10/20/1992 - City Council Human Resources Committee S
AGENDA
CITY COUNCIL PERSONNEL COMMITTEE MEETING
CITY OF EAGAN
Tuesday
October 20, 1992
5:30 p.m.
Eagan Municipal Center
I. ROLL CALL
II. RETIREE HEALTH INSURANCE (COLLECTIVE BARGAINING ITEM)
III. HEALTH INSURANCE UPDATE
IV. OTHER PERSONNEL ITEMS
V. ADJOURNMENT
The City of Eagan is committed to the policy that all
persons have equal access to its programs, services,
activities, facilities and employment without regard to
race, color, creed, religion, national origin, sex,
disability, age, marital status or status with regard to
public assistance. Auxiliary aids for persons with
disabilities will be provided upon advance notice of at
least 96 hours. If a notice of less than 96 hours is
received, the City of Eagan will attempt to provide such
aid.
MEMO TO: MEMBERS OF THE PERSONNEL COMMITTEE
FROM: CITY ADMINISTRATOR HEDGES
DATE: OCTOBER 19, 1992
SUBJECT: PERSONNEL ITEMS FOR MEETING OCTOBER 20, 1992
The following are personnel items which will be discussed at the
Personnel Committee meeting on October 20, 1992 :
Item 1. Retiree Health Insurance -- At the regular meeting of
October 8, 1992 , this item was referred to the Personnel Committee
for further study. Attached is a copy of a memo prepared by
Assistant to the City Administrator Duffy providing further
information requested by the City Council.
Item 2 . Health Insurance Update -- Attached is a copy of a memo
prepared by Assistant to the City Administrator Duffy regarding
health insurance. As the committee is aware, our health insurance
contracts run for the calendar year. It is necessary for the City
Council to make a decision regarding the health insurance program
for 1993 in as timely a manner as possible as we need to hold the
annual open enrollment period during the last two weeks of November
in order for all changes in enrollment to be submitted to the
insurance companies to be effective January 1, 1993 . It would be
desirable to have a decision by the entire Council in official
action at the regular meeting on November 5, 1992 .
Item 3 . Other Personnel Items -- If there is time and if there
are any other personnel items the committee wishes to discuss, it
would be appropriate to bring them up during this meeting.
(IN ;Kin
City Adrylastrator
1
MEMO TO: CITY ADMINISTRATOR HEDGES
FROM: ASSISTANT TO THE CITY ADMINISTRATOR DUFFY
DATE: SEPTEMBER 25, 1992
SUBJECT: RETIREE INSURANCE/POLICE ASSOCIATION
As you are aware, the bargaining agreement with the Police
Association was settled for the years 1992 and 1993 . The
percentage increase to wages for 1993 was 2% and the amount to be
contributed toward the family insurance premium for 1993 was set at
$286. 80 per month.
However, as you know, the Police Association was very concerned
that insurance coverage for retirees be provided and this was the
main reason they made the favorable settlement as noted above. The
agreement includes the following reopener clause:
"In the event the City is unable to fund and provide
retirement insurance for the employee plus one dependent
effective 1/1/93, the contract may be reopened by the
Union by sending a letter to the City. The reopener
would apply to wages or insurance effective 1/1/93 , but
not both. "
I have checked with our insurance representatives and they will not
provide a different tier system for retirees than that offered to
the other employees which is single and family.
The Police Association was of the understanding, as noted in the
language of the contract, that the City would pick up the entire
premium for either single or employee plus one health insurance.
However, they know we cannot get this type of coverage and are
willing to accept the same insurance contribution for retirees as
that given to active members of the association. This contribution
would only apply to early retirees in the Police Association who
are pension (PERA) eligible until age 65. This provision would be
added to the bargaining agreement for 1993 and would affect those
officers who retired during 1993 . They would continue to receive
the same contribution as active members do until they are 65.
However, the City would be free to bargain for different terms, if
desired, during the next contract bargaining period for those who
will retire after 1993 .
Would you please present this proposal to the City Council for
their approval. I told the association that the item would either
be brought before a special meeting or at the regular meeting of
October 8, 1992 .
The Council will also need to consider early retiree premium
funding if the other bargaining units bring it up during
negotiations and also need to consider it for non-collective
bargaining employees when compensation levels are set for 1993 .
Assistant tic, the City'4Administrator
MEMO TO: CITY ADMINISTRATOR HEDGES
FROM: ASSISTANT TO THE CITY ADMINISTRATOR DUFFY
DATE: OCTOBER 19, 1992
SUBJECT: ADDITIONAL INFORMATION/POLICE ASSOCIATION/RETIREE
HEALTH INSURANCE
For your information, I have attached a copy of the memo which
originally went to the Council for the October 8, 1992 meeting
regarding retiree health insurance for the members of the Police
Association.
Regarding the request for further data on this item:
1. How are other cities treating retiree insurance coverage;
mainly for police departments?
I contacted about ten other cities which are most comparable to
Eagan in size regarding this item. Those cities which had not
offered health insurance to their retirees prior to the 1992
legislation requiring this, such as Eagan, are just beginning to
consider how to handle this item. Contracts with their bargaining
units, especially the police ones, are just now beginning to be
negotiated; so there is little to no information as to how the
payment for retiree health insurance will end up in those cities.
There were a number of cities, however, that did let early retirees
continue with the cities' health plans until age 65 before the
legislation required it. About half of those cities made the
employee pay the entire premium and half paid some portion, most
frequently the entire single rate. One city, Prior Lake, pays the
entire premium rate for single or family coverage.
The personnel at the cities I contacted indicated that they now
expect collective bargaining proposals to request that the City pay
for retiree insurance given the change in the law. Those that do
not now pay all or part of the premium also indicated that they
would be more likely to do this if they have employees they would
like to encourage to take early retirement.
2. What are the cost projections for a police officer retiring at
the age of 55 and the City carrying that individual until 65? Is
there any method in which Gene could project that liability and
determine a proper funding level?
3. Are there methods in which the City could establish a fully
funded retiree coverage for pension eligible employees? This would
apply to police at the age of 55 and all other employees at the
rule of 90.
Attached please find a memo from Finance Director VanOverbeke
regarding questions 2 and 3 .
4.takk
Assistane to the City Administrator
MEMO TO: ASSISTANT TO THE CITY ADMINISTRATOR DUFFY
FROM: FINANCE DIRECTOR/CITY CLERK VANOVERBEKE
DATE: OCTOBER 19, 1992
SUBJECT: COST OF RETIREE INSURANCE COVERAGE
You recently asked for cost projections for health insurance coverage for a police officer
retiring at the age of 55 with the City carrying that individual until age 65. The City costs
per individual have been projected on two bases as follows:
1. The City contribution is $286 per month and does not change over the ten (10)
year period. The funds are invested in year one at 6% interest per year. The program
assumed insurance premium payments at the end of each month. To fund the premium
payments under these assumptions it would be necessary to invest $25,761 up front. Total
payments would actually equal $34,320 or $286 times 120.
2. The City contribution in year one is $286 per month and increases by 5%per year
over the ten (10) year period. Again the funds are assumed to be invested at 6% interest
and payments are made at the end of each month. To fund the premium payments under
these assumptions it would be necessary to invest $31,633 up front. Total payments would
actually equal $43,167.
Secondly, you asked if there are methods in which the City could establish a fully-funded
retiree coverage for pension eligible employees which would apply to police at the age of
55 and all other employees at the rule of 90. The City could certainly set money aside from
current operations to have the kinds of balances referenced above available at retirement.
We currently have accrual rates charged against all hours worked for leave time, insurance
including workers compensation, and retirement. We could add another category and
increase the total accrual percentage. The mechanics would be relatively simple although
there would obviously be an impact on the current allocation of resources as personnel costs
increased. Given the number of employees and the wide variation of ages when they would
be eligible, it would be somewhat complicated to determine actual financial requirements
in total. You have an actuarial problem of accruing dollars over a period of time to have
a specific sum available at a point in the future which would then be spent on insurance
premiums. This was not complicated with your first question because we fixed the ages and
we were not accruing the funds over a period of time. This cannot be done as easily with
rule of 90 employees. Implementation would also cause a catch up problem requiring a
doubling up because of no former accruals.
It seems as an aside that we need to carefully define the application of this benefit and what
"pension eligible" means. I don't think the City would want to provide coverage on a
general basis for employees retiring early. Does pension eligible mean employees can get
MEMO TO ASSISTANT TO CITY ADMINISTRATOR DUFFY
OCTOBER 19, 1992
Page Two
a pension at actual separation or does it mean that they can get one at some point in the
future. Then how would payment for insurance premiums be handled in each case.
I believe this answers the questions you raised. If you would like additional information or
would like to discuss this, please advise.
Finance Rj` ector/City Clerk
EJV/kf
MEMO TO: CITY ADMINISTRATOR HEDGES
FROM: ASSISTANT TO THE CITY ADMINISTRATOR DUFFY
DATE: OCTOBER 16, 1992
SUBJECT: CITY OF EAGAN HEALTH INSURANCE UPDATE
The following memo is an update of activities of the health
committee and a summary of its findings for you and the members of
the City Council Personnel Committee. If anyone has any questions
or concerns that you cannot answer, please refer them to me.
Background
As you all know, the City Council and the majority of employees
have become increasingly concerned during the past several years at
the rapid escalation of health insurance premiums. Therefore, it
was determined that the City' s insurance committee would be
reactivated to study the situation and make recommendations to the
Council. Members of the committee include representatives of each
bargaining group as required by the contracts as well as
representatives of the non-collective bargaining employees.
The insurance committee has been very active and each of the
members has acted as a liaison back to the employees he/she
represents. We have had excellent communications.
In addition, I have been separately investigating the possibility
of joining with the Cities of Apple Valley to enlarge our employee
group and to jointly request proposals.
Insurance Committee
A meeting of the insurance committee was held on Friday, October 2,
1992 . Prior to that meeting, we had requested from Medica, Group
Health and MedCenters information regarding the dollar amount of
premiums and the types of programs they could offer if:
1. The City stayed with the same three carriers in 1993 and
employees could choose between the carriers. The
coverages would remain the same.
2 . The City went exclusively with one company (obviously,
theirs) with either one plan or two plans offered by the
same company from which the employees could choose.
3 . The Cities of Eagan and Apple Valley joined together and
went exclusively with one company (obviously, theirs)
with either one plan or two plans offered by the same
company from which the employees could choose.
1
We also asked for a proposal from Blue Cross Blue Shield if Eagan
went exclusively with them either alone or with Apple Valley.
The proposals came in to me in a staggered fashion over
approximately the three weeks prior to the committee meeting. In
those three weeks, there was a great deal of reorganization taking
place at Group Health and MedCenters due to their merger. Not only
did I lose the agents I had been dealing with, i was assigned one
new agent to handle both accounts. In the future, they will have
products to offer which they are not able . to now. In addition,
Medica is still dealing with the merger with Share and does not
have some products ready to offer which we and they thought they
would. Finally, I was contacted by Blue Cross Blue Shield and told
that they were not submitting a proposal because they did not think
they could offer competitive rates.
The three companies all submitted renewal rates if we stayed with
the same three plans we had now. They also submitted a variety of
plans if we went exclusively with one of them. The proposals were
presented to the insurance committee.
I will also present the various proposals at the Personnel
Committee meeting. They need explanation. I will say, however,
that because of the transition period that all three companies are
going through, the proposals are less than we hoped for and do not,
in some cases, make sense. For instance, the rates at Group Health
would be less if we stayed with three companies than if we went
with them exclusively.
I will also present funding information.
At the end of the presentations, the insurance committee members
were asked to go back to their employee groups and take a survey as
to the wishes of those groups regarding insurance for 1993 .
Special note: Negotiations to join together with Apple Valley have
pretty much fallen through for this year. One of the reasons is
that most of their employees are with Group Health and most of ours
are with Medica. (107 employees at the City of Eagan are with
Medica, 42 with Medica and 30 with Group Health. )
Recommendations
All employees were asked to fill out a survey form. Those forms
have been returned to me. Interestingly enough, the employees are
almost equally split between wanting to remain with the same three
plans for 1993 and to go exclusively with Medica. Very few
employees want to go exclusively with MedCenters or Group Health
and some employees are adamantly against going exclusively with
MedCenters or Group Health.
I will present the results of the survey at the committee meeting.
2
Whatever the decision regarding health insurance for 1993, the
Insurance Committee is recommending to the Council that the
Insurance Committee remain active. Because the insurance industry
is currently in a state of flux, offerings for 1994 could be more
beneficial for both the City of Eagan as an employer and its
employees once the local HMOs have worked through the problems of
their mergers.
As the Personnel Committee members will see at the committee
meeting, the issue is fairly complex and may require another
meeting before a recommendation can be made to the full Council.
Additional Items
Additional options which a member or members of the committee
requested be presented to the City Council include:
1. Some employees are interested in separate dental coverage with
the premium paid by the employee. In our research for this
request, we discovered premiums for this coverage would range
from $15 to $25 per month for single coverage and $50 to $60
per month for family coverage. If orthodontia is included,
the rates would be $5 to $10 per month higher for family
coverage. One complication to this coverage is that the City
would have to choose between offering orthodontia for everyone
or not for anyone. Also, approximately 75% (depending on the
plan) of eligible employees would have to agree to
participate. Committee members indicated that they did not
think that that many of their employees would participate,
given the dental insurance rates. If the Council is
interested in pursuing this option, we will need to survey
employees to see if this option is even feasible from an
enrollment standpoint. (Please note that preventive dental is
now included in the City's health insurance plan. )
2 . Committee members are asking that the Council consider the
cashing in of sick leave hours at half their value to pay for
the employee's share of the health insurance premiums.
Currently, employees who have been with the City at least five
years and who leave in good standing are eligible to receive
a cash payment for half of their accumulated sick leave as
severance pay. Also, as part of the City's wellness program,
employees who have been with the City at least five years may
cash in their accumulated sick leave hours over 160 (at the
rate of 1/2 payment) to pay the costs of programs to improve
their health such as stop smoking programs, weight loss
programs, aerobic programs, etc.
3 . A few committee members also requested that the Council
consider allowing employees who were covered under a spouse's
health insurance policy to choose whether or not they wanted
health insurance coverage from the City of Eagan; and, if the
3
employees did not wish coverage, the City would give the
employees the cash amount of the premium it would have paid in
their behalf to the insurance company. Obviously, the
advantage to this would be the employee would receive more
money. Disadvantages could include increased costs to the
City and other employees if premium costs increased due to a
smaller employee pool.
Assistant tbthe City Administrator
r
4