HomeMy WebLinkAboutResolution No. 2008-23Suggested by: Administration
CITY ®F KElYAI
RES®LiJTI®N IJO. 2008-23
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AUTHORIZING
SHARING COST SAVINGS FROM THE CALENDAR YEAR 2007 HEALTH INSURANCE
PLAN WITH EMPLOYEES.
WHEREAS, in January 2007 the City implemented a new health insurance plan that
included a X1,000 deductible; and,
WHEREAS, the projected cost for this plan was $97,000 less than the premium for the
$200 deductible plan then in place and $177,000 less than renewing the $200
deductible plan; and,
WHEREAS, the City self insured the $800 per person difference in the deductible; and,
WHEREAS, the maximum exposure for this self insurance was calculated to be
$176,800; and,
WHEREAS, the actual cost of the self insurance was $86,000, which is $90,800 less
than the maximum exposure; and,
WHEREAS, as a motivation for the employees to reduce the City's self insured health
care costs, when the plan was implemented the administration told the employees that
it would seek to share Calendar Year 2007 cosi savings with them; and,
WHEREAS, the administration recommends that half the savings be shared with
employees; and,
WHEREAS, sufficient funds are appropriated in the various departmental health
insurance accounts.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI,
ALASKA, that in recognition of the fact that there was a savings of about $1,000 per
employee in the Calendar Year 2007 health insurance plan due to under utilization of
the self insurance cost calculated in the plan, the City Manager is authorized to pay
$500 to each current employee that was covered by health insurance in 2007.
Resolution 2008-23
Page 2 of 2
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this seventh day of
May, 2008.
a
PAT PORTER, MAYOR
ATTEST: y' ~y~'
Carol L. Freas, City Clerk
Approved by Finance:-~
(04/22/2008) hl
MEMORANDUM
To: Kenai City Council
Through: Rick Koch, City Manager
From: "Larry Semmens, Finance hirector` '
Date: Apri121, 2008
Subject: Savings from the Health Reimbursement Arrangement
(HRA)
The City purchased a $1;000 per person deductible health insurance plan
from Premera in January 2007 and serf-insured the amount of the deductible
ii1 excess of the $200 per person deductible that was in place for many years.
The new plan was $97,000 less expensive than the $200 deductible plan
even after considering the maximum exposure for self-insl~rance, which was
$176,800. If we would have renewed that $200 deductible plan the premium
would have been $177,000 more than the premium for the $1.,000 deductible
plan. So the City saved a substantial amount of money in lower premiums.
The total savings could not be determined until after March 31, 2008.
The actual cost of the self-insurance was just under $86,000, so there is an
additional savings of about $91,000. When this plan was implemented
employees were told that the administration would seek Council approval to
share with employees a portion of any savings fiom not spending the
maximum self-insurance exposure.
Since the savings is about $1,000 per employee I recommend that each
current employee that was covered by insurance in 2007 receive a $500
bonus. Employees that have left the City, or who were hired after January I,
2008 are not eligible.
I am in favor of offering the employees the option of either cash oi° a
contribution to their 457 account. Employees could make this choice even if
we only offered a cash option, unless they are already coaxed out on 457
contributions, but I hope making this offer encourages more employees to
establish a 457 account.
The bonus payment is not compensation subject to PERS but it is subject to
federal medicare tax of 1.45%.