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HomeMy WebLinkAbout02-11-03 Admin Com. MinutesDublu7 City Council Administrative Committee Tuesday, February 11, 2003 Council Conference Room - 6:30 p.m. ~lttenclin~• Mr. Kranstuber, Chair Ms. Chinnici-Zuercher Ms. Salay Mr. Harding Ms. Telfer Ms. Ruwette Ms. Hoyle Ms. Chinnici-Zuercher called the meeting to order at 6:40 p.m., noting that Mr. Kranstuber advised her that he would be arriving late. Mr. Harding indicated that the purpose of the Committee review, as he understands, is to examine future cost containment strategies to combat the rising costs of employee health benefits. The health care costs comprise a larger and larger share of the City's budget - this year the costs are estimated at 4.2 million. The agenda includes some items to be addressed in an upcoming benefits survey for discussion purposes. In this organizational meeting, an approach can be established and timeframes for the review and recommendation back to Council. Mr. Harding noted that a cost containment feature was introduced this year - a $50 charge for emergency room visits. If an individual were admitted from an emergency room visit, the $50 charge would be waived. There are many options for containment of health care costs -the plan design and the employee contribution through payroll deduction. He advocates focusing on the plan design features, as this is generally a more effective cost containment strategy than employee contribution. Plan design can be anything from deductibles, co-insurance provisions, out of pocket maximums, and preferred provider organizations. Currently, the co-insurance is at 90/10, and this could be adjusted to 80/20. The out of pocket maximum is currently $500, and this could be increased to $800 or $1,000. Currently, there is a preferred provider organization, but there is no disincentive for going out of the network -such as increasing the co-insurance to 70/30. The reason there is no disincentive at this time is that it was not negotiated in the existing labor agreements. Certainly, prescription drug co-payments could be adjusted -drugs are a spiraling health care expense. Last year, the City instituted a higher co-pay for drugs -this year the co-pay for generic is $8 and $15 for name brand drugs. The City's mail order plan co-pay is $1 based on the lower cost for wholesale drugs, versus purchase from a retail pharmacy. National statistics for other governmental entities show that employees share 33 percent ofthe prescription drug cost; in Dublin, they share 7 percent of the drug costs. Staff plans to circulate a benefit survey to other governmental entities within the next few days. Administrative Committee February 10, 2003 Page 2 Ms. Chinnici-Zuercher asked if employees are surveyed about what is most important in their benefit package. Mr. Harding responded that they have not been surveyed at this time. Ms. Chinnici-Zuercher stated that it would be prudent to do so - ifthe benefit package may be changed, it would be important to know the priorities of employees. It would also be important to list all of the benefits provided by the City, not just health benefits. Perhaps the frequency of use could be surveyed, their prioritization of importance, and how much employees are willing to pay for a particular benefit. Mr. Harding noted that staff plans to involve the third party administrator, Managed Health Care of America. They have a lot of knowledge on plan design and administer many public sector plans. He hopes to have the data back by March 31 so that the City knows what the market is, the current benefits being offered, the deductible levels, the PPO design, the out ofpocket maximum, and drug co-pays for generic, brand name and mail order. Ms. Salay asked if the City plans to stay self insured at this point. Mr. Harding stated that this is the plan at the present time. There is more control over the costs and elimination ofthe "middle man" results in cost savings for the City. With self- funding, the City does not have to pay premiums and can keep the money in the City's account until needed. Mr. Harding noted that when the survey results are received, a course of action could be established on what should be done with the City's health benefit plan. Another area of discussion during the budget workshops was car allowances. Staff is gathering information on that as well for the Committee's review. In terms of a timeline, if the benefit survey is completed by March 31, staff can deliberate and provide a report to the Committee, perhaps the Committee can review options by May 31 and recommend something to Council by June 9. At this point, Mr. Kranstuber arrived. Following brief discussion ofthe Committee regarding meeting dates for review in order to have the recommendation to Council for June 9, it was the consensus of the group to meet on Tuesday, April 8 at 6:30 p.m. for initial review of the survey results with staff. Staff could then return with a final document on Tuesday, May 20 for review prior to submission to Council. Ms. Chinnici-Zuercher stated that the issue will be one of cost and how this plays out to employees and the City, and how the union contracts will fit into the recommendations. Mr. Harding stated that in terms of unions, caution is needed in not losing sight of potential disproportionate impacts for non-union versus union personnel. There are a number of collective bargaining agreements in place for a couple of more years, and the communication technicians contract is currently in negotiation. Changes in the plan Administrative Committee February 10, 2003 Page 3 design would likely be easier to negotiate into a labor agreement than an employee contribution through payroll deduction. Staff has been successful in negotiating some changes in plan design with the FOP agreements. There is a huge employee relations side to making modifications to the health benefits. Ms. Chinnici-Zuercher suggested that staff prepare a document which shows which benefits are contained in the union agreements, not only the health benefits, but also such items as uniforms, dry cleaning. Other benefits have a financial cost to the City as well. Ms. Chinnici-Zuercher asked how cities compensate in terms of benefits for non-union employees. Mr. Harding stated that there are certain benefits applicable in a union environment, such as a boot allowance, uniform allowance, etc. While a tally is not kept, philosophically staff strives for parity between union and non-union groups. Mr. Kranstuber asked if the goal of this exercise is to reduce the City's costs or to ensure there is parity with other governmental entities. Mr. Harding stated that there was no direction in terms of a percentage of savings to be obtained. Instead, the Committee is reviewing modifications to encourage responsible use and reduction of overall costs of the health benefits. Mr. Kranstuber stated if the goal is to ensure the City is at the 80~' percent of the marketplace, similar to that for the salary levels. Mr. Harding stated that his sense is that Dublin wants to remain close to the 80t" percentile for wages and benefits. The current health benefits plan may actually exceed that level. Ms. Chinnici-Zuercher stated that while she agrees with the 80th percentile level, it is only responsible to monitor rising health costs. To do so, it is necessary to have a benchmark of information to determine what the 80th percentile is. Perhaps changes could be phased in over a period of tune, such as five years, if the assumptions remain constant. The employees would then have a sense ofwhat is being done and this would constitute good financial planning. There is at the same time an effort to change human behavior with a comprehensive approach, including wellness programs, etc. Mr. Kranstuber stated that the school district has a monthly premium for coverage. Mr. Harding stated that he estimates that $20 for single coverage and $70 for family coverage would be the average for public sector employers. Private sector health care premiums are much higher. Mr. Kranstuber asked if an option could be provided for an employee to select health care coverage or be given the money in lieu ofthis. Perhaps some employees could have coverage through a spouse. Administrative Committee February 10, 2003 Page 4 Ms. Hoyle stated that currently, the cost of family health coverage to the City is $1200 per month. Mr. Harding stated that since there is no premium paid through payroll deduction, any new employee generally takes the family coverage offered. If there were a cost to this coverage, perhaps they would not opt for family coverage but for single coverage. Ms. Saaay stated that due to the birthday rule, her health plan covers her family. If she were to decide to opt out of the plan and have her husband's plan cover, is this permissible? Mr. Harding stated that there is no rule governing opting out of this. Dublin is experiencing some of that adverse selection with its plan. It could be discouraged by charging some level of employee contribution. These are all options. Ms. Salay stated that phasing in changes would be desirable and more palatable to employees. This would provide the opportunity to have education of the employees about the reasons prompting the changes. Perhaps the City could look into charging new employees more for health insurance premiums than long-term employees -that might prevent some of the issues related to long-term employees. Ms. Chinnici-Zuercher asked if this is allowable in government. Ms. Salay stated that Columbus does this -for the first three years, only medical benefits are given to employees. On the third anniversary, dental and vision coverage are available. They do similar things for vacations benefits and others. Ms. Chinnici-Zuercher pointed out that, theoretically, a new employee could be given a higher salary than someone who has worked long-term, so maybe some of this is offset. Ms. Hoyle noted that she supports surveying employees about their desires in terms of benefits. As opposed to setting a premium, she suggests reviewing other options first - the perception is losing versus gaining something. Ms. Chinnici-Zuercher stated that each family's needs are different and these should be considered in the plan design. Ms. Telfer stated that she does not believe employees will be surprised with these changes -often, their reaction is that they were surprised the City did not act sooner. Ms. Chinnici-Zuercher suggested that benefits be the focus for upcoming internal newsletters -this will help to raise awareness. The cost at $1200 per month is a tremendous benefit. Ms. Telfer responded that this is already underway. Mr. Kranstuber noted that he assumes that any premiums would be with pretax dollars. Administrative Committee February 10, 2003 Page 5 Mr. Harding agreed. He noted that another option would be to offer cafeteria-style plans or flexible spending accounts. It is important, first of all, to know the market for public sector in order to understand how Dublin fits in. Mr. Harding briefly reviewed the summary of medical benefits currently offered by the City. He noted that these are the type of plan design features to be targeted in the survey data. He expects to find that the City's current prescription co-payments are low, especially for mail order. Ms. Salay asked for a copy of the survey which will be sent out. Mr. Harding agreed to provide this. The next meeting ofthe Committee is Tuesday, Apri18 at 6:30 p.m. The meeting was adjourned at 7:20 p.m. Clerk of Council