HomeMy WebLinkAbout06-29-05 Admin Com of WholeDublin City Council
ADMINISTRATIVE COMMITTEE MEETING OF THE WHOLE
June 29, 2005
ATTENDANCE
Council Members:
Committee Chair - Mr. McCash, Mrs. Boring, Mr. Keenan, Mr. Reiner, Mayor Chinnici-Zuercher
(departed at 6:30 p.m.), Mr. Lecklider (arrived at 7:10 p.m.), Ms. Salay (excused)
Staff Members:
Jane Brautigam, David Harding, Renee Telfer,
Hamilton, Jennifer Warren, David Ball
Sara Ott, Marsha Grigsby, Michele Hoyle, Jill
CALL TO ORDER
Mr. McCash called the meeting to order at 6:00 p.m. in Council Chambers. He noted that the topic
of tonight's discussion is a report on the Employee Health Benefits Plan.
BACKGROUND
Mr. Harding stated that the last time staff met with Council regarding aproposed re-design of the
employee health plan was in August 2004. Since that time, the City employee benefits team has
focused on developing a 3-year strategy to contain program costs. The recent change in providers
has resulted in some savings, but additional changes will be proposed tonight that would bring even
greater savings.
A year ago, an employee benefits team was formed. It is comprised of: Ron Buries, Scott David,
Jill Hamilton, Michele Hoyle, Susan Pahwa, Greg Jones, Mike Pinneault, Bruce Runyon, Mary Kay
Ruwette, Renee Telfer and Dave Harding. The team, which was made up of union and non-union
staff members, met twice a month, and over the last few months became quite knowledgeable
regarding employee benefit issues. Initially, the Human Resource staff educated the team on health
benefit issues. Then, the team progressed to the research phase. They studied all aspects of the
current plan, flexible spending accounts, and health wellness components. They reviewed the
components ofthe Worthington Industries health plan, the subject of a recent news article. The
team considered various iterations of a proposed strategic plan until the refined proposal was ready
for presentation.
Mrs. Boring stated that the memo indicates that the team's goal was to develop a plan that is
competitive with the market. Was that a reference to the government market?
Ms. Hoyle responded that they compared the City's plan to the general inarket -private and public.
Mr. Keenan stated that it would be necessary to have numbers to create a benchmark. Otherwise,
the City's self-funded program could not be compared with fully funded programs. That
information is readily available; the consultant should be able to provide that information.
Ms. Hoyle responded that the City's program is unique, with special components. No fully funded
program would match it.
Administrative Committee of the Whole
June 29, 2005
Page 2
Mr. Keenan stated that it would be essential to match them as closely as possible. Otherwise, the
goal of making the City's plan competitive with the market isn't possible.
Ms. Hoyle responded that the team does have some market numbers, such as the cost per employee
for other providers, both fully funded and self fiinded.
Mr. Keenan stated that there are some benchmarks then. He inquired if the City's employee group
would be considered fairly young.
Ms. Hoyle responded that City employee demographics are broad.
Mr. Keenan requested a report on City employee demographics indicating age and sex profiles.
Mr. Harding indicated staff would compile that report for Council. He stated that the team's goals
were: (1) to develop a plan that promotes wellness and prevention; (2) reduce the rate of growth in
rnedical and prescription drug expenditures; and (3) maintain a competitive program in the market
for recruiting purposes. The City's current plan is somewhat "rich," therefore, some changes should
be made. Two philosophical ideas guided the team's recommendations: (1) That wellness and
prevention are inseparably linked to a reduction in medical and prescription claim expenses, and (2)
That employees must be partners in their health care coverage. Studies indicate that adding a
wellness initiative to the employee health plan would bring a 3 to 1 return.
Mayor Chinnici-Zuercher inquired what would be requu•ed of each employee by the wellness
initiative. The materials do not provide specific information.
Ms. Hamilton responded that for year 2005, employees would complete a private, online health risk
assessment through the City's current insurer, United Health Care. In return, the employee would
receive feedback, for example: If the employee works in the sun, he would be asked to wear
sunscreen; if the employee's family history shows breast cancer, the employee would be requested
to have a mammogram. The questionnaire would consist of 25 - 85 questions.
11~Iayor Chimiici-Zuercher inquired if the assessment would include a physical assessment.
Ms. Hamilton stated that it would not be required in 2005. However, in 2006, a physical assessment
would be required.
Mrs. Boring inquired how the assessment could be considered private if: (1) the assessment is
online, (2) someone else is reviewing it other than the doctor and patient, and (3) a report of those
employees who have payroll deductions for health insurance would be available.
Ms. Hamilton responded that 2006 is intended to be a year of awareness. At the end of 2006,
employees would be required to take a health risk assessment, which would be conducted by a third
party administrator (TPA) - a company which deals entirely with this subject. The TPA would
define the employee's health risks and determine the goals for that employee. The employees
would be accountable for reaching those goals. The TPA would then provide a report to the City's
Administrative Committee of the Whole
June 29, 2005
Page 3
Human Resource department regarding which employees have met their goals, and the health
insurance contribution would be waived for those employees.
Mr. Keenan inquired if an employee should fail to meet their goals, would the City charge them for
that via a payroll deduction for their health insurance?
Ms. Hamilton responded that the team prefers to define it as a choice offered to employees. The
goals are attainable; the employees can choose to meet them or not.
Mr. Keenan stated that the employee who meets the goals would pay nothing, but the employee
who does not meet the goals, would be charged for failing to do so. That fact will be reflected in
payroll records. Are payroll records protected under the Medical Privacy Act?
Ms. Hoyle stated that they are not. However, knowledge would be limited to the fact that the
employee did not meet their goals -not what those goals were.
Mr. McCash stated that the payroll records would indicate only that the insurance deduction was
waived or not waived.
Mr. Keenan stated that the implication is obvious. However, his intent is only to pose critical
questions.
Ms. Hamilton stated that this is a new insurance concept, which the team is proposing. There have
been some companies who have reported a return on this investment.
Mr. Keenan responded that this is a lofty idea, which has been promoted by the insurance industry.
It is probably a good idea, but it is important to ensure that City employees are not placed in
embarrassing situations or in harm's way. Furthermore, as an entity, it is important to protect the
City from violation ofthe Medical Privacy Act. In his opinion, this is borderline in interpretation.
Mrs. Boring stated that in her opinion, it is very borderline.
Ms. Hoyle stated that the TPA report to Human Resources would consist only of a list of those
employees who had/had not met the defined goals. It would not detail those goals.
Mr. Keenan inquired if an employee does not participate in the online health assessment at the end
of this year, would he/she be required to pay an insurance contribution beginning in 2006?
Ms. Hoyle stated that is correct - in 2006, they would pay a contribution.
Mr. Keenan stated that in 2007, the employee would be required to have aone-on-one assessment
by the third party administrator.
Mrs. Boring inquired what the cost of involving a third party administrator for this service would
be.
Administrative Committee of the Whole
June 29, 2005
Page 4
Ms. Hamilton responded that the City has considered a couple of vendor options. Because the City
has not yet defined the scope of services, a quote cannot be requested, but the cost could be as little
as $2.50/employee per month.
Ms. Hoyle stated that the City's consultant indicated that they have prepared an RFP for another
entity, and the quotes they are receiving are approximately $2.50/employee per month.
Ms. Hoyle stated that the City's consultant indicated that the quotes they are receiving for an RFP
they recently prepared for another entity are approximately $2. SO/employee per month.
Mayor Chinnici-Zuercher noted that fee would be based upon 400 employees participating. How
tnany employees are eligible?
IVIrs. Boring noted that spouse participation would also be required.
Ms. Brautigam stated that the spouse would be required to take the test, but the City would not pay
for their testing.
Ms. Hamilton stated that the vendors have estimated a cost of $100 - $150/employee per year to
establish this type of program.
Ms. Hoyle noted that for 400 employees that would be approximately $60,000.
Mrs. Boring stated that she is uneasy with the fact that along with the proposal to make additional
requirements for employees in their health plan, the team is also proposing a reduction or limitation
of the employees' coverage.
Ms. Hamilton responded that the purpose of this addition to the City's insurance program is to
reduce the occurrence of some health issues.
Mr. Reiner stated that America is leading the world in chronic diseases -diabetes, heart disease,
cancer, Alzheimer's -and current research indicates that all of it is preventable. At a minimum,
those occurrences could be delayed from the 50-60 year old disease zone to the 70-80 year old
disease zone, when they would no longer be employed by the City. This would imply a significant
savings for the City.
Ms. Hamilton agreed that the City would prefer to pay the costs associated with early detection of a
health problem, than the more monumental costs of a later diagnosis.
Mrs. Boring stated the program is being touted as a wellness program. Yet, this program would
discourage employees from certain health prevention measures, such as taking blood pressure
medicine, by increasing the costs of that medicine.
Ms. Brautigam suggested that the Team proceed with presenting the entire proposal. When it is
taken out of context, various concerns can be assumed, such as discouragement of employees from
taking needed medicine. Insurance reports regarding prescription usage reveal that City employees
are not reluctant to take medicines.
Administrative Committee of the Whole
June 29, 2005
Page 5
[Mayor Chinnici-Zuercher departed due to another commitment.]
Mr. Harding stated that the underlying philosophy ofthe proposed changes to the employee health
benefits program is that employees must be partners in their health care coverage, more specifically,
the costs of the program. That would be accomplished by: (1) Cost sharing would be proportional
to an individual or a family's usage of the benefits. That would mean that an individual or family
who used the benefits more frequently would pay more at the point of service. (2) Individuals
should take responsibility for maintaining a healthier lifestyle. If they did not, they would be
required to contribute more through acost-sharing arrangement.
Ms. Hoyle stated that a couple of years ago, staff informed Council of significant increases in the
cost of the City's health benefits program. Since then, staff has conducted a review of the City's
program. Dublin has aself=funded health benefits program. That means the City pays the actual
costs of claims incurred by employees and their covered dependents.
Mr. Keenan stated that the City is partially self-funded.
Ms. Hoyle responded that the City is fully self-funded, except for stop loss.
Mr. Keenan stated that means that a big portion of the costs is subsidized somewhere else. It is a
misnomer to state that the City is fully self-funded.
Mr. Harding stated the City pays up to a ceiling of $100,000.
Ms. Hoyle stated that this item is based upon premium equivalents in the annual budget. The
projected costs ofthe City are calculated and allocated across the employee group, which is made
up of single and family coverage. The proposed plan is different from municipal fully insured plans,
in which a third party reviews all aspects of the plan and everyone is charged a fixed premium for
total plan coverage, regardless of usage. The Team investigated the cost of a fully insured program.
Because the City does enjoy the flexibility to control benefits and costs, it makes sense for Dublin.
However, that is not what is proposed at this time; it may be in the future.
Mr. Keenan noted that Columbus Public Schools are experiencing a deficit of $11-13M with their
employee health benefits program, but Dublin's situation is different.
Ms. Hoyle stated that Dublin's health benefits program was structured upon the condition of
taintaining reserves. There is always a reserve fund equaling 3-4 months of claims.
IVIrs. Boring noted that the City's program has not always been self-funded.
Mr. Harding stated that it has been self-funded since 1990. The City was fully insured before then.
Ms. Hoyle stated that because the City program is self-funded, the most effective action the City
can take is to contain costs by improving employee wellness and by managing the cost of claims
through health plan modifications. The past three years, staff has identified three methods of
containing costs: (1) vendor management, undertaken in 2004; (2) individual health care
management; (3) plan design. Changing vendors resulted in a savings of 20%. If that change had
not occurred, medical claims would have been close to $4M, as opposed to $2.9M. Prescription
Administrative Committee of the Whole
June 29, 2005
Page 6
costs would have been $1.6M, as opposed to $1.5M. That is not a significant improvement, but it
reflects the fact that, irrespective of providers, the cost of the City's program continues to grow.
Mr. Keenan noted that the City does have a rich plan.
Ms. Hoyle reiterated the goals of the recommended changes: (1) encourage employees to focus on
wellness and prevention; (2) make them more responsible consumers of health care; (3) contain
costs of the plan; and (4) ensure fiscal responsibility for the City.
Ms. Hamilton reviewed aspects ofthe employee wellness uiitiative. In addition to the current
wellness programs, employees would be encouraged to participate in a preventative health
assessment by City payment of the assessment costs. In addition to reduced health care costs, a
comprehensive wellness program reduces employee turnover and a reduction in lost work days.
Ms. Boring inquired if an employee had an occurrence of breast cancer and thereafter needed a
special exam annually -would that be considered preventive care?
Ms. Hamilton responded that it would be considered part of their regular health care plan.
She stated that Xerox reported that although only 1/3 oftheu• employees participated in their health
risk assessment, a significant savings in their workers comp expenses resulted. The industry
standard indicates a 3 to 1 return for the employer on this type of investment. Johnson & Johnson,
already considered the premier company for supporting employee wellness, recently initiated a
health assessment component. They focused on behaviors that can be changed -high cholesterol,
low fiber, lack of exercise, high blood pressure, seatbelt usage, and drinking/driving practices. A
nine-year study of hospital admissions, mental health care, outpatient care and emergency
department visits indicated a savings of approximately $5M/year, or $224/person.
Mrs. Boring inquired how many employees participated.
Ms. Hamilton stated that Johnson & Johnson has approximately 40,000 employees in the United
States. She will investigate how many participated in the wellness program. Northeast Utilities
documented a $1.4 million reduction in lifestyle and behavioral claims and in flat per capita costs
for health care in the first 24 months of its wellness program. The Team has received a base quote
of $2.50/employee per month for TPA services or $12,000/year.
Mr. Keenan inquired the reason this would not be implemented this year.
Ms. Hamilton responded that the City has not yet decided what services it would prefer to contract
for. Also, it is necessary for the City to make certain that it is ready to support alarge-scale
wellness initiative.
Mr. Keenan inquired what level of employee participation in completing the health risk assessment
is anticipated.
Ms. Hamilton responded that a high level of participation is expected. The City Manager is
supportive of the proposed program. Employee participation in the current Well Works program is
encouraging.
Mr. Reiner inquired how the critical nutritional aspect of wellness would be incorporated. Studies
show that nutrition is the single most important key to health, followed by exercise.
Administrative Committee of the Whole
June 29, 2005
Page 7
Ms. Hamilton responded that the City already has an arrangement with Ohio Health for the services
of Ms. Wolfe, a registered nurse and registered dietitian on each Thursday. The City hopes to
involve her in this program.
Mr. Harding stated that staff proposes that the recommended changes, if approved, would go into
effect on January 1, 2006 for non-union City employees with the goal that the same plan will be
incorporated into the next collective bargaining agreements. The expiration dates of those three
agreements are January 2006, September 2007 and January 2008. It is anticipated that in 2008 all
City employees would be under the same health plan. He reviewed the proposed plan design
changes:
Co-Insurance
Co-insurance is the percentage of the cost oftreatment, care, tests, or other items covered by
insurance, which is shared by the City and the employee. Presently, it is 90% City/10% employee.
The recommendation is that the City share of the in-network coverage would decrease gradually
over the next 3 years from 90% to 80%. Over the same time period, the City share of out-of-
network coverage would decrease markedly to 50%. The rationale behind such a steep reduction in
the City's share is to keep the maximum number of claims within the network. The providers in the
plan are under contract to provide services for an agreed upon price. On average, through UHC, the
City receives a 48% discount.
Mrs. Boring inquired if this deep of a cut is common.
Mr. Harding responded that many companies have this type of plan design.
Mr. Keenan stated that, in general, this would be perceived as a very steep cut. A 50/50 share on
out-of-network providers is not at all common. The only way it could work is if there is a very
good network.
Mr. Harding stated that the consultant conducted a penetration study, which indicated that 97% of
the providers with the previous network, Emerald Health, are also part of the United Health Care
network.
Mr. Keenan stated that with his business, the first thing they do is to check the physicians against
the employee base. It is impossible to sell the plan if the same providers are not there.
Mr. Reiner stated that recently Newsweek reported Cleveland Clinic as the best heart hospital. How
broad is the City's network? Does the City's network include Cleveland Clinic?
IVIr. Harding responded that the hospitals in the UHC network are Riverside, Grant, Mt. Carmel,
Ohio State, and Children's.
Ms. Brautigam stated that it is a national network.
Mr. Reiner stated that he is concerned that employees continue to be able to use the exceptionally
good hospitals with a specialty focus.
IVIr. Keenan stated that most of these networks have centers of excellence for significant health
issues, such as kidney transplants. The other hospitals are out of network, and the employee's share
of the covered costs would be 50-50 up to the cap, which is indicated on the next page.
Administrative Committee of the Whole
June 29, 2005
Page 8
Mrs. Boring stated in previous discussions on this topic, Council was very conscientious about
those employees who do not have physicians who are in this network. Although 97% of the
previous group of providers used by employees may be in the UHC network, it is not necessary to
make any employee give up their current provider if they are not in the network.
Mr. Harding responded that 97% is a good transfer rate. He understands Mrs. Boring's concern, but
that must be weighed against the fact that previously, the City received a 15% discount with
Emerald Health; it now has a 48% discount with UHC.
Mr. Keenan noted that the objective is also to encourage employees to use in-network providers.
Mrs. Boring responded that she understands the objective; yet, it is not fair to force an employee to
leave a provider that they may have been with for years.
Mr. McCash stated that it not possible to get 100% participation from the previous providers.
Mrs. Boring stated that in her opinion, a cut to 50-50 is far too much.
Annual Out-of-Pocket Maximum
Mr. Harding stated that the annual out-of-pocket for in-network services would graduate
significantly over the same 3-year time period, from the current for Individual - $500 to $1,500 in
2008, and from the current for Family - $1,000 to $3,000 in 2008. The annual out-of-pocket
maximum for out-of-network services will increase even more steeply, from the current for
Individual - $750 to $7,500 in 2008 and from the current for Family - $1,250 to $15,000 in 2008.
The reason for the steep increase is to accomplish the maximum number of claims in network.
Emergency Room
Mr. Harding stated that two years ago, the City implemented a $50 co-pay for emergency room
visits due to the fact that the usage reports revealed that City employee use of the emergency room
was higher than the industry norm. One year later, statistics indicate that change in the plan
reduced use of the emergency room by 20%. The new proposal is to gradually increase the co-pay
for in network providers from $50 to $100, and the City's share of the remaining cost would be
reduced to 80% ofthe eligible expense for in network providers. For out-of-network providers, the
co-pay would be increased to $100 then 50% of the remaining eligible expenses.
Mr. Keenan stated that the TPA should be able to identify the available urgent care providers for
each employee. This typically reduces the use of hospital emergency rooms, but sometimes it is
necessary to go to the emergency room.
Mrs. Boring agreed. At 10:00 p.m., if faced with an emergency situation, an employee can't search
their directory to find a 24-hour urgent care center.
Hospital Inpatient Stay
Mr. Harding stated that for in network services, the employee co-pay would remain the same,
$100.00. However, the City's share of eligible expenses will reduce from 90% to 80%. For out of
network services, the employee co-pay will immediately increase in 2006 to $500 and the City will
pay only 50% ofthe eligible expenses. An exception will be made, however, for specialty hospitals
not represented by another hospital within the network, so that the employee could obtain the
services of a hospital for that specialty.
Administrative Committee of the Whole
June 29, 2005
Page 9
Limitations Proposed
Mr. Harding stated that the current health plan imposes no limitations. This proposal suggests that
coverage be limited in the following areas:
(1) Chiropractic services would be subject to the appropriate in or out ofnetwork co-insurance
with an annual limit of 30 visits in and out of network combined;
Mr. Keenan noted that number is generous in comparison to the marketplace norm.
Mr. Harding responded that the intent is to gradually bring the City's plan in line with the industry
norm.
(2) Gastric bypass surgery. The plan will require that the patient be involved in a diet and
exercise program for at least 6 months prior to surgery. Coverage would be subject to appropriate
in or out ofnetwork co-payment and co-insurance, subject to apre-surgical review, with a $25,000
lifetime maximum for surgery and all related care.
Mr. Harding stated that this procedure is becoming popular, but there can be devastating post-
surgery complications. Many plans are excluding coverage for this procedure.
Mr. McCash inquired if 6 months is sufficient.
Mr. Harding stated that staff relied upon the consultant's knowledge of the industry, in this case.
However, the City can always take a second look at a recommendation, and use a different number,
if desired.
Mr. Keenan inquired if the lifetime maximum for care would cover the complications for the gastric
bypass surgery.
Ms. Hoyle responded that any complication related to this surgery would be included in the capped
amount of $25,000.
Mr. Keenan stated the $25,000 would be reached quickly with a gastric bypass surgery. Is staff
suggesting that if there are serious complications requiring additional surgery and care, that the City
will not be responsible for those costs?
Mr. Harding stated that the City's plan requires that the medical provider prescribe the surgery on
the basis that the weight condition is considered to be a "direct threat to life." There have been
several such occurrences, which were covered by City insurance.
Transplants
Mr. Harding stated that the City does achieve significant discounts in this category within the UHC
network. In this category, there would be no out-of-pocket maximum for out-of-network services.
There are centers of excellence where employees would prefer to have the procedures performed.
Rehabilitation Services
Staff proposes a $5,000 maximum benefit per individual per calendar year for in and out ofnetwork
combined for outpatient services. This includes physical therapy, occupational therapy and speech
therapy. There would be no cap on inpatient rehabilitation services.
Mr. Keenan inquired about a situation in which an employee injured in an automobile accident
would be required to travel to Dodd Hall for rehabilitation.
Ms. Hoyle responded that would be considered in-house rehabilitation.
Mr. Keenan requested that staff verify that. On this basis of the language used, health coverage can
be seriously impacted, and it is extremely important that employee benefits not be unintentionally
limited in this area.
Administrative Committee of the Whole
June 29, 2005
Page 10
Mr. Harding noted that the type of rehabilitation this limitation would apply to would be sports
injuries.
Mrs. Boring stated that she would prefer to ensure that the limitation not apply to any catastrophic
incidents.
Mr. Harding responded that staff would ensure the language does not place an undue burden on any
employee.
Durable Medical Equipment/Prosthetic Appliances
Staff proposes a $20,000 maximum benefit per individual per calendar year for and in and out of
network combined.
Mrs. Boring inquired what would be the possible cost of an artificial limb.
Mr. Harding indicated that he does not have that information but will obtain the information from
the consultant and provide it to Council.
Mrs. Boring stated that she would not want to approve a limitation without first knowing the typical
cost.
Mr. Keenan stated that the City has aself-insured plan. Therefore, there should be a mechanism in
place whereby the City can authorize coverage of occurrences that maybe considered outside the
coverage scope.
Mr. Harding stated that the City can do so. In those situations, either the TPA or the employee
would notify his office of disapproved claims that they believe merits re-consideration. If the City
does authorize payment of claims outside the plan's summary document, they are not covered by
stop loss insurance.
Mrs. Boring stated through this process, Council and management portray the extent to which they
care about the City employees. So, the Plan should be structured to minimize employees needing to
petition for reconsideration of denied claims.
Mr. Keenan stated that most ofthe proposed limitations are typical of other plans.
Proposed Three-Year Strategy for Health Plan Modifications
Mr. Harding reviewed a chart comparing the estimated plan costs for the current plan over the next
three years vs. the estimated costs of the proposed plan over the same time period. They estimate in
2006 a reduction of $85,856; in 2007, a reduction of $173,127; and in 2008, a reduction of
$403,037 - a total savings of $662,920 in claims paid.
Prescription Drug Prog~
Ms. Telfer stated that currently the City's prescription claims are about 1/3 of the City's total claims
cost; the national average was 15%. One premise of this proposal is that those who use the plan
more should share in the cost. Therefore, the concept will change from a flat co-payment per Rx to
a co-insurance with a maximum per prescription co-payment and an annual out-of-pocket
maximum. Currently, the Plan has a generic co-pay and a brand name co-pay. The proposal is that
the co-insurance percentage be based upon the Prescription Provider's formulary. A formulary is a
list of medications categorized based upon the following criteria: safety, efficacy, clinical utility,
outcomes, and cost. There would be a 3-tier classification of drugs: Tier 1 -generic, tier 2 - multi-
source brand name, tier 3 -single-source brand name. Current co-pays are $10.00 for generic drugs
and $25.00 for brand name. The proposal is in 2006 to charge the employee 15% per prescription
for tier 1 drugs to a maximum of $25.00; 20% per prescription for tier 2 drugs to a maximum of
$50.00; 20% per prescription for tier 3 drugs to a maximum of $100.00. Tier 2 prescription co-pay
Administrative Committee of the Whole
June 29, 2005
Page 11
tnaximum would be increased to $75 in 2007 and $100 in 2008. Tier 3 prescription co-pay
maximums would increase to $150 in 2007 and $200 in 2008.
Mrs. Boring stated that currently, the City's plan allows for the generic co-pay on prescriptions that
are written "dispense as written" (DAW).
Ms. Telfer confirmed that is true, however, with the proposed plan, there would be a higher out of
pocket maximum for the employee.
Mr. Keenan stated that the numbers indicate that the City's prescription claims are about 33% of the
City's total claims cost, while the national average was 15%.
Ms. Telfer noted that those numbers are reflective of 2004 data, and most of that time period was
before the prescription provider was changed in October. The prescription costs decreased
significantly after that. Those numbers also reflect that a majority of the prescriptions were single
source brand names, perhaps because employees have requested their physicians to write their
prescriptions DAW.
Mrs. Boring stated that there are some prescriptions for which there is no generic, such as Prevacid
and some cholesterol lowering and blood pressure lowering drugs.
Ms. Telfer stated that usually there are alternative drugs available, which are more cost-effective.
Mrs. Boring stated that she is very concerned about the impact of this on employees. The City's
most valuable asset is its employees.
Mr. McCash stated that perhaps employees' salaries would have to be cut if some type of cost
savings is not implemented.
Mrs. Boring responded that there are other ways for the City to save money than through
employees' salaries and benefits.
Ms. Telfer noted that the data also reflects that less than 1 % of the City's plan members equals 19%
ofthe plan costs.
Mr. Reiner stated that one aspect of this feature that is deficient is that it does not recognize the use
of herbs for health issues.
Ms. Telfer agreed that the plan does not cover any over the counter medications.
Mr. Reiner noted that not only is herb therapy less expensive, studies show that it is often more
effective than drug therapy.
Mr. Keenan stated that there is another way to address the costs of the plan than through these
proposals, if the employees would prefer, and that is to implement a higher employee contribution.
That is what most companies are doing.
Mrs. Boring stated that she is not convinced that most of these changes are necessary for the City of
Dublin. The City of Dublin has always been a first class City including fu•st class programs for its
employees. The employees will perceive that Council is discounting the value of their employees -
saving money there, where everywhere else, Council is approving proposals for additional
expenditures.
Mr. Keenan stated that this would still be a fu•st class plan. Employees are aware that most other
companies are asking employees to pay a contribution.
Administrative Committee of the Whole
June 29, 2005
Page 12
Mrs. Boring stated that one of the ways the City attracts and keeps first class employees is by
providing a health plan that is first class.
11~Ir. Keenan stated that most other employers have implemented employee contributions.
Mrs. Boring stated that the City is unlike other employers. It is able to do better than most other
employers because presently there is no economic need for the City to implement these changes.
Mr. Keenan inquired what was paid in 2004 budget for the employee health plan.
Ms. Hoyle responded that it was approximately $4I~•I.
Mr. Keenan noted that of that cost, 1/3 was for prescription costs -- $80,000 was for generic drugs
and $25,360 for multi-source brands, but $519,000 was spent on single-source brand names. That is
a huge amount.
Ms. Telfer noted that was in 2004, before a change in providers.
Mrs. Boring stated that the proposal notes the savings another company experienced with similar
plan changes -- $400,000/year. Gas prices have also increased for the City -where is the proposal
to save costs on gasoline? The City will spend $400,000 at the "blink of an eye" on a landscaping
project. The employee perception will be that because Council wants Dublin to look like afirst-
class City, they will spend $400,000 to make the City aesthetically pleasing, but Council does not
care equally about its employees.
Mr. Reiner stated that if the employees begin to select generic brands, they would not be as severely
impacted. They will begin to make wiser choices.
Ms. Telfer stated that employees have taken advantage ofthe DAW option. The practice has been
to try the premier brand immediately rather than trying a generic brand first to see if it would work.
Perhaps employees can be encouraged to try the less expensive alternatives first, purchasing the
more expensive name brand only if necessary.
Mrs. Boring stated that it is well known that there are cases in which the generic drug does not
work; generic brands are not always equally effective.
Ms. Telfer agreed, but the City would like to know that the generic drug has been tried first. The
proposed plan has been designed to encourage informed decision-making by the employees.
However, Human Resources is aware of employees with serious health conditions. Their
medications are not a luxury but a necessity. There are cases where the drug costs $24,000 fora 3-
monthperiod. To protect those employees from financial ruin, an out-of-pocket maximum is also
proposed.
Mr. Reiner noted that if all the employees participate in the wellness component, they would
experience less need for health care.
Mr. McCash noted that the out-of-pocket maximums would also be alleviated by use of the flexible
spending accounts.
Mr. Keenan noted that there is also the incentive of mail order for 90-day prescriptions, for which
there is an annual two-time deductible option.
Ms. Telfer noted that implementation of these changes will bring an estimated savings of 19.2% or
$200,000 in pharmaceutical costs by 2008.
Administrative Committee of the Whole
June 29, 2005
Page 13
Employee "Premium Equivalent" Contribution
Ms. Hoyle stated that the revised plan would offer the employee the option to pay an annual
premium contribution or to waive that contribution by participating in the health risk assessment
and achieving their- health goals. In 2006, the contribution would be $25/month single and
$50/month family, in 2007 it would be 5% of the City's projected premium equivalent and in 2008,
10% ofthe City's projected premium equivalent. This health plan modification will be used to
encourage a healthier lifestyle for employees and spouses. Studies show that an employee
contribution without any other plan design changes does not result in a long-term reduction in plan
costs.
Mrs. Boring inquired if an employee had health care coverage elsewhere through a spouse's plan,
would there be a way of providing them an equivalent value, perhaps via monthly contribution to
their flexible spending account?
Ms. Hoyle responded that incentives to opt out of the City's plan are anticipated, but eligibility
issues will be addressed in a subsequent plan design.
Ms. Hoyle stated that the 3-year strategy for the wellness initiative will be: 2005 -take written
health risk assessment and provide documentation of completion; 2006 -take written health risk
assessment provided by TPA, set goals for 2007, provide documentation of completion; 2007 -
TPA evaluation of employee goal achievement, set 2008 goals, provide documentation 2007 goals
were met.
Ms. Hamilton stated that their data collection relates primarily to for profit companies. There is not
data available on municipalities. They did find two municipalities who have reported a savings
after wellness components were initiated -Ames, Iowa and St. Charles, Illinois. Although the
amount of savings is not known, these are included on the WCA (Wellness Council of America)
list.
Mr. McCash inquired how many employees have Rec Center memberships.
Ms. Hamilton responded that only a few have memberships.
Mrs. Boring inquired if the employees would be given free memberships.
Ms. Hamilton stated that employees could purchase a membership at the resident rate.
Mr. McCash stated that it would make sense to provide free membership to the employee, not
necessarily to their spouses. Working offthe assumptions of the proposed plan, if the employee
works out, their health is improved, and the City reaps the results in decreased health costs.
Ms. Hamilton responded that is an excellent idea. Presently, aerobics, pilates and spurning classes
are available free of charge, limited to class size. Also, in the Service Complex, there is an
employee workout area, which has been refurbished with previous Rec Center equipment that has
been discarded because it is out ofwarranty.
Flexible Spending Account
Ms. Ruwette stated that the Flexible Spending Account (FSA) is a voluntary program, which allows
the employee to use before-tax dollars to reimburse themselves for eligible out-of-pocket expenses.
Administrative Committee of the Whole
June 29, 2005
Page 14
Two separate accounts are available -- one for rnedical expenses, another for dependent care
expenses.
IVIr. McCash stated that it is also possible to have employees' monthly insurance premiums paid
from these accounts. Is the City including that type of account?
Ms. Ruwette responded that it is not an option, as the flexible spending accounts are governed by
IRS regulations.
Mr. McCash responded that this is permitted by the IRS. He is certain of this because his employer
provides flexible spending accounts, and employee health premiums are paid pre-tax dollars from
those accounts.
Mr. Keenan stated that not only is it possible, there is an insurance premium only account,
structured solely for employee contributions to be paid from.
Mr. McCash noted that if all the money in the account is not used by year-end, it is reimbursed to
the employee, at which time the employee must pay taxes on it.
Ms. Ruwette indicated that staff would look into that option.
Mr. Reiner inquired what limits on amounts would be set on the accounts.
Ms. Ruwette responded that the dependent care account has a limit of $5,000. The City can set a
limit on the medical care account.
Mr. Keenan stated that everything can be paid from the pre-tax account - co-insurances,
deductibles, Lasik eye surgery, eye glasses and contacts, saline solution for contacts, dental work,
over-the-counter medications, such as aspirin, etc. Previously, if the employee did not use the
funds, they lost them at year-end. However, recent changes in the regulations have provided the
option of using those funds for an additiona190 days.
Ms. Ruwette stated that some ofthe increase in employees' out-of-pocket expenses could be
reduced by use of FSA accounts.
IVIr. McCash noted that there is a double savings as neither the employee nor the City would pay tax
on those dollars.
Mr. Reiner noted that it would be important for the City to remind employees to turn in those
receipts so they can be reimbursed.
Mr. Keenan inquired if a TPA would administer the FSA accounts.
Ms. Ruwette indicated a TPA would do so.
Mr. Keenan inquired the cost per employee.
Ms. Ruwette responded that the information has not yet been collected.
Ms. Hoyle stated that United Health Care charges $3.17/month per employee. That number will be
used as a benchmark in soliciting quotes.
Mr. Keenan stated that the Township discovered 10 years ago when they instituted FSA accounts,
that a private administrator of FSA accounts gaj~e them a better price than the insurance provider.
Communications Plan
Mr. Ball stated that after Council has reviewed the proposed changes and determines what changes
will be approved for the City's future plan, it will be necessary to achieve the employee's "buy in.'
A communications plan has been developed:
Administrative Committee of the Whole
June 29, 2005
Page 15
Phase 1
• Communication pieces sent to employees' homes
• Large group meetings to describe benefit plan changes
• Evening meetings for spouses
Phase 2
• Small group meetings to explain changes (i.e. work unit staff meeting)
• Articles in Mulligan Stew to outline plan changes
• Begin FSA and wellness program promotional effort
Phase 3
• Large group meeting to explain FSA accounts and wellness program
• Open enrollment period
Phase 4
• Large group meetings to cover changes
• Mailing to employee homes
Mr. Keenan stated that the proposal has been well developed. Options for minimizing their
potential cost increases will be provided to the employees. Through cost shifting, this plan design
should result in a significant savings. There is one component, however, that could be risky if the
definition is not understood, and that is the proposed limitation of $25,000 for outpatient
rehabilitation services.
Mrs. Boring inquired if employees would receive an incentive not to enroll in the plan, perhaps
through contribution to their FSA account.
Ms. Hoyle responded that eligibility issues, including opt-in/opt-out incentives, would be addressed
with later plan revisions.
Mr. Keenan stated that Washington Township paid anopt-out option of $2,000/year per employee.
Since the annual cost of a fully insured employee was $12,000, everyone was satisfied. With the
size of the City's employee group, probably 20-30 people would opt out -that could be a savings of
$300,000.
Mrs. Boring inquired about the anticipated timeframe for the next plan revision.
Ms. Hoyle estimated it could be proposed in another year.
Ms. Brautigam stated that it would take approximately 6 months to complete the implementation
process for the current changes. It would be difficult to study and propose additional changes
before another year.
IVIr. McCash inquired if the FSA accounts would be incorporated along with the other changes.
Ms. Brautigam stated that they would be included with the other changes, unless Council
disapproves some of those changes.
Ms. Hoyle noted that the changes would apply to non-union employees.
Mrs. Boring inquu•ed what percent are non-union.
Mr. Harding responded that 15% are non-union.
Mrs. Boring inquired the approximate dates ofthe contract expirations.
Administrative Committee of the Whole
June 29, 2005
Page 16
The expiration dates of the three collective bargaining agreements are: Dispatchers contract -
January 2006, Steelworkers contract -September 2007, and F.O.P. contract -January 2008. It is
anticipated that in 2008 all City employees would be under the same health plan.
Mrs. Boring inquired what if these negotiations for these changes are not successful?
Ms. Brautigam responded that success is anticipated because the comparables are in management's
favor.
Mrs. Boring responded that previously it did not work out that way.
Mr. Harding stated that in that case, management was proposing an innovative strategy for
prescription plan changes. A fact finder had actually indicated that the proposed changes were too
innovative. Fact finders and arbiters tend to look at the conventional wisdom of the day. The
climate has changed so dramatically over the past 12 years, that these changes are becoming
conventional in the marketplace. Management believes that they are now ui a good position to
implement these changes. Implementing these changes first with non-union staff would achieve a
strong internal comparable, which would be supported by external comparables.
Mr. McCash stated that the team is made up of some union members, so the unions have had some
representation through those members.
Ms. Brautigam noted that union members would not receive the benefit of a 3-year rollout period.
At the point their contracts are re-negotiated, they would be subject to the current plan status.
Mr. Reiner stated that he supports either free membership or a greater discount in Rec Center
memberships for participating employees, in order to encourage employee participation in the
wellness component.
Mr. McCash stated that there is already a discount. There should be no cost for employee
membership at the Rec Center.
Mr. Reiner agreed. There should be a significant incentive for the employee and for their families -
something that would really motivate them to get involved in a workout program.
Mr. McCash stated that if their health insurance will cost the employee -- for instance, $150 that
they did not previously pay, but the value of a free Rec Center membership is $100.00, in theory,
the employee recoups that cost. If they do use their Rec Center membership, the City will reap
benefits in excess ofthat $100. If they do not use their membership, the Rec Center is not
impacted, so it "costs" the City nothing in that case.
Mr. Harding noted that 8-9 years ago, Council discussed this issue. There was some concern that if
free memberships were provided to employees and a large number of employees used those
memberships, it could possibly impact the Rec Center's capacity to provide services to paying
members. That would probably be the only issue to consider in providing free employee
memberships. However, staff would encourage and recommend Council authorization for that
policy change.
Administrative Committee of the Whole
June 29, 2005
Page 17
Mr. McCash stated that in view of the City's focus on employee wellness, the City should reap
desired results in healthier employees.
Mrs. Boring agreed. In the previous discussion, the City was not considering making physical
fitness a requirement for employees. If the City is going to require that, and has the resources the
employees need in order to comply, it is only fair to provide the means. The City should not require
its employees to pay more out-of-pocket for their medical expenses, and also pay for a membership
in an exercise facility to avoid paying a health insurance premium.
Ms. Brautigam stated that because Council is in consensus on this item, free Rec Center
memberships would be included as a new benefit to employees.
Mrs. Boring stated that she would prefer to wait until Council takes action at its regular meeting on
July Stn
This Mr. Keenan stated that would not be necessary, as there are five affirmative votes present.
Mrs. Boring stated that all Council members should have the opportunity to vote.
Ms. Brautigam stated that discussion regarding "Employee Health Benefits" would be added to the
July 5th Council agenda.
Mr. McCash inquired if the memberships would be provided to part-time employees.
Mrs. Boring responded that they would be provided only to those who have health insurance -- full-
time employees.
Mr. McCash stated that Council members are considered part-time employees, yet they have health
insurance through the City. Would they receive free Rec Center memberships? He is not asking on
his own behalf. He has declined City health insurance coverage on ethical grounds -the City does
not provide health insurance to other part-time employees. He proposes that the free memberships
not be provided to Council members.
Mr. Keenan noted that if Mr. McCash would introduce a motion to that effect at the July 5th
meeting, he would support it.
The meeting was adjourned at 7:50 p.m.
Clerk of Council