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Home My WebLink About08/19/2008, C7 - MODIFIED HEALTH INSURANCE CONTRIBUTION FOR SAN LUIS OBISPO CITY EMPLOYEES ASSOCIATION AND UNREPRESN council j acEnda Report CITY OF SAN LUIS OBISPO FROM: Monica Irons,Director of Human Resources SUBJECT: MODIFIED HEALTH INSURANCE CONTRIBUTION FOR SAN LUIS OBISPO CITY EMPLOYEES' ASSOCIATION AND UNREPRESENTED CONFIDENTIAL AND MANAGEMENT EMPLOYEES CAO RECOMMENDATION 1. Adopt a resolution approving an amendment to the San Luis Obispo City Employees Association (SLOCEA) Memorandum of Agreement implementing a new health insurance contribution structure for SLOCEA employees. 2. Adopt resolutions implementing a new health insurance contribution structure for confidential, appointed official, and management employees. DISCUSSION Background The 2007 Benchmark Compensation Report (Compensation Study) received by the Council on November 6, 2007, found most City benefits for SLOCEA, management, and confidential employees were competitive. One exception was the City's contribution to family health coverage. The Compensation Study compared employer contributions for family coverage on comparable preferred provider option (PPO) medical, dental, and vision plans. The City currently contributes 59% of the total cost of family health (medical, dental, and vision) insurance for SLOCEA, confidential, and management employees. This family contribution significantly "lags market" where median contributions to comparable City health insurance plans vary from 79% to 89%. The City's contribution is lower than eight of the ten comparison agencies. Feedback from job applicants, new hires, and existing employees confirmed the City contribution was not viewed as competitive. In January 2008, in order to improve the competitiveness of the City's health insurance contribution, Council directed staff to return in August 2008 with a proposal. The proposal would "shift" contributions from employees who opt out of City medical insurance or elect employee-only medical coverage to those employees who elect dependent or family coverage. Council authorized staff to re-open the SLOCEA Memorandum of Agreement (MOA) to discuss this topic. Approved changes will coincide with the City's open enrollment of benefits period starting in mid September. Open enrollment is an annual month-long period when employees can review their health care needs and make changes to their health care elections for the next calendar year. C7-� Council Agenda Report—Health Insurance Contribution Page 2 August 19,2008 The Current"One Size Fits All" Contribution to Health Insurance The City currently contributes $790 per month to SLOCEA, confidential, appointed official, and management employees regardless of the number of dependents they enroll in City health plans. An employee who chooses to "opt out" of City medical coverage receives $790 per month (less the cost of dental and vision insurance) as taxable income. On the other hand, an employee who elects family coverage (employee plus two or more dependents) on City health plans has approximately$550 per month deducted from his or her paycheck. The City health insurance contribution was scheduled to increase to $870 per month for SLOCEA and confidential employees effective December 1, 2008. However, analysis indicated the City's "one size fits all" approach was contributing to the lack of competitiveness by "over- funding" those employees who opt-out of City provided health insurance or elect employee-only coverage while "under-funding" those who elect dependent coverage. SLOCEA representatives were open to forgoing the scheduled December increase in order to improve the contribution to family coverage. Developing a New Approach Staff initially met with representatives of the SLOCEA bargaining team to understand.their concerns and proposals regarding the dependent health contribution. SLOCEA represents approximately 150 employees in clerical, maintenance, engineering, technician, inspector, and planning classifications. The bargaining team shared concerns that employees were opting out of City medical insurance because they could not afford to cover their dependents. In order to opt out of City medical insurance employees must provide proof of medical coverage for themselves under another plan. However, they are not required to show evidence of dependent health insurance coverage. Therefore, some members purchase high deductible, catastrophic coverage for themselves, and leave their dependents uninsured or enroll them in public assistance health programs. The approximately 75 management (including department heads) and confidential employees do not have a formal bargaining group. Therefore, a diverse committee solicited input and feedback from all management and confidential employees regarding possible changes to the City dependent health contribution. The SLOCEA bargaining team and the confidential/management employee committee agreed to work collaboratively on a unified proposal (the committee). The committee discussed the City's overall objective of attracting and retaining highly qualified employees and agreed the current "one size fits all" contribution structure was not accomplishing this objective, nor adequately covering employees with family dependents. The committee explored alternative structures that provide a higher contribution to employees who elect dependent coverage (because the premiums are higher) and a lower contribution to those who elect employee-only coverage or who "opt out" of City medical insurance. A "tiered" approach focuses the benefit on providing access to competitive cost health insurance instead of on receiving cash. Tiered health contribution structures are common in comparison cities and other C � -C�_ Council Agenda Report—Health Insurance Contribution Page 3 August 19,2008 organizations. A tiered health contribution structure has been in place for Police Officers' Association members since 2002 and has been well received by employees in that association. The Proposed Modification If approved, three contribution level "tiers" will be established each year in time for the annual open enrollment period. An employee would receive the contribution amount corresponding to his or her medical enrollment (i.e. employee-only, employee plus one, or family). Employees who elect not to enroll in City medical insurance (i.e. opt out) would receive a $200 per month contribution to purchase City dental and vision insurance and offset the cost of medical insurance from another source. Under the current "one size" system, such an employee would have received the same benefit as employees with dependent families. The tier contribution levels will be set each year after all health insurance premiums are received (typically in late August or early September). The contribution amounts will equal 100% of the combined premiums for the lowest cost Health Maintenance Organization (HMO) medical plan available in San Luis Obispo County, the dental plan (Delta Preferred Option), and the vision plan (Medical Eye Services); but not less than 80% of the combined premiums for the lowest cost PPO medical plan available in San Luis Obispo County, the dental plan(DPO), and the vision plan. The concept for this proposal was borrowed from comparison cities that contribute 100%of the cost of a"base"level of health coverage; typically on a Kaiser medical plan. The proposal ensures access to an HMO while allowing employees the option to "buy up"to coverage that may better meet the needs of their family. Setting a"safety net"of.80%of the lowest cost PPO medical plan ensures the benefit remains competitive, as this is close to the median contribution level in comparison cities. The following chart indicates how the health contribution would change under the proposal, using 2008 premiums: Election Choice Current Contribution Sample 2008 Contribution t Out $790 $200 Employee Only $790 $409 Employee+ One $790 $818 Family $790 $1,169 Implementation If approved, the proposal will take effect September 1, 2008, for employees hired on or after that date. Health insurance contributions for new hires would be as stated in the above chart under the "Sample 2008 Contribution" column. When health insurance premiums are received for the 2009 plan year, the contribution amounts would be re-calculated and communicated to all employees during Open Enrollment in September. Existing employees (hired prior to September � -3 Council Agenda Report—Health Insurance Contribution Page 4 August 19,2008 1, 2008) would continue to receive $790 per month unless they elect to change the number of dependents currently enrolled in City medical during Open Enrollment. Open Enrollment changes are effective December 1, 2008. The MOA with SLOCEA expires December 31, 2009 as does the resolution governing compensation and benefits for confidential employees. The appointed officials and management compensation and benefits resolution expires December 31,2008. As previously mentioned above, SLOCEA and confidential employees' health contribution was scheduled to increase to $870 per month on December 1, 2008, which will not occur under this proposal. In order to implement this proposal the SLOCEA MOA must be amended (Attachment 1) and new resolutions approved for confidential (Attachment 2), and appointed officials and management employees (Attachment 3). As part of the negotiation process with SLOCEA, staff will review the health insurance contribution to see if it continues to meet the needs of the City and SLOCEA employees. Similar discussions will also be held with management and confidential employees when the resolutions expire. CONCURRENCES Approximately two thirds of the SLOCEA membership voted in favor of the proposal before Council. Unrepresented groups such as confidential and management employees do not formally vote on proposals, however, committee members presented views from these employees during the development of this proposal. Although concerns were voiced from some employees, the committee believes the proposal better positions the City to attract and retain employees by providing a more competitive benefit. FISCAL IMPACT The City has not received all 2009 health insurance premiums and therefore, the proposed health contribution amounts cannot be finalized. Staff modeled the cost of this proposal by considering current enrollment elections, predicting (based on input from employees) the number of employees who may enroll in dependent coverage if a higher contribution was provided, and estimating 2009 insurance premiums. The estimate was offset by the anticipated $80 per month increase in the health insurance contribution. The added cost of the modified health contribution proposal for 2009 will be approximately $205,000; $123,000 from the General Fund and $82,000 from Enterprise Funds. The cost is well within the amounts originally budgeted as part of the Compensation Study implementation. ALTERNATIVES 1. Do Not Adopt the resolutions implementing changes to the cafeteria contribution for SLOCEA, confidential, and management employees. This alternative is not recommended as failure to implement these adjustments will further challenge recruitment and retention concerns. C Council Agenda Report—Health Insurance Contribution Page 5 August 19,2008 2. Modify the Proposed Health Insurance Contribution Changes. The Council may elect to modify the proposed health insurance contribution changes. If Council chooses this alternative, staff requests that Council provide direction, as appropriate. ATTACHMENTS 1. Resolution adopting an amendment to the January 1, 2006 through December 31, 2009 SLOCEA MOA. 2. Resolution adopting new health contribution structure for confidential employees. 3. Resolution adopting new health contribution structure for appointed officials and management employees. T:\Council Agenda Reports\Human Resources CAR\August 19th\Dependent Health 8-19.doc C �--5 Attachment#1 RESOLUTION NO. (2008 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ADOPTING AND RATIFYING AN AMENDMENT TO THE MEMORANDUM OF AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND THE SAN LUIS OBISPO CITY EMPLOYEES' ASSOCIATION FOR THE PERIOD OF JANUARY 1, 2006—DECEMBER 31, 2009 BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. The Amendment to the Memorandum of Agreement between the City of San Luis Obispo and the San Luis Obispo City Employees' Association, attached hereto as Exhibit"A" and incorporated herein by this reference, is hereby adopted and ratified. SECTION 2. The Finance Director shall adjust the Personnel Services appropriation accounts to reflect the negotiated health insurance contribution changes. SECTION 3. The City Clerk shall furnish a copy of this resolution and a copy of the executed Amendment approved by it to: Ron Faria, San Luis Obispo City Employees Association President and Monica Irons, Director of Human Resources. Upon motion of seconded by , and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this 19th day of August, 2008. Mayor David F. Romero ATTEST: Audrey Hooper, City Clerk T:\Council Agenda Reports\Human Resources CAR\August 19th\Attachment 1 SLOCEA.doc C.7—b Resolution No. (2008 Series) Attachment# 1 Page 2 APPROVED AS TO FORM: J athan P. Lowell, City Attorney C Exhibit A AMENDMENT TO THE JANUARY 1, 2006 THROUGH DECEMBER 31,2009 MEMORANDUM OF AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND THE SAN LUIS OBISPO CITY EMPLOYEES' ASSOCIATION A. PURPOSE OF THIS AMENDMENT The City and Association agree to modify Article 16, Insurance and Refund, Section A, Contribution of the 2006-2009 Memorandum of Agreement (MOA) as follows: Effective December 2008 for the January 2009 premium the City's contribution to the Cafeteria Plan will be set using the procedure outlined below. Within 30 days of receipt of health insurance premiums from medical, dental, and vision insurance providers, the City will set the cafeteria contribution using the following methodology: One hundred percent of the combined premiums for the lowest cost Health Maintenance Organization (HMO) medical plan available in San Luis Obispo County to employees covered by this MOA, the Dental Preferred Option (DPO) dental plan, and the vision plan; but not less than 80% of the combined premiums for the lowest cost Preferred Provider Option (PPO) medical plan available in San Luis Obispo County to employees covered by this MOA, the DPO dental plan, and the vision plan. New employees (hired on or after September 1, 2008) who elect not to be covered under a City medical plan will receive a $200 cafeteria contribution. Employees hired prior to August 31, 2008 who opt out of the City medical plan will receive $790 per month unless they choose to enroll themselves and/or their dependents in a City provided medical plan. At that time, they will receive the greater of $790 per month or the current cafeteria contribution. This methodology will be reviewed at expiration of this contract and the City's commitment to continue this methodology will be subject to review and further negotiation. This amendment confirms the agreement of the parties to modify the MOA. Except as modified above, all other terms and conditions shall remain in full force and effect. r Amendment To 2006-09 Memorandum of Agreement Exhibit A City of San Luis Obispo City Employees' Association Page 2 of 2 CITY OF SAN LUIS OBISPO SAN LUIS OBISPO CITY EMPLOYEES' ASSOCIATION Ken Hampian, CAO Paul Bechely, SLOCEA Consultant Monica M. Irons, Human Resources Director Ron Faria, President Other SLOCEA Negotiating Team Members Ed Humphrey Madelyn Paasch Randy Stevenson Greg Zocher T:\Council Agenda Reports\Human Resources CAR\August 19th\Exhibit A SLOCEA.doc C� -q i ) Attachment#2 RESOLUTION NO. (2008 Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO ADOPTING AND MODIFYING THE HEALTH CONTRIBUTION FOR THE CITY'S CONFIDENTIAL EMPLOYEES WHEREAS, the City of San Luis Obispo has designated the Executive Assistant to the City Administrative Officer, the Executive Assistant to the Director of Human Resources, the Legal Assistant/Paralegal and the Human Resources Specialist as confidential employees pursuant to the Government Code, WHEREAS, confidential employees are precluded from collective bargaining and therefore are not governed by a collective bargaining agreement, WHEREAS, the wages, hours and other terms and conditions of employment for confidential employees are established by resolution, NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Luis Obispo hereby revises the confidential health insurance contribution as follows: SECTION 1. Effective December 2008 for the January 2009 premium the City's contribution to the Cafeteria Plan will be set using the procedure outlined below. Within 30 days of receipt of health insurance premiums from medical, dental, and vision insurance providers, the City will set the cafeteria contribution using the following methodology. One hundred percent of the combined premiums for the lowest cost Health Maintenance Organization (HMO) medical plan available in San Luis Obispo County to employees covered by this resolution, the Dental Preferred Option (DPO) dental plan, and the vision plan; but not less than 80% of the combined premiums for the lowest cost Preferred Provider Option (PPO) medical plan available in San Luis Obispo County to employees covered by this resolution, the DPO dental plan, and the vision plan. New confidential employees (hired on or after September 1, 2008) who elect not to be covered under a City medical plan will receive a $200 cafeteria contribution. Confidential employees hired prior to August 31, 2008 who opt out of the City medical plan will receive $790 per month unless they choose to enroll themselves and/or their dependents in a City provided medical plan. At that time, they will receive the greater of$790 per month or the current cafeteria contribution. SECTION 2. All other compensation and benefits afforded confidential employees C�--/o Resolution No. (2008 Series) Attachment#2 Page 2 of 2 under Resolution No. 9833 (2006 Series) and not superseded by the above, shall remain in full force and effect. SECTION 3. The Finance Director shall adjust the Personnel Services appropriation accounts to reflect the health insurance contribution changes. Upon motion of , seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this 19th day of August, 2008. ATTEST: Audrey Hooper, City Clerk Mayor David F. Romero APPROVED AS TO FORM: I*a�ffian'P. . fiz-� U AjweT, CiTAttomey T:\Council Agenda Reports\Human Resources CAR\August 19th\Attachment 2 Confidentials.doc C �-1 / fi Attachment#3 RESOLUTION NO. (2008 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ADOPTING THE HEALTH INSURANCE CONTRIBUTION FOR APPOINTED OFFICIALS AND MANAGEMENT EMPLOYEES WHEREAS,the City Council is committed to a comprehensive policy that strengthens the recruitment and retention of well qualified and effective appointed officials and management personnel; and WHEREAS, the City Council wishes to provide an appropriate health insurance contribution for its management personnel; NOW,THEREFORE, BE IT RESOLVED,that the City Council of the City of San Luis Obispo hereby revises the management health insurance contribution as follows: SECTION 1. Effective December 2008 for the January 2009 premium the City's contribution to the Cafeteria Plan will be set using the procedure outlined below. Within 30 days of receipt of health insurance premiums from medical, dental, and vision insurance providers, the City will set the cafeteria contribution using the following methodology. One hundred percent of the combined premiums for the lowest cost Health Maintenance Organization (HMO) medical plan available in San Luis Obispo County to employees covered by this resolution, the Dental Preferred Option (DPO) dental plan, and the vision plan; but not less than 80% of the combined premiums for the lowest cost Preferred Provider Option (PPO) medical plan available in San Luis Obispo County to employees covered by this resolution, the DPO dental plan, and the vision plan. New employees (hired on or after September 1, 2008) who elect not to be covered under a City medical plan will receive a $200 cafeteria contribution. Employees hired prior to August 31, 2008 who opt out of the City medical plan will receive$790 per month unless they choose to enroll themselves and/or their dependents in a City provided medical plan. At that time, they will receive the greater of $790 per month or the current cafeteria contribution. SECTION 2. All other compensation and benefits afforded appointed officials and management employees under Management Compensation Resolution No. 9892 (2007 Series) and not superseded by the above, shall remain in full force and effect. SECTION 3. The Finance Director shall adjust the Personnel Services appropriation accounts to reflect the health insurance contribution changes. C � -12- Resolution No. (2008 Series) Attachment#3 Page 2 of 2 Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this 19th day of August,2008. ATTEST: Audrey Hooper, City Clerk Mayor David F. Romero APPROVED AS TO FORM: i i y A orney Jonathan Lowell TACouncil Agenda Reports\Human Resources CAR\August 19th\Attachment 3 Management.DOC