HomeMy WebLinkAbout04-25-2016 Finance Com. MinutesDUBLIN CITY COUNCIL
FINANCE COMMITTEE MEETING OF THE WHOLE
Monday, April 25, 2016
Council Chambers
Minutes of Meeting
Mr. Keenan, Chair, Finance Committee, called the meeting to order at 5:30 p.m.
Council members present: Mr. Keenan, Mr. Lecklider, Ms. Alutto, Ms. Salay, Mayor Peterson, Ms.
Amorose Groomes, and Vice Mayor Reiner.
Staff present: Mr. McDaniel, Ms. Mumma, Mr. Rogers, Mr. Nahvi, Ms. Kennedy, Ms. Goss, Ms.
Crandall, Ms. Richison, Mr. Poland.
Mr. Keenan stated that the topic of tonight’s agenda is Employee Benefits. He and Mr. McDaniel
have met on this topic already. The committee discussion will be broken into two parts. Tonight’s
meeting will be a review/history of some of the mechanisms that have been in place for the last
four-five year years. The next meeting will have more substantial discussion about details of the
City’s benefit plans.
Jason Nahvi, Benefits Administrator reiterated that the Employee Benefits Plan discussion will be
addressed in two parts:
Tonight will be: (1) a history of the City's health plan; (2) a brief overview of how the City’s
health insurance has progressed over the years; and (3) a review of the City’s claims
experience that demonstrates how well the plan is working.
The second portion of the presentation will be provided at the June 13 Finance Committee
of the Whole. At that meeting, a comparison of health plans from several local agencies
and statistics from the private sector will be provided. Staff will also provide
recommendations for revisions to the City's health plan for Council’s consideration.
Self Insured
The City of Dublin has been self-insured for over 13 years.
Being self-insured has been vital to the success of the City’s plan. It has allowed the City to
be flexible with its plan design and to customize it based on the needs of the employees
and the City.
If the City had a fully insured health plan, the City would pay an insurance provider in
advance to cover projected claims, in addition to the insurer’s overhead and administrative
costs. With a self-insured plan, the money collected by the City is only paid out when
claims actually occur, and the funds remain in a reserve account until needed.
Because the City is directly paying for health insurance claims, this makes wellness
programs more relevant. With fully insured plans, wellness initiatives generally do not result
in significantly lower health insurance costs. Because the City is self-insured, however, an
overall improvement in employee health can lead to an immediate reduction in claims,
which feeds back into the reserve fund. If those trends continue, it reduces the City’s overall
healthcare costs.
As self-insured, the City was allowed to purchase stop-loss insurance. This provides
protection against catastrophic claims and protects the City from taking on 100% of the
liability with large claims.
Finance Committee of the Whole
April 25, 2016
Page 2
Milestones
In 2004, the City switched to United Healthcare as its third party administrator for the City
health insurance plan for employees. The City has stayed with United Healthcare since that
time and continues to have a productive partnership.
In 2006, the wellness program “Healthy By Choice” was introduced. With the first year of
HBC, biometric screenings and health risk assessments were implemented. Development of
the wellness program has continued since its introduction.
In 2007, the City added to its wellness program. Employees worked with a health coach via
telephone to discuss how to improve their health and wellness; employees and spouses
were required as part of the health plan to have a preventive care check-up and attend
education classes on various healthy topics.
By 2008, the health risk assessments reflected a reduction in medium risk status (which is
2 to 3 health factors and can include issues such as diabetes and heart disease) and high
risk status (which is 4 or more health factors) for employees participating in the wellness
program.
In 2009, if an employee or spouse used tobacco they participated in a tobacco cessation
program as part of Health by Choice. These classes continue to this day.
During 2010, the City started preparing for the change from a traditional Preferred Provider
Organization plan to a High Deductible Health Plan with a Health Savings Account
At the beginning of 2011, a High Deductible Health Plan with a Health Savings Account was
implemented. These remain in place today.
In 2013, a Health Reimbursement Arrangement (HRA) was added to the plan for those
employees eligible for Medicare.
In 2015, the City partnered with OhioHealth to provide on-site health coaching sessions for
employees. They also conducted the biometric screenings at the City.
Current Plan Design
The City Plan has a $2,500 yearly deductible for employees with single coverage. Co-
insurance begins once the deductible is met and provides an 85/15 split. The City’s yearly
out-of-pocket maximum is $3,425 for single coverage.
Employees can also earn money in their Health Savings Account (HSA) for participating in
the City’s wellness program. Total contributions for participation and undergoing biometric
screenings is $1,875 each year for single coverage.
Employees with family coverage have a $5,000 yearly deductible; co-insurance begins once
the deductible is met, which is the 85/15 split. The yearly out-of-pocket maximum is $6,850
for family coverage.
Health Savings Account (HSA) contributions for participating in the wellness program and
undergoing biometric screenings is $3,750 for family coverage.
Employees have the opportunity to earn up to 75% of their yearly deductible through
participation in the wellness program.
The health plan's history demonstrates how far the plan has evolved since 2004. Efforts
are constantly made to improve the plan.
Claims History since 2010
The table graphic shown indicates the actual net amount the City paid in total claim costs for each
year compared to the costs that had been projected based on estimates from the claims experience.
It shows the following:
Finance Committee of the Whole
April 25, 2016
Page 3
The first row of this table shows the average enrollment of employees in our plan for each
year.
The second row indicates the total paid claims for each year. After the high deductible
health plan was implemented in 2011, the claims costs were significantly lower for 2011
and 2012. Even though the net paid claims went up in 2013, it was still lower than the total
net paid claims in 2010 before the high deductible health plan was implemented. The 2014
claims were up slightly, but the total net paid claims for 2015 were almost identical to the
2010 numbers.
With the rising cost of healthcare since 2010, this is a testament to how effective the plan
is working by keeping costs down and absorbing catastrophic claims.
The fourth row shows estimated total claims costs for each year. Actual claims costs for
2011 and 2012 were significantly lower than projected claims costs. Actual claims costs for
2013 and 2014 were higher than what was estimated. Our actual claims costs went back
down further for 2015 than what was estimated, and that trend is expected to continue.
Average Claim Payments per Employee per Year.
This next table shows what was paid on average for claims per employee each year.
The significance of this table shows that for every year except 2014 (which was only
$251.78 higher than the estimate), the City was able to keep actual paid claims per
employee costs significantly lower than what was estimated.
This shows that the introduction of the high deductible health care plan and wellness
program have kept costs lower year to year -- or at least kept them steady -- since 2010.
This is the benefit of the programs in place.
This can be attributed to the wellness program emphasis on employee health, and the high-
deductible health care plan making employees wise consumers.
Stop-Loss Insurance
Stop-loss insurance has played a major role in keeping the City’s health care costs from
rising to out-of-control levels.
Because the City is self-insured, it has been able to purchase this insurance policy. Stop-
loss is an insurance product that provides protection against catastrophic or unpredictable
losses. It allows the City to not assume 100% of the liability for losses arising from the
health plan. Under a stop-loss policy, the insurance company becomes liable for eligible
losses that exceed certain limits.
In 2010, the City’s stop-loss was set at $125,000 and since 2011 it has been at $150,000.
This means the City will only pay up to $150,000 on a claim for an employee.
In recent years, there has been an increase in stop-loss claims. This is an anomaly and
does not reflect on the City’s health plan design. High claims occur no matter how effective
the plan is, which is the reason the stop-loss policy was purchased.
Stop-Loss Insurance Savings
The table shown indicates the City’s savings by having stop-loss insurance since 2010.
The first row shows how much would have paid in total claims for each year if the City did
not have stop-loss insurance.
The second row shows what the City paid in total net claims paid with stop-loss insurance.
The third row shows the savings year-to-year with the stop-loss insurance. The City
experienced significant savings in 2014 and 2015.
Finance Committee of the Whole
April 25, 2016
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Since 2010, the City has saved over $4 million in paid claims because of its stop-loss
insurance. That is a huge savings for the City.
Stop-loss Insurance Premiums since 2010
The Stop loss premiums for each year are based on the group’s claims experience and the
manual stop loss rate of $150,000.
The manual rating assesses factors such as age and gender of the group, nature of
claims, plan design, and geographic area. The rate that the group is charged each year is
based on a weighting of the experience and the manual rate, and it goes back and
reviews the previous three years’ experience with the City’s claims. So for 2016, the
premium rate will be set by 50% of the claims for 2015, 30% of the claims for 2014, and
20% of the claims for 2013.
Based on projections, the City anticipates an increase in its premiums over the next few
years, based on claims experience. The renewal rates will be set based on the three
challenging years of 2013-2015.
Although the City’s premiums have increased over the years, because the claims are
increasing, the policy has worked to save the City considerable money in high dollar
claims.
Plan Cost Savings
The City’s Plan has resulted in a cost savings over the years.
The average healthcare cost per employee in 2015 was $10,717 which was up from $10,266
in 2014. The City is significantly below the industry trend compared to the national average.
The City’s 2015 healthcare cost per employee was $9,489.99 and the 2014 healthcare cost
per employee was $9,066.00. As costs are rising, the average cost per City employee is still
lower due to increased awareness with the consumer driven healthcare plan.
The cost of healthcare is increasing for every employer, be that in the public or private
sector. For the industry as a whole, the average increase of healthcare costs for each
employee per year is 7.8%. The City only had a 6.2% increase in 2015, even with an
increase of high-dollar claims over the past two years. This number is a positive reflection
of the effectiveness of the wellness program and plan design.
The stop-loss insurance policy has saved the City over $4 million since 2010 in potential
claims costs. Having this policy in place has prevented high dollar claims from significantly
increasing the cost of the healthcare plan.
In 2010, medical utilization of office visits was at a high of 4,370 total visits, which equaled
around 11.97 visits per employee. As of last year, 2015, there was only a total of 3,592
office visits and on average 10.47 visits per employee. (Office Visits 2010 – 4,370; 2011 –
3593; 2012 – 3,677; 2013 – 3538; 2014 – 3,760; 2015 – 3,592)
This is a direct result of requiring preventive care visits at least once a year and the
biometric screenings at the City. Employees are taking better care of their health and
making wiser choices with healthy lifestyles.
Employee use of generic prescriptions has continued to be a cost saver for the City’s health
plan. Over the past two years, generic prescription utilization has been at 88% for total
paid drug claims. The benchmark for 2014 and 2015 was 73.6%, so that is excellent. The
number of prescriptions per member per year has decreased by 2.6%.
Finance Committee of the Whole
April 25, 2016
Page 5
Savings of Current High Deductible Health Plan.
(He displayed graph showing the savings that has resulted from the City’s current high-deductible
health care plan.) The City’s cost per employee per year would have increased without the
aggressive approach taken with the health plan. Per trends, the City’s cost would have been at
$16,000/employee for 2015. Instead, the City’s cost per employee per year remained rather
consistent (approximately $9,000), and was extremely below what the costs could have been
without the cost-effective measures taken with the health benefits plan and wellness program.
Health Plan Funding
Ms. Mumma stated that when Council approves the operating budget each year, staff presents the
funding level based on the number of employees both at a single level and a family level. Each
pay, Finance charges back to the employee’s department $392/single coverage or $888/family
coverage. Over the course of 26 pays, that amount is accumulated and deposited into the City’s
Employee Benefit Self Insurance Fund. Throughout the course of the year, the City pays the claims
– medical/dental/vision, stop loss insurance, contributions to the employees HBC program, any
third party administrative fees, HBC programming, sponsors wellness fairs, funds the staff time for
this.
During the operating budget discussion, staff had discussed the employee’s rate for 2016 being
$10,195 for single coverage and $23,080 for family coverage. Over the course of the past two
years, because of those cost savings measures that have been put into place, and because the
claims have been managed, the City’s fund balance within that employee self-insurance fund has
increased, particularly in 2011 and 2012. It plateaued in 2013. As that fund balance grew, the City
did not need to fund for the anticipated expenditures for the upcoming year at 100%. That fund
balance was used to “buy down” what was being charged back to the departments. In 2013, the
City funded about 92% of what the expected costs for the year would be. In 2014, the City only
had to fund about 86%. That is because of the very health fund balance. Back in 2015, this
accomplished what was desired, because it did not make sense to have a high balance within the
Employee Self Insurance Fund, while continuing to fully charge back the General fund, the Street
Fund, the Police Fund, artificially increasing costs. In 2015-2016, the City is funding it at 100% of
what is expected to be the total costs for the Fund itself. The health insurance costs, which Mr.
Nahvi just shared, along with the additional costs just outlined are all charged back to the Employee
Self Insurance Fund.
Mr. McDaniel stated that there is some pending Federal legislation that could impact the City.
Mr. Keenan stated that the expectation is that those rule changes would not be effective until next
year, as they would be difficult to implement midyear.
Mr. Rogers responded that is his expectation. There are a couple of aspects of this. There is the
EOC rule, which relates to how much a wellness plan can be incentivized. The initial proposal placed
a 30% limitation on the overall cost of the plan at a single coverage level. There was no separate
discussion about family coverage. That would have been approximately a limit of $1,300.
Mr. McDaniel stated the Federal Government was considering capping the amount that could be
contributed to an HSA.
Mr. Rogers stated that since then, there have been some updates. The orig inal limitation was based
upon the Americans with Disabilities Act. If the plan was incentivized too much, it was felt that it
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April 25, 2016
Page 6
would no longer be voluntary, but mandatory, which would have been discriminatory to people
with disabilities. Mr. Rogers stated that the other issue under review is the Cadillac tax, which was
expected to be implemented in 2018. Because our costs per employee per year were very close to
already being in line with that, not much of an increase in 2018 was anticipated, assuming that the
City’s claims rate remained consistent. The excise tax would be 40% above and beyond the
required limit. If the City’s plan paid more than the limit, approximately $12,500, then what was
paid above that limit would be assessed a 40% excise tax. This rule change has been delayed to
2020. Whether that goes forward or not will likely be impacted by the results of this year’s election.
Mr. Keenan stated that there is not much support in Congress for that Cadillac tax. He is fairly
certain it will be discarded, because it is definitely punitive.
Mr. Rogers stated that the other concern with it was the threshold that was set the first year,
though it was expected to increase incrementally thereafter. It would have been an ongoing
concern, if implemented.
Mr. Keenan inquired what portion of the participant charge for the ACA is the City responsible. He
believes it was per participant per month. It would have impacted self-funded insurance, as well
as fully-funded.
Ms. Mumma responded that information is available and will be forwarded to Council.
Ms. Salay inquired about the tobacco cessation program. Is it effective? Are there employees who
have ceased using tobacco?
Mr. Nahvi responded that it is effective. An increase in that number is seen annually. The program
has been effective.
Mr. McDaniel stated that the City of Dublin was among the first to become smoke-free – in the
early 1990s, and began to provide smoking cessation programs for employees.
Ms. Salay that the City’s family coverage is $3,750. Is that the same if it is one parent and children
versus two parents and children?
Mr. Nahvi responded that is still considered a family plan. A single parent with children on the plan
receives the full contribution.
Mr. Keenan stated that many plans offer three options – single, single plus spouse, and single plus
spouse and children.
Mr. Nahvi responded the City offers either single or family coverage.
Mr. Keenan stated that $3,750 is the maximum contribution, but of that there are four
health/biometric factors to be met.
Mr. Nahvi responded that there are four biometric screenings, which if met, would earn $750 for
the single plan or $1,500 for the family plan.
Mr. Keenan stated that the HSA contribution is $1125 for the single plan or $2250 for the family
plan. How is $3,750 reached?
Mr. Nahvi stated that the amount received for meeting the biometric measures is $1,500 for the
family plan. Screenings are provided and met for BMI/waist measure, tobacco free, blood pressure,
Finance Committee of the Whole
April 25, 2016
Page 7
and cholesterol to earn that participation. The employee can also request an alternative standard
and take classes for those health factors.
Mr. Keenan stated that there are many alternatives, such as the classes, to earn that incentive.
Mr. Nahvi responded that the City offered different approaches with those classes this year, which
the employee could choose.
Mr. Rogers stated that the City of Dublin does very well in its offering of alternative standards.
Ours are not punitive or discriminatory.
Mr. Keenan stated that he understands the City is on a regular schedule of gathering quotes for
the Stop Loss to ensure the best coverage.
Mr. Nahvi responded the City just had an RFP last year for a Third Party Administrator for a three-
year contract. Staff will begin the RFP process for health insurance coverage either the end of this
year or in 2017.
Mr. Reiner inquired if the health insurance still provided free DCRC membership to the employees.
Mr. Nahvi responded that the City actually began assessing a tax for that membership this year,
but the employee does still have the opportunity to have that membership.
Mr. Reiner inquired the percentage of employee participation at the DCRC from that membership.
Mr. Nahvi responded that he has that information and can forward it to Council.
Mr. Reiner stated that it is a real benefit for the employees.
Mr. Nahvi responded that included in that are a variety of classes. There is a second facility in
another building that some employees take advantage of as well.
Mr. Salay stated that the program is sometimes referred to as “Healthy by Force”! Is the program
well received by the employees?
Mr. Nahvi responded that he believes it is. Before his current position in HR, he was a Human
Resources business partner and had the opportunity to work in many departments around the City.
Employees see the value of the program, especially the health screenings offered by the City -- the
assessment results often motivate them to go the doctor. Employees are more aware of their
overall health due to the HBC program and health education provided by the City. The program
has evolved from classes on healthy eating/well-being to class offerings, such as elder care and
retirement. It now looks at the full spectrum.
Ms. Salay stated that she appreciates that the program is looking at employee health holistically,
and the many things that can impact wellness.
Mr. Rogers stated that in the short time he has been in Dublin, a couple of employees have shared
with him their appreciation. They weren’t aware of some health issues they were having until they
had the health screenings. They believe those may have saved their lives.
Ms. Salay stated that we often talk about the richness of the City’s plan, and how the City is unique
in that the employees do not pay a hefty fee for health insurance. She recalls a Council discussion,
probably three years into the HBC program, about having the employees pay a premium or
otherwise contribute to their health insurance. At that point, it was determined that the financial
benefit to the City would not be that significant, but the emotional impact on employees would be
negative. Employees would feel they had worked hard, saved the City money, and were becoming