4.5. SR 10-15-2012 - Laserfiche WebLink

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Health Insurance Opt Out It has been the city's policy to require all eligible employees to take three core benefits within our Flexible Benefits Plan. The core benefits are group term life insurance, single dental insurance,and single health insurance. The city's contribution to the Flexible Benefits Plan has always paid 100% of these core benefits for at least one of the health plans offered. By mandating employees to carry health insurance, some may be covered under two different plans. Often the economics of health care and plan design make it cheaper for one family member to carry family coverage. The general thought is that if allowed to opt out of coverage,the healthy employees would leave the plan and the employees with high claims would stay on the plan, causing premiums to increase. Our brokers have assured us that they are not seeing this trend. Most employers require employees to provide proof that they are covered by insurance elsewhere before allowing them to opt out. The employees who choose to opt out are doing so because they have coverage through their spouse or could get coverage through their spouse at a lower cost than they would pay at their own employer. The$300 incentive to opt out of health coverage is designed to encourage employees to not maintain double coverage or to make it more economically feasible to transition their coverage to their spouses plan. We surveyed our insurance eligible employees and 26%indicate that they would consider opting out of the city's health insurance depending on how the numbers add up with their spouse's plan and provided they could get back on our plan if needed. Employees are,by law, able to return to city benefits based upon a life-changing event. Our dental plan design requires 100%participation of eligible employees and changing that would impact rates. Therefore,we are only considering an option to opt out for health insurance. Review of the League of Minnesota Cities Salary Survey shows that 131 of the 174 (75%) responding cities allow employees to opt out of their health insurance. Of those, 74 (57%) provide incentive compensation to waive health insurance. The amount provided varies significantly from$27.10 to $944 per month. FCI works with 12 large group city clients and six of them offer incentives to waive insurance with an average monthly incentive of$317. If half of our employees who said they'd consider the opt out option would choose the opt out with a monthly incentive of$300 the city could save about$32,000 this year. This is of course based upon 2012 enrollments and on a survey in which employees were not told of the amount of the incentive. 2013 Flexible Benefits Plan Design The 2013 budget includes a 5%increase to insurance benefit costs. Over the past few years,we have taken the full amount budgeted and allocated that between contributions to employee's flexible benefits plans and health savings accounts. We would like to continue to assist those employees willing to take on the risk of the high deductible plan by contributing to their health savings account. The implementation of the high deductible plan in 2008 has proven to be successful as it continues to experience low claims- to-premium ratios which significantly help our entire plan. Contribution Amount We have looked at city contribution options from a zero increase up to 5%. Each option would leave some amount of money available to contribute to employee's health savings accounts. While all of these options are fairly similar in effect,we suggest a 4%increase to the city contribution amount reserving the N:\Public Bodies\City Council\Council RCA Agenda Packet\10-15-2012\2013 Flexible Benefit Design RFA 10-15.docx