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5.8. SR 03-13-2006 City of Elk River REQUEST FOR COUNCIL ACTION Agenda Section Meeting Date Worksession March 13, 2006 Item Description Tobacco Settlement Pa ment Ex enditure Discussion Item Number 5.8. Prepared by Lori ohnson, Ci Administrator Reviewed by Introduction In December the City received $10,381.56 of tobacco settlement funds from BlueCross BlueShield (BCBS) of Minnesota. Guidelines for how to use these funds need to be established. Discussion The settlement funds are in the Insurance Reserve fund where they have been be set aside for programs that meet the requirements of the settlement. Generally, according the BCBS information, "these programs will focus on tobacco use, physical inactivity and nutrition." Several employees have requested that the City reimburse the cost for tobacco cessation programs, which clearly falls within the parameters of the settlement. If the Council agrees, that will be the first program funded with this money. In addition to tobacco cessation, I recommend that the funds be spent on programs that will help to control or reduce health insurance premiums and health care costs such as health awareness and screening, healthy eating, and other preventative health programs. Another important program that could be funded because it is currently not available to non-union employees is an employee assistance program (EAP). BCBS does not offer one with the health insurance plan through the consortium in which the City participates. The EAP would cost several thousand dollars per year. Many of the recommended programs can be offered to employees at minimal cost. Currently the Health Rewards Committee coordinates these programs for employees with a small annual allotment (approximately between $1,000 and $1,500 per year) from the consortium. However, these funds will not be available if the City changes insurance plans. Further, the annual allotment does not cover all of the costs of offering these programs to employees because union and Elk River Municipal Utilities employees participate in all of the programs while the funding from the consortium is based on the number of non- union City employees covered by BCBS. Perhaps the best way to ensure that settlement funds are spent appropriately is to allocate a set amount to the Committee each year for programs that promote healthy lifestyles and control or reduce health insurance costs. This would supplement the current funding and replace the consortium contribution if the City changes insurance plans. Financial Impact All programs and expenditures will come from the tobacco settlement payment from BlueCross BlueShield of Minnesota. Attachments BlueCross BlueShield of Minnesota letter on settlement. s: \ Council \Lori\2006 \ Tobacco Settlement. doc Action Requested Council direction and concurrence on proposed expenditure of settlement funds. Council Action Motion by _ Second by _ Vote Follow Up S: \Council\Lori\2006\ Tobacco Settlement.doc +Q P.O. Box 64560 St. Paul, MN- 55164-0560 651.662.8000 1.800.382.2000 www.bluecrossmn.com LOl l BlueCross BlueShield of Minnesota DEe J 7 2005 To: Blue Cross Group Eligible for Settlement Payment Blue Cross and Blue Shield of Minnesota is pleased to provide you with a settlement check from the settlement of the Tow Distributing class action litigation. At the end of November, our court-approved settlement was finalized and we can now distribute these proceeds. Approximately 1 0,000 Blue Cross employer groups are receiving checks as part of a settlement agreement that calls for the di~tribLition of $41. miHion to emp!oyer groups (less plaintiffs' attorneys fees and court awarded costs). We also will use tobacco proceeds to fund programs through our Prevention Minnesota initiative to improve the health of all Minnesotans. These programs will focus on tobacco use, physical inactivity and nutrition, which are the leading preventable causes of death. In addition to Prevention Minnesota and the settlement checks sent to employers, proceeds from the original tobacco litigation settlement will go to other health- related causes. We have already sent nearly $30 million to current and former individual policyholders. Approximately $30 million will be going to community health clinics in Minnesota. These clinics serve the uninsured and under-insured of our communities. And, approximately $70 million will be going to provide debt relief for the Minnesota Comprehensive Health Association. MCHA provides health insurance policies to Minnesota residents, who have been denied private health insurance because of a pre-existing condition. You should be aware that the U.S. Department of Labor has advised us that they plan to do random audits of groups that received settlement checks and are subject to the Employee Retirement Income Security Act of 1974 (ERISA) to assure .comp!iam~e with ER.ISA requirements. A summary of B ,U,S. Department of Labor Advisory Opinion regarding ERISA issues associated with these payments and the full Advisory Opinion can be found at our website: www.bluecrossmn.com/public/healthandwellness/settlement.html For more specific guidance on your situation, we recommend you seek the advice of your attorney or other advisor. If you have questions about your settlement check or our tobacco related programs, please call 1-866-356-2426. Sincerely, Blue Cross and Blue Shield of Minnesota Blue Cross and Blue Shield of Minnesota is an independent licensee of the Blue Cross and Blue Shield Association " Bluetrass BlueShield . ....... .... of Minnesota . . .._--..;..._- FACT SHEET A Healthier Minnesota - A Blue Cross Investment to make Minnesota a healthier place to live and work Give Minnesota children a better chance to grow up healthy. Reduce premiums for many Minnesota businesses that buy health insurance products. Provide cost relief. Save lives - and money - by making people healthier. .. Asa taxable nonprofit - not a for-profit company or a charitable organization - Blue Cross' intent has always been to use our landmark 1998 settlement with the tobacco industry to benefit all Minnesotans. It's an extraordinary opportunity to save lives and save money by investing in health. Our Healthier Minnesota plan for our tobacco proceeds benefits everyone - our members, our neighbors, small businesses, large businesses, the uninsured and the under-insured. When everyone is healthier, we all reap the rewards. Payments to eligible fully insured Blue Cross groups under a legal settlement and to individual members are also a component. The plan also provides immediate relief by reducing premiums for many Minnesota businesses, and invests in tomorrow, by preserving the community clinic safety net, and targeting the greatest health challenges in our state: heart disease, cancer and tobacco use. At a Glance: A Healthier Minnesota Investment What it Means Provide needed new funds for community clinics. To the Healthier Minnesota Community Clinics Investment: $30 million Fund to help community clinics serve the uninsured and under-insured in our state, and preserve the community clinic safety net Reduce the deficit facing the Minnesota To offset MCHA' s deficit and make health care Comprehensive Health Association (MCHA) more affordable, especially for small businesses, by Investment: $70 million reducing the burden on the businesses taxed to fund MCHA Distribute a portion of the. pro,ceeds directly to Blue Immediate relief for eligible :ftJ.lly insured Blue Cross eligible fully insured individual members. Cross individual and Medicare Supplement Investment: $30 million members who had coverage on June 15,2001 Distribute a portion of the proceeds directly to Blue Payments distributed to 10,000 Blue Cross groups Cross eligible fully insured groups pursuant to a fully insured between 1978 and June 15, 2001.The class action settlement. Investment: $41 million, original plan the Commerce Department approved less plaintiffs' attorneys fees and costs called for $30 million. Another $11 million has now been added under the legal settlement. Save lives and save money by investing in health Prevention Minnesota, our 10-year initiative, will improvement and heart disease and cancer target the leading preventable causes of death and prevention programs for all Minnesotans. disability: tobacco use, physical inactivity, and Investment: $241 million unhealthy eating.