City Explains Expected Drop in Health Insurance Budget

Below are answers to my questions regarding the budget assumptions that allow the city's health insurance to drop by nearly $500,000 from this budget year 2012-13 to the upcoming one 2013-14.  Human Resources Manager Lisa Marley's responses are in blockquotes below.

During the budget process each year, I am provided a target amount from the Budget Division.  When the budget is turned in it must balance to zero between expenditures and revenues.  At the time that the proposed budget is due, HR only has 4 months of claims data.  Using 4 months of data, I try to estimate what may happen with claims.  Every year this is only a place holder in the budget until more detailed claims data is available later in the calendar year.  To make it balance to zero for this exercise, any differences are deducted from projected claims. The final budget for the self-insurance fund is taken to Council after 10/1 each year. 

1)  How many people are assumed to be in each category for the two budget years - employee/dependents, early retiree/dependents and over 65 retiree?

The demographics are as follows:  2012/13 Assumptions = 805 employees; 237 pre-65 retirees; 229 post-65 retirees.  2013/14 Assumptions = 790 employees; 215 pre-65 retirees; 228 post-65 retirees. (NOTE: The decline in the employee count in this year’s assumptions can be attributed to 34 vacant positions.)

2)  How much are the monthly rates projected to change from the current year to the next?  Lisa Marley said she would have those rates by now in one of the public budget/City Council meetings.

I said I hoped to have them soon and said we had a meeting scheduled with the consultants to start determining upcoming premiums.  The rates have not been finalized.  At this point, I am planning to take the rates to Council at the October 15, 2013 meeting.

3)  Will the city cover fewer people as a result of using temporary employees (from public bids)?  If so, how many fewer due to this one strategy?

The City does not have a strategy to make current fulltime/part time employees temporary.  The City uses temp agencies when employees are off long-term, or if there is a special project that requires more employees, etc.  Presently when temp agency employees are needed, we must call around and get 3 quotes from local agencies and provide this to Purchasing before a request can be approved. The temp agency bid is to simplify rates when temp employees are needed and to have an approved sole vendor for temp services.  Through the bid process if we have one source to use, it will make it more efficient to get temp employees faster by not having to call around for quotes and it will be easier to give consistent prices to the departments who are requesting the temps.

4)  Does the city plan to drop its over 65 retiree group plan and shift this to a private health exchange?

No.

I request to be informed on the reasons, however many, the city budgeted far fewer dollars for health insurance in the coming year than represented in the current budget.

See first response above.  

This leads me to my final questions:

5)  What is the city's health coverage cost year to date?  How does it compare with the budget, which is all the public sees in budget documents?

The latest figures available are through July 31, 2013 (which is 83% of the fiscal year).  Budgeted expenditures = $6,746,767.  Through July 2013 = $5,655,510.  (Not reflected in this amount are five claims paid in August which were in excess of $100,000 each.)

6)  Has the city spent any ERRP monies in this fiscal year?  If so, how much of the roughly $343,000?

Yes.  Council approved the use of $142,000 for this fiscal year in order to keep premiums flat from 2012 through 2013.  $201,000 ERRP funds remain, and I will likely ask Council to approve use of those funds for the upcoming premium calculations.

7)  Will the city bid any of its health insurance plans this year?  If so, when.  If not, when might this topic come before City Council?

No.  The current health insurance contract expires on 12/31/14.  An RFP for health insurance should go out in the spring of 2014.