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