HomeMy WebLinkAboutResolution No. 2022-76CITY OF KENAI
RESOLUTION NA-7-4=7-76
A RESOLUTION AUTHORIZING A CONTRACT FOR EMPLOYEE HEALTH CARE EFFECTIVE
JANUARY 1, 2023.
WHEREAS, as part of a comprehensive employee benefit package and pursuant to KMC 23.40. 120 the
City provides group medical, dental, and vision insurance to its employees; and,
WHEREAS, the City's current provider for group medical, dental and vision is PREMERA Blue Cross
Blue Shield of Alaska; and,
WHEREAS, Resolution No. 2022-42 authorized the City Manager to execute a contract with PREMERA
Blue Cross Blue Shield of Alaska to provide group medical, dental, and vision insurance effective July 1,
2022 for an estimated annual premium of $3,075,669, with an option to cancel after 6 months; and,
WHEREAS, the City obtained renewal quotes and considered alternative quotes as well as plan and
provider changes to improve the benefit value to employees that would be effective on January 1, 2023;
and,
WHEREAS, the standard benefit cycle is on a calendar year basis; and,
WHEREAS, the administration recommends the City enter into a contract with PREMERA Blue Cross
Blue Shield of Alaska to provide group medical, dental, and vision insurance to the employees of the City
of Kenai effective January 1, 2023 for an estimated annual premium of $2,783,821; and,
WHEREAS, providing quality major medical, dental, and vision insurance is a component of a
comprehensive compensation package which allows the City to recruit and retain quality employees to
provide the services of the City for its residents.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA:
Section 1. That the City Council authorizes the City Manager to execute a contract with PREMERA
Blue Cross Blue Shield of Alaska to provide group medical, dental, and vision insurance to the employees
of the City of Kenai effective January 1, 2023 for an estimated annual premium of $2,783,821.
Section 2. That the City Council authorizes a health plan structure which includes an HRA maximum
contribution to achieve a net employee deductible of $500 individual and $1,000 for employee with
dependent(s).
Section 3. That this resolution takes effect January 1, 2021
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THIS 16th DAY OF NOVEMBER, 2022,
Brian Gabriel Sr., Mayor
ATTEST:
Michelle . V.--.er M.-C,City Clerk
New Text Lkiderlined; [DELETED TEXT BRACKETED]
ElaMEMEN
.enai 1210 Fidalgo Ave, Kenai, AK 99611-7794 1907.283.7535 1 www Lenakity
MEMORANDUM
TO: Mayor Brian Gabriel and Kenai City Council
THROUGH: Paul Ostrander, City Manager
FROM: Christine Cunningham, Human Resources Director
DATE: November 9, 2022
SUBJECT: Resolution 2022-76 - Employee Health Insurance
Resolution 2022-76 authorizes a contract for the City's employee group medical, dental, and
vision insurance pursuant to KMC23.40.120 effective January 1, 2023.
The City currently provides health insurance coverage to employees through PREMERA Blue
Cross Blue Shield of Alaska for an estimated annual premium of $3,075,669. The current plan
became effective on July 1, 2022, and has an option to cancel after six months.
During the FY23 budget process, the administration indicated that it planned to work with the
City's health and life insurance benefits consultant to develop an improved plan design with
potential changes to the plan or providers in an effort to find sustainable options for coverage
beginning in the calendar year 2023.
The administration is in the process of reviewing health and life insurance renewals, market
options, plan design, and contribution strategies with our health and life insurance benefits
consultant. However, the administration still needs to receive all of the quotes for comparable
coverage to finalize an analysis and recommendation by the deadline to include in this City
Council packet. It is expected that this information will be received through the City's benefits
consultant no later than Friday, November 11, 2022, and will be provided to the City Council
before the November 16, 2022 Council Meeting.
Including this resolution on the November 16, 2022 Council Meeting Agenda is necessary to
ensure that the administration can move forward with benefits open enrollment for employees
beginning in December.
Your consideration is appreciated.
IN Iftunnuunnul
,enao 1 210 Ficlalgo Ave, Kenai, AK 99611-7794 1907.283.7535 1 wwwlenai.city
MEMORANDUM
TO: Mayor Brian Gabriel and Kenai City Council
FROM: Paul Ostrander, City Manager
Christine Cunningham, Human Resources Director
Terry Eubank, Finance Director
DATE: November 15, 2022
SUBJECT: Resolution 2022-76 - Employee Health Insurance Requested
Amendment
The purpose of this memo is to request an amendment to Resolution 2022-76. The original
resolution does not include the contract amount or name of the group medical, dental, and vision
insurance provider. The Administration received final proposals and an updated analysis for
coverage through the City's health and life insurance benefits consultant Marsh & McLennan
Agency LLC on November 15, 2022.
Administration worked with Marsh & McLennan to obtain proposals and analyze options to find
cost -sustainable quality employee group medical, dental, and vision insurance coverage for
employees and recommends renewal with PREMERA at a 10% reduction in premium for an
estimated annual premium of $2,783,521 for the calendar year beginning January 1, 2023 that
results in savings to the City and employees in premiums with no changes in coverage. The
employee share of the premium would remain at 13%, with the City's share at 87% until July 1,
2023, when the employee share is scheduled to increase to 14%, and the City's share decreasing
to 86%.
The City has the flexibility to choose between renewal of its existing fully -funded plan or the
OptiFlex level -funded plan through PREMERA at the same rate. Administration considered both
options, and recommends the OptiFlex plan, which offers some of the flexibility and potential cost -
savings of a self -funded health plan with the financial safety and predictability of a fully -funded
plan. Through the OptiFlex plan, the City would be eligible for a 50% refund of any premium
amount in excess of actual claims, after the payment of preset plan administration costs, if the
City renews the plan for calendar year 2024 through PREMERA.
Additionally, as part of this years' open enrollment, employees would be offered the option to
enroll in a higher deductible ($3,000) plan instead of the City's current group plan with a deductible
of ($2,000). For employees who elect the higher -deductible option, the City would increase its
contribution to the HRA by $1,000 for Employee -Only and $2,000 for Employee with Dependent(s)
to make up the difference in the deductible, resulting in an additional cost savings to the City and
employees who opt for the higher deductible plan.
As part of the process of reviewing health and life insurance renewals, market options, plan
design, and contribution strategies, several alternatives were considered, including continuing
with the City's current plan, which administration determined was not a viable option because it
would not allow the City to take advantage of savings provided by other options or move us to a
calendar year renewal cycle. Administration also considered switching group plan providers or
providing an HSA-eligible health plan option in addition to the City's current group (co -pay) plan.
Administration is not currently recommending these alternatives, and due to the potential
significant impacts on the City and its employees, additional detailed analysis of these impacts is
necessary.
Over the next year, Human Resources, in coordination with, the Finance Director, and the City
Manager can work with the City's health and life insurance benefits consultant to collect and fully
consider information on benefit utilization and employee coverage needs and concerns to
customize a plan that focuses on cost sustainability and quality. Moving to a calendar year
renewal puts the City in a better position to consider improved plan design and implementation,
including HSA-eligible plans (HSA education is critical, especially during the first year), high
deductible health plans (HDHPs), self -funding, and hybrid options.
The City is consistently looking for ways to find savings in employee salaries and benefits.
However, providing the highest quality, lowest cost health plan is an important factor to consider
in the recruitment and retention of quality employees to provide the services of the City for its
residents. There are real trade-offs that come with switching health plans or providers. The main
one is that some employees may have to change doctors, hospitals, or prescriptions may no
longer be covered, potentially negatively impacting employees suffering from serious health
conditions. These risks can be mitigated by working with a new provider on the transition of care.
However, without a proposed premium increase or change to the current plan design at this time,
switching providers to achieve further cost savings comes with potential performance risk and an
undetermined impact to employees and recruitment efforts, which have seen a downward trend
in applications for all City vacancies.
Alternatives Considered but Not Recommended at This Time
New Group Plan Provider
Through our benefits consultant, an additional proposal from MODA Health that was similar in
design to the current plan came in at a 20% reduction in premium with a medical renewal rate cap
of 9%, and, if dental is purchased, a renewal rate cap of 4%. Switching providers would result in
the greatest premium savings to the City and employees; however, it could have a noticeable
impact on employees, including differences in the Network and Prescription
Formulary. Employees would need to seek (non -emergent) care at Alaska Regional in Anchorage
— as compared to PREMERA, which utilizes Providence for this service — for the highest benefit.
Additionally, MODA's AM Best rating does not currently meet the requirement in City standardized
contracts, which require insurance by a company/corporation currently rated "A" or better by A.M.
Best.
HSA Eligible Plan
Administration also considered providing employees the option of enrolling in the City's group
plan or a Health Savings Account (HSA)-eligible plan that would offer lower premiums than the
City's current group (co -pay) plan, but would have a higher deductible ($3,000). For employees
who select the HSA-eligible plan, the City could contribute to a HSA instead of contributing to an
HRA. An HSA-eligible plan has the potential to provide first -year premium savings for the City
depending on the amount contributed to the HSA and is responsive to employee survey results,
which showed employees were interested in learning more about an HSA and having options.
However, employees would need to select the City's higher deductible plan to be eligible for the
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HSA, which may mean that the employee would pay at least $3,000 out-of-pocket in a year before
the health plan starts paying for its share of health costs.
The following amendments are respectfully requested:
Motion
1. Amend the Fifth WHEREAS to read (new text underlined):
WHEREAS, the administration recommends the City enter into a contract with
PREMERA Blue Cross Blue Shield of Alaska to provide group medical, dental, and vision
insurance to the employees of the City of Kenai effective January 1, 2023 for an estimated
annual premium of $2,783,821; and,
2. Amend Section 1 to read (new text underlined):
Section 1. That the City Council authorizes the City Manager to execute a contract with
PREMERA Blue Cross Blue Shield of Alaska to provide group medical, dental, and vision
insurance to the employees of the City of Kenai effective January 1, 2023 for an estimated
annual premium of $2,783,821.
Section 2. That the City Council authorizes a health plan structure which includes an HRA
maximum contribution to achieve a net employee deductible of $500 individual and $1,000
for employee with dependent(s).
3. Renumber remaining section as appropriate:
Section 3. That this resolution takes effect January 1, 2023.
Thank you for your consideration.
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