 million for 2006. For active employees the City pays 80% of the premiums and the employees pay 20%. The retirees pay different amounts depending on coverage and years of service, but pay an average share of 27%. B A K E R'S F I E L D OFFICE OF THE CITY MANAGER MEMORANDUM October 26, 2005 TO: Honorable Mayor and City Council FROM: Alan Tandy, City Manager~/~/~ SUBJECT: Council Meeting of October 26, 2005 Reports - Item 15.a. Personnel Committee Reports Attached is additional backup information, which was finalized after the agenda packet had been sent to the printer. Health Insurance Plans Costs No Plan Majority Minority Insurance Committee' Changes Report Report Recommendation Current Cost $ 15,887,991 $ 15,887,991 $ 15,887,991 $ 15,887,991 Projected Cost $ 18~121r776 $ 17~162~373 $ 17~326~973 $ 17~648~223 Increase $ 2,233,785 $ 1,274,382 $ 1,438,982 $ 1,760,232 City Share of Increased Cost $ 1,639,710 $ 925,166 $ 1,045,884 $ 1,285,817 · One time cost due to phasing $ 64,000 $ 1,109,884 City Costs compared to majority report $ 714,544 $ 184,718 $ 360,651 Cost comparedto Budget $ (762,202) $ (47,658) $ (232,376) $ (408,309) 10/26/2005 11:47 Health Insurance Plan Changes Majority Minority Insurance HMO Plans Current Report Report Committee Office Visit Co-Pay $10 $15 $15 $20 Hospital Co-Pay $0 $250 $250 * $0 Emergency Room Co-Pay $251550 $100 $75 * $100 PPO Plans Co-Insurance In/Out 80-100% depending 90%/60% 90%/60% 80-100% depending of Network on type of service on type of service Out of Network, Out of $1,600 $5,000 $5,000 $2,000 Pocket Maximum Hospital Co-Pay $0 $250 $250 * $0 Emergency Room Co-Pay $0 $100 $75 * $100 Individual Deductible $200 $250 $200 $250 Blue Cross Dental Prosthodontic Service 80% 60% 60% 80% (Bridges and Crowns) * Proposed Plan Change Effective January 1, 2007 PPO/In and Out-of-Network Coverage Scenarios Current PPO · 80% to 100% coverage provided o 80% is often accepted by provider · $1,600 individual out-of pocket maximum for choosing an in-network · $1,600 individual out-of pocket maximum for choosing an out-of-network · Out-of-pocket includes: o Deductibles o Employee share of coinsurance (the 20% not covered by insurance) · There is currently no incentive t° stay in-network, which is less costly service · Worst case: Medical expenses would be covered at 80% to a maximum of $1,600 out-of- pocket for each individual. Family of 4 could be responsible for up to $6,400 if all family members met maximums ($1,600 each). Maiorit¥ and Minority Report PPO · 90% coverage in-network, 60% coverage out-of-network o 60% would mean more out-of-pocket costs if out-of-network is chosen · $1,600 individual out-of-pocket maximum for choosing an in-network provider · $5,000 individual out-of pocket maximum for choosing an out-of-network provider · More savings because in-network offers higher percentage paid less out-of-pocket · Choice determines out-of-pocket exposure: o If in-network provider is chosen, 90% coverage provided ($1,600 max. applies) o If no in-network provider, 90% coverage or as if in-network ($1,600 max. applies) o If an emergency occurs, 90% coverage ($5,000 max. applies) · Worse-case: Medical expenses would be covered at 90% to a maximum of $5,000 out-of- pocket for each individual. Family of 4 could be responsible for up to $20,000 if all family members met maximums ($5,000 each). Insurance Committee Report PPO · 80% to 100% coverage provided for in or out-of network o 80% is often accepted by provider · $2,000 individual out-of pocket maximum for choosing an in-network provider · $2,000 individual out-of pocket maximum for choosing an out-of-network provider · This alternative is the same as current system but with higher limits · There is no incentive to use less costly, in-network service · Worst case: Medical expenses would be covered at 80% to a maximum of $2,000 out-of- pocket for each individual. Family of 4 could be responsible for up to $8,000 if all family members met maximums ($2,000 each). Created on 10/26/2005 i :08 PM C:\Documents and Settings\achriste\Desktop\PPO Scenarios.doc B A K E R S F I E L D OFFICE OF THE CITY MANAGER MEMORANDUM October 24, 2005 TO: Honorable~M,~or and City Council FROM: Alan Tand~,'City Manager SUBJECT: Council Meeting of October 26, 2005 Reports - Item 15.a. Personnel Committee Reports Attached is additional backup information, which was finalized after the agenda packet had been sent to the printer. Health Insurance Plans Costs No Plan Majority Minority Insurance Committee Chancjes Report Report Recommendation Current Cost $ 15,887,991 $ 15,887,991 $ 15,887,991 $ 15,887,991 Projected Cost $ 18,121,776 $ 17,162,373 $ 17,326,973 $ 17,648,223 Increase $ 2,233,785 $ 1,274,382 $ 1,438,982 $ 1,760,232 City Share of Increased Cost $ 1,639,710 $ 925,166 $ 1,045,884 $ 1,285,817 One time cost due to phasing $ 64,000 $ 1,109,884 City Costs compared to majority report $ 714,544 $ 184,718 $ 360,651 Cost compared to Budget $ (762,202) $ (47,658) $ (232,376) $ (408,309) 10/24/2005 8:31 ADMINISTRATIVE REPORT I MEETING DATE: October 26,2005 I AGENDA SECTION: Reports I ITEM: TO: Honorable Mayor and City Council APPROVED FROM: Alan Christensen, Assistant City Manager DEPARTMENT HEAD ~ DATE: October 21,2005 CITY ATI'ORNEY /~~ CITY MANAGER ~ SUBJECT: Personnel Committee Reports: 1. Majority report regarding Health Insurance Plan Renewals 2. Minority Report regarding Health Insurance Plan Renewals RECOMMENDATION: The Personnel Committee recommends: 1. Accept Majority Report and implement recommendation; or 2. Accept Minority Report and implement recommendation Note: Insurance Committee has submitted an alternate proposal BACKGROUND: The Personnel Committee has had several meetings with Buck Consultants, our health care consultants, over the past several months. These meetings were to assess potential changes in our health care plans designs and determine which changes were needed. Also, the meetings were to understand changes the federal government is making in regard to Medicare. The consultants initially estimated rate increase of abo~t 9%. Initial rate increase discussions involved the City picking up 1/2 the increase and the balance being made up by plan changes. On June 13, 2005, the Personnel Committee voted unanimously to implement plan changes that would be needed to offset the rate increases when the final numbers arrived. Subsequently, the actual increases in the proposed rates have now arrived and are at 14%. Based on this large rate increase the Personnel Committee discussed not only implementing the plan changes initially approved, but additional ones to help address the increased costs. PROPOSED HEALTH PLAN CHANGES: Due to the projected increases in the City's health plans, the Personnel Committee reviewed some minor plan design changes for both the PPO and HMO plans. The plan design changes the Personnel Committee Majority is recommending are detailed in the attached Majority report. The Minority Report proposal is a compromise position that defers some plan changes and shifts more cost to the City. ADMINISTRATIVE REPORT Page 2 The Insurance Committee met on October 19, 2005, to propose alternative plan design changes. All employee groups were represented at the Insurance Committee. A number of plan changes were proposed, which are also attached in the Insurance Committee Report. However, because the Insurance Committee's proposal came late Wednesday evening, we were not able to accurately produce numbers showing the financial impact of their proposal. They will be provided to the Council as soon as they are available. MEDICARE PART D AND RELATED CHANGES:' In addition to the above mentioned changes, additional modifications to the health .plans need to be made due to Medicare Part D prescription drug coverage, which was added to Medicare by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This coverage will become available on January 1. 2006. MMA gives employers who provide retiree health coverage several options for offering prescription drug coverage to their Medicare-eligible retirees, including- · Continuing their current plans and applying for the 28% Federal subsidy for qualifying enrollees' allowable prescriPtion drug costs · Providing coverage that '~Nraps around" the Medicare Part D prescription drug benefit · Contracting with a national or regional prescription drug plan (PDP). The Personnel Committee has studied the various options, considered recommendations from the Insurance Committee (a meet and confer committee) and from Buck Consultants, the City's health care consultants and are recommending the following actions: · Because'both Kaiser Senior Advantage and Blue Cross Senior Secure intend to be a Medicare Advantage PDP, take advantage of this option which will be financially advantageous for both retirees in those programs and the City for these two plans. · Blue Cross PPO and HMO intend to offer a wraparound benefit plan, which will require a separate policy for the retirees. Currently the Blue Cross HMO plan blends the rates for actives and retirees. This change will require an unblending of the rates. This would be in concert in regard to retiree medical coverage and GASB 43/45 reporting requirements. It is recommended for the plan year 2006, the City elect the option to seek the subscription drug subsidy from the Federal Government and take advantage of the wrap around coverage. This option can be changed in the future. · As the unblending of the rates will cause a substantial premium increase for retirees, it is recommended to develop a phase in plan to separate the rates for the active and retirees. The exact amount of the HMO retiree "subsidy" will be determined after the rates for the 2006 plan year are received. It is anticipated that the increase in rates will be phased in, 20% per year for five years. However, any "subsidy" will decrease incrementally and will completely cease after 5 years. · It is recommended that an actuarial study be done to determine theCity's unfunded liability under GASB 43/45 reporting requirements for medical benefits. 10/21/2005 4:02:04 PM AC/JWS/AT:al S:~,dmin Rpts~005~Health Care Reports Admin 102605.doc CITY OF BAKERSFIELD PERSONNEL COMMITTEE MAJORITY REPORT NO. 1 - 05 OCTOBER 26, 2005 TO: HONORABLE MAYOR AND CITY COUNCIL SUBJECT: HEALTH INSURANCE PLAN RENEWALS AND PLAN DESIGN CHANGES The Personnel Committee has met several times with the City's health care consultants, staff and employee groups regarding the renewals of the City's health plans. The consultants initially estimated rate increase of about 9%. Initial rate increase discussions involved the City picking up 1/2 the increase and the balance being made up by plan changes. Subsequently, the actual increases in the proposed rates have now arrived and are at 14%. Based on this large rate increase the Personnel Committee discussed not only implementing the plan changes initially discussed, but additional ones~to help address the increased costs. The Committee was divided on this issue and, therefore, recommended sending a Majority and a Minority Report to the City Council. The 'Personnel Committee Majority feels that the health insurance plan changes reviewed are necessary to contain costs for both the City and its employees. The following plan changes are recommended: PPO plan · Change coinsurance to 90% in-network and 60% out-of-network · Increase out-of-network out-of-pocket maximum to $5,000 · Add $250 per admission hospital co-payment · Add $100 emergency room co-payment · Increase individual deductible from $200 to $250 HMO plans · Increase office visit copay to $15 · Add $250 per admission hospital co-payment · Add $100 emergency room co-payment Blue Cross dental plan · Change prosthodontic service to 60% COMMUNITY SERVICES COMMITTEE MAJORITY REPORT NO. 1 - 05 OCTOBER 26, 2005 PAGE -2 - Additionally, The Committee Majority also recommends approval of the changes related to the implementation of Medicare Part D, which are consistent with GASB 43/45 requirements, which are detailed in the administrative report. The recommendations above would ensure that increased plan costs are addressed through plan changes which help contain costs for both the City and its employees and retirees. Even with the recommended plan changes, health plans for employees and retirees continue to provide comprehensive and adequate health care coverage. Respectfully submitted, Councilmember Jacquie Sullivan Councilmember Zack Scrivner S:~Admin Rpts~4ajority Report No. 1-05.DOC CITY Of BAKERSFIELD PERSONNEL COMMI'I-i'EE MINORITY REPORT'NO. 1 - 05 OCTOBER 26, 2005 TO: HONORABLE MAYOR AND CITY COUNCIL SUBJECT: HEALTH INSURANCE PLAN RENEWALS AND PLAN DESIGN CHANGES The Personnel Committee has met several times with the City's health care consultants, staff and employee groups regarding the renewals of the City's health plans. The consultants initially estimated rate increase of about 9%. Initial rate increase discussions involved the City picking up 1/2 the increase and the balance being made up by plan changes. Subsequently, the actual increases in the proposed rates have now arrived and are at 14%. Based on this large rate increase the Personnel .Committee discussed not only implementing the plan changes initially discussed, but additional ones to help address the increased costs. The Committee was divided on this issue and, therefore, recommended sending a Majority and a Minority Report to the City Council. The Personnel Committee Majority report includes implementing the following plan changes: For the PPO plan, increases coinsurance to 90% in-network and 60% out-of- network; increases out-of-network out-of-pocket maximum to $5,000; adds $250 per admission hospital co-payment; and adds the $75 emergency room co-payment. For the HMO plans, increases office visit copay to $15, adds $250 per admission hospital co-payment; and adds the $75 emergency room co-payment. For the Blue Cross Dental plan changes prosthodontic service to 60%. Also recommended are several changes related to the implementation of Medicare Part D, and consistent with GASB 43/45 requirements, which are detailed in the administrative report. The proposals represented by the Personnel Committee Majority Report have not been accepted by the various bargaining units. Councilmember Harold Hanson is bringing forward this Minority Report to provide a possible compromise plan which PERSONNEL COMMITTEE MINORITY REPORT NO. 1 - 05 OCTOBER 26, 2005 PAGE -2 - may be more acceptable to the employee groups and would still provide long term cost savings through the phased implementation of the proposed plan changes. This Minority Report recommends the following alternative: · The phase in of the previously discussed plan design changes over 2 years rather than one by deferring the implementation of the $250 per admission hospital co-payment and $75 emergency room co-payment until 2007, and not increasing the individual deductible from $200 to $250 or further increasing the co-payment for emergency room visits to $100 at this time. · Implementing the proposed plan changes not only helps out the City, but also the employees and retirees, by reducing their share of the cost of premium increases they will have to pay. · Staff estimates that increased property tax valuations appear to be sufficient to cover the remaining deficit amount after plan changes are made. · Medicare D and related plan changes as outlined by staff would be implemented in 2006. These changes would meet the objectives of the City to contain health care costs yet provide a compromise for employee groups who are concerned with the impact of numerous plan changes in one year. Respectfully submitted, Councilmember Harold Hanson S:~,dmin Rpts\Minority Report No. 1-05.DOC CITY Of BAKERSFIELD INSURANCE COMMITTEE OCTOBER 26, 2005 TO: HONORABLE MAYOR AND CITY COUNCIL sUBJECT: HEALTH INSURANCE PLAN RENEWALS AND PLAN DESIGN CHANGES The Insurance Committee is the City's designed "meet and confer" body authorized to make recommendations to the Council with regards to health insurance benefits. The Insurance Committee has met three times since iMarch 16, 2005, to discuss the anticipated health insurance increases for 2006. The Committee met again, for a fourth time, on October 19, 2005, to propose specific plan changes to close a budget shortfall in 2006 caused by health plan increases of 14% overall. All employee bargain groups were represented at the Insurance Committee. The Insurance Committee proposed the following alternative: HMO Plans · Increase office visit co-payment from $10 to $20. · Increase emergency room co-payment from 0 to $100. · No change to the hospital co-payment, which would remain at $0. PPO Plans · Increase out-of-pocket maximum from $1,600 to $2,000... · Increase deductible from $200 to $250 per individual.. · Increase emergency room co-payments from $0 to $100. · No change to co-insurance for in and out of network coverage, which would remain at 80% to 100% depending upon the type of service. · No change to the hospital co-payment, which would remain at $0. Blue Cross Dental · No change in the prosthodontic service, which would remain at 80% coverage. Because the Insurance Committee's recommendations were proposed late Wednesday evening, we were not able to accurately produce numbers showing the impact of the recommendations. They will be provided to the Council as soon as they are available. S:V~,dmin Rpts\Minority Report No. 1-05. DOC PERSONNEL COMMITTEE MEETINGS FOR 2006 INSURANCE RATES March 16, 2005 April 11,2005 May 31,2005 June 13, 2005 October 4, 2005 INSURANCE COMMITTEE MEETINGS FOR 2006 INSURANCE RATES Mamh 16, 2005 May 31,2005 August 17, 2005 October 19, 2005 ADMINISTRATIVE REPORT MEETING DATE: October 26, 2005 I AGENDA SECTION: Consent Calendar I ITEM: i~. O. TO: Honorable Mayor and City Council APPROVED FROM: John Stinson, Assistant City Manager DEPARTMENT HEAD DATE: October 13, 2005 CITY ATTORNEY CITY MANAGER SUBJECT: City Physician Agreements 1) Agreement with Central Valley Occupational Medical Group, Inc. 2) Agreement with Business Health Network/Southwest Urgent Care Center, Inc. RECOMMENDATION: Staff recommends approval. BACKGROUND: On August 2, 2005, a request for proposal for city physician services was sent to eleven providers. Four medical providers submitted responses to the RFP. All four providers were selected to participate in the oral interview process on September 19, 2005. The agreements are for a three year period commencing November 1, 2005. The city physician services include the following: pre-employment physicals; treatment for work related injuries; hazmat physicals; fitness for duty exams; and drug and alcohol testing. The four medical providers interviewed were Central Valley Occupational Medical Group (Dr. Davies and Dr. Sanchez), Business Health Network/Southwest Urgent Care Center (Dr. Cousin and Dr. Del Toro), Professions HealthCare (Dr. Reilly and Dr. Schmidt), and Kaiser Permanente (Dr. Haq). The oral board consisted of the follOwing staff: Ginny Gehnaro, City Attorney; Robert Bivens, Police Captain; Gary Hutton, Deputy Fire Chief; Carroll Hayden, Human Resources Manager; and Pat Flaherty, Risk Manager. The medical providers were rated on the following categories: knowledge of the workers' compensation system, general medical competence, customer service, and range of services. The top two providers selected were Central Valley Occupational Medical Group and Business Health Network/Southwest Urgent Care Center as they best met the city requirements. The other two providers were unable to clearly demonstrate the necessary experience in occupational medicine to meet the city standards. Currently, there are two medical providers serving as city physicians: Central Valley Occupational Medical Group provides services to police and miscellaneous employees and Business Health Network/Southwest Urgent Care Center provides services to fire employees. Bakersfield Occupational Medical Group was October 14, 2005, 11:43AM S:\Meg\CONTRACTS\RFP\City Physician 20051ADMIN-RPT05.DOC ADMINISTRATIVE .REPORT also providing city physician services but do to service changes we no longer utilize their services. They did not respond to the current RFP. Fees for services are similar for Central Valley Occupational and Business Health Network/Southwest Urgent Care and there is no significant increase in pricing from the 2002 agreements. Based on the results from the oral, board interviews and input from fire and police, staff recommends we continue with the current arrangement: · Police and miscellaneous employees utilize Central Valley Occupational Medical Group · Fire Department emplOyees utilize Business Health Network/Southwest Urgent Care Center October 14, 2005, 11:43AM S:'tMegICONTRACTS\RFP\City Physician 2005V~DMIN-RPT05.DOC 15. INDEMNITY. CONTRACTOR shall indemnify, defend, and hold harmless CITY, its officers, agents and employees against any and all liability, claims, actions, causes of action or demands whatsoever against them,' or any of them, before administrative or judicial tribunals of any kind whatsoever, arising out of, connected with, or caused by CONTRACTOR, CONTRACTOR's employees, agents, independent contractors, companies, or subcontract°rs in the performance of, or in any way arising from, the terms and provisions of this Agreement whether or not caused in part by a party indemnified hereunder, except for CITY's sole active negligence or willful misconduct. 16. EXECUTION. This Agreement is effective upon execution. It is the prodUct of negotiation and all parties are equally responsible for authorship of this Agreement. Section 1654 of the California Civil Code. shall not apply to the interpretation of this Agreement. 17. NOTICES. All notices relative to this Agreement shall be given in wdting and shall be personally served or sent by certified or registered mail and be effective upon actual personal service or depositing in the United States mail. The parties shall be addressed as folloWs, or at any other address designated by notice: CITY: CITY OF BAKERSFIELD CITY HALL 1501 Truxtun Avenue Bakersfield, California 93301 CONTRACTOR: CENTRAL VALLEY OCCUPATIONAL MEDICAL GROUP (CVO) 4100 Truxtun Avenue, 'Suite 200 Bakersfield, California 93309 18. GOVERNING LAW. The laws of the State of California will govern the validity of this Agreement, its interpretation and performance. Any litigation arising in any way from this Agreement shall be brought in Kern County, California. 19. FURTHER ASSURANCES. Each party shall execute and deliver such papers, documents, and instruments, and perform such acts as are necessary or appropriate, to implement the terms of this Agreement and the intent of the parties to this Agreement. · 20. ASSIGNMENT. Neither this Agreement, nor any interest in it may be assigned or transferred by any party without the prior written consent of all the parties. Any such assignment will be subject to such terms and conditions as CITY may choose to impose. 21. BINDING EFFECT. The rights and obligations of this Agreement shall inure to the benefit of, and be binding upon, the parties to the contract and their heirs, CITY PHYSICIAN CONTRACTOR'S AGREEMENT S:\MEG\CONTRACTS\RFP\CITY PHYSICIAN 2005\CVO PHYSCiAN K.DOC -10/10/2005 11:14 AM - - Page 5 of 7 Pages -- administrators, eXecutors, personal representatives, successors and assigns, and whenever the context so requires, the masculine gender includes the feminine and neuter,. and the singular number includes the plural. This Agreement may be executed in any number of counterparts, each of which shall be considered as an original and be effective as such. 22. ACCOUNTING RECORDS. CONTRACTOR· shall maintain accurate accounting records and other Written documentation pertaining to all costs incurred in performance of this Agreement. Such records and documentation shall be kept at CONTRACTOR's office dudng the term of this Agreement, and for a period of three years from the date of the final payment hereunder, and said records shall be made 'available to CITY representatives upon request at any time during regular business hours. 23. .CORPORATE AUTHORITY. Each individual signing this Agreement on ~' behalf of entities represent and warrant that they are, respectively, duly authorized to sign ii on behalf of the entities and to bind the entities fully to each and all of the obligations set ~ forth in this Agreement. ~.i 24. TAX NUMBERS. CONTRACTOR's Federal Tax ID Number: #77-0544635. CONTRACTOR is a corporation? Yes 25. NON-INTEREST. No officer or employee of the CITY shall hold any interest in this Agreement (California Government Code section 1090). 26. CONFIDENTIALITY. Dudng the term of this Agreement, CONTRACTOR will be dealing with information of a legal and confidential nature, and sUch information cOuld severely damage CITY if disclosed to outside parties. CONTRACTOR will not disclose to any person, directly or indirectly, either during the term of this Agreement or at any time thereafter, any such information or use such information other than as necessary in the course of this Agreement. All documents CONTRACTOR prepares and confidential information given to CONTRACTOR under this Agreement are the exclusive property of the CITY. Under no circumstances shall any such information or documents be removed from the CITY without the CITY's prior written consent. 27. NEWS RELEASES/INTERVIEWS. All news releases, media interviews, testimony at hearings and public comments concerning CITY personnel or legal matters arising from or related to this Agreement shall, by CONTRACTOR, be prohibited unless authorized by the CITY. 28. TERM. This Agreement shall continue for a period of three (3) years commencing November 1,2005. The CITY, as an option, may extend the contract for one additional year with the same terms and conditions. CITY PHYSICIAN CONTRACTOR'S AGREEMENT S:\MEG\CONTRACTS\RFP\CITY PHYSICIAN 2005\CVO PHYSCIAN K.DOC - 10110/2005 11:14 AM - - Page 6 of 7 Pages -- 15. INDEMNITY. CONTRACTOR shall indemnify, defend, and hold harmless CITY, its officers, agents and. employees against any and all liability, claims, actions, causes of action or demands whatsoever against them, or any of them, before administrative or judicial tribunals of any kind whatsoever, arising out of, connected with, or caused by CONTRACTOR, CONTRACTOR's employees, agents, independent contractors, companies, or. subcontractors in the performance of, or in any way arising from, the terms and provisions of this Agreement whether or not caused in part by a party indemnified hereunder, except for CiTY's sole active negligence or willful misConduct. 16. EXECUTION. This Agreement is effective upon execution. It is the product of negotiation and all parties are equally responsible for authorship of this Agreement. Section 1654 of the California Civil Code shall not apply to the interpretation of this Agreement. 17. NOTICES. All notices relative to this Agreement shall be given in wdting and shall be personally served or sent by certified or registered mail and be effective upon actual personal service or depositing in the United States mail. The parties shall be addressed as follows, or at any other address designated by notice: CITY: CITY OF BAKERSFIELD CITY HALL 1501 Truxtun Avenue Bakersfield, California 93301 CONTRACTOR: BUSINESS HEALTH NETWORK/ SOUTHWEST URGENT CARE CENTER, INC. 9500 Stockdale Highway Bakersfield, California 93311 18. GOVERNING LAW. The laws of the State of California will govern the validity of this Agreement, its interpretation and performance. Any litigation arising in any way from this Agreement shall be brought in Kern CountY, California. 19. FURTHER ASSURANCES. Each party shall execute and deliver such papers, documents, and instruments, and perform such acts as are necessary or appropriate, to implement the terms of this Agreement and the intent of the parties to this Agreement. 20. ASSIGNMENT. Neither this Agreement, nor any interest in it may be assigned or transferred by any party without the prior written consent of all the parties. Any such assignment will be subject to such terms and conditions as CITY may choose to impose. 21. BINDING EFFECT. The rights and obligations of this Agreement shall inure CITY PHYSICIAN CONTRACTOR'S AGREEMENT S:\MEG\CONTRACTS\RFP\CITY PHYSICIAN 2005\BUS HEALTH NETWK K.DOC -10/10/2005 11:20 AM - - Page 5 of 7 Pages -- to the benefit of, and be binding upon, the parties to the contract and their heirs, administrators, executors, personal representatives, successors and assigns, and whenever the context so requires, the masculine gender includes the feminine and neuter, and the singular number includes the plural. This Agreement may be executed in any number of counterparts, each of which shall be considered as an odginal and be effective as such. 22. ACCOUNTING RECORDS. CONTRACTOR shall maintain accurate accounting records and other wdtten documentation pertaining to all costs incurred in performance of this Agreement. Such records and documentation shall be kept at CONTRACTOR's office during the term of this Agreement, and for a period of three years from the date of the final payment hereunder, and said records shall be made available to CITY representatives upon request at any time during regular business hours. 23. CORPORATE AUTHORITY. Each individual signing this Agreement on behalf of entities represent and warrant that they are, respectively, duly authorized to sign on behalf of the entities and to bind the entities fully to each and all of the obligations set forth in this Agreement. 24. TAX NUMBERS. CONTRACTOR's Federal Tax ID Number: #77-0061436. CONTRACTOR is a corporation? Yes 25. NON-INTEREST. No officer or employee of the CITY shall hold any interest in this Agreement (California Government Code section 1090). 26. CONFIDENTIALITY. Dudng the term of this Agreement, CONTRACTOR will be dealing with information of a legal and confidential nature, and such information could severely damage CITY if disclosed to outside parties. CONTRACTOR will not disclose to any person, directly or indirectly, either during the term of this Agreement or at any time thereafter, any such information or use such information other than as necessary in the course of this Agreement. All documents CONTRACTOR prepares and confidential information given to CONTRACTOR under this Agreement are the exclusive property of the CITY. Under no circumstances shall any such information or doCuments be removed from the CITY without the CITY's prior written consent. 27. NEWS RELEASES/INTERVIEWS. All news releases, media interviews,' testimony at hearings and public comments concerning CITY personnel or legal matters arising from or related to this Agreement shall, by CONTRACTOR, be prohibited unless authorized by the CITY. 28. TERM. This Agreement shall continue for a period of three (3) years commencing November 1,2005. The CITY, as an option, may extend the contract for one additional year with the same terms and conditions. CITY PHYSICIAN CONTRACTOR'S AGREEMENT S:\MEG\CONTRACTS\RFP\CITY PHYSICIAN 2005\BUS HEALTH NETWK K.DOC --10/10/2005 11:20 AM - - Page 6 of 7 Pages -- City Cost of employees salary and benefits. 2000 2005 Service Maint. Wkr. Salary $27,916 $35,158 Benefits $7,040 $14,626 Total Comp. $34,956 $49,784 Heavy Equip Op Salary $37,633 $47,393 Benefits $9,491 $19,715 Total Comp. $47,124 $67,108 Acct Clerk Salary $25,449 $29,070 Benefits $6,418 $12,093 Total Comp. $31,867 $41,163 Fire Capt. Salary $41,837 $67,925 Benefits $10,551 $51,195 Total Comp. $52,388 $119,120 Fire Engineer -. Salary $35,008 $56,839 Benefits $12,011 $42,840 Total Comp. $47,019 $99,679 Fire Fighter Salary $31,732 $51,519 Benefits $10,888 $38,830 Total Comp. $42,620 $90,349 Detective Salary $52,435 $57,841 Benefits $17,990 $43,595 Total Comp. $70,425 $101,436 Sergeant Salary $60,902 $68,501 Benefits $20,896 $51,629 Total Comp. $81,798 $120,130 Police Officer Salary $46,565 $51,368 Benefits $15,976 $38,716 Total Comp. $62,541 $90,084 Assumption: All salary figures are step 3 & medical & dental benefits are at 2 party Blue Cross. GR: P:\CARROLL~Compare 2005 2000.xls 1013/2005 4:33 PM City Cost of employees salary and benefits. 2000 2005 Service Maint. Wkr. Salary $27,916 $35,158 Benefits $7,040 $14,626 Total Comp. $34,956 $49,784 Heavy Equip Op Salary $37,633 $47,393 Benefits $9,491 $19,715 Total Comp. $47,124 $67,108 Acct Clerk Salary $25,449 $29,070 Benefits $6,418 $12,093 Total Comp. $31,867 $41,163 Fire Capt. Salary $41,837 $67,925 Benefits $10,551 $51,195 Total Comp. $52,388 $119,120 Fire Engineer Salary $35,008 $56,839 Benefits $12,011 $42,840 Total Comp. $47,019 $99,679 Fire Fighter Salary $31,732 $51,519 Benefits $10,888 $38,830 Total Comp. $42,620. $90,349 Detective Salary $52,435 $57,841 Benefits $17,990 $43,595 Total Comp. $70,425 $101,436 Sergeant Salary $60,902 $68,501 Benefits $20,896 $51,629 Total Comp. $81,798 $120,130 Police Officer Salary $46,565 $51,368 Benefits $15,976 $38,716 Total Comp. $62,541 $90,084 Assumption: All salary figures are step 3 & medical & dental benefits are at 2 party Blue Cross. GR: P:~CARROLL~Compare 2005 2000. xls 10/3/2005 4:33 PM City of Bakersfield Personnel Committee and Insurance Committee Meetings May 31,2005 · buckco ns'u Itants · ~ an ACS company City of Bakersfield Table of Contents Page Section I: Medicare Part D 2 Section I1: Plan Design Changes 9 buckconsultants an ACS company City of Bakersfield Medicare Part D The Personnel Committee requested additional information about the "wraparound" option for Medicare Buck Consultants discussed this option with both Kaiser and Blue Cross. We want to share with you: - The recommended approach for the Kaiser Senior Advantage plan - The recommended approach for the Blue Cross Senior Secure plan - The results of the discussions with Blue Cross concerning the Prudent Buyer PPO and'California Care HMO plans "2 buckconsUltants/~, an ACS company A c ,. City of Bakersfield Medicare Part D- Back.cl.round The table below provides a "snapshot" of the retiree population over age 65, by plan. It provides a rough idea of the number of individuals who could be affected by Medicare Part D Retiree Spouse Total Kaiser Senior Advantage 18 5 23 Blue Cross Senior Secure 30 10 40 PPO 80 19 99 HMO 81 43 124 Total Blue Cross 191 72 263 Total All 209 77 286 The table shows that the maximum number affected is 286; however, the 63 individuals in the Kaiser plan and the Blue Cross Senior Secure options are not directly affected 3 buckconsultants an ACS company ,, ,, ,. City of Bakersfield Medicare Part D- Back round In addition, some of the retirees currently coVered by the City do not participate in Medicare because they did not participate in Social Security while they were active emPloyees ®' We do not know how many of these retirees are covered-by the City, but it will reduce the "possibly affected" population because those individuals cannot be covered under Medicare Part D The Medicare-eligible population will continue to grow as current retirees get older and life expectancy continues to climb 4 buckconsUltants an ACS company, c ,. City of Bakersfield Medicare Part D - Kaiser Senior Advanta e The City currently does not provide retirees in the Kaiser Senior Advantage plan with any prescription coverage beyond the limited coverage provided by Kaiser Because Kaiser intends to be a Medicare Advantage PDP plan, it will add Part D coverage to this plan Buck recommends this approach for these retirees: - The subsidy is not available for these retirees - Kaiser will enroll these retirees in Part D if they so request - 'Kaiser will pay the $35 monthly rate for each retiree - Kaiser is anticipating 15% premium increases in the non-PDP plan, but either no increase or a rate decrease for the plans with the PDP option - This option will be financially advantageous to both the retirees and the City 5 buckconsultants an ACS company City of Bakersfield MediCare Part D - Blue Cross Senior Secure The City currently does not provide retirees in the Blue Cross Senior Secure plan with any prescription coverage beyond the limited coverage provided by Blue Cross Because Blue Cross intends to be 'a Medicare Advantage PDP plan, it will add Part D coverage to this plan Buck recommends this approach for these retirees: - The subsidy is not available for these retirees - Blue Cross will enr. oll these retirees in Part D directly //- - Blue Cross will likely 'pay the $35 monthly rate for each retiree- "/ ~¢~ ~ - Blue Cross is anticipating larger premium increases for the non-PDP plan than for the plans with the PDP option - This option will be financially advantageous to both the retirees and the City buckconsultants /~, 6 an ACS company, c ,. City of Bakersfield Medicare Part D Blue.Cross HMO and PPO Plans Blue Cross intends to offer a wraparound benefit plan, but it will not have pricing available Until late June or early July 2005 -- , ~ This option woulS~eqb~~eparate~group r~umber for th~retirees, which is a change for the City and thus may require programming changes Blue Cross has not finalized the plan designs that will be offered to insured benefit plans like the City's This will likely require the City to discontinue active subsidization of the retiree HMO rates, which in turn.will increase the retiree rates by more than 100%, even after taking into account the reduction due to the wraparound benefit design. buckconsultants an ACS company .,. City of Bakersfield Medicare Part D-;Buck Recommendations · B_ecause of the complexity of the wraparound coverage and because Blue Cross cannot provide e.s. sential informa!ion until late June or early July, Buck recommends that the Qty keep the designs of the PPO and HMO plans unchanged and elect to seek the subsidy from the federal government ; ® We also recommend that the K.aiser Senior Advantage and Blue Cross Senior S_ecure plans take advantage of the MA-PDP option, which will lower the City's cost somewhat and provide a better benefit to the affected retirees; the movement of any retir_ees from the current Blue Cross PPO and HMO plans will further lower the City's cost ® Th.is. op!ion .w. ill re.s. ult in a fairly sign. ificant payment to the City while ' minimizing disruption to current retirees ' '~¢.~,.~ / ( ' ® It also gives the City time to develop a long-term position in regard to retiree medical coverage in general, in concert with the GASB 43/45 reporting requirements buckconsUltants an ACS company., ~ .,. City of Bakersfield Plan Desi n Chan es At the request of the City, we are Providing our recommendations on plan design changes and additional changes that would produce reductions of up to 15% in premium costs These changes together should allow the develo, pment of a plan design that w~¢c.p premium rates at 2005 lev~ The extent of the change needed will not be known until the Blue Cross and Kaiser renewals are presented .and negotiated, but Buck is anticipating increases of 10% to 12% for Kaiser, 8% to 10% for the Blue Cross HMO, and 9% to 12% for the Blue Cross PPO plans 9 buckconsultants .an ACS company, c ,. City of Bakersfield Recommended Changes for 2006 Medical Plan Changes PPO Plan ,kvP-A'a~ ./u' dc ]/&~-.,~ .-----~' Change coinsurance to 90% in-network and 60% out-of-network -4.1% ~/~ ,~0tvJ Increase out-of-network out-of-pocket to $5,000 -0.4% -0.7% Add $250 per admission hospital copayment -0.9%. Add $75 emergency room copayment Total ReCommended Medical Changes -6.0% Increase deductible from $200 to: $250 -1.9% $350 -3.3% $500 -5.5% Add $100 emergency room copayment - 1.0% Increase in-network out-of-pocket to $2,000 -1.6% buckconsuitants 10 an ACS company City of Bakersfield Recommended Changes for 2006 Medical Plan Changes Increase office visit copayment to $15 -1.7% Add $250 per admission hospital copayment -0.8% Add $75 emergency room copayment -0.6% Total Recommended Medical Changes -3.0% Increase office visit copayment to $20 -3.2% Increase office visit copayment to $25 -4.8% Add $100 emergency room copayment -0.8% buckconsUltants /& an ACS company.. City of Bakersfield Recommended C'han.qes for 2006 Dental Plan Changes Estimated Rate Impact Blue Cross Dental Plan Change prosthodontic services to 60% '-5.1% buckconSultants/~, 12 an ACS comPany ,, ,: ,. City of Bakersfield ~ ~..~ Discussion Questions Next Ste s ~ Discussion "13 buCkconsUltants , an ACS company Erom: Carroll Hayden To: Jean Parks Date: 5/24/2005 1:32:20 PM Subject: Re: Personnel Committee Agenda Items Sorry to keep you waiting. Under deferred business have: A) Report and Committee Recommendation on Medicare Part D - Hayden and B) Review and Committee Recommendation on Health Plan Design Changes. Thank you. >>> Jean Parks 05/23/05 11:19 AM >>> The agenda for the Personnel Committee meeting next Tuesday, May 31st at 11:00 a.m. needs to go out this week. Do we know what's going to be on the agenda? Page 1 of 1 ' 3ean Parks - RE: Bakersfield Personnel Committee Meeting Date From: "Beck Timothy D" <beck.t@mellon.com> To: ".lean Parks" <.~parks@ci.bakersfield.ca.us>, "Schionning Michael W" <schionning.m@mellon.com> Date: 4/25/2005 1:11 PM Subject: RE: Bakersfield Personnel Committee Meeting Date CC: "Carroll Hayden" <CHayden@ci.bakersfield.ca.us> ok .lean. Thanks. tim ..... Original Message ..... From: .~ean Parks [mailto:.~parks@ci.bakersfield.ca.us] Sent: Monday, April 25, )_005 10:23 AM To: Beck Timothy D; Schionning Michael W Cc: Carroll Hayden Subject: Bakersfield Personnel Committee Meeting Date Carroll Hayden and Ginger Rubin are both out of the office. Carroll wanted you to know as soon as possible the date the City of Bakersfield Personnel Committee confirmed: It is Tuesday, May 31st at 11:00 a.m., in order to free up the other dates you gave us in .~une. Carroll will be back on Wednesday if you have any questions, or if there are problems with this date, please let me know. Thanks. .lean Parks, Secretary City Manager's Office Bakersfield, CA 661/326-3752 The information contained in this e-mail may be confidential and is intended solely for the use of the named addressee. Access, copying or re-use of the e-mail or any information contained therein by any other person is not authorized. If you are not the intended recipient please notify us immediately by returning the e-mail to the originator.(17b) file://C :~Documents%20and%20Settings\jparks.BAKERSFIELD\Local%20Settings~Temp\,... 4/25/2005 arks - Re: Personnel Comm ttee From: <zscrivner@ libertystar, net> To: "Jean Parks" <Jparks@ci.bakersfield.ca.us> Date: 4/22/2005 4:56:12 PM Subject: Re: Personnel Committee tues, May 31 @ 1 lam is good. Thanks ..... Original Message ..... From: "Jean Parks" <Jparks@ci.bakersfield.ca.us> Subj: Personnel Committee Date: Fri Apr 22, 2005 3:52 pm Size: 559 bytes To: <zscrivner @ libertystar.net> Earlier today I left a voice mail message on your cell--and sometimes they are full, so just wanted to check-in with you. The Consultants have gotten back to us with more dates. Tuesday, May 31st or June 1, 2, or 3, at 11:00 a.m. Harold preferred Tuesday, however, he and Jacquie can meet on Tuesday, or any of the other days. Harold would like to get it on his calendar before Monday noon when he leaves for his two-week vacation. Thanks. City of Bakersfield Table of Contents Page Section I: Medicare Part D 2 Section I1: Blue Cross Emergency Room Utilization 15 Mellon City of Bakersfield Medicare Part D · The City needs to make final decisions as to direction by June of 2005. Mellon has developed a detailed decision guide for the City that outlines: - the various decisions that need to be made - the dates by which the decisions need to be made - the impact on the City and retirees of the decisions - the recommended option that meets the City's needs Mellon City of Bakersfield Medicare Part D- Background ® The table below provides a snap shot of the retiree population that is over 65 by benefit program, This provides a relative estimate of the number of individuals that could be effected by Medicare Part D program, Retiree Spouse Total Kaiser Senior Advantage 18 5 23 Blue Cross Senior Secure 30 10 40 PPO 80 19 99 HMO 81 43 124 Total Blue Cross 191 72 263 Total All 209 77 286 · The table shows that the maximum number effected is 286 participants; however the 63 individuals in the Kaiser plan and the Blue Cross Senior Secure options are not directly effected, 3 ~) Mellon m m m m m mm m m m m mm m m m ,m m m m m City of Bakersfield Medicare Part D- Background ® In addition, some of the retirees currently covered by the City do not Participate in Medicare because they did not participate in Social Security while an active employee. We do not know how many of these retirees are covered by the City, but it will reduce the possible effected population because those individuals cannot be covered under Medicare Part D. The Medicare eligible population will continue to grow as current retirees age and life expectancy continues to climb. 4 -(~) 'Mellon City of Bakersfield Medicare Part D- Decisions · As discussed in the March 16, 2005 Personnel Committee meeting, the City as three options regarding this new benefit: - Do nothing - Keep the current plans unchanged and seek the subsidy payment from the Federal Government - Revise the prescription drug benefit for the Medicare-eligible retirees to coordinate with Medicare ® We believe that the first option is not desirable because: - The City will miss an opportunity to reduce the cost of providing retiree coverage for Medicare-eligible retirees that can benefit both the retiree and the City - It may force the City to accept changes made by Blue Cross and/or Kaiser that are not in the City's best interest s ~) Mellon City of Bakersfield Medicare Part D- Decisions - Subsidy ® We recommend that the City consider either the second or third option. · The second option is to seek the subsidy from the Federal Government. - This option would provide the City with a reimbursement from the federal government equal to 28% of the amount that the City and the retiree spends on prescription drug coverage, subject to some limitations. - The government estimates that this will be approximately $677 per covered retiree beneficiary, which includes both the retiree and spouse - This money is paid to the City as the plan sponsor and can be used for any purpose; the federal government does not require that the money be used to reduce the cost of providing retiree benefits. - The subsidy is only available for retirees who participate in both Medicare Part A and Part B, are not enrolled in the Senior Secure or Senior Advantage programs, and who do not enroll in the Medicare Part D plan. Mellon City of Bakersfield Medicare Part D- Decisions- ~Subsidy ® Advantages - The City's current HMO and PPO plans do meet the requirements under the federal regulations to receive the subsidy payment - This option allows the City to keep its current retiree benefits unchanged · The City offers the Blue Cross Senior Secure and Kaiser Senior Advantage programs and has some currently retired employees who cannot participate in Medicare Part A and Part B · If the City decided to develop a Medicare Wrap Around product, then the benefit offering for those retirees who cannot participate in Medicare Part A and Part B would have to be different from the other retirees - This payment could be as much as $150,000 per year based on the current retiree population. - The process required to seek the subsidy is fairly straightforward, but will require additional administrative work for City staff. Mellon m m m mm m 'm m m m m m m m m m m m m City of Bakersfield Medicare Part D- Decisions - Subsidy ® Disadvantages - The City will need to coordinate enrollment with CMS (the federal government) to determine whether the retiree enrolled in Part D or not. - The City will need to work with Blue Cross to collect the necessary data to claim the subsidy payment. - The City will need to provide an annual actuarial attestation and an annual notification to CMS that it intends to seek the subsidy. - The City will need to determine which retirees cannot participate in Medicare and track them separately - The City will have to provide annual certificates of credible coverage to these retirees as well as provide them if the retiree requests one during the year. - The City will need to communicate with the retirees to ensure that they do not enroll in Medicare Part D - with the exception of those in Senior Secure and Senior Advantage. Mellon City of Bakersfield Medicare Part D- Decisions- Wrap Plan · The third option is to develop a program that supplements the Medicare Part D benefit and require that all eligible retirees elect Part D to receive any prescription drug coverage from the City - This option could reduce the Blue Cross premiums by as much as 25% for these retirees. - It would require splitting the Blue Cross PPO premiums between those retirees eligible for Medicare and those who are not eligible, similar to the splits for the HMO benefit. - This option is also subject to the ability of Blue Cross to effectively and efficiently coordinate coverage with Medicare. - This option would require all effected retirees to enroll in Medicare Part D and pay the estimated $35 monthly premium, although this is likely to be lower than the reduction in the retiree premium that could be achieved under this plan. 9 {~) Mellon City of Bakersfield Medicare Part D - Decisions - Wrap Plan · Advantages - Retirees' benefit can remain unchanged in aggregate, reducing disruption to participants - Consistent with current COB approach to Medicare Parts A and B - No actuarial attestation, certificates of creditable coverage or CMS reporting requirements - Potentially greater savings that those represented by the Subsidy Mellon City of Bakersfield Medicare Part D- Decisions- Wrap Plan ® Disadvantages - This option would require the City to change its current retiree benefits · The City offers the Blue Cross Senior Secure and Kaiser Senior Advantage programs would remain unchanged · The current benefits for those retired employees who cannot participate in Medicare Part A and Part B would remain unchanged, but would be different from that for those employees eligible for Medicare - Much more complex claims payment particularly if the retiree's chosen PDP (Medicare Part D plan) has a different administrator from Blue Cross. - Inconsistencies in plan terms between the PDP and the Blue Cross Plan could lead to retiree confusion - Significant retiree communications necessary to help retirees make choices and assure enrollment in a PDP - Since the PPO rates would have to be split'between Medicare and non-Medicare retirees, the' non-Medicare retirees could see a large increase in cost. Mellon City of Bakersfield Medicare Part D- Mellon Recommendation ® Based on the cOmplexity of the wrap coverage, Mellon recommends that the City keep the current benefit plans unchanged and elect to seek the Subsidy from the federal government. · This option provides a fairly significant payment to the City while minimizing the disruption to the current retirees. It also give the City time to develop a long term direction in regards to retiree medical coverage in general in concert with the GASB 43/45 reporting requirements ~ ~~ ~;;2/-/¢'~ ,~-,~'~ ~ ~ [~'-~ t The timetable on the next pages are based on this recommendation. 12 ~ Mellon City of Bakersfield Medicare Part D - Timetable for Decisions · April/May 2005 - City makes decision as to seek the subsidy. ® Late April 2005 - CMS issues final guidelines regarding application requirements, notice forms for credible coverage, instructions for determining actuarial equivalence, and other related information. · May 2005 - City begins developing retiree communications directing retirees to not elect Medicare Part D, and informs Blue Cross and Kaiser as to its decision to seek the subsidy - City begins working with Blue Cross and Kaiser to develop the process for collecting the needed claim data to support the subsidy reimbursement ® June 2005 - City begins communication campaign with retirees concerning Medicare Part D and the City's position 13 ~) Mellon mm m m m m m mm m mm m m m mm City of Bakersfield Medicare Part D- Timetable for Decisions · August 2005 - Mellon works with the City to develop the actuarial attestation and complete the application · September 2005 - Submit the actuarial attestation and completed application to CMS and provide notice and exchange data on beneficiaries enrolled and creditable coverage with CMS · October 2005 - Provide credible coverage notice to effected retirees and work with CMS to track retirees who elected Part D and communicate directly with these retirees. ® Ongoing in2006 - Claims, recordkeeping and reporting to CMS - Filing for subsidy payments and documentation - Maintenance of auditable records to support claim for subsidy - Compliance with CMS requirements 14 ~ Mellon City of Bakersfield Blue Cross Emergency Room~ Utilization · At the request of the Insurance Committee, we requested data on the use of emergency rooms for calendar year 2004. Similar information was not available from Kaiser. The table below shows the number of visits for active and retired members for the PPO and HMO plans. PPO HMO Active 226 96 Retiree 39 18 Total 265 114 ~ Mellon City of Bakersfield Blue Cross Emergency Room Utilization · The table shows that the use of emergency rooms is much higher for the PPO plans- which covers this visits at 100%- as compared to the HMO which does have a $25 copayment. · There are approximately 650 active employees in the PPO and 470 active employees in the HMO; the corresponding counts for retirees are 140 in the PPO and 160 in the HMO., While the number of covered employees is similar, the PPO use of emergency rooms is more than 2 times higher. Adjusting for the enrollment differences shows that the PPO use rate is 1.7 times higher for the active employees and 2.4 times higher for the retirees. · This provides additional support for the Mellon recommendation to add an emergency room copayment to the PPO plan. 16 ~1 Mellon City of Bakersfield Discussion, Questions, Next Steps Discussion 17 i~ Mellon Page 1 of 1 Jean Parks - Re: Personnel Committee Agenda From: Carroll Hayden To: Jean Parks 'Date: 4/5/2005 2:47 PM Subject: Re: Personnel Committee Agenda The 3 items Mellon is prepared to discuss on the agenda are: 1. Medicare Part D 2. Review emergency room utilization for Blue Cross PPO 3. GASB 45 Please let me know what is approved. Thank you. >>> Jean Parks 04/04/05 8:20 AM >>> Do you have the items you would like on the Personnel Committee agenda for April 11th at 11 a.m.? Thank you. file://C :XDocuments%20and%20Settings\jparks. BAKERSFIELD~Local%20Settings\Temp\G... 4/5/2005 From: Alan Tandy To: Jean Parks Date: 3/23/2005 10:41:54 AM Subject: Re: Personnel Committee Update yes to schedule- thanks >>> Jean Parks 3/23/05 9:15:25 AM >>> Carroll Hayden and Alan Christensen had me working on setting up a Personnel Committee meeting. As they are both out, 'progress so far: 1. Harold, Zack and Jacquie can all meet on Monday, April 11th at 11:00 a.m. 2. Legislative and Litigation Committee is scheduled at 1:00, but we have no items, so AC and Zack, Chair, said we could cancel Legislative and Litigation Committee. 3. I am waiting for Ginger in HR to call back with a confirmation from Mellon on the date of April 11th at 11:00 a.m. Carroll said Mellon could meet any day the week of April 11th, but Carroll wanted me to reconfirm through Ginger, before setting the meeting up with everyone. If Mellon confirms, is it okay with you to set Personnel and cancel Legislative and Litigation? The items the Committee requested were: More info on GASB 45 and the Consultants were bringing back a decision guide on Medicare Part D as direction if any is taken needs to be by June 2005. I don't know what else Carroll has for the agenda. From: Alan Tandy To: Jean Parks Date: 3/24/2005 11:27:00 AM · Subject: Re: Health Consultants for Personnel If they say he can respond to questions I trust their judgement >>> Jean Parks 3/24/05 11:26:02 AM >>> Ginger for HR did not reach the Consultants until today and now they say only Tim Beck is available to come to a Personnel Committee meeting on April 11th as Mike Schionning (the one who made the presentation) has to be in Phoenix. She is calling them back, but is it okay if only Tim Beck comes? ~ Jean Parks - Re: Health Consu tants for Personnel ,. Page From: Alan Tandy To: Jean Parks Date: 3/24/2005 11:27:00 AM Subject: Re: Health Consultants for Personnel If they say he can respond to questions I trust their judgement >>> Jean Parks 3/24/05 11:26:02 AM >>> Ginger for HR did not reach the Consultants until today and now they say only Tim Beck is available to come to a Personnel Committee meeting on April 11th as Mike Schionning (the one who made the presentation) has to be in Phoenix. She is calling them back, but is it okay if only Tim Beck comes? From: Alan Tandy To: Jean Parks Date: 3/23/2005 10:41:54 AM Subject: Re: Personnel Committee Update yes to schedule- thanks >>> Jean Parks 3/23/05 9:15:25 AM >>> Carroll Hayden and Alan Christensen had me working on setting up a PersOnnel Committee meeting. As they are both out, progress so far: 1. Harold, Zack and Jacquie can all meet on Monday, April 11th at 11:00 a.m. 2. Legislative and Litigation Committee is scheduled at 1:00, but we have no items, so AC and Zack, Chair, said we could cancel Legislative and Litigation Committee. 3. I am waiting for Ginger in HR to call back with a confirmation from Mellon on the date of April 11th at 11:00 a.m. Carroll said Mellon could meet any day the week of April 11th, but Carroll wanted me to reconfirm through Ginger, before setting the meeting up with everyone. If Mellon confirms, is it okay with you to set Personnel and cancel Legislative and Litigation? The items the Committee requested were: More info on GASB 45 and the Consultants were bringing back a decision guide on Medicare Part D as direction if any is taken needs to be by June 2005. I don't know what else Carroll has for the agenda. From: Alan Tandy To: Jean Parks Date: 3/23/2005 10:41:54 AM Subject: Re: Personnel Committee Update yes to schedule- thanks >>> Jean Parks 3/23/05 9:15:25 AM >>> Carroll Hayden and Alan Christensen had me working on setting up a Personnel Committee meeting. As they are both out, progress so far: 1. Harold, Zack and Jacquie can all meet on Monday, April 11th at 11:00 a.m. 2. Legislative and Litigation Committee is scheduled at 1:00, but we have no items, so AC and Zack, Chair, said we could cancel Legislative and Litigation Committee. 3. I am waiting for Ginger in HR to call back with a confirmation from Mellon on the date of April 11th at 11:00 a.m. Carroll said Mellon could meet any day the week of April 11th, but Carroll wanted me to reconfirm through Ginger, before setting the meeting up with everyone. If Mellon confirms, is it okay with you to set Personnel and cancel Legislative and Litigation? The items the Committee requested were: More info on GASB 45 and the Consultants were bringing back a decision guide on Medicare Part D as direction if any is taken needs to be by June 2005. I don't know what else Carroll has for the agenda. (~) Mellon City of Bakersfield Initial Planning for Calendar Year 2006 March 16, 2005 Human Resources & Investor Solutions City of Bakersfield Table of Contents Page Section I: Initial Projection of Calendar Year 2004 Results 2 Section I1: Projected Calendar Year 2005 Results 4 Section II1: Initial Projection for Calendar Year 2006 6 Section IV: Recommended Benefit Changes for 2006 9 Section V: Additional Considerations 11 Section VI: Discussion, Questions, Next Steps 28 Mellon City of Bakersfield Initial Projection of Calendar Year 2'004 Results The initial projection of the results for the self-insured plans for calendar year 2004 show that the plans should produce an additional $97,000 in surplus This experience is for the refunding coverages - the-Blue Cross PPO and Dental plans · This will increase the total accumulated surplus to $560,000 of which approximately $270,000 is available for refund to the City Final results will be provided by Blue Cross in May of 2005. Mellon City of Bakersfield Blue Cross PPO and Dental Plans- CY2004 CY 2004 Estimated Results Using Claims Through December 2004 1. Total Premium $7,580,214 2. Incurred Charges $6,963,539 a. Paid Claims $6,619,748 b. Pooled Claims ($250,000) c. Pooled Paid Claim Charge $497,365 d. Beginning Reserve ($789,329)~ e. Ending Reserve $885,755 3. Retention $527,469 4. Surplus/(Deficit) $89,206 5. Claim Stabilization Fund Offset $0 6. Prior Year Surplus $462,835 7. Interest on Surplus $7,522 8. Accumulated Surplus (~ 12/31/04 $559,562 ~) Mellon City of Bakersfield Projected Calendar Year 2005 Results Using data thrOugh December 2004, Mellon revised the calculations used to · develop the Calendar Year 2005 rates for the Blue Cross plans · This allowed us to.determine the projected, results for 2005 as compared to the negotiated premiums · Overall, the HMO plan is running as projected, the PPO plan is running better than projected and the Dental plan is running higher than projected ® In total the three plans are running as projected in August of 2004. (~) Mellon City of Bakersfield PrOjected Calendar Year 2005 Results Projected Results for Calendar Year 2005 Blue Cross Blue Cross Blue Cross Total HMO PPO Dental Blue Cross Incurred Claims $2,552,910 $6,756,576 $728,475 $10,037,961 Capitations (HMO Only) $1,968,962 $0 $0 $'1,968,962 Administration $395,523 $440,016 $82,828 $918,367 Total Plan Cost $4,917,395 $7,196,592 $811,303 $12,925,290 Total Premiums $4,919,933 $7,229,382 $779,518 $12,928,833 Gain/(Loss) $2,538 $32,790 ($31,785) $3,543 Mellon City of Bakersfield Initial Projection for Calendar Year 2006 Using the data through December 2004 and the current calendar year 2005 premiums, we developed an initial estimate of the projected increases for calendar year 2006 for the Blue Cross plans · Our initial projection shows the following for the Blue Cross plans: - The HMO plan will need a 7.7% increase - The PPO plan will need a 9.0% increase - The Dental plan will need a 9.3% increase - Overall, the Blue Cross plans will need an 8.5% increase. This translates into an increase in total premiums of $1.1 million. (~) Mellon City of Bakersfield Initial Projection for Calendar Year 2006 Projected Increase for Calendar Year 2006 Blue Cross Blue Cross Blue Cross Total HMO PPO Dental Blue Cross Incurred Claims $2,795,875 $7,416,660 $764,899 $10,977,434 Capitations (HMO Only) $2,087,100 $0 $0 $2,087,100 Administration $415,300 $462,017 $86,969 $964,286 Total Plan Cost $5,298,275 $7,878,677 $851,868 $14,028,820 Total Premiums $4,919,933 $7,229,382 $779,518 $12,928,833 Increase Needed 7.7% 9.0% 9.3% 8.5% 7 ~) Mellon City of Bakersfield Initial Projection for Calendar Year 2006 · Based on initial discussions with Kaiser, we expect that the Kaiser increase will be between 10% and 12% · The HealthComp FSA administration fee is expected to increase 10% The increases for the other benefit plans will be 5% or less. These include: - Dedicated Dental - Pacific Union Dental - PacifiCare Behavioral Health - Medical Eye Services - Ft. Dearborn Mellon City of Bakersfield Recommended Benefit Changes for 2006 Medical Plan Changes Rate Impact PPO Plan Change coinsurance to 90% in-network and 60% out-of-network -4.1% Increase out-of-network out-of-pocket maximum to $5,000 -0.4% Add $250 per admission hospital copayment -0.9% Add $75 emergency room copayment -0.7% HMO Plans Increase office visit copay to $15 -1.7% Add $250 per admission hospital copayment -0.8% Add $75 emergency room copayment -0.6% Total Recommended Medical Changes -4.7% 9 {~) Mellon City of Bakersfield Recommended Benefit Changes -.- ~~~,:i ~ :~:~::~::: ."~ '~ ~.' Dental Plan Changes Estimated Rate Impact Blue Cross Dental Plan Change Prosthodontic Sevices to 60% -5.1% ~) Mellon City of Bakersfield Additional Considerations · This section provides information on additional strategic considerations for Calendar Year 2006 These include: - Decisions regarding how the City deals with Medicare Part D coverage - Decisions regarding the impact of GASB 45 -. Decisions regarding program design options that can significantly impact the benefit cost structure for the City. Mellon City of Bakersfield Additional Considerations- Medicare Part, D A Medicare Prescription Drug benefit will be available beginning January 1, 2006 This change effects the Medicare-eligible retirees covered by the City plan · The City as three options regarding this new benefit: - Do nothing - Keep the current plans unchanged and seek the subsidy payment from the Federal Government- this is estimated to be approximately $150,000 for the City of Bakersfield - Revise the prescription drug benefit for the Medicare-eligible retirees to coordinate with Medicare - this would reduce the premium for the Medicare- eligible retirees by as much as 25%. (~) Mellon City of Bakersfield Additional Considerations - Medicare Part D ® The City needs to make final decisions as to direction by June of 2005 Mellon is developing a detailed decision guide for the City that outlines: - the various decisions that need to be made - the dates ,by which the decisions need to be made - the impact on the City and retirees of the decisions - the recommended option that meets the City's needs The decision guide will be presented in early April of 2005. Mellon City of Bakersfield Additional Considerations - GASB 45 GASB - the Government Accounting Standards Board - has issued a new statement dealing with the accounting treatment of post retirement non- pension benefits · This statement- GASB 45 - requires governmental entities to measure the value of the benefits that it provides to retired employees as the rights to these benefits are earned by active employees On an accounting basis, the standards require the City to account for the retiree medical benefits in the same way it accounts for pension benefits · The City will have to reflect this cost for the first fiscal year beginning after December 2006, which will be the July 2007 through June 2008 fiscal year. Mellon City of Bakersfield Additional Considerations - GASB 45 The new standard requires that the City measure two items: - The value of premium payments it makes on behalf of the retiree and his or her covered dependents. - The value of the "subsidy" that occurs when the active and retiree rates are the same. · The "subsidy" results if the actual cost for the retirees is higher than the actual cost for the active employees · For the current City plans, the "subsidy" only exists for the Blue Cross HMO plans, since the retiree plan rates are significantly lower than the cost experience for this plan. Mellon City of Bakersfield Additional Considerations - GASB 45 · Mellon recommends that the City develop an initial estimate of the accounting impact This would include the impact of Medicare Prescription Drugs on the accounting costs This allows the City time to assess the options that are available to mitigate the accounting impact. Mellon City of Bakersfield _. Additional Considerations - Other Benefit Options Consumer Directed Health Care ® Consumer directed healthcare plans can provide: - Medical coverage - Prescription drug coverage - Dental coverage - Vision coverage Consumer directed healthcare plans typically include: - A high deductible medical plan to provide financial incentives for seeking care - A flexible spending account funded by the employer - Web tools and information to support informed consumer decision- making behaviors ("e-health") 17 {~ Mellon City of Bakersfield Consumer Directed Heal,th Care (cont'd) Patients pay actual cost of care (rather than $10 copays) with money from a personal care account (for example, $1,000) funded by the employer · Employer then provides catastrophic (high-deductible)insurance (in the form of a PPO plan with coinsurance) for when the personal care account runs out · There is a corridor deductible (paid by employee with employee money) between the personal care account and the PPO plan. The personal care account plus the corridor deductible make up the deductible on the PPO plan Cost transparency encourages prudent decisions while Internet tools and information support informed consumer decision-making behaviors · Preventive care is often covered at 100% to discourage employees from building their personal care accounts by not getting regular check-ups. Mellon City of Bakersfield Components of a Typical CDHC Plan Prescription drugs would be Preventive care is carved covered on a coinsurance basis out of the program and covered at 100% Employee uses these City funds first. Unused funds this balance carries over to portion next plan year When the PCA is exhausted, the The employee employee is funds this responsible for 100% portion of charges up to the deductible amount City and employee share the A traditional PPO premium cost for plan covers the this traditional amount over the PPO plan deductible Mellon City of Bakersfield Consumer Directed Health Care (cont'd) Support Provided to Employees ® Disease/cam management · Provider pricing and qualitydata programs; 24-hour nurse lines ® Nurse coaches; patient advocacy; ® Wellness programs and health risk referral services assessments · Rx information · EAP services · Quiz on the "true" cost of services ® Assistance in choosing a health · Member services numbers and plan; information about what the other resource numbers/Web plans cover addresses ® Information on hOw to choose a ® Wallet cards doctor; questions to ask during your doctor visit · Meetings and seminars · Web links and other health · Help in deciding where to get care services decision support tools Mellon' City of Bakersfield Additional Considerations - Other Benefit Options Health Savings Accounts · Tax-exempt trust/savings vehicle - Similar to Archer USA and IRA - Trustee is bank, insurer, or entity approved by IRS Employer/employee cash contributions - Must be funded · Account belongs to individual - Non-forfeitable - Portable (~) Mellon City of Bakersfield Health Savings Accounts (cont'd) Eligibility for HSA ® Must be covered under high-deductible health plan (HDHP) Must not be covered by non-HDHP - Spouse plan - FSA - HRA - Individual'plan Cannot be claimed as dependent on tax return Cannot be entitled to Medicare Mellon City of Bakersfield Health Savings Accounts (cont'd) High Deductible Plans Defined 2004 minimum deductible: - $1,000 individual - $2,000 family Amounts indexed for inflation Family deductible .any coverage level that is not individual - No"embedded deductibles" Preventive care can have no deductible Mellon City of Bakersfield Health Savings Accounts (cont'd) II I ........... ~ High Deductible Plans Defined ® 2004 out-of-pocket maximum: - $5,000 individual - $10,000 family Amounts indexed for inflation "Out-of-pocket" includes: - Deductible - Copays - Coinsurance Mellon City of Bakersfield Health Savings Accounts (cont'd) Limits on Contributions ® Contributions can be made by: - Employee - Employer - Family member · Maximum annual contribution is lesser of: - Annual deductible (for in-network services) - $2,600/55,150 individual/family (indexed) All contributions aggregated Contribution limit applies monthly Mellon City of Bakersfield Health Savings Accounts (cont'd) Qualified Medical Expenses Distributions at any time Excluded from gross income if: - 'For qualified medical care - For beneficiary, spouse, dependents Included in income for purpoSes of other distributions - Additional 10% tax, except for: · Death or disability · Age 65 or older (~) Mellon City of Bakersfield Health Savings Accounts (cont'd) Qualified Medical Expenses Out-of-pocket medical (Sec. 213(d)) COBRA premiums · Long-term care insurance For individuals age 65 or older: - Medicare premiums - Employer retiree medical premiums - Individual health policies (not UediGap) Mellon City of Bakersfield Discussion, Questions, Next Steps Di. scussion ~) Mellon From: Alan Christensen To-- Jean Parks Date: 2/1/2005 4:24:24 PM Subject: Fwd: Re: personnel committee do it. thx. Page 1 of 1 Jean Parks - Personnel Committee Meeting From: .lean Parks To: Alan Christensen Date: 2/1/2005 9:55 AM Subject: Personnel Committee Meeting Carroll called and requested that we set up a Personnel Committee meeting for: 1. Report on how 2004 Health Insurance Plans finished 2. Planning for 2006 Health Insurance Plans Mellon would be attending and making a presentation. As Jacquie won't be back until next Monday, we won't be able to firm up a date until that time. ! have not touched base with AT on this--thought you might want to discuss with him. Please let me know if it's okay to set up a meeting. ~e://C:~D~cuments%2~and%2~Settings\jparks.BAKERSFIELD\L~ca~%2~Settings\Temp\~... 2/2/2005 From: Alan Tandy To: Alan Christensen Date: 2/1/2005 4:20:18 PM Subject: Re: personnel committee ok >>> Alan Christensen 2/1/05 4:09:21 PM >>> Fyi, Harold is itching to have a personnel committee meeting soon on Health Insurance. We'll be scheduling around end of Feb. Page 1 of 1 Jean Parks - Personnel Committee Meeting From: .lean Parks To: Alan Christensen Date: 2/1/2005 9:55 AM Subject: Personnel Committee Meeting Carroll called and requested that we set up a Personnel Committee meeting for: 1. Report on how 2004 Health Insurance Plans finished 2. Planning for 2006 Health Insurance Plans Mellon would be attending and making a presentation. As Jacquie won't be back until next Monday, we won't be able to firm up a date until that time. 1: have not touched base with AT on this--thought you might want to discuss with him. Please let me know if it's okay to set up a meeting. ~e:#C:~)~cuments%2~and%2~Settings\jparks.BAKERSFIELD\L~ca~%2~Settings\Temp\G... 3/8/2005 From: Alan Christensen To: Jean Parks Date: 2/1/2005 4:24:24 PM Subject: Fwd: Re: personnel committee do it. thx. Page 1 of 1 Jean Parks - perSonnel Committee Meeting Date? From: Jean Parks To.' Zack Scrivner Date: 2/7/2005 2:17 PM Subject: Personnel Committee Meeting Date? We are trying to set a date for the Health Insurance Consultants (Mellon) to make a presentation to the Personnel Committee re How 2004 finished and projections for 2005-06. Harold has asked that we meet in the morning. Would you please check your calendar to see if you would be available on Wednesday, March 16th at 9;00 a.m.? Mellon consultants are available at that time. Thanks. ~e://C:~D~cuments%2~and%2~Settings\jparks~BAKERSFIELD\L~ca~%2~Settings\Temp\G~ 3/8/2005 Page 1 of 1 3ean Parks - RE: Personnel Committee Meeting Date? IIIIII From: "Zack Scrivner" <zscrivner@libertystar. net> To: "'Jean Parks'" <Jparks@ci.bakersfield.ca.us> Date: 2/7/2005 2:43 PM Subject: RE: Personnel Committee Meeting Date? That will work for me. Call me when it is set. 205-7607 ..... Original Message ..... From: Jean Parks [mailto:Jparks@ci.bakersfield.ca.us] Sent: Monday, February 07, 2005 2:18 PM To: zscrivner@libertystar, net Subject: Personnel Committee kleeting Date? We are trying to set a date for the Health ]nsurance Consul~nts (Mellon) to make a presentation to the Personnel Committee re How 2004 finished and projections for 2005-06. Harold has asked that we meet in the morning. Would you Please check your calendar to see if you would be available on Wednesday, March 16th at 9:00 a.m.?" Mellon consultants are available at that time. Thanks. ~e://C:~D~cuments%2~and%2~Settings\jparks.BAKERSFIELD\L~ca~%2~Settings\Temp\G... 3/8/2005 ADMINISTRATIVE REPORT I MEETING DATE: January 26, 2005 I AGENDA SEC, TION ConSent I' ITEM: I&. O.O. . TO: Honorable Mayor and City Council h ~/- APPROVED FROM: Carroll Hayden, Human Resources Manager DEPARTMENT HEAD DATE: January 18, 2005 CITY ATTORNEY 'CITY MANAGER SUBJECT: Agreement with Mellon Health Care Consultants - Name Change RECOMMENDATION: · Staff recommends approval of the agreement.. BACKGROUND: This agreement came to you on October 20, 2004 for approval and was approved. However, b~tween the time the contract was prepared and you approved it, Mellon had a name change. The change was from Mellon Human Resources & Investor Solutions to Mellon Consultants, LLC. This. agreement reflects only the name Change for the corporation. All Previous terms and conditions under the original agreement remain.. January 18, 2005, 2:41PM S:~DMINRP'I'~MelIon Contract, 2nd ver..dot Page 1 of 1 Jean Parks - Re: Dept Head f4eeting IIIIIII From: Delores Oldham To: Parks, .lean Date: 1/18/2005 3:17 PM Subject: Re: Dept Head Meeting I did not receive it so you got it in time. Thanks .lean.. >>> .lean Parks 01/18/05 2:53 PM >>> Delores, I guess you heard from Vicki, this change is not going to work, so I am waiting to hear from her. I sent out a new schedule, but she called and I quickly deleted it, so I hope no one has it. >>> Delores Oldham 01/18/05 8:45 Alii >>> At the request of Chief Rector the dates for the Police Dept to host the Dept Head I~leeting have been changed. The City Attorney's office will host the August meetings and the Police Dept will host the Sept. meetings. ~~e://C:xD~cuments%2~and%2~Settings\jparks.BAKERSFIELD\L~ca~%2~Settings\Temp\~... 1/25/2005