The URL can be used to link to this page

Home My WebLink About2003-11-17 City Council (10)4 City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: HUMAN RESOURCES DATE:NOVEMBER 17, 2003 CMR: 510:03 SUBJECT:APPROVAL OF RESOLUTION FIXING THE AMOUNT OF THE CITY’S CONTRIBUTION UNDER THE PUBLIC EMPLOYEES’ MEDICAL AND HOSPITAL CARE ACT (PEMHCA) HEALTH PLANS AT THE SPECIFIED CURRENT PERS CHOICE RATES FOR MANAGEMENT AND PROFESSIONAL GROUP RECOMMENDATION This report recommends Council approve the attached resolution fixing the City of Palo Alto’s contribution under the Public Employees’ Medical and Hospital Care Act (PEMHCA) for Management and Professional group employees, to reflect that the City shall pay up to the applicable PERS Choice premium rate on behalf of eligible active employees, up to the single party PERS Choice premium rate for individual retired employees, and the required percentage of health care premiums for eligible dependents of retired employees (applying the PERS Choice cap). BACKGROUND In 2003, the average health premium costs paid by the City increased by 22%. In 2004, the health insurance premiums costs will increase by another 18% and costs are expected to increase yet again in 2005 by at least 17%. With health care costs continuing to increase significantly each year, the City must make cost containment changes. At the same time, the City’s goal is to maintain excellent health insurance benefits for its employees, which has also been a key recruitment tool over the past several years. In May 2003, a Healthcare Committee was formed with representatives from each of the City’s bargaining groups, the City’s Management employee committee, and Human Resources Department staff to address the escalating costs of employee benefits: During this collaborative process, alternatives were explored but were found not to be cost effective. City employees value the stability of the PEMHCA Health Plans. The Healthcare Committee consensus was that the preferable alternative to lower costs is to stay in PEMHCA and cap medical benefits at a lower rate. CMR: 510:03 Page 1 of 3 DISCUSSION Effective January 1, 2004, the City will cap its contribution to health care premiums at the PERS Choice Basic plan rates for the Management and Professional group. Retirees who worked in the Management and Professional group who are enrolled in PERS Care Basic on 1/01/04, will pay then be reimbursed by the City for the differences in the premium amounts under the PERS Care and PERS Choice plans, due to the City’ s differing legal obligations to these retirees. The plan to cap at the PERSChoice Basic plan will provide affected employees with a quality PPO plan and will lower the City’s cost of providing health insurance. During the open enrollment period, employees currently enrolled in the more costly PERS Care PPO health plan were given the option of staying in that plan, with the option to pay the difference, in premiums, enrolling in PERS Choice or electing to enroll instead in an available lower cost HMO. Council already authorized these changes to the compensation plan for the Management and Professional group on October 27, 2003. RESOURCE IMPACT The following table illustrates the differences in premiums between the higher cost PPO, PERS Care and the lower cost PPO, PersChoice PPO plans and illustrates the City’s health cost avoidance per employee: Employee Two-Party Family Total Monthly Savings for Management and Confidential Employees PERSCare PERS Choice Difference Base Cost $ 544.00 $1,089.54 $1,416.40 $349.41 $698.82 $908.47 $195.36 $390.72 $507.93 Enrollment (2003) 10 13 9 Avoidance (2004) $65,372.40 $169,968.24 $152,971.20 $218,513.56 As the chart shows, the City will have a cost avoidance for calendar year 2004 of approximately $218,500 if this resolution is adopted. POLICY IMPLICATIONS This request does not represent any change to existing City policy. ENVIRONMENTAL REVIEW This is not a project under the California Environmental Quality Act (CEQA). CMR: 510:03 Page 2 of 3 ATTACHMENTS Attachment 1 -Resolution fixing the City of Palo Alto contribution under the Public Employees’ Medical and Hospital Care Act at the PERS Choice rates for Management Professional employees PREPARED BY Sandra T.R. Blanch, Risk and Benefits Manager DEPARTMENT HEAD: LESLIE LOOMIS Director of Human Resources CITY MANAGER APPROVAL:~ ~ EMILY HARRISON Assistant City Manager CMR: 510:03 Page 3 of 3 NOT YET APPROVED 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 WITH RESPECT TO MANAGEMENT AND PROFESSIONAL PERSONNEL AND COUNCIL APPOINTED AND ELECTED OFFICERS GROUP AND RESCINDING RESOLUTION NO.8070 WHEREAS, Government Code Section 22825.6 provides that a local agency contracting under the Public Employees’ Medica! and Hospita! Care Act shall fix the amount of the emp!oyer’s contribution at an amount not less than the amount required under the Section 22825 of the Act; and WHEREAS, Government Code Section 22857 provides that a contracting agency may fix the amount of the emp!oyer’s contribution for emp!oyees and the emp!oyer’s contribution for annuitants at different amounts provided that the monthly contribution for annuitants shal! be annually increased by an amount not less than 5 percent of the monthly contribution for emp!oyees, unti! such time as the amounts are equa!; and WHEREAS, the City of Palo Alto is a local agency contracting under the Act for participation by members of the Management and Professiona! Personne! and Counci! Appointed and Elected Officers Emp!oyee Group (formerly known as "Management, Confidential and Counci! Appointed and Elected Officers Group"); and WHEREAS, pursuant to Resolution No. 7538 the City Counci! fixed the City’s emp!oyer contribution in accordance with the Act; and WHEREAS, pursuant to discussions with the CalPERS Board and its staff, the City in June 2001 adopted new resolutions fixing the City’s emp!oyer contribution under the Act, to better // // // // 031110 sm 81204!I 1 NOT YET APPROVED reflect the intent of both the City and CalPERS under the Act with regard to the City’s contributions for retiree dependents; and WHEREAS, the City now desires to change its employer contributions in accordance with Government Code section 22825 and 22825.6 to cap its contribution at specified dollar amounts and desires that PERS continue to apply the same agreed upon five percent (5%) annua! increase calculation for the City’s contribution to annuitant dependents (now incorporating the specified premium caps). NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION i. That as of January !, 2004, the employer’s contribution for each employee shal! 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 $349.41 dollars per month for an individua!; $698.82 dollars per month for an emp!oyee plus one; and $908.47 per month for a family; plus administrative fees and Contingency Reserve Fund Assessments. SECTION 2. The City’s employer contribution for each annuitant shal! be 100% of the single party premium up to $349.41. Effective January i, 2004, the City’s contribution for one~ dependent of an annuitant wil! be fifty-five percent (55%) of the difference between the applicable single party premium (up to $349.41) and the applicable two-party premium (up to $698.82). The City’s contribution for more than one dependent of an annuitant (in 2004) wil! be fifty-five percent (55%) of the difference between the applicable single party premium and the applicable family premium (up to $908.47). Each subsequent year, the percentage of the City’s contributions for dependents wil! increase by five percent (5%) (e.g., 60% in 2005, 65% in 2006, etc.) of the difference between the single party premium and the two-party premium or family premium, as applicable, unti! such time as the City contributes the same percentage of the applicable premium for annuitants and their dependents. SECTION 3. Resolution No. 8070 is hereby rescinded. // 031110 sm 8120411 2 NOT YET APPROVED SECTION 4. The Council finds that this is not a project under the California Environmenta! Quality Act and, therefore, no environmenta! impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: City Attorney City Manager Director of Human Resources Director of Administrative Services 031110 sm 8120411 3