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HomeMy WebLinkAbout08-31-09 Admin Committee - minutesDublin City Council ADMINISTRATIVE COMMITTEE OF THE WHOLE Monday, August 31, 2009 Minutes of Meeting Mr. Lecklider called the meeting to order at 6:35 p.m. Council members present: Ms. Salay, Mr. Lecklider, Mayor Chinnici-Zuercher, Mr. Keenan, Mr. Gerber, and Mr. Reiner. Vice Mayor Boring arrived at 6:50 p.m. Staff present: Mr. Foegler, Ms. Ott, Mr. Harding, Ms. Grigsby, Mr. Thurman, Ms. Hoyle, Ms. Ruwette, Ms. Rummer. Consultants: Todd Miller, Senior Vice President, Oswald Companies and Linda Barr, Strategic Account Executive, United Health Care (UHC). Mr. Lecklider stated that the purpose of this meeting of the Administrative Committee of the Whole is to review proposed changes to the employee health benefits program. Mr. Harding stated that management’s recommendation is to implement a consumer-driven health plan with individual health savings accounts (HSAs). Consultants present tonight are: Todd Miller, Senior Vice President, Oswald Companies and Linda Barr, Strategic Account Executive, United Health Care (UHC). Oswald Companies has been the City’s benefits consultant for the past three years for the City’s health management initiative. UHC has been the City’s PPO provider and third party administrator for the past five years. This recommendation is not a new strategy. It is a proven strategy for reducing health care costs. It was first tried in the 1990’s, and legislation in 2003 and 2007 improved that particular model. Several other central Ohio municipalities have adopted a consumer- driven health plan. Those include the cities of Upper Arlington, Westerville, Pickerington, Grandview Heights, Reynoldsburg, City of Springfield and Dublin City Schools. Comparative data regarding employee contributions has been included in tonight’s presentation. Mr. Keenan inquired if the other entities provide only the HSA option or other options as well. Ms. Ruwette replied that Westerville, Reynoldsburg and Pickerington’s HSAs are full replacement plans. Mr. Harding stated that a couple of major employers have also implemented HSA plans – United Health Care, Wendy’s International and Nissan Motor Corporation. Mr. Harding stated that it could be helpful to review the City’s philosophy and strategies with the existing health benefits program, which have set the foundation for this recommendation. If adopted, the HSA program would begin in 2010. From the implementation of the HBC program in 2005, there have been two major components – wellness and prevention and the requirement for employees to partner in their health care coverage. Not only does that mean that employees should be stewards of their own health, engaged in changing lifestyle behaviors and risk factors, but it means sharing in the costs of their medical benefits program, as well. Since 2005, the City has implemented several strategies to enforce that philosophy, including health risk assessments, which provide feedback on employees’ current health status; health coaching; preventive care coverage at 100%; required consultation with physician regarding recommended screenings; biometric measurements so that employees know their numbers; and free recreation center memberships. Mandatory classes on consumerism and generic prescription alternatives Administrative Committee of the Whole Minutes – August 31, 2009 Page 2 have also been provided. The City strives to remain an employer of choice. The City believes there is a link between the benefits design and the ability to attract and retain talent. It is important for the City to contain the growth in health care costs, and since 2005, changes have been implemented to shave percentage rate increases off the usual annual medical inflation. The Healthy By Choice (HBC) Program has been successful in “bending the upward trend.” Despite the national trend, the City had a “zero” trend from 2007-2008 – no percent of increase in medical claims. Significantly less is now being spent on prescriptions. In addition, 70% of the City’s cost savings is attributable to the wellness component of the HBC Program. The City has received recognition because of the innovative design of its plan. Mr. Miller stated that he has conducted a plan decrement study from 2005 to the present, tracing the financial impact of the increased co-insurance pays, prescription drug co-pays, increased out-of-pocket maximums and deductibles versus the impact of the wellness components of the plan. Each of the plan design changes had a value. A comparison was made between the projected health plan costs if no changes had been made in the City’s health benefits plan and the actual costs. The estimated savings to the City in 2006 – 2008 was $672,380. Mr. Reiner inquired if there was an increase in employees, and if so, was that factored in. Mr. Miller responded that the increase in employees was minimal, fluctuating 4-5 employees at the most. So the impact was negligible. Mr. Keenan inquired if the City claims over $60,000 were not included in the study. Ms. Hoyle noted that the City’s annual stop loss is $125,000. Mr. Miller responded that with these studies, typically, anything over 50% of the specific deductible – the large claim deductible, is not included. Mr. Keenan inquired if the cost of the stop loss is included in the study. Mr. Miller responded that the stop loss premiums, administrative premiums and any fixed costs to operate the plan are included in the study. Ms. Salay requested clarification of the term “stop loss.” Mr. Miller responded that this is a reference to the insurance the City carries for large claims. The large claim incidence will affect the costs of claims. This study pulled out any large claim over $60,000 in cost, which would then be paid by insurance. However, the cost of the insurance is factored into the study. Mr. Keenan inquired if the stop loss amount would remain the same under an HSA plan. Ms. Hoyle responded that it would remain the same; however, testing of different limits is being conducted. The aggregate, which is 125% of the claims, would remain the same, but the individual stop loss may increase. Mr. Miller stated that the study showed that the HBC plan has been a significant success from financial and wellness standpoints. It is their opinion that the majority of the reduction in costs can be attributed to the gradual reduction in risk for the employees. However, the City has probably maximized the potential return of the current strategy. The difference between where the costs can be expected to trend and the actual costs will begin to “flatten out.” If the City desires to continue to reduce costs – to continue widening the gap between the trend and the actual, the plan will need to require employees to assume more Administrative Committee of the Whole Minutes – August 31, 2009 Page 3 responsibility. If an insurance plan is not gradually but significantly changed, the gap will begin to close. Mr. Harding stated that it is consistent with the City’s existing philosophy that City employees should share in the costs of their health care and that the City must control cost increases of the employee health benefits program to implement a consumer driven health program (CDHP). There are two concepts to the CDHP. First would be the implementation of a significant deductible on both the single and family coverage basis. This would be a new feature to the employees’ plan. Aside from a $100 in-patient hospitalization deductible, currently the City’s plan has no deductibles. Second is the implementation of health savings accounts (HSAs). Plan members would pay out of their HSA non preventive health care expenses up to the deductible amount. A deductible is provided to protect the employees from catastrophic losses, but employees would be required to take responsibility for a significant deductible. The HSA can be funded by both employee and the employer. Many employers fund the HSAs, and the recommendation does provide for the City to partially fund the accounts. Any unused funds in the employee’s HSA at the end of that year roll over to the following year. This is unlike the current flexible spending arrangement where the unused funds at the end of the year (or March) are lost. The employee owns the account, and it is portable. If the employee leaves employment, they take the account with them. Mr. Keenan stated that the concept is if the employee takes good care of their HSA fund, they can use it in retirement to pay Medicare premiums, or long-term care premiums. Mr. Harding responded that this consumer behavior aligns with the strategy – most employees spend their own money more wisely. It is an incentive for employees to stay healthy. Ms. Hoyle reviewed the total claims cost of the current plan design, 2006-2009. In 2008, there was no increase over 2007. However, in 2009, there has been an increase. In the last six months, there have been several high dollar claims, but there have been some other factors that are not unique to Dublin. Vice Mayor Boring inquired if the high claims were removed, where would the level be? That is the reason insurance exists – for the high claims. Ms. Hoyle responded that the trend would have been slightly upward, but not as significant as the graph shows. She did not calculate that adjustment. The City did have two claims that passed the stop loss limit of $125,000 – a cost of $250,000. Another claim was $95,000 and another was $70,000. Eliminating those claims ($415,000) would indicate a much more moderate trend upward [an increase of $155,573 over 2008]. However, elective surgeries are increasing. This is beginning to show in the employee population, as well. Mayor Chinnici-Zuercher inquired if age could be a factor. Ms. Hoyle responded that age can be a factor, but actually City employees are younger than their peer group. Vice Mayor Boring requested clarification of the reference to elective surgeries. If the reference is to those surgeries that can be timed, the employee must choose the best time to do it. At some point, it makes more sense to have such surgeries at an earlier age. Administrative Committee of the Whole Minutes – August 31, 2009 Page 4 Ms. Hoyle responded that, due to recent economic concerns in the nation about jobs and health coverage, people are beginning to take care of surgeries that they have deferred. “Elective” may not be the best word. Ms. Salay stated that if the City had experienced the same high claims in an HSA environment, the result would not have been any different. The claims experience wouldn’t change, nor would the bottom line. The increase in claims isn’t anything that can be connected to “maxing out” the potential of the HBC -- it just seems to be a bad year for high claims, and the current concerns in the nation could account for the remaining amount. Ms. Hoyle responded that is correct. What is happening with Dublin is not different than others are experiencing. The City’s experience with high claims will remain the same. Approximately every three – five years, there will be an occurrence of high claims. However, it is time to re-evaluate the City’s health benefit plan. What the City wants to manage is not the high claims, but the remaining amount that can be managed. Mr. Keenan inquired how close to the aggregate high claims amount the City has come. Ms. Hoyle responded that in past years, the City has not come close to that amount. This year, it may come close. Ms. Ruwette stated that the trend that is beginning to show is higher utilization of the plan. That is probably due to the fact that the employee population is aging, and as they age, the City will see continued use of the plan, unless a change in the plan is implemented. An example of how the HSA would benefit the City is with the continued use of ER instead of urgent care. This past year, the City increased the co-pay for an ER visit from $100 to $150, anticipating that would reduce the occurrence of ER use. The reverse was true. Evidently, it was still easier to use the Dublin Methodist Hospital ER than an urgent care or primary care physician. With a consumer-driven health plan, the employee would be using their own dollars for the full amount of the care. That would probably cause them to reconsider their choices. This is some of the data they are considering when they review the health benefits plan. Vice Mayor Boring inquired exactly how many employees are using the ER inappropriately. She does not want to burden all the employees who try not to use the ER because a small number of people have used the ER inappropriately. Ms. Ruwette indicated she would forward that information to her. Vice Mayor Boring stated that there will always be a few cases of abuse of utilization. If the implication is that there is a trend, she would like to know how many people are doing this. She does not want to say that no employee should be going to the emergency room. Ms. Salay stated that is some cases, it might be a case of education. Dublin Methodist Hospital is close, but America’s Urgent Care is also close. Could it be the perceived wait time? Perhaps it is the unexpected result of the hospital’s success. Patients are treated quickly and well there. Mr. Reiner stated that the employees may not know the recommended choice for urgent care within the local area. Ms. Hoyle stated that using the hospital ER costs three times that of urgent care. If employees had to pay $1,200 rather than $150 from their HSA for an ER visit, that would provide the education. Administrative Committee of the Whole Minutes – August 31, 2009 Page 5 Mr. Reiner stated that making employees aware now would be preferable. He inquired what level of education is provided employees on other recommended health practices, such as nutrition and exercise. Mr. Harding responded that the My UHC web site provides the employee an abundance of information on wellness topics. Mr. Reiner stated that he is referring to something more interactive for the employee, for instance, bringing in a lecturer who can really inspire the employees. Ms. Ruwette stated that many speakers were brought in to present talks for the employees. This was offered through the Healthy Bucks program. Vice Mayor Boring stated that the issue is the level of knowledge of the speakers. She attended one talk at the Rec Center, and she mentioned that she was having problems taking off weight. The “expert” asked her if she had tried the Nutri System, where they provide the meals for you. The foods provided are processed and full of sodium. So what level of experts is the City providing for the employees, if that is the advice given? Mayor Chinnici-Zuercher stated that the concern is whether the City has really tried everything extensively and long enough with employees before changing to a completely different system. As Council members have pointed out, switching to a different type of plan alone will not change behavior. People may be going to the ER, not only because they are unaware of the cost difference, but because it is more convenient – they can go any time of the day. Ms. Salay stated that she spent some time studying the materials, and she is curious about what other alternatives were considered. The suggestion is to move from a zero deductible to $1,750 for a family. That is a significant leap. There are also recommendations to impose accountabilities for lifestyle issues -- smoking, blood pressure, waist circumference. She is trying to understand how those would be addressed in the future. It seems that a step is missing. She is not comfortable with this as outlined. Mr. Harding responded that they did consider not going the CDHP route but making the HBC program a performance-based incentive strategy with a requirement to show biometric results. However, that strategy probably would not have as great a cost reduction as a CDHP. Ms. Salay stated that she understands the City wants to control costs. These are taxpayer dollars. At the same time, Council must consider the employees and their families -- to ensure that they are able to have the appropriate care when needed and that this is not a burden to them or a barrier to their accessing the care they should have. Is there not another step between the current HBC and entirely going to this sort of a program? It sounds like there is a lot of “big brother” involved, in requiring employees to show they have improved by lowering their blood pressure, decreasing their waist circumference, or whatever. She wonders if there is a step in between that would be preferable to this type of plan. Ms. Hoyle responded that staff discussed possible intermediate steps. Because City employees make no contribution today, there is no good intermediate step. Mr. Miller stated that the decrement study showed that over 80% of the employees in the City’s HBC program spend less than $1,000/year on health care. The majority of the health care costs paid by the City are a result of the claims of the other 10–20% of the population. Administrative Committee of the Whole Minutes – August 31, 2009 Page 6 Legally, there are a limited number of incentives that can be tied to employee contributions. Consequently, there are no user costs in the plan. Without incentives to limit their use of insurance, the best example to describe what occurs is a situation in which everyone could go to a high-end restaurant and order the most expensive meals in whatever amounts they wished. Everyone would take advantage of that because it is not their money. That is how the insurance plan can be used, without controls. Vice Mayor Boring stated that she objects to that example of employees’ behavior. Mr. Miller responded that the way the City of Dublin’s plan is structured, there are no user costs in the plan, no deductibles and no co-insurances. The majority of the employees have very limited expenses. Their expenses are related to preventive care, care for children, or occasional illnesses; they are not related to catastrophic medical events. The HSA program is structured to protect the 80% of employees who have expenses less than $1,000/year. Legally, there is a limit to the incentives the employer can tie to premium contributions. Based on the current utilization of the plan, the proposed funding level of the HSAs would cause most of the employees to have a significant rollover amount each year. Instead of paying first dollar costs for everyone, regardless of how they use the program, employees will pay for everything as they go. This will incentivize them to have a more judicious use of health care, but it will not overly burden employees with the costs. If it had been determined that there would be a significant financial benefit from doing so, the next step would have been to charge employees premium contributions. Mr. Keenan stated that it is his view that the employees’ health benefit plan is very rich, not only in the plan design, but because the employees make no contributions. He isn’t aware of anyone else in the private or public sector that has a plan like Dublin’s. Mr. Harding stated that they are sensitive to putting a disproportionate burden on the employees. This change will not be a punitive measure to employees. Ms. Salay stated that Mr. Miller presented an interesting statistic – 10-20% of the employees are spending 80% of the costs. Mr. Keenan responded that is typical with any plan. Ms. Salay inquired if it is true that 80% of the employees are spending less than $1,000. Ms. Hoyle responded that they are spending less than $1,000/year in terms of total medical costs, including all preventive costs. Vice Mayor Boring stated that her prescriptions are Tier 3, the highest cost, and that cannot be changed. With the proposed HSA, the employee will not pay a portion of the prescription cost, but the entire cost. In 4-5 months, the cost of her prescriptions would be $900. Other City employees would have the same situation. She asked that the City conduct a survey of employees asking them what the full costs of their prescriptions are annually. Ms. Hoyle stated that the HSA account would not be funded only with the employee’s contribution of $1,750. The City will contribute a portion, as well. Vice Mayor Boring stated that she would like the City to conduct the survey asking employees what the true cost of their prescriptions would be. Council wants the City to be a happy workplace, and one way to do that is to create less stress for the employees. If employees are expected to attend night meetings, it is important to demonstrate that the City recognizes what they are giving, and that the City cares about them. She was on Council several years ago and recalls the philosophy that previous City Councils expressed: that they “would not build the City on the backs of the employees.” Employees are now Administrative Committee of the Whole Minutes – August 31, 2009 Page 7 indicating that is what appears to be happening. They ask Council to consider all the money being approved for roadways and many other projects, while at the same time the City is considering requiring employees to pay for what was previously provided as part of their compensation. She, personally, does not believe the statement that employees will not end up paying and reaching that limit. Ms. Hoyle reviewed graphs comparing the future trend for City health care costs without and with a plan change. The plan change will flatten the trend line. Another graph depicts how the proposed plan would compare with other public entities in regard to annual family contribution (monthly premium and share of deductible). The City would continue to be competitive. Dublin Schools’ annual family contribution is significantly higher, but they are making an effort to not include families. Mr. Keenan stated that many of the City’s employees have spouses with options for other health care plans, but they will not choose other alternatives when Dublin requires no contribution. Ms. Salay inquired clarification of the birthday rule for coverage of children. Ms. Ruwette responded that rule is used when both parents have health care coverage available for their children. The birthday rule is used to determine which plan the dependent children will be listed on. That rule does not apply when there is a court order in place specifying which plan will cover the children. Mr. Keenan stated that the other parent isn’t required to carry their own plan. Ms. Hoyle responded that is correct. The birthday rule applies only to designating the primary and secondary coverage. Mr. Keenan stated that it is likely the City plan covers most of the employees’ dependents. Ms. Hoyle noted that the City’s number of covered lives per family unit is higher that their peers. Mr. Harding stated that, typically, it is not the children driving up the costs; it is the spouses. Ms. Ruwette showed charts comparing the current plan with implementation of a CDHP in 2010 and implementation of the biometric measures in 2011. With the current plan, the employee and spouse have the option of enrolling in HBC at no cost for the next year. Plan members do pay a share of any medical costs they have -- the employee pays 15-20%; the plan pays 85% - 80%, up to an out-of-pocket limit. Approximately 94% of the City’s employees are in the HBC program, including spouses. Ms. Salay stated that the employees not enrolled in the HBC program pay 15% of their monthly premiums. Mayor Chinnici-Zuercher inquired why they do not pay more. Ms. Ruwette responded that, legally, the City is not permitted to charge them more than 20%. There are only 22 employees who are not in the HBC plan and pay a portion of their premium instead. The City’s plan covers preventive services at 100% and has a separate dental and vision plan. A CDHP in 2010 would begin with the open enrollment period. The flexible spending account (FSA) would not be offered, as it would be replaced by the HSA. An FSA for dependent care only would be offered. Two things would occur: the current benefit plan would remain with the addition of an annual deductible for single or family coverage. The Administrative Committee of the Whole Minutes – August 31, 2009 Page 8 annual deductible must be used to pay for any medical costs before the medical plan would kick in. At the same time, an HSA would be created for employees. Mayor Chinnici-Zuercher inquired the difference between the annual deductible and the HSA. Could the HSA be used to pay the annual deductible? Ms. Ruwette confirmed that the HSA could be used to pay the deductible. If the employee participated in HBC in 2009, the City would fund a certain portion of their HSA. The money in the HSA can be used toward the medical and pharmacy expenses that the employee must now pay due to the annual deductible. Mr. Keenan stated that it is important to note that there will be no office or pharmacy co-pay. The employee will pay the full costs, but will have the money in the HSA to re-pay himself. Vice Mayor Boring inquired how the use of an out-of-network provider would be impacted with this change. Ms. Ruwette responded that nothing would change. The employee would not be prohibited from using an out-of-network provider. However, the employee will pay the full cost of the out-of-network provider, and his/her HSA account would be used up more quickly. Mr. Keenan stated that with the 65%/ $3250 City contribution, $5,000 family deductible scenario, that would be only $1,750 out of pocket before the plan moves to the 85%/15% co-pay to a certain stop loss. $1,750 is less than most people pay for a deductible. Ms. Salay inquired what the out-of-pocket would be. Ms. Hoyle stated that it is $1,750, but the out-of-pocket max is $8,000 per family, $4,000 for an individual. The money in the HSA is the employee’s. They can also add additional funds to their account. Mr. Keenan noted that amount is tax free. His company has some insureds who have built their HSA accounts up to $30,000 to $40,000 over recent years. They are permitted to invest the money in mutual funds or another investment vehicle. Mr. Reiner inquired if the employee takes their money out, would that then be taxable. Mr. Keenan responded that it is not taxable as long as it stays in their account or as long as it is spent for a qualified medical use. Ms. Hoyle noted that it could also be rolled into a qualified IRA. Mr. Harding clarified that preventive care would still be paid at 100% -- no deductible, no out-of-pocket. Mr. Lecklider stated that as long as the employee goes to an in-network provider, they get the benefit of the negotiated rate. He was looking for the employee’s bargaining power. What is being incentivized in that respect? Ms. Ruwette responded that the employee is concerned about their choice in care. A good example is in the employee’s choice to use the E.R. or an urgent care center. Another area would be with pharmacy. The City does have a mandatory generic policy. However, when employees see the full cost of their prescriptions, they will be incentivized to consider any other options available. They will discuss all options with their physician, and choose the one that is most cost efficient. UHC offers a 24-hour nurse care hotline. City employees do not use that much at this time. However, when their HSA funds will pay for the E.R. or primary care visit, they may choose to call the nurse hotline first. HSA plans Administrative Committee of the Whole Minutes – August 31, 2009 Page 9 make individuals aware of the full medical and pharmacy costs and drive them to make different decisions. Vice Mayor Boring noted that as mentioned in the information provided to Council, smart consumerism is almost impossible in today’s health care marketplace, as providers don’t post price lists. Ms. Salay stated that when faced with choices for one’s own care or the medical care of family members, the costs do not come to mind. When faced with an illness, the primary drive is to get well. Health is priceless, and the cost doesn’t matter. It becomes very emotional and difficult to consider cost when you’re thinking about a personal situation. Council needs to consider these issues wholly on behalf of the entire employee population. This is what gives her great concern. If an employee is in the upper tier of compensation, then a mandatory $5,000 contribution isn’t a lot of money. However, for an employee earning $35,000 with a family, that is a huge amount of money. From having part of their compensation be free health care to being required to pay that significant dollar amount will have a huge impact on that family. Whatever Council’s decision is tonight, realization of that impact is important. Educating employees properly on this change will be very difficult, and she doubts that is possible to achieve in the four months remaining in 2009. The City says it wants to remain an employer of choice, and at the same time says it now wants to know private things about an employee – their weight, waist measurement and blood pressure? That is a quite a challenge! Mayor Chinnici-Zuercher stated that another concern is that this is only one piece of the financial pie. In 60 days, the City may propose giving 5 to 10% raises to compensate for the employee having to pay this money towards health care. There has been a previous discussion about controlling the level of traditional raises. There needs to be a reasonable balance between being fiscally responsible in an overall sense yet not placing an unreasonable burden on employees. Mr. Keenan stated that Council must be stewards of the taxpayers’ money, which will probably require something like an HSA or an increase in contributions. Every employer in the marketplace is paying a lot more every year for health coverage for their employees, and they are considering higher deductibles, higher co-insurances and higher contributions. It will be necessary to do something. Perhaps Council could have staff explore the other options, but it will be necessary to do something to achieve the Council’s goals for the budget. Mayor Chinnici-Zuercher stated that she does not disagree and does not object to asking employees to pay something for their health insurance. Ms. Hoyle stated that the question is whether to charge the employees $1,750/year or $149/month. The advantage of the HSA is that the City benefits in two ways – the essential contribution and the potential for employee behavioral change. Mr. Keenan noted that the employees who are not utilizing that level of funds will have a fund that continues to grow. Vice Mayor Boring stated that the employees who do not use their funds will retire with extra money. Administrative Committee of the Whole Minutes – August 31, 2009 Page 10 Ms. Salay stated that if they do not use the funds, that means they are staying very healthy, which is a positive thing. The financial success of the HBC program also means that employees are making healthy choices. Mr. Gerber stated that the HSA funds are pre-tax dollars, so the cost of this option is less. Ms. Salay noted that if the decision is to implement this, that would be an important employee education piece. Ms. Ruwette stated that, as with the FSA, the employees have the option to fund their accounts up to the IRS limit. The money funded by the employees themselves is also pre- tax. These funds also earn tax-free interest. There are some advantages to the employees. Ms. Hoyle stated that as part of their newly negotiated FOP labor contract, the Westerville Police chose a smaller wage increase in favor of a larger employer contribution to their HSA. Their decision was based upon the tax liability and the contribution to the Police & Fire Pension. From that aspect, the City’s employees could be better served with an HSA. Mr. Keenan inquired if cost modeling had been conducted – the total costs with the 85/15% co-pay. Did they also consider a higher deductible, with 100% paid after that? Many of the individual insurance products are structured that way. The employee knows their fixed cost. Ms. Salay stated that they would also know that information with the current proposal, as the cap is at $8,000/family. Mr. Lecklider stated that the HSA will reward the person who has healthy behaviors. Mayor Chinnici-Zuercher stated that there would be two full years that the non-union employees would have this new program before it would be implemented for the union employees. The non-union employees may not perceive that as positive. She does not understand what some of the biometric components mean. Does that mean the employee cannot smoke nor have high cholesterol or blood pressure? What if they do have it? Ms. Ruwette stated the biometric measurement component of the plan would be communicated to the employees a year in advance of implementation of those measurements. The Healthy By Choice Bucks Program would also be targeted to help employees reach their goals. Ms. Ruwette stated that employees who participated in the HBC program in 2009 would have their HSA pre-funded at a 65% level for next year. Employees would have the option to add additional funds up to the IRS limit. Vice Mayor Boring inquired what that amount is. Ms. Hoyle responded that it is $6,100 per family in 2010. Ms. Ruwette stated that in 2011, the next phase of the health management strategy would be implemented. The City’s contribution would be based two factors: (1) the employee’s participation in the plan: health risk assessment, preventive care visit with physician, participation in the mandatory education requirement. There is a second opportunity for additional City contribution: (2) the employee meeting medical standards for four biometric measures: Administrative Committee of the Whole Minutes – August 31, 2009 Page 11 - smoke free - meet medical standards for cholesterol - meet medical standards for blood pressure) - meet medical standards for waist measurements In addition to the City’s contributions, the employee may also contribute additional funds to his/her account. Ms. Salay stated that the concept is that, initially, the City would fund $3,200 to a family HSA. The employee has a remaining deductible of $1,750. If the employee does not meet that deductible, could they fund their deductible out of the City’s contribution to their HSA? Ms. Ruwette responded that they could. Ms. Hoyle stated that if the employee funds their differential through their HSA, they would have the advantage of it being from tax free dollars. Mr. Keenan stated that they may pay their co-pays for prescriptions, etc. with after-tax dollars. Ms. Salay inquired if the employee knows they will meet the deductible and wants to begin paying their obligation through their HSA, could they divide the total amount into 12 payments, and pay it into their account on a monthly basis? Ms. Hoyle responded that they could. Ms. Ruwette noted that any preventive health services would continue to be covered at 100%, which includes well child visits. Mayor Chinnici-Zuercher inquired if the City’s contribution would continue to be made on a yearly basis. Ms. Hoyle confirmed that would be the practice. Ms. Ruwette responded that the amount of the contribution would change. The amount discussed tonight, the amount proposed for 2010, is the base contribution. The biometric component would not be implemented until 2011 to give the employee the opportunity to plan ahead. The details are: the employee has a deductible (the amount they pay out themselves before the plan takes effect) of $2,500 (single) or $5,000 (family). Of that amount, the City will fund 65% into their HSA. If the employee is incurring medical or pharmacy expenses that will fall under their annual deductible, the employee may pay for them with their HSA. Mr. Keenan noted that the employee would have an HSA debit card, which makes it easy to use. Ms. Ruwette stated that after the employee has met their deductible, the plan would go into effect and would cover 85% of the employee’s covered expenses up to an out-of-pocket max. After that, their expenses are paid at 100%. Vice Mayor Boring inquired if vision and dental expenses would continue to be considered medical expenses. Ms. Ruwette responded they would. Ms. Hoyle noted that anything not covered by the City’s plan would not be counted toward the deductible, however, the HSA money could be used to pay for it. Mr. Keenan stated that the employee’s current FSA would lose the medical portion. Administrative Committee of the Whole Minutes – August 31, 2009 Page 12 Mr. Lecklider inquired about prescription drugs. Under the current plan, the employees probably receive a significant discount. Under this plan, they would be required to pay the full amount. Ms. Hoyle responded confirmed that they would pay the full discounted price of the drug under the City’s plan, but that full price would count toward their deductible. Ms. Ruwette noted that after their deductible is met, the employee’s co-pay would become effective – they would pay 15%. In 2011, the HSA funding would require the employee to meet biometric measurements. The City would fund a lesser amount as the base amount for plan participation ($1,000 single, $2,000 family). The additional funds must be earned by the employees by reaching the biometric standards. These standards would be met in conjunction with consultation with the physician. For instance, if an individual has high blood pressure but takes a medication that lowers it, that meets the measure. Vice Mayor Boring inquired if the spouse meets the measurement, but the employee does not, what is the determination. Ms. Ruwette responded that one-half of the $370 would be funded to the HSA. Mayor Chinnici-Zuercher stated that the tobacco measurement would be self reporting. Ms. Hoyle responded that there is a urine test possible for that, which is being considered. Mayor Chinnici-Zuercher stated that from the employer standpoint, this appears to require personal and confidential information of employees. Ms. Ruwette responded that the employer would not see the specific information. Either a form could be created that the employee would have signed by their physician, or the testing could be conducted at the City, as the health assessment screenings are now done. The form would indicate only how many of the four measurements the employee has met. Mr. Reiner inquired if there are more advanced biometric measurements than these four. Ms. Hoyle responded that these are the four baseline measurements typically used by other employers. Ms. Ruwette stated that these measurements have been developed in consultation with the UHC medical director. He has indicated that these measurements are endorsed by the U.S. Preventive Services Task Force, accepted by the medical community and cost efficient. Some of the other testing can be expensive and could have gray areas in interpretation, which would require more testing that would cost the plan money. Mr. Reiner suggested that providing the employees fact sheets on this information would be helpful – items such as the preventive health assessments covered by their plan and the recommended frequency for having them. Many employees do not take time to study the UHC web site. Vice Mayor Boring stated that it is her understanding the City’s contribution to the HSA is not taxable. If the employee’s spouse has insurance, is there no coordination of benefits? Ms. Hoyle responded that there is not. Vice Mayor Boring inquires what happens when an employee reaches age 65 and must sign up for Medicare. Ms. Hoyle responded that, currently, the City does not require employees to sign up with Medicare. Coordination of benefits with Medicare is also not possible. Administrative Committee of the Whole Minutes – August 31, 2009 Page 13 Mr. Keenan stated that the law considers the employee’s health provider primary and the employee would remain under this plan. This plan is primary and Medicare is secondary unless the time of service is under 20 years -- then it is the reverse. Ms. Ruwette stated that with an HSA, however, if the employee’s spouse is eligible for Medicare, the employee can no longer be covered under an HSA. Ms. Barr, UHC representative, responded that if the employee is eligible for Medicare, they can no longer contribute to an HSA. Ms. Salay inquired if the spouse is eligible for Medicare but the employee is not, can the employee continue to contribute to their HAS? Ms. Barr responded that the employee can continue their HSA. Ms. Salay inquired if there can be no coordination of benefits, does a family select which health plan to place their children on, regardless of when the birthday is? Ms. Hoyle responded that the employee can choose. Mr. Keenan stated that there are some public entities who do not permit elected officials to participate in their plan. He believes Washington Township was confronted with this issue. Perhaps that was due to the fact the township is under State statute, while Dublin is a charter city. He asked staff to check into this. Vice Mayor Boring inquired if an employee’s spouse is 65, the employee can no longer fund an HSA? Ms. Hoyle responded that it can be funded for the employee only. Vice Mayor Boring stated that the employee would need to change to a single HSA plan. Mr. Keenan stated that if it is a common plan, it is possible to roll some amount over to the spouse. Ms. Barr stated that employers will often have a PTO plan available for employees who are age 55 and older. Vice Mayor Boring inquired if the employee would remain eligible for an HAS, even though their spouse is no longer eligible. Ms. Hoyle responded that the City cannot require an employee or their spouse to enroll in Medicare at age 65. They can continue to stay fully covered by the City’s plan. Unless they choose to enroll in Medicare and have secondary coverage, they will continue to be covered as any other employee. Mayor Chinnici-Zuercher stated that she understood Ms. Barr to have said that although the employee and the employee’s spouse would continue to be covered by the City’s plan that contributions to the HSA on behalf of that individual could no longer be made to the HSA. Ms. Barr confirmed that when the plan participant is 65, contributions on their behalf can no longer continue. Mr. Keenan requested staff to look into the Medicare rules on this question. Mr. Reiner inquired if taxes are paid on the funds when the employee withdraws them. Mr. Miller responded that there is a tax penalty if the funds are withdrawn early. Mayor Chinnici-Zuercher inquired what is considered an early withdrawal. Administrative Committee of the Whole Minutes – August 31, 2009 Page 14 Mr. Keenan stated that there is no need to withdraw any of it. The funds can remain in the HSA to be used when the individual is 70 or 80. Mayor Chinnici-Zuercher inquired if the employee draws it out before they are 65, is that considered withdrawing it early? Ms. Hoyle responded that withdrawing the funds to use for anything that is not medically eligible would constitute withdrawing it early. Mayor Chinnici-Zuercher inquired if the funds are withdrawn at any time in the future and are used for a purpose that is not medically eligible, would there be a tax penalty? Ms. Ruwette responded that the account is the employee’s, so they can withdraw the money at any time, but there would be a tax penalty. Mayor Chinnici-Zuercher noted that the employee would pay whatever the tax rate is at that time. Mr. Keenan stated that the employee would pay both the taxes and an additional 10% penalty. Vice Mayor Boring inquired if the HSA funds could be used for any medical reason, even when the employee is retired on PERS. Ms. Hoyle responded that the existing funds could be used, but the account cannot be added to. Vice Mayor Boring inquired if the situation is different for the re-employed retiree. Ms. Hoyle stated that OPERS regulations state that if any employee is eligible for coverage under their employer, they cannot take OPERS insurance. Mr. Lecklider stated that there seems to be a significant internet component to this. Ms. Ruwette responded that it is another part of a UHC publication, inclusive of all their services. It can send out reminders to the employee. Ms. Barr stated that whenever the City has a consumer-driven health care plan, it will be very important to the employees to have these tools to access the information. Ms. Salay stated inquired what happens if there is a need to speak directly to a UHC representative? She has dealt with UHC quite a bit, and it can be exceedingly difficult. If the plan will require the employee to research or look for additional information on how the plan works, it will be important to make UHC or City staff available by phone to support the employees. An employee who does not have that amount of personal time to devote to the task would be seriously handicapped. This new account will bring many more questions related to its use. The information provided must be accurate, documented and the process should go smoothly for the employees. Ms. Hoyle responded that it will be important for the HR staff to be as informed as possible so they can direct employees appropriately to the right questions and answers. Ms. Salay stated that the intention is that Dublin staff will not be aware of employees’ private information or situations. If the employees must come to Dublin staff for direction or answers, it will become abundantly clear what their issues are. It would be preferable to have someone at the insurance company available to provide that information, however, that would seem to be difficult to achieve. Ms. Hoyle responded that they have raised those issues with UHC, who has been working with the City to become more responsive. Vice Mayor Boring inquired about pre-authorization for a negotiated rate. Ms. Hoyle responded that everything about the plan will remain unchanged. Administrative Committee of the Whole Minutes – August 31, 2009 Page 15 Ms. Ruwette stated that if the City can provide a network, such as UHC, that has the best negotiated discount rates, employees will be paying less from their HSA for medical expenses. Funding Strategy Ms. Hoyle stated the proposal is that the City would pay 65% of the HSA the first year; however, the recommendation is that the full amount not be provided at the beginning of the year. It would be possible for the employee to use it all at the beginning of the year, then drop the plan and sign up with their spouse’s insurance provider a little later in the year. Also, an employee retiring in the first half of the year would have the full $3200 to take with them. On the other hand, an employee could have legitimate expenses in the first part of the year for which they need the full amount, such as childbirth. It will be important to develop a funding strategy to address those situations. It is Council’s prerogative to let staff know how they would like them to handle the funding. In the first year, the City would not see a significant reduction in claims costs, but that should occur in the following years. Ms. Salay inquired if the employee meets all the biometric measures, what percentage of their HSA would be funded by the City? Ms. Hoyle responded that they could have their account funded up to 70%. Mr. Lecklider inquired where the $630,500 total City HSA deposit would come from. Ms. Hoyle responded that in the first year, it would come from claims reductions. Mr. Lecklider inquired if in the first year, there would be a $630,000 savings by conversion to the proposed plan. Ms. Hoyle responded that there would be that amount of reduction in claims, but the money would go toward funding the deductible. This would be changing the way the City funds claims. Ms. Salay inquired what the suggestion would be for the employee who has a baby in February or on New Year’s Day needs an appendectomy. Will that amount be paid back to the employee after the occurrence? Ms. Hoyle responded that the employee would need to pay for the amount initially, but it would be paid back to them later. The employees could also contribute additional amounts to their fund so that they would have more available. When the City of Grandview went to HSAs, they made a hardship request available to employees the first year. If an employee really needed the funds sooner, Grandview made them available to them. There are ways to pre-fund for plan participants who need it. Ms. Salay inquired what could constitute a hardship. Ms. Hoyle responded that it can be perceived differently. Braces may be important to one person but not another. Ms. Salay inquired who the “judge” was in Grandview. Ms. Hoyle responded that it was their HR director, but it could be reviewed by someone else. Mayor Chinnici-Zuercher suggested the Personnel Board of Review might be able to handle these questions. Ms. Salay responded that the request would need to have identification removed, and the members could not be accessible for someone to lobby. Mr. Harding stated that a panel could be set up. Administrative Committee of the Whole Minutes – August 31, 2009 Page 16 Mayor Chinnici-Zuercher stated that FirstLink pays into the accounts on a quarterly basis. People can request early funding for hardship reasons. Mr. Keenan stated that with the current FSA, if a payout is made to the employee early in the year and then they leave, the money is not recovered. Ms. Hoyle stated that with the HSA, there would be an opportunity to recover it. Ms. Barr stated that once funds have been deposited to an account, the money is the employee’s and cannot be recovered. However, HSAs can be funded quarterly, not annually, at the beginning of the year. Ms. Salay noted that in any event, the maximum the employee could end up paying is $8,000. It will be important to communicate that. Ms. Hoyle stated that they realize that this will require a significant communication effort. Ms. Salay stated that the task would be very challenging. Even though the change would have less impact on Council members than on employees, consider the number of questions/ concerns Council raised tonight. Ms. Ruwette stated that with the assistance UHC, they would set up several staff meetings. One-on-one meetings with employees could also be made available. These could be useful in helping employees plan what they might need to deposit in their accounts. Once this proposal is approved, staff will begin to roll out communications on a weekly basis to employees. Vice Mayor Boring stated that in 2010, there will only be 50% of the employees available to participate. So why not wait until 2011 when two union contracts expire and those employees could be included? In view of the increases in pay the bargaining employees have negotiated, which non-union workers will not receive, it seems that the non-union workers are being treated unfairly. Ms. Hoyle responded that to some non-union workers, this will be a good thing. Vice Mayor Boring stated that, in reference to Ms. Salay’s concern about the employees who are not at the top of the pay scale and have families to support -- it would seem fairer to plan this change a year in advance. Mr. Harding responded that a mid-year implementation would also be possible. Ms. Hoyle noted that it would be more difficult administratively to do mid-year. Mr. Keenan stated that many entities have different plans, a traditional PPO and an HSA. He doesn’t necessarily advocate that, but it may be a transitional way to implement this, so employees could see how it works. It may be a surprise how many employees would choose to participate in an HSA. Administratively, it would be a challenge, but it would permit a transition. Ms. Hoyle stated that would not work easily with the current funding mechanisms. Mr. Keenan stated that he understands. However, there may not be the opportunity to do it at all then, as there may not be sufficient Council votes in favor of it. Ms. Hoyle stated that if two plans are offered, the City wouldn’t be able to fund the HSAs at the same level. Mr. Keenan inquired why that would be the case. Ms. Hoyle stated that the City wouldn’t have the claims savings to use to fund the accounts. Administrative Committee of the Whole Minutes – August 31, 2009 Page 17 Mr. Keenan stated that if the City remains in the traditional program, there would not be any savings, perhaps even a loss. Ms. Hoyle responded that one reason they preferred to go with a full conversion to HSA was that Upper Arlington had a very low participation in their HSA – only the healthy employees opted in. The City continued to have claims for the other employees. Mr. Keenan stated that he understands, as he has handled these plans many times previously, and the communication piece is very difficult. The difficulty is not at the administration levels. Ms. Salay stated that employees will not want to sit down with a City staff person and discuss their situation; they will be very uncomfortable with that setting. This will require an independent, disinterested third party to come in and counsel employees on how it can work for them. Mayor Chinnici-Zuercher concurred. The proposal before Council is to implement a significant change for employees in 90 days. She likes the idea of a personal approach, but with a disinterested third party, who would lay out a personal worksheet with the employee, let them take it home and consider it. However, this will take some time to provide employees with good education and ease them into a new type of plan. She agrees with Mr. Keenan’s and Ms. Salay’s suggestion. Staff should look at the calendar and consider how long it would reasonably require to roll out the education; allow time for all the personal, one-on-one meetings; provide any additional education; and then consider a possible implementation date. That could potentially be July 2010. Although the projected savings won’t be realized in 2010, it will happen eventually within a different timeframe. Ms. Hoyle stated that delaying the implementation date would be preferable. The City would be better served to push the implementation date back. Vice Mayor Boring stated that allowing time for education before actual implementation, similar to what PERS does, is fairer to the employees. It gives them time to plan how to handle this financially. Mr. Keenan inquired if the implementation occurred in mid-2010, would any other options be recommended for the current plan renewal period of six months? Ms. Hoyle responded that she does not believe any changes would be made in the plan design prior to that time. Mr. Keenan noted that if there were a deductible, that would serve to educate employees on the increased costs. He believes that for a couple of years, City employees have anticipated paying a portion of the premium or having a higher deductible. Everyone in the private sector, and the public sector as well, has known this is coming. Ms. Salay stated that she comes from a public sector family. There are different reasons that people consider public sector employment. The rate of compensation isn’t the primary consideration, due to the different awards with the public sector employment. Typically, the monetary compensation is less, but the benefits are richer. There are different aspects that make Dublin an employer of choice. The change that is being proposed is radically different. The HBC program was a major change, but employees have accepted it. It has been successful in terms of encouraging healthier employees, which is also backed up by the Administrative Committee of the Whole Minutes – August 31, 2009 Page 18 claims experience. However, this proposed concept is very different, and the education piece will be very difficult in such a limited timeframe. Mr. Keenan stated that he concurs with a delayed timeframe, as he agrees that the education piece will be quite difficult. Implementing a change in 90 days would be extremely aggressive. Mayor Chinnici-Zuercher stated that the communication should convey that 9 months will be needed to allow for planning with the individual employees. Education of the employees should not be delayed until April. The desire is to have responsible planning with the employees so that they are prepared for the change, whenever it happens. From an administrative standpoint, it has been recommended to have the same plan and change it on a given date than to offer different plans. Mr. Harding stated that Council could choose to defer this plan change to January 1, 2011. Contract negotiations with the Steelworkers will occur in September 2010. The CDHP could be proposed for the Steelworkers contract and implementation with the non-union staff could occur simultaneously on January 1, 2011. Ms. Salay stated that the Steelworker employees could be included in the education that will be occurring earlier in the year. If the other employees are being made aware of the coming change, they will be aware of it, as well. Ms. Hoyle responded that it could be communicated to all employees. Mayor Chinnici-Zuercher suggested that staff develop two potential timelines and plans of action -- one for a July 1, 2010 implementation and the other for a January 1, 2011 implementation. For her, the goal is to allow for a reasonable planning period to work toward an ultimate implementation. Mr. Keenan stated that the proposed plan would have been extremely difficult to implement in 90 days. Mr. Harding agreed. He believes the City of Westerville implemented an HSA in a 90-120 day timeframe, but it is not the preferred method. Vice Mayor Boring stated that she prefers Mr. Harding’s suggestion to bring in both the non- bargaining employees and the Steelworkers at the same time, with a January 1, 2011 implementation. She noted that in addition to the request for a proposed calendar/work plan for the two dates, there were two other requests: to research the Medicare rule regarding continuing HSA contributions if the spouse is eligible for Medicare, and a list of recommended preventive health services/assessments for employees. Another concern expressed by Ms. Salay is the current difficulty in communicating with the third party administrator. Are there any proposed changes to address this issue? Mr. Gerber noted that staff was also asked to research how this change would apply to elected officials. Mr. Lecklider stated that from the perspective of a public employee, he appreciates what Ms. Salay said regarding the public employee’s compensation being less, but including richer benefits. However, in Dublin, the compensation component is not less. In respect to this part of the operational budget, the conservative estimate of an annual increase in health Administrative Committee of the Whole Minutes – August 31, 2009 Page 19 care costs is eight percent. In no other part of the budget -- salaries or other -- is an 8% annual increase in a program acceptable. Something does need to be done. Vice Mayor Boring expressed Council’s appreciation of staff’s vigilance on this issue. However, due to the questions and concerns expressed by Council, it is clear that implementation of this change in January 1, 2011 is recommended versus January 1, 2010. Mr. Reiner moved to adjourn to executive session for the discussion of a personnel matter. Ms. Salay seconded the motion. Vote on the motion: Mayor Chinnici-Zuercher, yes; Mr. Keenan, yes; Mr. Reiner, yes; Vice Mayor Boring, yes; Mr. Gerber, yes; Ms. Salay, yes; Mr. Lecklider, yes. The meeting was adjourned at 8:46 p.m. __________________________________________ Clerk of Council