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ACCEPT THE 2023 ANNUAL HEALTH BENEFITS REPORT AND ADOPT THE MONTHLY PREMIUM RATES FOR THE CITY’S HEALTH PLANS FOR 2023-2024
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RECOMMENDATION
It is recommended that the City Council approve a motion to:
1. Accept the 2023 Annual Health Benefits Report for the City’s medical, dental, vision, and fringe benefit plans; and
2. Approve moving to an 18-months renewal changing our benefit enrollment schedule from a fiscal year to a calendar year; and
3. Approve the recommended monthly premium rates for the City’s benefit plans; and
4. Authorize the City Manager or their designee to execute health benefit policies and plans to address the health care needs of the City’s employees.
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Summary
Council is being asked to approve the premium rates for employee benefit plans effective July 1, 2023. These premiums are reflected in Attachment B of this Council agenda item. It is important to note that the employer contributions in this report are dependent upon the provisions of the Memoranda of Understanding (MOU) with the various bargaining units and the Unrepresented Management/Confidential and Law Employees Compensation Plan (Unrepresented Compensation Plan).
In addition, Council is being asked to approve moving to an 18-month renewal effective July 1, 2023, through December 31, 2024. This will change our benefit plan year from a fiscal year to a calendar year basis. Benefits of having plans run on a calendar year basis include:
• Plan deductibles/out-of-pocket maximums will align with the calendar year renewal cycle going forward.
• HSA and FSA calendar year deductions/maximums will align with benefit plan year.
• Premiums will be locked in for 18 months rather than only 12 months as health care costs continue to trend higher.
• Employees will not be required to complete enrollment renewals until Fall 2024 but will have the option to make changes effective January 2024.
DISCUSSION
Background
The City of Stockton (City) has undergone significant benefit design and delivery changes to its health plans over the last several years due to strategic and financial decisions, the Affordable Care Act (ACA), and the general change of the benefits marketplace in the Stockton area.
Effective July 1, 2021, the City’s self-insured PPO medical plan was no longer financially sustainable due to the declining enrollment and uncertainty of stop-loss coverage and was terminated and replaced with a fully insured Kaiser POS plan. The current Kaiser PPO plan is cost prohibitive to employees but is included in the City’s renewal report due to an enrollment of a surviving spouse. This plan is not open to new renewals.
Effective July 1, 2022, the City moved to PRISM for Delta Dental to offer employees a richer plan design at a decreased rate with a 5.7% savings for the City.
Effective July 1, 2022, the City moved to PRISM to consolidate Life Insurance, AD&D, and Long-Term Disability plans. This provided employees with the option to purchase additional voluntary benefits with a 31.8% savings for the City.
Present Situation
During the COVID-19 pandemic, less individuals went to the doctor, and we did not see a significant increase to monthly premiums. Since early 2022, employees are returning to the doctor, dentist, and/or eye doctor. This and high claims have increased our utilization leading to a higher increase to health premiums.
The 2023 Annual Health Benefits Report (Attachment A) was prepared by our Benefit Consultant, Alliant Insurance Services. This report provides a comprehensive review of all plans, benefit breakdowns, and premium rates for the upcoming renewal plan years.
MEDICAL
• Kaiser POS plan premiums increased by 12.1%
• Kaiser PPO plan premiums increased by 12.1%
• Kaiser HDHP plan premiums increased by 5%
• Kaiser HMO plan premiums increased by 11.9%
• Sutter HDHP plan premiums increased by 2.5%
• Sutter HMO plan premiums increased by 7.2%
DENTAL
• Delta Dental Self-Insured PPO rates pass - based on utilization, increase funding rate by 2.82%
• Delta Dental HMO rates increased by 0.7%
VISION
• VSP Self-Insured Rates increased by 4.30%
Fully Insured Medical Plans
Total employee enrollment for the fully insured plans as of February 15, 2023:
|
Fully Insured Plan |
Enrollment as of |
|
Kaiser HMO |
572 |
|
Kaiser HDHP |
219 |
|
Kaiser POS |
2 |
|
Sutter HMO |
410 |
|
Sutter HDHP |
111 |
|
Total Enrollment |
1314 |
Health Plan Premiums
The following table shows the monthly health insurance premiums for 2023-24:
Employer Contribution
The employer contribution rates are dependent upon completed MOUs with bargaining units and the Unrepresented Compensation Plan.
The 2022-23 employer contribution rates for non-safety units (SCEA/Unrep, B&C, O&M, T&M, and WS) are:
The 2023-24 employer contribution rates for safety units (Fire, Fire Mgt, SPMA, and SPOA) are:
OE3’s Health Plan Options
Employees in the OE3 bargaining groups, including the Operations and Maintenance Unit (O&M), Trades and Maintenance Unit (T&M), and the Water Supervisory Unit (WS), have seven (7) additional health plan options available through the Operating Engineers’ Public and Miscellaneous Health and Welfare Trust Fund. Each year on January 1, the OE3 plan rates are established and set by the Board of Trustees of the Operating Engineers’ Public and Miscellaneous Health and Welfare Trust Fund. Employer contribution costs are budgeted and funded through the Health Internal Service Fund (ISF). The administrative cost is $27.55 per employee per month. These fees are included in the employee’s monthly premium. Currently, 24 employees participate in an OE3 plan.
FINANCIAL SUMMARY
Premium cost-sharing is determined by the City and its employees through collective bargaining as approved by Council. The actuary does not set or make cost-sharing recommendations. Cost-sharing with active employees is set by the collective bargaining process and memorialized in the MOUs between the City and the bargaining units. The cost-sharing for the Unrepresented employees is approved by Council and memorialized in the Unrepresented Compensation Plan. Further, the actuary does not determine the plan types or design of employee benefits. The types and design of employee benefits are determined by legal requirements, such as the ACA, and through the applicable collective bargaining process. Alliant considers the plan design, plan requirements, and applicable ACA fees as part of its cost analysis when developing the 2023 Annual Health Benefits Report.
To ensure that the City charges rates that reflect the true cost of health care expenses for employees, staff is submitting the 2023 Annual Health Benefits Report and proposed premium rates for Council approval. Implementation of health plan premium rates that accurately reflect the cost of medical, dental, and vision benefits are critical to the City’s efforts to maintain fiscal sustainability. These premium rates are used to determine the appropriate funding levels for the health plans and establish fair and appropriate rates to charge employees. The projected premium rates will be reflected in the proposed FY 2023-24 Health Internal Service Fund budget.
Attachment A - 2023 Annual Health Benefits Report
Attachment B - Health Premiums Rates