HomeMy WebLinkAboutResolution No. 2023-65KENAI
CITY OF KENAI
RESOLUTION NO. 2023-65
Sponsored by: Administration
A RESOLUTION AUTHORIZING A CONTRACT FOR EMPLOYEE HEATH CARE AND BASIC LIFE
INSURANCE EFFECTIVE JANUARY 1, 2024.
WHEREAS, as part of a comprehensive employee benefit package and pursuant to KMC 23.40.120 the
City provides group life, 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, the City's current provider for group life and supplemental life insurance is UNUM; and,
WHEREAS, the City obtained renewal quotes and worked with the City's health care insurance broker to
consider alternative quotes as well as plan changes to improve the benefit value to employees that would
be effective on January 1, 2024; and,
WHEREAS, PREMERA Blue Cross Blue Shield of Alaska has provided a renewal quote for continuing
group medical and vision coverage at a premium increase of 8.5% and dental coverage at a premium
increase of 4.5%; and,
WHEREAS, Lincoln Financial Group has provided a quote for life and supplemental insurance effective
July 1, 2024; 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, 2024, for an estimated annual premium of $2,596,016; and,
WHEREAS, the administration recommends the City enter into a contract with Lincoln Financial Group
to provide group life and supplemental insurance to the employees of the City of Kenai effective January
1, 2024, for an estimated annual premium of $11,562; and,
WHEREAS, sufficient funds are budgeted in the FY24 annual budget through June 30, 2024, and an
amount sufficient to maintain the contract will be proposed in the FY25 annual budget; and,
WHEREAS, providing quality life, medical, dental, and vision insurance is a component of a
comprehensive compensation package that allows the City to recruit and retain quality employees to
provide the services of the City for its residents is in the best interests of the City.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA:
Section 1. That the City Manager is authorized 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, 2024, for an estimated annual premium of $2,596,016.
Section 2. That the City Manager is authorized to execute a contract with Lincoln Financial Group to
provide group life and supplemental insurance to the employees of the City of Kenai effective January 1,
2024, in the amount of $11,562.
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Resolution No. 2023-65
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Section 3. That this Resolution takes effect immediately upon passage.
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THIS 1 ST DAY OF NOVEMBER, 2023.
Brian Gabriel Sr., Mayor
ATTEST:
Michelle M. Saner, MMC, City Clerk
Approved by Finance:
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K F N A I
City of Kenai 1210 FiJalgo Ave, Kenai, AK 99611-7794 1907.283.7535 1 wwwkenaixity
MEMORANDUM
TO:
Mayor Brian Gabriel and Kenai City Council
THROUGH:
Terry Eubank, City Manager
FROM:
Stephanie Randall Human Resources Director
DATE:
October 26, 2023
SUBJECT:
Resolution 2023-65 — Employee Heath Care and Basic Life Insurance
Resolution 2023-65 authorizes a contract for the City's employee group medical, dental, and
vision insurance and basic life insurance pursuant to KMC23.40.120 effective January 1, 2024.
The City currently provides health insurance coverage to employees through Premera Blue Cross
Blue Shield of Alaska for an estimated annual premium of $2,783,821. The current plan is a level -
funded plan which offers flexibility and potential cost -savings — the City is 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. The plan provides two options for employees, who may choose
between a $2,000 and a $3,000 deductible. The current plan became effective on January 1,
2023 and expires on December 31, 2023, with an option for renewal. Basic life and supplemental
insurance are provided through Unum Insurance for an estimated annual premium of $22,706.
During the FY24 budget process, the Council had a goal to improve sustainability and to maintain
the quality of employee medical, dental, and life insurance while continuing toward an employee
cost share of 15%. This process began in FY21, and the employee cost share increased by 1%
each year until FY23. However, due to the significant cost savings achieved during FY23 and to
maintain the City's competitiveness for recruitment and retention of employees, the plan to
continue the 1 % increase in the employee's cost share was temporarily paused. The employee's
cost share of the current plan remains at 13%.
Administration worked with Marsh & McLennan, the City's health insurance broker, to obtain
proposals and analyze options to find cost -sustainable quality employee group basic life, medical,
dental, and vision insurance coverage for employees. The initial renewal quote from Premera
showed a 19% increase to current rates, and the administration worked through Marsh &
McLennan to request additional proposals from other providers. Aetna and United Healthcare did
not respond, and Cigna formally declined to propose. The City received a competitive proposal
from Moda Health with a comparable plan design that showed a 7% increase over the City's
current rates, but the proposal did not include vision. Premera provided an updated renewal
proposal that showed an 8.5% increase to current rates, with a 4.5% increase to dental rates.
The administration evaluated two competitive proposals. While the Moda Health proposal would
result in cost savings, it could have a noticeable impact on employee experience, including
differences in the Network and Prescription Formulary. Employees would need to seek (non -
emergent) care at Alaska Regional in Anchorage, compared to Premera, which utilizes
Providence for this service, for the highest benefit. If the City transitioned to another provider, any
potential shared surplus from Premera would be forfeited under the Premera Level -Funded
contract. In order to receive a portion of the surplus in a level -funded arrangement, a group must
renew with the carrier for the following year. Based on the cost increases proposed by both
providers, the administration considered plan design changes to only offer one plan with a medical
deductible of $3,000, which would be consistent with inflation. Moving from a $2,000 deductible
plan to a $3,000 deductible plan would result in a lower estimated premium for employees and
the City.
The administration recommends renewal with Premera to offer a $3,000 Medical Deductible Plan
for an estimated annual premium of $2,596,016 for the calendar year beginning January 1,
2024.This results in a slight increase in premiums for employees. The employee share of the
premium would remain at 13%, with the City's share at 87%. No changes are proposed to the
Health Reimbursement Arrangement (HRA), which reimburses employees for eligible health and
vision costs. Employees may use the HRA to offset the cost of the deductible. An employee would
only pay the first $500 of deductible expenses, and the HRA would reimburse the employee up
to $3,150 for eligible medical and vision expenses. Employees with dependents would be eligible
to receive additional reimbursement for deductible expenses.
The administration reviewed proposals from Unum, MetLife, and Lincoln Financial Group for basic
life and supplemental insurance. Lincoln's rates are overall significantly lower, and a transition to
Lincoln is estimated to cost the City 49% less annually for the same coverage as currently
provided by Unum. Lincoln offers an employer navigator program to assist employees with
enrollment at no cost to the employee and provides a dedicated account manager to assist
employees with claims and other questions. The administration recommends the City enter into
a contract with Lincoln Financial Group to provide group life and supplemental insurance to the
employees of the City of Kenai effective January 1, 2024, for an estimated annual premium of
$11, 562.
If the Council approves Resolution 2023-65, the administration can move forward with benefits
open enrollment for employees.
Your consideration is appreciated.
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