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Home My WebLink About04/11/2005 B A K' E R S F I E L D Harold Hanson, Chair Zack Scrivner Jacquie Sullivan Staff: Carroll Hayden SPECIAL MEETING NOTICE PERSONNEL COMMI'I'I'EE of the City Council - City of Bakersfield Monday, April 11, 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 MARCH 16, 2005 AGENDA SUMMARY REPORT 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Report and Committee recommendation on Medicare Part D - Hayden B. Review and Committee recommendation on emergency room utilization for Blue Cross PPO - Hayden C. Report on Government Accounting Standards Board (GASB) 45 - Klimko/Smith 5. COMMITTEE COMMENTS 6. ADJOURNMENT S:~C\05 Personnel~PO5aprl lagen.doc DRAFT U~_.,~_~ /~'~ Harold Hanson, Chair Staff: Carroll Hayd~n Zack Scrivner For: Alan Tandy, City Manager Jacquie Sullivan AGENDA SUMMARY REPORT SPECIAL MEETING · PERSONNEL COMMITTEE Wednesday, March 16, 2005 - 9:00 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 9:02 a.m. Present: Councilmembers Harold Hanson, Chair; Zack Scrivner; and Jacquie Sullivan 2. ADOPT AUGUST 30, 2004-AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. NEW BUSINESS A. Report on Performance of 2004 Health Insurance Plans Committee Chair Hanson explained the meeting was going to be informational and rather informal, so questions would be taken as the presentation moved along. Human Resources Manager Carroll Hayden stated the first item on the agenda covers the performance of Blue Cross plans for 2004. Health Care Consultant Michael Schionning from Mellon reported the initial projection of the results for the self-funded plans for calendar year 2004 shows the plans should produce an additional $97,000 in surplus. This experience is for the refunding coverages--Blue Cross PPO and Dental Plans. This will increase the total accumulated surplus to approximately $560,000 of which approximately $270,000 is available for refund to the City; the balance is held by Blue Cross as stabilization for claims. Final results will be provided by Blue Cross in May of 2005. DRAFT Agenda Summary Report Personnel Committee Meeting March 16, 2005 Page - 2- Blue Cross PPO and Dental Plans - Calendar Year 2004 Estimated Results: · Total premiums (80% paid by the City) $ 7,580,214 · Less projected incurred charges - 6,963,539 · Less retention (administrative costs) - 527,469 .. · .Surplus (prior year interest not included) $ 89.206 · Surplus $ 89,206 · Prioryear surplus 462,835 · Intereston prioryear 7,522 · Accumulated surplus- 12/31/04 $ 559.563 Preliminary Proiected 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 Mellon 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 combined are running as projected in August 2004 with total premiums projected at $12,928,833. B. Presentation on Planning for 2006 Health Insurance Plans a. Committee recommendations Consultant Michael Schionning reported using the data through December 2004 and the current calendar year 2005 premiums, Mellon developed an initial estimate of the projected increases for calendar year 2006 for the Blue Cross Plans. The initial proiections show the followinq premium increases will be needed for the Blue Cross plans in calendar year 2006: · The HMO plan will increase 7.7% · The PPO plan will increase 9.0% · The Dental plan will increase 9.3% DRAFT Agenda Summary Report Personnel Committee Meeting March 16, 2005 Page - 3- Total overall .projected premiums for the Blue Cross plans will increase 8.5%. This translates into an increase in total premiums of $1.1 million. In comparison to the current trends in the market this is a very positive number; .however, this is a substantial increase for the City. For plans other than Blue Cross the followinq are initial proiections for calendar year 2006: · Based on initial discussions with Kaiser, Mellon expects the Kaiser increase will.be 10% to 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 provided recommended benefit changes for calendar year 2006 to reduce the percentaqe of the projected premium increases: Estimated PPO Plan Rate Impact · 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% o. Add $75 emergency room copayment -0.6% These medical changes would reduce projected premium increases -4.7% (for calendar year 2006) Blue Cross Dental Plan · Change prosthodontic service to 60% -5.1% DRAFT Agenda Summary Report- Personnel Committee Meeting March 16, 2005 Page - 4- Consultant Michael Schionning provided information on additional strategic considerations for calendar year 2006. Decisions re,qardin,q hoTM the City deals with Medicare Part D coverage · A Medicare Prescription Drug benefit will be available beginning January 1, 2006 · This change affects the Medicare-eligible retirees covered by the City plan and disabled employees eligible for Medicare · The City has three options regarding .this new benefit: · Do nothing, but the health insurance companies will do something for you · 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% · 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 will be presented in early April of 2005, which outlines timelines, decisions and impacts Decisions regarding the impact of GASB 45 · The Government Accounting Standards Board (GASB) 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 now accounts for pension benefits · The City must reflect this cost beginning with fiscal year 2007-2008 DRAFT Agenda Summary Report Personnel Committee Meeting March 16; 2005 Page - 6- Health Savinqs Accounts Consultant Michael Schi°nning provided an overview of health savings accounts. Accounts · Tax-exempt trust/savings vehicle · Employer/employee cash contributions (must be funded) · Account belongs to individual Eliqibility · Must be covered under a high-deductible health plan · Must not be covered by non-high deductible health plan - Spouse plan - · FSA - HRA - Individual plan · . Cannot be claimed as dependent on tax. return · Cannot'be entitled to Medicare Committee Chair Hanson requested staff to provide the agenda summary report within two weeks and set upanother Personnel Committee meeting early in April. He also requested more information be brought back to the Committee on GASB 45 and the unfunded liability for accrued benefits for retiree health care. 5. COMMITTEE COMMENTS 6. ADJOURNMENT The meeting was adjourned at 10:30 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; Assistant Finance Director Nelson Smith; Vicki Avila, Recreation and Parks, and JOhn Patterson, Craft Worker II (CCAPE/Miscellaneous); Dean Clason, Scott Monroe, and Paul Smith, Fire Department; Ginger Rueben, Human Resources Benefits; pete Rodriguez, CCAPE; and Tatum Sullivan, Tim Beck and Michael Schionning from Mellon cc: Honorable Mayor and City Council S:~,C\05PersonnelCommitteeP05mar16summary DRAFT Agenda Summary Report Personnel Committee Meeting March 16, 2005 Page - 5- Finance Director Gregory Klimko explained GASB 45 will require the City beginning in 2007-08 to reflect the unfunded liability in the annual report for the retiree medical program as these benefits are earned by active employees, similarly to the way we report the unfunded liability for PERS. This unfunded liability may affect how the City is viewed by bond rating agencies. The City does. not currently have a policy regarding how .the City will handle what he believed is going to be an unfunded liability for retiree medical. City Manager Alan Tandy explained in all probability the City will need to take General Fund revenues, designate the funds in a special account, and take them out 'of the General revenue stream, which is over and above that 'year's specific cost estimate. An actuarial will-need to be done to obtain the exact amount, but it will be a very big number. Additional Consideration of Other Benefit Options Consumer Directed Healthcare Plans Consultant Michael Schionning explained there are other benefit options with more of a futuristic view of market trends. There are option plans that introduce more consumerism into health care and give the employees tools to assist them to use health care more wisely to help control costs. In the health care environment these plans are relatively new in the last six years. Around 25% of employers are offering these types of plans as an option as they provide cost savings. He provided highlights of typical Consumer Directed Healthcare Plans. · Consumer directed health care plans can provide medical, prescription drug, dental and 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) · Employer provides catastrophic (high-deductible) insurance when the personal care account runs.out · To keep employees from not going for preventive care, preventive care is often covered at 100%