12. City of Kalispell's Health Insurance Plan4D City of Kalispell
Post Orlice Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758
REPORT TO:
FROM:
SUBJECT:
Honorable Mayor and City Council
Chris A. Kukulski, City Manager
The City of Kalispell's Health Insurance Plan
MEETING DATE: June 17, 2002
BACK GROUND: The City of Kalispell's health insurance must change July 1, 2002. Due to the rising
costs of health insurance and increased health insurance claims over the last year, we have been forced to
re-evaluate our self -insured program. During this process, we met with our Health Insurance Committee
members and the City Council several times to try to solve this serious problem. After numerous phone calls
to other cities and health insurance providers, we narrowed our options and presented them to the City
Council on June 3. From direction given at that work session and in compliance with our three labor
contracts, we presented the employees with a city wide vote of two options. The employees
overwhelmingly voted in favor of the "80/20" plan. The proposed new coverage is similar to our existing
coverage, but includes higher deductibles and increased out-of-pocket costs by employees and retirees.
Unfortunately, the necessary change results in a decreased health benefit for employees and retirees, while
at the same time substantially increasing the cost of premiums. Asa result of this increase cost for premiums
the city employees that have dependents covered on our existing plan will now have to pay a portion of the
premium. Employees will pay $52.50 per month to add their spouse or $87.50 per month to add their family.
These rates for dependents were determined by splitting the burden of the premium increase on a 75/25
percent split between the City and the employees.
The change in health plans is estimated to cost employees and retirees approx. $212,000. In addition to the
Employees' contribution, the City's cost has also increased substantially and is estimated to be
approximately $407,000. This added cost will add approximately nine (9) mills to the City's overall millage
levy which will cost citizens owning a median priced home in Kalispell ($125,000) approximately $36
annually. Under Montana law, mill levies can be raised to cover the increased cost of health insurance. Last
budget year, the City of Kalispell did not have to utilize this option. Nearly all counties and seven of
Montana's larger cities had to increase mills as a result of higher health insurance costs
Due to both our internal challenges in funding health insurance and the ever changing face of health
insurance in Montana and the nation, I am highly recommending the Health Insurance Committee continue
to meet to monitor our situation and make future recommendations on how to strengthen our self insured
system.
Attached is the cost work sheet for the current plan and proposed plan. Even though this issue is closely
related to the budget process, the City must sign into an annual agreement prior to July 1, 2002. Therefore,
I am seeking your permission to sign the documents for the 80/20 Blue Cross and Blue Shield plan which
will include deductibles of $300/individual and $600/family with a maximum out-of-pocket of
$1,000/individual and $2,000/family. The plan documents will be reviewed by our Legal Council prior to
signature. I sign this document annually without Council action, however, due to the drastic change in the
health insurance system and the costs associated, your approval is being requested.
RECOMMENDATION: The City Council authorize the CityManager to sign into a Contract with Blue
Cross and Blue Shield for an 80/20 benefit system with a $300/person and $600 per family deductible and
$1,000/individual $2,000/family co -pay
FISCAL EFFECTS: The increased cost in insurance premiums will necessitate a nine mill levy
increase which will cost the owner of a median valued home in Kalispell $36 per year. Nine mills are
estimated to generate approximately $211,500 annually. An employee will pay $630 per year to add their
spouse, and an employee with a family will pay an additional $1,050 per year. The employees' contributions
are estimated to generate around $126,000.
ALTERNATIVES: As suggested by the Council.
Respectfully submitted,
Chris A. Kukulski f
City Manager
Report compiled June 12, 2002
80/20 plan with $300 deductible/$600 per family - max out of pocket $1,000/$2,000
contracts single 2 party family
# 28(14emp) 44 (29emp) 105
current funding:
current rates: $ 189 $ 399 $ 464 $
annual revenue -today $ 63,504 $ 210,672 $ 584,640 $
requested:
Additional mo. Contrib.
annual revenue
from City
from Employees
from retirees/others
Total
Anticipated Expenditures
claims estimate
this year paid -est.
80/20 plan-6%
trend 23%
margin .5%
subtotal
attachment point 15%
admin/stop loss ins
WITH DENTAL
s-med 2p-med
32 3
99 $ 198
38,016 $ 7,128 $
#3
total
212
903,960
70
90
125
$
170
$
210
$
355
$
25
$
50
$
45,320
$
85,460
$
447,300
$
9,600
$
1,800
$
589,480
$
21,420
$
54,810
$
351,450
$
427,680
$
7,140
$
9,450
$
111,825
$
128,415
$
16,760
$
21,200
$
-
$
9,600
$
1,800
$
49,360
$
45,320
$
85,460
$
463,275
$
9,600
$
1,800
$
605,455
Total revenue
$
1.509.415
$ 1,150,000
$ (69,000)
$ 1,081,000
$ 250,576
$ 5,405
$ 1,336,981
$ 200,547
$ 1,537,528
Grand Total costs
Fund with cash on hand
Fund for this amount
Mill levy increase of approximately 9 mills
Premium split 75% City and 25% employee
Employee pays additional out of pocket expenses of $85,560 .
for medical and higher deductible.
Plan cost to the City if PREMIUM is split 75/25
$
406,980
Cost to the employee
premium $
126,840
reduced benefits $
85,560
$
212,400
1,537,528
Rates:
Monthlv
170,000
single
$
359.00 $
1,707,528
2 party
family
single retiree
2-retiree
$
$
$
$
609.00 $
819.00 $
259.00
489.00
(200,000)
1 50
fam-retire
$
589.00
S-medicare
$
124.00
2P-medicare
$
248.00
359.00 $
556.50 $
52.50
731.50 $
87.50
$
259.00
$
489.00
$
589.00
$
124.00
$
248.00