Health & Drug Plan, City, Employee Contributions
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MEMORANDUM
September 12, 2005
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Employee Contribution to Health and Prescription Drug Plan Premiums
Personnel Manager Randy Peck is transmitting information regarding employee
contributions to health and prescription drug plan premiums.
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Mi hael C. Van Milligen
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Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
Randy Peck, Personnel Manager
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Memorandum
September 9, 2005
TO: Michael C. Van Milligen
City Manager
FROM: Randy Peck /)0
Personnel Manager fo
SUBJECT: Employee Contribution to Health and Prescription Drug Plan Premiums
One of the City Council's priorities for Fiscal Year 2006 was to have City employees pay part of
the health and prescription drug insurance premium. Effective July 1, 2005, all City employees
will be paying 10% of the health and prescription drug plan premium for which they are enrolled.
One of the reasons for seeking employee contribution to the health and prescription drug
insurance premiums is to minimize the migration to the City's insurance plan by the dependents
of our employees who have insurance made available to them through their employer. Because
the City pays 100% of the premium, dependents of our employees decline insurance from their
employer because there may be a cost to enroll in their employer's plan.
City taxpayers should not be absorbing the cost of providing health and prescription drug
insurance when such a benefit is offered by another employer. 100% payment of the health and
prescription drug insurance premium by the City encouraged migration and therefore created
additional costs. Having employees pay a portion of the premium begins to address this issue.
Another reason for seeking payment by employees for a portion of the health and prescription
drug insurance premium is that if employees have a financial stake in the cost of the insurance,
they will become a better consumer of health care. If employees participate in the cost of the
insurance, they will have a greater incentive to control costs.
The attachment shows the changes in the health and prescription drug plan enrollments from
Fiscal Year 2005 to Fiscal Year 2006. The enrollment numbers show a migration from the
family plan and the single plus one dependent plan to the single plan. In addition, twelve
employees declined coverage. The total number of covered lives was also reduced by 86. By
lowering the number of covered lives, the risk to the plan has been reduced, which translates
into a reduction in health and prescription drug claims. In addition, our stop-loss insurance is
priced based on the number of single plans and family plans. Consequently, due to the
reduction in family plans and the increase in single plans, we will lower the cost of stop-loss
insurance.
This is for your information. No action is requested. If you have any questions, please feel free
to call.
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Enclosure
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HEALTH AND PRESCRIPTION DRUG INSURANCE
PLAN ENROLLMENT
Total
Number of Number
Single Employees who of
Plus One Family Declined Total Covered
Fiscal Year Sinqle Plan Dependent Plan Plan CoveraQe Contracts Members
2005 75 142 283 0 500 1533
2006 103 129 252 12 496 1447
+28 -13 -31 +12 -4 -86