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2. Health Insurance Penalty= City of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406) 758-7000 Fax - (406) 758-7758 REPORT TO: Honorable Mayor and City Council FROM: Frank Garner, Interim City Manager SUBJECT: Insurance For Medicare Eligible Former Employees MEETING DATE: Workshop — September 28, 2004 BACKGROUND: Over the years, a number of former city employees have successfully runt for local office in Kalispell or returned to work for the city in a part time capacity. As former employees, both groups have generally been members of the city's insurance group. As a result of an obscure federal law, former employees who are Medicare eligible are penalized when they are elected to office or join the city on a part time basis. Federal TEFRA laws require the employer's insurance carrier to be the primary payee on claims when they work for an organization that has more than 20 employees. This requires Medicare eligible employees to carry full coverage rather than Medicare supplements. The premium for the two-party general coverage will be $891.26 under our new plan and the supplement will be $561.94, A difference of $329.32 that the employee must pay for the privilege of returning to work for the city, or as a result, of being elected to office. As premiums continue to rise it is foreseeable that employees and council members who are former employees will be required to pay more for the primary insurance than they receive in compensation. As it is in the best interest of the city not to penalize former employees for future community service, the council should consider a change in its policy. RECOMMENDATION: The council should consider a resolution that would eliminate the insurance penalty for employees. Frank Garner, Interim City Manager