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Home My WebLink About09/18/2003 B A K E R S F I E L. D Alan Tandy, City Manager Irma Carson Staff: Carroll Hayden Mark Salvaggio AGENDA SUMMARY REPORT SPECIAL MEETING · PERSONNEL COMMITTEE Thursday, September 18, 2003, 4:00 p.m. City Manager's Conference Room, Suite 201 Second Floor, City Hall, 1501 Truxtun Avenue, Bakersfield, CA 1. ROLL CALL Called to Order at 4:05 p.m. Present: Councilmembers Harold Hanson, Chair; and Mark Salvaggio Councilmember Irma Carson arrived at 4:10 p.m. 2. ADOPT SEPTEMBER 17, 2002 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. NEW BUSINESS A. Staff report, review and Committee recommendation on medical insurance plan renewals Human Resources Manager Carroll Hayden provided an overview of the information in the memo, which was included in the Committee packet. Every year the City's health insurance plans are renewed and the rates and increases are reviewed by the Insurance Committee and a recommendation is forwarded to the Personnel Committee for review and recommendation to the City Council. As anticipated by staff, the City's 2004 renewal plans have increased 20 percent, which seems to be the trend nationwide. In the 2003-04 budget process, it was decided to budget for about half the anticipated increase in insurance premiums to cover the first half of 2004 and balance the fiscal year budget, and to ask the employee groups to recommend plan design changes or employee premium level changes to cover the remaining half of the premium increases. The premium renewal rate numbers are in for the 2004 calendar year and the dollar Agenda Summary Report Personnel Committee Meeting September 18, 2003 Page - 2- figure needed to fully fund the health insurance plans for 2004 in plan design changes is $1,036,585. ' Staff has been meeting with the Insurance Committee, a meet and confer group, to discuss the need to make plan design changes to decrease the amount of premium dollars paid. At the last Insurance Committee meeting on August 28th a motion was made and approved by all employee representatives that the following design changes be made: CHANGE TOTAL REDUCTION Increase PPO deductible from $150 to $200 $ 80,000 Increase HMO co-pays from $5 to $10 107,039 Increase Rx co-pay, all plans from $5/10 to $10/20 414,093 Total $601,132 Staff was in agreement with the Insurance Committee's recommendation; however, this leaves a shortfall of $435,453. City Manager Alan Tandy explained staff has provided two alternates for the Committee's consideration as a mechanism to deal with the $435,453 and wished he had one that was harmless, but there were none. 1. Recommend additional plan design changes, or 2. Direct staff to cover the costs through other expense reductions. Staff's current "best plan" for how that could be done was as follows: Cost to be covered $435,453 Less 20% employee share of those costs 87,090 Less non-General Fund share of costs 78,381 Less use of all Council Contingency for FY 03/04 - 100,000 Less conversion of four General Fund "frozen" positions to permanent staff reductions - 169,982 NET: -0- Committee Chair Hanson expressed this is a very difficult process with the budget and rising health benefit costs, because no one wants to go to employees with reductions or additional costs to cover benefits. He further expressed appreciation to the Insurance Committee for their efforts in working with staff. Committee Member Salvaggio stated he would not support any further plan design changes that would result in additional premium increases to the employees over those already recommended by the Insurance Committee, as employees are working harder than ever. Agenda Summary Report Personnel Committee Meeting September 18, 2003 Page - 3 - Committee Member Carson spoke regarding all businesses having to deal with the rising cost of health care benefits, and expressed concerns if the state budget crisis continues to impact the City and the number of its employees. The Committee reviewed the other alternate plan design changes and associated reductions listed in the memo, included in the Committee packet. Chuck Waide, Central California Association of Public Employees, explained the Insurance Committee struggled with reviewing all the possible plan design changes. It was decided to go over the plans and choose those changes that could be agreed upon by the members of the Insurance Committee. The agreed upon plan changes provided for premium reductions of $601,132. Margaret Ursin spoke about the hardships of increased premiums for retirees. Committee Chair Hanson stated he would like the Personnel Committee to start meeting at least every four months. This would allow time to review anticipated health plan premium increases and plan ahead. The Committee agreed to accept the Insurance Committee's recommendation and to cover the shortfall through other budget reductions. Committee Member Carson made a motion to cover the $435,453, less the 20% employee share of those costs, through other budget reductions with the exception of using all the FY 03-04 Council Contingency and requested the City Manager to use half of the Council Contingency and fund at least $50,000 with other budget reductions. The Committee unanimously approved the motion. The City Manager will provide the budget information in an administrative report to the City Council for the meeting on October 8th. B. Staff report, review and Committee recommendation on retiree paid, City administered dental plan Human Resources Manager Carroll Hayden explained the Insurance Committee has proposed a retiree-paid dental plan be put in place by January 1, 2004. The dental plan would have two price-level options available. There would be no expense to the City; staff proposes charging a two to three percent fee to recover administrative costs. It was noted the Insurance Committee has not met to review the retiree dental plans being offered as they were not available at their last meeting, when providing a retiree-paid dental plan was approved. Agenda Summary Report Personnel Committee Meeting September 18, 2003 Page - 4- Committee Member Salvaggio made a motion to approve offering a retiree-paid dental plan and charging an administration fee, with a notation when the Insurance Committee meets to review the retiree dental plans being offered if there are any concerns, staff will address those concerns before the administrative report goes to the Council on October 8, 2003. The Committee unanimously approved the motion. C. Staff report, review and Committee recommendation on changes to mail order prescription program Human Resources Manager Carroll Hayden stated the Insurance Committee has requested to change how the prescription drug mail order program works. The current program only allows a 60-day supply of pharmaceuticals through mail order. The Insurance Committee would like to increase the 60 days to 90 days; however, with the current plan there would be an increased cost. In order to avoid an increase, the plan can be changed to make mail order of pharmaceuticals mandatory after the second refill of a prescription. In the industry, once a person has had two refills and are refilling for the third time, it is considered a maintenance drug. This 90-day prescription drug plan would reduce the amount of co-pay and save money for the employees and the City. It was discussed mail ordering can be done by phone or on-line. When a person gets a prescription from the doctor, ask for two: one for 30 days and the other to use for mail order. Refills can be requested by phone. Committee Member Salvaggio made a motion to approve the Insurance Committee's request for a prescription plan change to a 90-day mail order plan. The Committee unanimously approved the motion. 5. ADJOURNMENT The meeting was adjourned at 5:15 p.m. Attendees: City Manager Alan Tandy; City Attorney Bart Thiltgen; Assistant City Manager Alan Christensen; Human Resources Manager Carroll Hayden; Human Resources Benefits Account Clerk Sam Chernabaeff; Assistant Finance Director Nelson Smith; City Clerk Para McCarthy; Police Officers: Harry Scott; Jim Cecil, and Bill Ware; Fire Suppression Services: Paul Smith and Scott Monroe; Secretary II Mary Ellen Gonzales, Risk Management; Craft Worker II John Patterson, Fire Department; Chuck Waide and Denny Haynes, CCAPE; Richard Watkins, B-FLAG; Retirees: Margaret Ursin and Sandra Morris; and Michael Schionning, Buck Consultants PO3sep18summary B A K E R S F I E L D MEMORANDUM September 2, 2003 TO: ALAN TANDY, CITY MANAGER ~/~/~/ // FROM: CARROLL HAYDEN, HUMAN RESOURCES MANAGER SUBJECT: MEDICAL INSURANCE RENEWALS FOR 2004 The medical insurance renewals for calendar year 2004 have come in and On the whole average 20%, which is consistent with what staff had projected. During the 03-04 FY budget process, it was decided to budget for about half the anticipated increase in insurance premiums and to ask the employee groups to recommend plan design changes or employee premium level changes to cover the remaining half of the premium increases. With the renewal rate numbers in, the dollar figure needed is $680,000, which equates to $1,036,585 in annual total plan design change savings (both employer and employee, city wide.) Premium level payment changes would require a newly signed MOU by all represented employee groups, as the current 80% - 20% premium payment split is spelled out in each MOU. To change the split would be a lengthy and difficult process. Over the past 5 years, the city has experienced insurance premium increases from 4.8% to 44.0%, with no plan design changes. The city has picked up the entire increased cost other than the increase to the employees' 20% share. This increased cost over the past 5 years is approximately $15,000,000 or a 97% increase in premiums See the attached chart. Staff has met with the employee Insurance committee, a meet and confer group, three times over the summer months, regarding the insurance renewal process and to discuss the need to make plan design changes to decrease the amount of premium dollars paid. The last meeting was held on August 28, 2003. At that meeting, a motion was made and approved by all employee representatives that the following design changes (with resultant plan cost decreases) be made: CHANGE TOTAL REDUCTION Increase PPO deductible from $150 to $200 $ 80,000 Increase HMO co-pays from $5 to $10 107,039 Increase Rx co-pay, all plans from $5/10 to $10/20 414,093 Total $601,132 At this time, staff is recommending the health plan renewals with the plan design changes as recommended by the Insurance Committee. This leaves the amount needed to fund the budgeted numbers lacking $435,453. The Personnel Committee has two options: 1. Recommend additional plan design changes 2. Direct staff to cover the costs through other expense reductions. Our current "best plan" for how that would be done would be as follows: Cost to be covered $435,453 Less 20% employee share of those costs - 87,090 Less non-General Fund share of costs - 78,381 Less use of all Council Contingency for FY 03/04 -100,000 Less conversion of four General Fund "frozen" positions to permanent staff reductions -169,982 NET: -0- Other plan design changes and the associated reductions are: CHANGES TOTAL REDUCTION Increase PPO deductible from $150 to $300 $225,000 Increase PPO out of pocket maximum from $1,600 to $2000 113,643 Increase PPO ER co-pay from $0 to $50 55,000 Increase HMOs visit co-pay from $5 to $20 256,487 '-In -crease~Rx-co-pay, all plans from $5/10 to $10/20 414,093 PPO deductible to $250 170,464 PPO deductible to $500 461,674 HMO co-pay to $15 176,366 PPO provider split from 100%/80% to 90%/70% 184,670 (preferred vs. non-preferred)