HomeMy WebLinkAbout09/04/09 DIRECTOR OF HUMAN RESOURCES DR. ALBERT THIGPENttEC~ly c~-
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T0: Stephen B. Fitzgibbons, City Manager DATE: 09/04/09
FROM: Dr. Albert T. Thigpen, IPMA-CP, CAS
Director of Human Resources and Civil Service
RE: Major Medical Insurance Renewal Ref. Renewal Rate Analysis
Cvoar~nG
As you are aware, Blue Cross Blue Shield [BC/BS] of Texas has
presented a major medical insurance renewal in which the
proposed rates for the City have been held constant [q.v. E;Xhibit
"A"]. Although, this is good news for the City, the shift which has
occurred over time with regard to payment of "true" insurance
costs leaves the City holding (paying) the larger end o1F the
financial burden.
A closer examination of renewal as shown in Exhibit "A" reveals
BC/BS basically rated the City's covered lives in two (2) groups:
Medicare and "Under 65", the latter including retirees and "active"
(currently working) employees. Irr order to see the impact of
retirees on renewal rates, Mr. Moshier, City Health Insuirance
Consultant, had BC/BS provide renewal rates for "Active"
employees. The result indicated a reduction of the previiously
presented renewal rate from $ X13.79 to $ 393.10 - a reductiion of
approximately five (5%) percent [q.v. Exhibit "B"].
A key concern discussed by you, Ms. Underhill, ACM/Admin., and
myself is the impact of the shift of the financial burden to the City.
BC/BS has been requested to provide renewal rates for three (3)
groups: "Actives", "Under 65 Retirees", and "Over 65 [Medicare]
Retirees" based on actual utilization costs. These rates are
reflected in Exhibit "C".
As we have discussed, this year it will be prudent to return to a
true 50/50 arrangement on premiums in which the emplloyee
and/or retiree are participating jointly. I have requested Mr.
Moshier to ask BC/BS to provide renewals rates keeping the
"Actives" at the original renewal rate of $ 413.79, the "OvE~r 65
Retirees" at the proposed $ ;216.70, and using the difference
between the "Actives only" renewal rate of $ 393.10 and the
original renewal rate to mitigate the renewal rate of the "Under 65
Retirees" which is shown in Exhibit "C" as $ 589.65.
The revised rates would be used to calculate premium costs for
plan participants. Retirees in the "Over 65 Retirees" (Medicare)
category would pay $ 216.70 which is their funding rate basE~d on
utilization and a true one-half (50%) of their dependent care costs
[Note: The City would see a reduction in individual and "Medlicare
Z+ Dependent categories; however,, there would be an increase in
"Medicare Retiree/Medicare Dependent" category as the City
currently does not pay one-half (50%) of that cost.], "Act:ives"
would pay one-half the appropriate dependent premium
(single+l, family), and "Under 65 Retirees" would pay one-half of
the new adjusted premium. However, as in the past, City Council
can choose to absorb all or a portion of the increase.
Undoubtedly, additional modifications, as we have discussed, to
the City's Major Medical Insurance Plan will be necessary to
control costs and to maintain a viable plan for employees, retirees,
and dependents. The changes will impact other benefit areas such
as retirement, etc. Changes to control costs should always be
considered in the view of the greater concern of providing
maximum healthcare benefit to all concerned.
In considering a prospective view, it would appear prudent to
examine our "covered lives" base lin three principal components:
retirees, employees with fifteen (1.5+) plus years of service,, and
those with 0 to fourteen (14+) years of service. Examining how
we offer insurance benefits to~ each of these groups will afford
opportunities to modify insurance offerings regarding retirement;
yet,, maintain the goal of fairness and reasonableness. An
additional requirement regarding persons qualifying for retirement
eligibility using "prior service credit" [i.e. eligible time at another
public employer] would be to add a fifteen (15) year "direct
service with the City of Port Arthur" to qualify for retiree medical
benefits at the full level. This would be in keeping with the
proposed grouping of "covered lives" and recognize those ~nrhose
retiree status is the direct result of tenured service to the citizens.
A plan to tie years of service to retiree insurance benefit level in a
tiered manner will need to developed and considered. An example
of such a .plan would be: 20-+- years of direct service - ]~00%
benefit level, 19 - 15 years of direct service - 75%, and 10 - 14
years of direct service - 50%.
The renewal date for the City's Major Medical Health Insuirance
Plan is November 01, 2009; therefore, we will have a renewal
resolution on the September 22, 2009 Council Meeting Agenda in
order to have the month of October for "Open Enrollrnent"
purposes (i.e. sign-up, benefit and dependent changes, etc.).
Other changes to the City's Major Medical Health Insurance Plan
will require significant due diligence and research; further, such
changes are most effective, and receive City Council endorsement,
when there is employee input.. Therefore, I would recomimend
further changes which would have greater impact on covered
individuals be considered, and prepared, for implementation at the
November 01, 2010 renewal.
Please advise should you need additional information.
c: John Comeaux, PE
Rebecca Underhill, CPA
Deborah Echols, CPA
Patricia Davis
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