8.1. SR 11-13-2000
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City of lY
Elk
Item #8.1.
MEMORANDUM
TO:
Mayor & City Council
FROM:
Lori Johnson For The Employee Benefits
Committee
DATE:
November 13, 2000
SUBJECT: Benefits Committee Insurance and Benefits Proposal
Introduction
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On Wednesday, November 8,2000, the final piece of health insurance
information for 2001 was received and reviewed by the Benefits Committee.
The Committee met on Wednesday and has prepared a benefits proposal for
Council consideration. The Committee put a great deal of thought into the
proposal; it is the result of considerable discussion, research, and, most
important, compromise. The insurance benefits issue is a difficult one, as the
Council has acknowledged, because of the diverse opinions on what is fair.
Add to that the fact that insurance premium rates and types of plan offerings
are out of our control, and you are faced with a very difficult situation.
With that knowledge, the Committee developed a proposal that it feels is
acceptable to both the Council and employees. Before presenting the
proposal, it is important again to stress that the Committee unanimously
approved this proposal, but that does not mean that each member agrees in
total with the proposal. The Committee members, Joan Frick, Scott
Harlicker, Cheryll Edinger, Bob Mahutga, Steve Tillman, Marc Nevinski, and
Lauren Wipper often had differing opinions on what type of proposal should
be presented. Comments ranged from asking the Council to tie the family
contribution to a percentage of the total premium to offering the same cash
contribution to each employee regardless of type of coverage. In the end the
Committee decided to pursue a plan that falls in the middle with the
assumption that the Council would make changes as it felt appropriate.
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13065 Orono Parkway' P.O. Box 490' Elk River, MN 55330' TDD & Phone (763) 441-7420' Fax (763) 441-7425
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2001 Insurance Quotes
First, it is important to discuss health insurance since the entire benefits
proposal is built around health insurance. The City currently has its health
insurance contract with Medica. Medica offered a renewal increase of just six
percent - far less than expected. However, Medica declined to offer a dual
choice plan. Apparently, even though they told us last year that it would be
offered in 2001, they do not offer that to groups under 100. So we decided to
solicit a quote from HealthPartners on their new nine-tier plan. We were
encouraged by early discussions with HealthPartners, but in the end
HealthPartners declined to offer a quote because they couldn't compete with
Medica's rates. This means that our rates are fair and not out of line, but it
does nothing to meet our goal of offering more choices to employees. This left
us with only one option, to renew with Medica.
Previous Council Direction
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At the April 24 meeting, the Council census was to consider a cafeteria
(flexible benefits) plan with "different contribution levels depending upon the
type of coverage selected." The minutes go on to say "the Council would like
the family contribution increased and would consider a plan that offers some
after insurance dollars to employees with single coverage." Based on this
information, the Committee is proposing a cafeteria plan with different
contribution amounts depending upon the type of coverage selected.
The ProlJosal
The plan proposed by the Committee is almost identical to the cafeteria plan
in Maple Grove except that the contribution amounts are different. Please
refer to the attached OVERVIEW taken directly from Maple Grove's
employee information for details on how a flex plan works. The proposed
contribution amounts are shown on the next attachment, Employee
Insurance Benefits, 2001 Benefits Committee Recommendation. The left side
of this sheet provides current year information. The right side, labeled 2001
Contract Year, is the proposed flex plan for 2001. The bottom left side
provides current group demographics and the bottom right side shows the
City's costs.
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Based on the current group demographics, the City's annual cost is $246,187.
Even if the contribution is not increased in 2001, the cost increases to
$254,539. If the contribution is increased to $460 per month, the annual cost
increases to $261,824. If the Council agrees with the flex plan as proposed,
the annual cost increases to $286,920. The 2001 budget proposal includes
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approximately $270,000 for non-union employee insurance. The actual cost,
of course, may vary depending upon any adjustments the Council makes to
the contribution levels.
One of the main goals is to decrease the amount employees pay for family
insurance. The full flex proposal increases the family contribution to $500
per month. This is high in comparison to other cities; however, it needs to be
that high to offer any savings to this group of employees. The proposed plan
would decrease the amount these employees pay by $230 to $300 per year
depending on the coverage selected. The only way to further decrease the
employee cost is to increase the city contribution.
The main benefit of a cafeteria plan is that it offers choice and ownership to
employees. Employees have control of how their money is spent for benefits.
Employees can then decide what is best for their individual situation, and
spend their benefit money appropriately.
Conclusion
Members of the Benefits Committee will be present at the meeting to present
and discuss this proposal in greater detail. There are too many issues to
discuss all of them in this memo so please contact a committee member or me
on Monday if you need additional information prior to the meeting.
Employees will receive this information before the meeting and may be at the
meeting to express their views on the proposal.
If the Council agrees to implement a Flexible Benefits Plan, it will be
important to move quickly so everything can be in place for implementation
on January 1, 2001. It will be necessary to involve an expert in this area to
draft the plan and to assist with employee meetings and enrollment this first
year. The consultant has estimated that it will cost around $3,000 to $5,000
to draft and implement the plan.
Action Reauested
The Council is asked to consider the 2001 benefits proposal as presented by
the Benefits Committee.
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OVERVIEW
At the City of Maple Grove, we
recognize that all employees have
unique personal and family health care,
insurance and financial needs. Since no
two employees are exactly alike, we've
made choice and flexibility the
cornerstones of the Flexible Benefits
Plan. The Plan gives you an opportunity
to design a benefits package that. more
closely fits your personal needs and
goals.
..~
The City of Maple Grove makes monthly
Employer Contributions to the Plan on
your behalf. You may use these
Employer Contributions to purchase
benefits from a menu. some benefits
are considered "CORE". That is, they
are required for all Plan participants. A
variety of additional benefits are
"OPTIONAL" and are available for
purchase with the money that is not
spent on Core benefits.
If you use up all your Employer
Contributions and still have additional
needs, you may contribute your own
money to the Plan. Stich vc;>luntary
Employee Contributions increase your
buying power. - giving you more
flexibility to pick and choose among the
coverages that are offered.
Any money left over after buying Core
and Optional benefits may be taken as
extra taxable compensation in your
regular paycheck and then, if you wish,
you could alsoconsider.deferring..some
of your dollars pre-tax, to a Section 457
Deferred Compensation Plan.
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The diagram to the right illustrates the
selection process.
Monthly Employer and Voluntary
Employee Contributions
CORE BENEFITS
I
Medical Coverage for Yourself
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Basic Life Insurance for Yourself
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Dental Coverage for Yourself
(Not required if Family Medical Coverage is
selected .
OPTIONAL BENEFITS
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Family Medical Coverage
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Family Dental Coverage
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Optional Life Insurance for You and Your
Famil
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Long-Term Disability Coverage for
Yourself
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Flexible Spending Accounts for You and
Your Famil
CASH
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Taxable Cash Compensation
I
Section 457 Deferred Compensation Plan
(Please note that you can begin
participation or change any current
contributions to your deferred compensation
plan at any time throughout the year. This
benefit, unlike the'others noted above, is not
limited to this annual enrollment period for
making changes or beginning new
contributions .
1
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EMPLOYEE INSURANCaEFITS (Non-Union Only)
2001 Benefits Committee Recommendation
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2000 CONTRACT YEAR 2001 CONTRACT YEAR
Medica Health Delta Medica Health** Delta
Elect Select Dental Life Elect Select Dental* Life
Single 210.85 234.25 20.25 4.63 Single 223.50 248.31 21.67 4.63
Employee & Spouse 442.70 491.90 Employee & Spouse 469.26 521.41
Employee & Children 389.90 433.35 Employee & Children 413.29 459.35
Family 739.50 821.60 52.85 Family 783.87 870.90 56.55
City contribution $430.00 per month ($5,160.00 per year). *Seven percent rate increase
** Six percent rate increase.
Employee Employee Employee Employee
Sinale & Spouse & Children Familv Full Flex Sinale & Spouse & Children Familv
City Contribution 430.00 430.00 430.00 430.00 City Contribution 310.00 460.00 460.00 500.00
Life Insurance 4.63 4.63 4.63 4.63 Life Insurance 4.63 4.63 4.63 4.63
Single Dental 20.25 20.25 20.25 20.25 Single Dental 21.67 21.67 21.67 21.67
Balance Avail. For 405.12 405.12 405.12 405.12 Balance Avail. For 283.70 433.70 433.70 473.70
Health Insurance Health Insurance
Health Insurance Health Insurance
Elect 210.85 442.70 389.90 739.50 Elect 223.50 469.26 413.29 783.87
Employee Contribution 0.00 37.58 0.00 334.38 Employee Contribution (60.20) 35.56 (20.41) 310.17
Annual City Cost 2,828.76 5,160.00 4,977.36 5,160.00 Annual City Cost 3,720.00 5,520.00 5,520.00 6,000.00
Annual Employee Cost 0.00 450.96 0.00 4,012.56 Annual Employee Cost (722.43) 426.69 (244.95) 3,722.01
Select 234.25 491.90 433.35 821.60 Select 248.31 521.41 459.35 870.90
Employee Contribution 0.00 86.78 28.23 416.48 Employee Contribution (35.39) 87.71 25.65 397.20
Annual City Cost 3,109.56 5,160.00 5,160.00 5,160.00 Annual City Cost 3,720.00 5,520.00 5,520.00 6,000.00
Annual Emplovee Cost 0.00 1 041.36 338.76 4997.76 Annual Em 10 ee Cost 424.71 1 052.49 307.77 4 766.37
CURRENT DEMOGRAPHIC INFORMATION CITY INSURANCE BENEFIT COST ANALYSIS
Employee Employee Employee Employee Annual City
Current Enrollment Sinale & Spouse & Children Familv Sinale & Spouse & Children Familv Cost
Elect 10 3 7 6 26 Current $118,465 $20,640 $65,802 $41,280 $246,187
Select 29 1 6 2 38 $430 Contribution 2001 125,539 20,640 67,080 41,280 254,539
Total 39 4 13 8 64 $460 Contribution 2001 125,539 22,080 70,045 44,160 261,824
Flex as Proposed 2001 145,080 22,080 71,760 48,000 286,920
Note: Premiums, City Contribution and Employee costs are stated in Monthly terms unless otherwise noted.
Under the Full Flex plan a negative Annual Employee Cost is the amount available to the employee to spend on other flex benefits.