HomeMy WebLinkAboutResolution No. 2024-45-z
KENAI
CITY OF KENAI
RESOLUTION NO. 2024-45
Sponsored by: Administration
A RESOLUTION AUTHORIZING A CONTRACT EXTENSION FOR EMPLOYEE HEALTH CARE
EFFECTIVE JANUARY 1, 2025.
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 worked with the City's health insurance broker to negotiate an extension of the City's
contract with PREMERA to include plan changes which will reduce costs and improve the benefit value
to employees and be effective on January 1, 2025; and,
WHEREAS, PREMERA Blue Cross Blue Shield of Alaska has provided a renewal quote for continuing
group medical and vision coverage with a premium increase of 11.2% and dental coverage at a premium
increase of 4.0%; and,
WHEREAS, the City's health care insurance broker and the administration recommends the City enter
into a contract extension 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, 2025, for an
estimated annual premium of $2,785,163; and,
WHEREAS, sufficient funds are budgeted in the FY25 annual budget through June 30, 2025, and an
amount sufficient to maintain the contract will be proposed in the FY26 annual budget; and,
WHEREAS, providing quality 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 extension 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, 2025, for an estimated annual premium of $2,785,163.
Section 2. That this Resolution takes effect immediately upon passage.
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THI;� DAY OF EM / 024.
Kn st ,Vice Mayor
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Mic ell e . S r, MC, City Clerk
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Resolution No. 2024-45
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Approved by Finance:
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KFNAI
City of Kenai 1 210 Fidalgo Ave, Kenai, AK 99611-7794 1 907.283.7535 1 www.6naixity
MEMORANDUM
TO:
Mayor Brian Gabriel and Kenai City Council
THROUGH:
Terry Eubank, City Manager
FROM:
Stephanie Randall Human Resources Director
DATE:
October 22, 2024
SUBJECT:
Resolution 2024-45 — Health Insurance Contract Extension
Resolution 2024-45 authorizes the City Manager to execute a contract extension for the City's
employee group medical, dental, and vision insurance pursuant to KMC 23.40.120, effective
January 1, 2025.
The City currently provides health insurance coverage to employees through Premera Blue Cross
Blue Shield of Alaska for an estimated annual premium of $2,596,016. 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. Employees currently have one plan option which has a $3,000
deductible. The current plan became effective on January 1, 2024 and expires on December 31,
2024, with an option for renewal.
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 Parker Smith & Feek, the City's health insurance broker, to obtain a
quote for renewal and analyze options to find cost -sustainable quality employee medical, dental,
and vision insurance coverage for employees. The initial renewal quote from Premera showed a
16.5% increase to current rates, with a 13.5% increase if the City did not request additional bids.
The administration worked with Parker Smith & Feek to determine if additional proposals from
other providers might result in competitive proposals. Based on the current experience of claims,
it is unlikely that other companies would provide a lower cost option and the recommendation
from Parker Smith & Feek was to accept the no bid offer. They were able to negotiate with
Premera to bring the total increase down to 11.2% over last years' contract.
The proposed plan will offer employees two options. The first option is identical to the current
single -option plan, which has a $3,000 deductible and provides employees with an employer -
funded Health Reimbursement Arrangement (HRA). The HRA allows employees to request
reimbursement for qualified medical expenses up to a maximum of $2,800 for individual employee
and $5,600 for an employee with dependents. Any unused HRA funds revert back to the City at
the end of the plan year. The second option has a $4,000 deductible and provides employees
with an employer -funded Health Savings Account (HSA). The HSA allows employees to use the
account for eligible medical expenses with a City contribution of $2,000 for an individual employee
or $4,000 for an employee with dependents in the first year of the plan. In subsequent years, the
City's contribution to the employee's HSA account will be $1,000 for an individual employee or
$2,000 for an employee with dependents. Unlike the HRA, the funds in the HSA belong to the
employee and are fully portable. Not all employees are eligible to participate in HSA-qualified
plans. However, offering an HSA option provides potential cost -saving opportunities to the City
and employees as the plan has lower premiums and offers long-term savings opportunities to
employees.
If the Council approves Resolution 2024-45, the administration can move forward with benefits
open enrollment for employees.
Your consideration is appreciated.
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