SUBJECT/RECOMMENDATION:
Title
Authorize the funding of city medical insurance and a contract between the City and Cigna Healthcare for administrative services under a self-insured funding arrangement for the period January 1, 2019 through December 31, 2019, at a total not-to-exceed $20 million, to be funded by city budgeted funds, payroll deductions of employee and retiree premiums. (consent)
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SUMMARY:
Historically, the City’s health care costs have escalated due to increased inflation in health care cost (8% to 10% annually) and less than favorable claims experience. The result was increased costs for the City, the employees, family members, and retirees who participate in the city plan.
In recent years, the City has seen cost trending downward which can be attributed to savings from the use of the Employee Health Center and a greater focus on wellness by the City and employees. These savings resulted in health plan design changes that lowered the office visit co-pays, hospital admission fee, and prescription drug co-pays.
The City historically pays 100% of Employee only coverage, 75% of Employee + 1 coverage and 68% of Employee + Family coverage. For plan year 2018, the projected 2.1% increase was absorbed by the City and there was no premium increase to the employees. When the City agreed to pay the entire 2.1% premium increase, it shifted the City contribution to 78% for employee + 1 and 69% for employee + family.
For plan year 2019 the projected increase is 4.4%. This increase was due to several large claims. Despite these large claims, the plan did well and as of June 2018 the plan spend was $425,095 under budget. The majority of the City Benefits Committee has agreed that employees will pay the employee share of the increase and return to the 75%/68% shared costs.
The estimated contract increase for 2019 is $776,405. The City’s fiscal 2019 budget is $18,157,000 which includes $16,400,000 million across all operations for health plan costs and $1,757,000 budgeted for the Employee Health Center, a budgeted increase of approximately $979,000 from fiscal year 2017/18.
APPROPRIATION CODE AND AMOUNT:
Funds are available in the in cost code 5907590-530300 (contractual services) and 5907590-545602 (major medical claims) to fund the City’s portion; and revenues from payroll deductions and retiree premiums will provide remaining funds necessary to fund this contract.