HomeMy WebLinkAboutOrdinance No. 3548-2026IC
KENAI
CITY OF KENAI
ORDINANCE NO. 3548-2026
Sponsored by: Administration
AN ORDINANCE INCREASING ESTIMATED REVENUES AND APPROPRIATIONS IN THE
EMPLOYEE HEALTH CARE FUND AND AUTHORIZING A CONTRACT FOR EMPLOYEE HEALTH
CARE AND BASIC LIFE INSURANCE AND OTHER ANCILLARY POLICIES EFFECTIVE JANUARY 1,
2027.
WHEREAS, as part of a comprehensive employee benefit package and pursuant to KMC 23.40.120 the
City provides group life, medical, vision, and dental insurance to its employees; and,
WHEREAS, pursuant to KMC 7.15.060(g) group insurance coverage for employees may be procured by
direct negotiation subject to Council approval by resolution; and,
WHEREAS, the City's current provider for group medical, vision, and dental is PREMERA Blue Cross
Blue Shield of Alaska, and the City's current provider for basic life, accidental death and dismemberment
(AD&D) is Lincoln Financial Services; and,
WHEREAS, Administration worked with the City's health care insurance broker to obtain renewal and
alternative plan quotes and proposals to be effective on January 1, 2027; and,
WHEREAS, PREMERA Blue Cross Blue Shield of Alaska provided a quote for continuing group medical
and vision coverage with a premium increase of 29% and dental coverage at a premium increase of 15%;
and,
WHEREAS, after reviewing the renewal and alternative plan options, the City's health insurance broker
and the Administration recommend the City enter into a contract renewal with PREMERA Blue Cross
Blue Shield of Alaska to provide group medical, vision, and dental insurance to the employees of the City
of Kenai effective January 1, 2027, for an estimated annual premium of $3,508,632; and,
WHEREAS, the City's health insurance broker and the administration recommend the City enter into a
contract renewal with Lincoln Financial Group to provide basic life insurance and ancillary insurance to
the employees of the City of Kenai effective January 1, 2027, for an estimated annual premium of
$12,120; and,
WHEREAS, the increased insurance costs exceed the amounts budgeted for expenses in the Employee
Health Care Fund, requiring an additional appropriation of $343,749 to fund anticipated costs for
remainder of the fiscal year; and,
WHEREAS, providing quality medical, vision, and dental 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; and,
WHEREAS, a double reading of this ordinance is requested to exercise Premera's November 2 early bird
discount deadline and begin employee open enrollment; and,
WHEREAS, pursuant to KMC 1.15.070(d) the City may introduce and finally pass on the same day, an
ordinance making, repealing, transferring or otherwise changing and appropriation.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, AS
FOLLOWS:
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Ordinance No. 3548-2026
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Section 1. That estimated revenues and appropriations be increased as follows:
Employee Health Care Fund:
Increase in Estimated Revenues
Appropriation of Retained Earnings $343,749
Increase Expenses:
Insurance
$343,749
Section 2. That the City Manager is authorized to execute a contract renewal with PREMERA Blue
Cross Blue Shield of Alaska to provide group medical, vision, and dental insurance to the employees of
the City of Kenai, effective January 1, 2027, for an estimated annual premium of $3,508,632.
Section 3. That the City Manager is authorized to execute a contract renewal with Lincoln Financial
Group to provide basic life insurance and ancillary insurance to the employees of the City of Kenai
effective January 1, 2027, in the amount of $12,120.
Section 4. Severability: That if any part or provision of this ordinance or application thereof to any
person or circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall
be confined in its operation to the part, provision, or application directly involved in all controversy in
which this judgment shall have been rendered, and shall not affect or impair the validity of the remainder
of this title or application thereof to other persons or circumstances. The City Council hereby declares
that it would have enacted the remainder of this ordinance even without such part, provision, or
application.
Section 5. Effective Date: That pursuant to KMC 1.15.070(f), this ordinance shall take effect
immediately upon enactment.
ENACTED BY THE COUNCIL OF THE CITY OF KEN
2026.
ATTEST:
e an r, M , City lerk
Approved by Finance:
Introduced: October 21, 2026
Enacted: October 21, 2026
Effective: October 21, 2026
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KENAI
.enai 1 210 Ficialgo Ave, Kenai, AK 99611-7794 1 907.283.7535 1 www.kenai.city
MEMORANDUM
TO: Mayor Knackstedt and Council Members
THROUGH: Terry Eubank, City Manager
FROM: Stephanie Randall, Human Resources Director
DATE: October 15, 2026
SUBJECT: Ordinance 3548-2026 An Ordinance Increasing Estimated Revenues and
Appropriations in the Employee Health Care Fund and Authorizing a Contract
for Employee Health Care and Basic Life Insurance and Other Ancillary
Policies Effective January 1, 2027.
The City currently provides employee medical, vision, and dental insurance through Premera Blue
Cross Blue Shield of Alaska and basic life, accidental death and dismemberment (AD&D), and
voluntary employee -paid supplemental policies with Lincoln Financial Group. The proposed
ordinance authorizes the renewal of the contracts and provides additional funding for the
remainder of the current fiscal year, effective January 1, 2027.
The City currently provides medical, vision, and dental insurance to employees under a level -
funded arrangement. This structure offers flexibility and the potential for cost savings. Under the
current arrangement, if claims cost are less than expected, the City is eligible for a refund of 50%
of the unused claim funds, after payment of predetermined plan administration costs. In 2026, the
City received a refund of $179,385.49 because actual claims in 2025 were lower than anticipated.
A portion of the refund was shared with employees through a premium holiday in May 2026.
Actual 2026 year-to-date claims are overall higher than expected, with a greater concentration of
high -cost claims. The City's medical, dental, and vision plan renewal is based on claims
experience and market factors. The City's insurance broker, IMA, negotiated Premera's medical
and vision renewal quote from an initial 36% increase to 30%, with an additional early renewal
discount of 1 % available if the City renews by November 2, 2026. Premera's dental renewal quote
proposed an increase of 15% with an early renewal discount of 1 % available if the City renews
by November 2, 2026.
To evaluate alternatives and identify potential cost savings, the Administration asked IMA to
obtain proposals from other carriers. Aetna declined to submit a proposal. Moda proposed a fully
insured plan approximately 35% higher than the City's current premiums and without the potential
of a surplus refund.
IMA also reviewed the existing Premera medical plans and alternatives to the plan deductibles
and Health Reimbursement Arrangement (HRA) plan designs for potential cost savings. The
alternatives to the PPO and HSA plan designs increase deductibles, copays, coinsurance
percentages, and out-of-pocket limits.
After reviewing the available options, the Administration recommends renewing the City's
medical, vision, and dental insurance with Premera, for an estimated annual premium of
$3,508,632, a $792,362 annual increase from the current premium.
In the FY2027 annual budget, the employee premium cost share was scheduled to increase from
13% to 15% of premium costs effective January 1, 2027. Under the recommended plans,
employee premiums, absent an increase in employee cost share, will increase approximately
29%. If the employee cost share were to increase to 15%, employee premiums would increase
by 48%. Due to the increased insurance costs caused by a 29% premium increase, the
Administration does not recommend increasing the employee cost share at this time.
The Administration and IMA also reviewed the City's basic life and supplemental life insurance
coverage through Lincoln Financial Group, which has not been subject to a rate increase for three
years. Lincoln's basic life and AD&D renewal is estimated at $12,120 annually, an increase of
$499, or 4.3%, with rates guaranteed through January 1, 2029. Voluntary life rates remain
unchanged; short-term disability rates increase approximately 5%.
The proposed ordinance increases estimated revenues and appropriations in the Employee
Health Care Fund by $343,749 to provide funding for the additional insurance costs from January
1 through the end of the fiscal year, June 30, 2027. This amount includes the employee
contribution to the premium of $51,503. Reserves in the Employee Health Care Fund are
sufficient and exist for situations like unusually high renewal rate increases.
Renewing with the City's existing insurance providers supports continuity of coverage,
maintaining benefits comparable to those offered by other public employers, and the City's
objective of providing a compensation structure that attracts and retains competent employees.
The appropriation provides the additional funding necessary to cover the increased cost of
employee insurance benefits.
Your consideration is appreciated.
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