HomeMy WebLinkAboutStaff Report 1412City of Palo Alto (ID # 1412)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 2/14/2011
February 14, 2011 Page 1 of 3
(ID # 1412)
Summary Title: Employer’s Contribution under PEMHCA
Title: 9a. -Adoption of a Resolution Fixing the Employer’s Contribution Under
the Public Employees Medical and Hospital Care Act (PEMHCA) with Respect to
Members of Local 521, Service Employees International Union (SEIU) and
Management and Professional Employees Group
From:City Manager
Lead Department: Human Resources
Recommendation
Staff recommends that Council approve the attached resolution fixing the City of Palo Alto’s
healthcare premium costs under the Public Employees’ Medical and Hospital Care Act
(PEMHCA) for Local 521, Service Employees International Union (SEIU) and Management and
Professional personnel. The purpose of this recommendation is to complete the CalPERS
contract amendment process required to implement the Memorandum of Agreement (MOA)
and Compensation Plan health care premium provisions for these employee groups.
Background
In an effort to continue to contain escalating healthcare costs, the City has negotiated several
measures in recent years to cap healthcare premiums with all employee groups. Over the last
ten years, the City reached agreement to reduce its maximum payment for medical premiums
from the highest health plan (PERSCare) to the second highest plan for all active employees as
well as future retirees and also, the City implemented 20-year vesting for new hires. In 2010,
following imposed terms with Local 521, Service Employees International Union, the City
reached agreement with the Union (CMR:339:10) which included a cap on City contributions
towards medical premiums for current employees and future retirees. The same provision was
extended to Management and Professional current, active employees and future retirees. At
present, public safety units are not subject to this provision. The City is in negotiations with Fire
and the Police Management Association and will begin negotiations with PAPOA this spring.
Discussion
On August 2, 2010, City Council authorized the implementation of the 90/10 cost share plan for
SEIU employees. The City currently pays the full premium cost of an employee-selected health
care plan, up to the cost of the second most expensive PEMHCA plan offered for the Bay Area.
The attached table titled, “Monthly Employee Contribution Rates for 2011,” describes the new
February 14, 2011 Page 2 of 3
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contribution model. Under the new plan, the City and employees will split the cost of the
annual increase in medical premium costs, with a cap for the employee share of 5% premium
increase per year. Once the employee contribution reaches 10% of total premium cost, the
employee contribution will continue for future years at 10% of total premium cost with the City
picking up the remaining 90% of total premium cost.
Prior to the adoption of the 2009-2010 Management and Professional Compensation Plan,
those employees proposed that that the City consider proposals to develop an alternate health
care contribution plan. In the event that the proposed alternative contribution plan was not
adopted by City Council, then the City’s 90/10 cost share plan implemented for SEIU employees
would also apply to the Management/Professional employees, CAOs and Council Members.
The City formed a healthcare committee involving all employee groups to discuss alternatives
over the last five months. Implementation of the 90/10 cost share plan was delayed to allow
the group more time to explore various options in-depth. While these discussions were fruitful
and some options had significant cost savings, they did not yield alternatives that met Council
goals of generational equity and shared risk between the City and employees. It is important to
the City that costs are shared among all users of the benefits and that future hires not have a
greater share of the burden while employees closer to retirement have little or no
responsibility for healthcare costs. Additionally, employees (active and retired) have more of
stake in containing health care costs when they share in those costs.
While the City acknowledges that the challenge of rising healthcare costs will require other
changes in the future and remains open to exploring alternative cost sharing options with all
employee groups that meet Council goals, the alternatives identified to-date do not meet the
goals. The City expects that future negotiations will provide additional time to review and
develop additional alternatives and solutions.
Contributions by active SEIU and Management and Professional employees will begin effective
April 1, 2011. In order to implement provisions for the aforementioned employee groups, the
CalPERS contract amendment process requires Council to approve the attached resolutions.
Staff has reviewed the resolutions with CalPERS and due to the inability of CalPERS to directly
administer the 90/10 contribution model, the resolutions reflect that the health plan rates will
be fixed at a lowered specified amount for SEIU and Management and Professional employees.
The City will work with CalPERS to implement an internal process for appropriate contributions
under the 90/10 cost share plan.
Resource Impact
The implementation of the 90/10 cost share plan for miscellaneous employees (excludes sworn
safety employees in police and fire departments) results in 3 months of medical premium
savings this fiscal year, which is estimated to be $95,730. The employee contributions toward
medical premiums are expected to save the City $370,000 on an annual basis according to the
2011 healthcare rates.
February 14, 2011 Page 3 of 3
(ID # 1412)
The implementation of employee and future retiree medical premium contributions by
miscellaneous employees (excludes sworn safety employees in police and fire departments)
results in 3 months of medical premium savings this fiscal year, which is estimated to be
$95,730. This amount is a reduction for FY 2011 due to the delay of the 90/10 implementation
to allow the employee healthcare committee to develop alternatives. The employee
contributions toward medical premiums are expected to save the City $370,000 on an annual
basis according to the 2011 healthcare rates.
The City will contribute to its retiree insurance trust an amount not less than the amount of
premiums paid by active employees in the miscellaneous employee groups.
Policy Implications
This resolution implements provisions previously approved in the 2010-11 SEIU MOA and the
2009-10 Compensation Plan for Management and Professional Personnel. It also supports the
Finance Committee’s recommendation for staff to bring alternatives forward on how to slow
the increase of employee benefits and lessen the impact on infrastructure and other City
priorities. Staff also plans to continue pursuing health care benefit changes in negotiations with
other employee units.
Environmental Review
This is not a project under the California Environmental Quality Act (CEQA).
ATTACHMENTS:
·Monthly Employee Contribution Rates 2011 (PDF)
·8261529 RESO PEMAHCA (2)(DOC)
Prepared By:Elizabeth Egli, Administrative Assistant
Department Head:Sandra Blanch,
City Manager Approval: ____________________________________
James Keene, City Manager
Plan 2011 Monthly
Premium
2010 Monthly
Premium % Increase % EE
Responsibility
$ EE Monthly
Responsibility
$ Per Pay
Period
Blue Shield Employee Only $675.51 $577.33 17.01% 5.00% $28.87 $13.32
Blue Shield Employee +1 $1,351.02 $1,154.66 17.01% 5.00% $57.73 $26.65
Blue Shield Employee + 2 $1,756.33 $1,501.06 17.01% 5.00% $75.05 $34.64
Blue Shield NetValue Employee Only $581.24 $500.35 16.17% 5.00% $25.02 $11.55
Blue Shield NetValue Employee +1 $1,162.48 $1,000.70 16.17% 5.00% $50.04 $23.09
Blue Shield NetValue Employee + 2 $1,511.22 $1,300.91 16.17% 5.00% $65.05 $30.02
Kaiser Employee Only $568.99 $532.56 6.84% 3.42% $18.22 $8.41
Kaiser Employee +1 $1,137.98 $1,065.12 6.84% 3.42% $36.43 $16.81
Kaiser Employee + 2 $1,479.37 $1,384.66 6.84% 3.42% $47.35 $21.86
PERS Choice Employee Only $563.40 $508.74 10.74% 5.00% $25.44 $11.74
PERS Choice Employee +1 $1,126.80 $1,017.48 10.74% 5.00% $50.87 $23.48
PERS Choice Employee + 2 $1,464.84 $1,322.72 10.74% 5.00% $66.14 $30.52
PERS Select Employee Only $492.68 $474.93 3.74% 1.87% $8.88 $4.10
PERS Select Employee +1 $985.36 $949.86 3.74% 1.87% $17.75 $8.19
PERS Select Employee + 2 $1,280.97 $1,234.82 3.74% 1.87% $23.08 $10.65
PERSCare Employee Only $893.95 $868.17 2.97% 1.48% $231.33 $106.77
PERSCare Employee +1 $1,787.90 $1,736.34 2.97% 1.48% $462.66 $213.54
PERSCare Employee + 2 $2,324.27 $2,257.24 2.97% 1.48% $601.46 $277.59
PORAC Employee Only $527.00 $484.00 8.88% 4.44% $21.50 $9.92
PORAC Employee +1 $987.00 $906.00 8.94% 4.47% $40.50 $18.69
PORAC Employee + 2 $1,254.00 $1,151.00 8.95% 4.47% $51.50 $23.77
% Increase = (2011 Monthly Premium - 2010 Monthly Premium)/2010 Monthly Premium
% EE Responsibility = 1/2 % Increase not to exceed 5%
$ EE Responsibility = 2010 Monthly Premium x % EE Responsibility
PERSCare Contribution = (PERSCare premium - Blue Shield premium) + [(2011 Monthly Premium - 2010 Monthly Premium)/2010 Monthly Premium]
Revised 08/30/10
Monthly Employee Contribution Rates for 2011
Bay Area Regional Plans (Basic)
* NOT YET APPROVED *
110211 sh 8261529 1
Resolution No. ______
Resolution of the Council of the City of Palo Alto Fixing the
Employer’s Contribution under the Public Employees’
Medical and Hospital Care Act for Local 521, Service
Employees International Union (SEIU) and Management
and Professional Personnel
WHEREAS,Government Code Section 22892(a) provides that a local agency
contracting under the Public Employees' Medical and Hospital Care Act shall fix the amount of
the employer's contribution at an amount not less than the amount required under Section
22892(b)(1) of the Act; and
WHEREAS,Government Code Section 22892(c) provides that a contracting agency
may fix the amount of the employer's contribution for employees and the employer's contribution
for annuitants at different amounts, provided that the monthly contribution for annuitants is
annually increased to equal an amount not less than the number of years the contracting agency
has been subject to this subdivision multiplied by 5 percent of the current monthly contribution
for employees, until such time as the amounts are equal; and
WHEREAS, City of Palo Alto, hereinafter referred to as Public Agency is local
agency contracting under the Act for participation by members of the City of Palo Alto.
NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as
follows:
SECTION 1. That effective April 1, 2011 the employer's contribution for each
employee shall be the amount necessary to pay the full cost of his/her enrollment, including the
enrollment of his/her family members in a health benefits plan up to a maximum of the minimum
employer contributions per month as prescribed in Section 22892(b)(1) of the Government Code
($108.00)per month.
SECTION 2. That effective April 1, 2011 the employer's contribution for each
annuitant shall be the amount necessary to pay the full cost of his/her enrollment, including the
enrollment of his/her family members in a health benefits plan up to a maximum of 90% of the
minimum employer contributions per month as prescribed in Section 22892(b)(1) of the
Government Code per month.
SECTION 3. That the employer's contribution for each annuitant shall be increased
annually by 5 percent of the monthly contribution for employees, until such time as the
contributions are equal, plus administrative fees and Contingency Reserve Fund Assessments.
SECTION 4. That the City of Palo Alto has fully complied with any and all
applicable provisions of Government Code Section 7507 in electing the benefits set forth above.
* NOT YET APPROVED *
110211 sh 8261529 2
SECTION 5. The County of Santa Clara as lead agency has determined that this
project is exempt from the provisions of the California Environmental Quality Act (“CEQA”)
under CEQA Guidelines Section 15308 as an action by regulatory agencies authorized by state or
local ordinance to assure the maintenance, restoration, enhancement, or protection of the
environment.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
_______________________________________________________
City Clerk Mayor
APPROVED AS TO FORM:APPROVED:
_______________________________________________________
Sr. Deputy City Attorney City Manager
_____________________________
Director of Human Resources
_____________________________
Director of Administrative Services