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HomeMy WebLinkAbout04/11/2005 B A K E R S F I E L D U'~q"r-"'~-'~-///~ Harold Hanson, Chair Staff: Carroll Hayder( Zack Scrivner For: Alan Tandy, City Manager Jacquie Sullivan AGENDA SUMMARY FIEPORT SPECIAL MEETING · PERSONNEL COMMITTEE Monday, April 11,2005 - 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 11:00 a.m. Present: Councilmembers Harold Hanson, Chair; Zack Scrivner; and Jacquie Sullivan 2. ADOPT MARCH 16 2005 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Report and Committee recommendation on Medicare Part D Human Resources Manager Carroll Hayden explained the City needs to make a decision by June 2005 on a plan to handle the newly enacted Medicare Part D, which covers prescription drug benefits. She introduced Tim Beck and Jim Summers from Mellon, the City's health care consultants, who have developed a decision guide on Medicare Part D outlining options and timelines. Consultant Jim Summers explained the newly enacted Medicare Part D only affects retirees who are over 65 years of age and eligible for Medicare. Some retirees during their active working years did not participate in Social Security and are not eligible for Medicare. There are approximately 286 affected retirees; however, 63 of the 286 retirees who are covered in the Kaiser Senior Advantage plan or the Blue Cross Senior Secure are not directly affected as these HMO plans will most likely deal directly with Medicare. Agenda Summary Report Personnel Committee Meeting April 11, 2005 Page - 2 - The City has three options to choose from regarding this new benefit. Highlights of the options are: Option 1. Do nothing. The consultant did not recommend this option for the following reasons: · It may force the City to accept changes made by Blue Cross and/or Kaiser that are not in the City's best interest. · The City will miss out on the opportunity to receive subsidy payments from Medicare to reduce the cost of providing retiree coverage for Medicare-eligible retirees, which can benefit both the retiree and the City. Option 2. Seek the subsidy from the Federal Government: · This option would provide a reimbursement to the City from the Federal Government equal to 28% of the amount the City and each retiree over 65 years of age spend on prescription drug coverage, subject to some limitations. · The federal government estimates this will be approximately $677 per covered retiree beneficiary, which includes both the retiree and spouse--the payment to the City could be as must as $150,000 annually based on current retiree population. · The money is paid to the City as the plan sponsor and can be used for any purpose. There is no requirement the money be used to reduce the cost of providing retiree benefits. · The subsidy is only available for retirees over 65 who participate in Medicare Parts A and B, are not enrolled in the Senior Secure or Senior Advantage plans and who do not enroll in the Medicare Part D plan. · The City's HMO and PPO plans meet the requirements under Federal Regulations to receive the subsidy payment. · This option allows the City to keep its current retiree benefits unchanged. The process required to seek the subsidy is fairly straightforward, but will require additional administrative work for City staff: · Enrollment--the City will need to inform the CMS (Federal Center for Medicare and Medicaid Services) whether the retiree is enrolled in Medicare Part D or not. · The City will need to work with Blue Cross to keep track of drug claims for retirees over 65 years of age to calculate the subsidy. · 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 retirees, so the retirees will have proof of qualification for Medicare Part D in case at some point later in time they wish to sign up. Agenda Summary Report Personnel Committee Meeting April 11,2005 Page - 3- · The City will need to communicate with the retirees to ensure they do not enroll in Medicare Part D (with the exception of those in Senior Secure and Senior Advantage plans) and assure the retirees that they still will have the same drug coverage. The Federal Government will do a blitz coverage telling retirees to sign up for Medicare Part D. City 'Manager Alan Tandy expressed the City provides options to retirees, but has never given advice, especially, when the advice contradicts advice from the Federal Government and is dealing with financial advice that could cost retirees money and impact their health plans. The consultant said the City would need to inform the eligible retirees not to sign up and not to pay the $35. If the retiree does enroll in Medicare Part D, the City will not get the subsidy for that retiree. Each year, the City and retirees will have an opportunity to change the plan as long as the retirees have the certificate of credible coverage for Medicare Part D.' Retiree Margaret Ursin spoke regarding the employer plan to apply for the subsidy and the advantages for the City and retirees. Option 3. The Wrap Plan. This option is to develop a program that supplements the Medicare Part D benefit and requires all eligible retirees to elect Medicare Part D and pay the $35 per month to receive any prescription drug coverage from the City. · It was noted the $35 per month payment for Medicare Part D could increase with inflation. The $35 is the present cost. · This could reduce the Blue Cross premiums by as much as 25% for these retirees because it includes a component for prescription drugs. · The City would pay secondary coverage. · It would require splitting the Blue Cross PPO premiums between those retirees eligible for Medicare and those who are not eligible. · This option is also subject to the ability of Blue Cross to effectively and efficiently coordinate coverage with Medicare. · Retirees' benefits can remain unchanged in aggregate, reducing disruption to participants, consistent with current City approach to Medicare Parts A and B. · There are no actuarial attestation, certificates of credible coverage or CMS reporting requirements. · Potentially greater saving than those represented by the Subsidy plan. Disadvantages include: · Much more complex claims payment particularly if the retiree's chosen Prescription Drug Plan (PDP) Medicare Part D has a different administrator than Blue Cross. Agenda Summary Report Personnel Committee Meeting April 11, 2005 Page - 4 - · Inconsistencies in plan terms between the Prescription Drug Plan (PDP) and the Blue Cross Plan could lead to retiree confusion. · Significant communications necessary with retirees 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 their health insurance costs. Based on the complexity of the wrap coverage, the consultant stated Mellon recommended the City keep the current benefit plans unchanged and elect to seek Option 2, the Subsidy from the federal government. The subsidy would reduce the liability reported under GASB 45. If the City makes a decision to go with the Subsidy Plan, the following would be the immediate time frame: Late April 2005 · CMS (Federal Government) issues final guidelines. May 2005 · Personnel Committee makes recommendation to the City Council. May 2005 · City begins developing retiree communications directing retirees to not elect Medicare Part D. · City begins work with Blue Cross and Kaiser to develop the process for collecting the needed claim data to support the subsidy reimbursement. City Manager Alan Tandy asked the consultant how much extra staff will be needed to facilitate the Subsidy Plan. Before staff would be able to make a recommendation to the Committee, it will be necessary to get the costs for implementation versus the subsidy the City would receive. Consultant Tim Beck stated he would provide the information regarding the work required for the retiree campaign and cost savings information to the c~ty. Committee Chair Hanson requested the Personnel Committee meet again when the cost information is available. The Mellon consultants will provide hard copies of the information and if necessary, set up a conference call during the Committee meeting. Agenda Summary Report Personnel Committee Meeting April 11, 2005 Page - 5 - B, Review and Committee recommendation on emergency room utilization for Blue Cross PPO Consultant Jim Summers explained currently there is no co-payment in the PPO plan when employees go to a hospital emergency room as compared to the HMO plan which has a $25 co-payment. Many employees go to hospital emergency rooms instead of urgent care centers. The information below was provided by Blue Cross for active and retired employees for the PPO and HMO plans. Similar information was not available from Kaiser. Hospital Emergency Room Visits--Patient Not Admitted PPO HMO Active 226 96 Retiree 39 18 Totals 265 114 Committee Chair Hanson expressed he would like to wait until the Insurance 'Committee meets and makes its recommendation to the Personnel Committee before the Personnel Committee takes any action. The Committee deferred this item to the next Personnel Committee meeting. C. Report on Government Accounting Standards Board (GASB) 45 - Klimko/Smith This item was not heard due to time constraints. 5. COMMITTEE COMMENTS 6. ADJOURNMENT The meeting was adjourned at 11:55 a.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 Gregory Klimko; Deputy Fire Chief Gary Hutton; John Patterson, Craft Worker II (CCAPE/Miscellaneous); Scott Monroe and Paul Smith, Fire Department; City Clerk Pam McCarthy; Ginger Rubin, Human Resources Benefits; Chuck Waide and Pete Rodriguez, SEIU-CCAPE; Tim Beck and Jim Summers from Mellon; and Margaret Ursin, Retiree. cc: Honorable Mayor and City Council S:~AC\05PersonnelCommitteeP05aprl 1summary