9.a) 2010 Employee Health Insurance Plan Meeting Date: 9/21/2010
Agenda Item: 9 a: �
City Council Agenda Report
City of Scandia
14727 209th St. North
Scandia, MN 55073 (651) 433-2274
Action Requested: Approve employee health insurance plan for 2011 (Resolution 09-21-10-�)
Deadline/Timeline: New policy year begins January 1, 2011. Blue Cross Blue Shield has
requested city action by October 15, 2010.
Background: • The city provides an employee health insurance plan through Blue
Cross Blue Shield (BCBSM), as a member of the Southwest/West
Central Service Cooperative, a pool of 124 cities, counties and other
governmental units insuring over 6,000 members. The current plan is a
major medical plan with an annual deductible ($1,450/yr for individuals,
$2,900 for family in 2010),paired with a health savings account (HSA)
to help pay the deductible. Five employees are currently eligible for the
plan (4 full time& 1 part-time; 1 currently taking family coverage.) A
new employee recently hired has not yet determined whether or not they
will be requesting single or family coverage.
• Rates for 2011 will increase by 20%. This is the maximum rate increase
for members of the pool. Because the city's experience rating for the
covered time period was poor, the pool protected the city from a much
larger increase. The carrier(Blue Cross) found that the "needed
increase" for our group was $570.80%.
• The reason for the poor experience rating is a single case for which the
carrier calculated the "trended claims"to be almost half a million
dollars during the rating period (March 1, 2008 through February 28,
2010, paid through Apri130, 2010.)
• Staff inquired if it would be beneficial to seek rate quotes outside of the
pool. We were told that the experience rating will follow the group and
to go outside the pool would not help. However, if and when the
individual with the large case is no longer with the group, there may be
benefits to getting quotes from other carriers even with the poor past
experience. We have been advised by the city's agent (Barry
Sutherland, Health Insurance mart)that we may seek quotes at any time
and are not required to wait until the 2012 renewal.
• For the current plan, the 2011 deductible and maximum out of pocket
cost will be $1,600 and $3,200 for single and family coverage,
respectively. The prescription drug coverage portion of the plan would
stay the same as in 2010.
• Rates for this plan for the last four years, proposed rates for 2011 and
city contributions for each year are shown on an attachment to this
Page 1 of 3
09/14/10
report.
• The City currently contributes 100% of the premium cost for employees
taking single coverage, and 80% of the premium for employees taking
family coverage. In 2010 the City also contributed $105 per month to a
health savings account (HSA) for each eligible employee taking single
coverage, and $135 per month for employees taking family coverage.
• Prior to 2010, the contributions to HSAs were the same for all
employees. An additional $35 was added to the HSA for family
coverage to mitigate the fact that the city did not increase pay rates, and
the rate increase would cause take-home pay to go down. It appears that
this will also be the case in 2011.
• Prior to 2010, the city contributions for insurance and the HSA for part-
time employees were set at 75% of the amount paid for a full-time
employee. In 2010, because the premium amount exceeded that
amount, the city covered the full cost of single coverage. (Employees
are not allowed to opt out of the plan because it would negatively affect
the group.) If a part-time employee wished to purchase family insurance
coverage, the city would contribute the equivalent amount per month
toward the family coverage premium.
• The draft 2011 General Fund budgets included an assumption that
health care costs would increase 18% from 2010 (the same increase
experienced in 2009) and that the city would continue to contribute the
same share for premiums and to the HSAs. The draft budgets included
a total of$46,426 for the city's share of health insurance premiums and
HSA contributions. The actual proposed increase would total $49,940
($3,514 more) assuming the city covers 2 families and 3 singles. (We
do not yet know if a new employee will take family or single coverage.)
• Rate quotes were received for a number of alternatives to the current
plan. Any changes to the plan will alter the prescription drug benefit to
a more restrictive formulary, and reduce coverage in some other areas as
the city would no longer be "grandfathered" under the new federal law
(which guarantees certain rights to keep existing insurance plans.) We
are very concerned about making changes in insurance coverage when
we have a participant with a serious illness. Some prescription drugs
used by that participant would not be covered under the more restrictive
formulary. Also, the alternatives may not offer enough savings in
premiums to justify the decrease in benefits.
Recommendation: I recommend that the Council adopt the resolution approving the health care
plan and establishing city contributions for 2011.
Attachments/ • Draft Resolution 09-21-10-0�, Establishing City Contributions to
Materials provided: Employee Health Insurance Benefits for 2011
Contact(s):
Prepared by: Anne Hurlburt, Administrator
(health insurance for 2011)
Page 2 of 3
09/14/10
City of Scandia
Blue Cross/Blue Shield Health Insurance Plan
Southwest Service Cooperative
2007 Monthly Rates
Single Family($741.40)
City Share City Share Employee
Monthly Premium $231.50(100%) $593.20(80%) $14830(20%)
HSA Contribution $91.70 $100.00
Total $323.20 $693.20 $148.30
Annual Deductible: $1,375 $2,750
2008 Monthly Rates
Single Family($872.00)
City Share City Share Employee
Monthly Premium $272.00(100%) $697.60(80%) $174.40(20%)
HSA Contribution $100.00 $100.00
Total $372.00 $797.60 $174.40
Annual Deductible: $1,450 $2,825
2009 Monthly Rates
Single Family($948.50)
City Share City Share Employee
Monthly Premium $296.00(100%) $758.80(80%) $189.70(20%)
HSA Contribution $105.00 $105.00
Total $401.00 $863.80 $189.70
Annual Deductible: $1,450 $2,900
2010 Monthly Rates
Single Family($1,124.00)
City Share City Share Employee
Monthly Premium $351.00(100%) $899.20(80%) $224.80(20%)
HSA Contribution $105.00 $140.00
Total $456.00 $1,039.20 $224.80
Annual Deductible: $1,450 $2,900
2011 Proposed Monthly Rates
Single Family($1,349.00)
City Share City Share Employee
Monthly Premium $421.00(100%) $1,079.20(80%) $269.80(20%)
HSA Contribution $105.00 $140.00
Total $526.00 $1,219.20 $269.80
Annual Deductible: $1,600 $3,200
Page 3 of 3
09/14/10
.
CITY OF SCANDIA
RESOLUTION NO.: 09-21-10-0�
RESOLUTION ESTABLISHING CITY CONTRIBUTION TO EMPLOYEE
HEALTH INSURANCE BENEFITS FOR 2011
WHEREAS, the Scandia City Council has determined that it is the best interest of the City to
provide a health insurance plan to help maintain the health of its current employees and to enable the
city to attract and retain a quality workforce; and
WHEREAS, on March 16, 2010 the Council adopted Resolution No. 03-16-10-06,
establishing the City of Scandia Personnel Policy, which includes policies for employee health
insurance benefits, including employee and city contributions to the cost of premiums; and
WHEREAS, it is now necessary to determine the insurance plan and contributions to
premium costs for 2011;
NOW, THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF
THE CITY OF SCANDIA, WASHINGTON COUNTY, MINNESOTA, that it should and hereby
does approve the renewal of the health insurance plan with Blue Cross Blue Shield (BCBSM)
(Service Cooperative Health Plan #176) for the period of 1/1/11 to 12/31/11; and
FURTHER BE IT RESOLVED, that for calendar year 2011, the City of Scandia's
contribution to the total cost of providing health insurance benefits shall be as follows:
City Contribution to City Contribution to
Health Insurance Health Savings Account
Premiums (Monthly): (Monthly):
Full-time Employee (40 hours/week), $1,079.20 (80%) $140.00
Family Coverage:
Full-time Employee (40 hours/week), $421.00 (100%) $105.00
Sin le Covera e:
Part-Time Employee (30 to 40 $421.00 (100%) $0.00
hours/week), Single Covera e
Part-Time Employee (30 to 40 $421.00 $0.00
hours/week), Family Coverage
Adopted by the Scandia City Council this 215t day of September, 2010.
Dennis D. Seefeldt, Mayor
ATTEST:
Administrator/City Clerk