HomeMy WebLinkAbout15 Medical Insurance ReviewMinnesota
To: Honorable Mayor and City Council Members
From: Ryan R. Schroeder, City Administrator
Date: February 1, 2012
Subject: Medical Insurance 2011 Year End Performance
As part of the January 14, 2012 All Commission meeting we included a January 9, 2012
memorandum denoting what we believe are our top ten most significant recent initiatives
having a positive impact on our bottom line. Item number six (6) on that list is our health
insurance redesign. This redesign has actually been taking place on a continual basis over the
past several years. As has been reported in the past, Cottage Grove was among the first
metro cities to introduce a Health Reimbursement Account (HRA) into our plan offerings. We
believe we actually were the first metro suburb'to integrate a High Deductible Health Plan
(HDHP) with a Health Savings Account (HSA) as we implemented immediately after federal
authorization about six years ago.
For plan year 2011 we implemented additional changes. In simplest terms we now have an
80/20 plan on top of an HRA plan on top of the HSA. The result is that the maximum exposure
for a single employee increased to $2,950 /year after premiums although the City contributes
up to $1,000 toward that exposure in the employee medical savings account. The exposure for
the City increased to $3,850 for single coverage employees after premiums. The City pays
100% of premium for single coverage and 70% of premium for all other coverages (family,
single plus one (spouse), single plus children). There were twenty -one (21) FTE's qualifying
for the $225 /month waiver stipend. While this stipend is a $54,000 annualized cost it is a
much lower cost than single coverage exposure which was $4,072.20 in 2011 premium plus
the $3,850 noted above (more for family coverages). Conversion of employees with a waiver
stipend to single coverage results in annualized exposure of $158,444.
The result of our 2011 changes was positive for both employees and employers. Employee
premiums were reduced from $142,721 to $80,095. The average premium savings to the
employee was about $681 for 2011. The Employer costs declined from 2010 of $891,669 to
$680,501 in 2011.
A review of premium cost share plus the Employer contribution to the HSA savings reveals that
the City contributes 87.64% of the total outlay. The City additionally contributes about 60% to
the claims exposure (inclusive of employee contribution to their HSA savings account). The
rationale is that it is in the employees own best interest to reduce their exposure to claims and
therefore that "best interest" results in better consumerism when that is available to the
covered employee.
Premiums have increased about $48,000 for 2012 of which the Employer is responsible for
about 84 %,
2011
P113 to]
Savings $211,168.41
Premiums Paid
Premiums Paid
January
$45,619.18
January
$75,817.53
February
$44,363.47
€
February
$75,270.76
March
$42,798.55
March
$75,270.76
April
$43,717.09
April
$75,100.22
May
$44,057.29
.r
May
$75,694.53
June
$43,751.11
June
$78,932.17
July
$44,967.65
K
July
$77,313.35
August
$43,644.96
August
$74,008.62
September
$43,951.14
k?
September
$75,627.44
October
$43,542.90
"
October
$76,221.75
November
$45,890.28
'
November
$77,410.37
December
$47,18304
December
$76,154.66
Total Premium
$533,486.66
Total Premium
$912,822.16
EE Premium
$80,094.66
- �
EE Premium
$142,721.16
ER Premium
$453,392.00
ER Premium
$770,101.00
HSA
$114,350.64
HSA
$64,867.95
Waivers
$45,900.00
Waivers
$56,700.00
HRA
$62,990.90
" ""
HRA
FSI Fee
$3,867.00
FS] Fee
V:
Total
$680,500.54
Total
$891,668.95
Savings $211,168.41
To: Mayor /Council and City Commissions
From: Ryan R. Schroeder, City Administrator
Date: January 9, 2012
Subject: Update of Financial Metrics and Initiatives
Fiscal issues within Minnesota state and local government have been at the forefront of
media coverage for the past ten years as the state has struggled with structural
imbalances within its' own budget and operation. For decades prior, cities supported
the partnership between the state and local government as the partnership brought with
it a pass through of funds intended to moderate local property taxes. That relationship
and downward flow of funds has changed dramatically. In the case of Cottage Grove
we have moved from a reliance on state funds that at one point supported about 30% of
our budget to the current situation within which the City does not receive any non-
restricted state dollars into our general fund.
The City of Cottage Grove has aggressively sought out improvements in its fiscal
operations over this past decade to prepare for or react to threats to our financial
stability. It is as a result of many of these operating and policy adjustments that Cottage
Grove has been able to "motor on" through the "crises" of this decade of diminishing
resources to local government without significant taxpayer impacts.
Following are our top ten most Significant Initiatives:
1. In 2002 the Council amended its Fund Balance Policy to include specific
allocations and targets for those years within which revenues exceeded
expenditures (which to date has been every year since). This policy has
provided the mechanism for the City to create stable funding for future equipment
purchases (in earlier years the City often borrowed in order to acquire larger
trucks and fire apparatus). This policy has also resulted in the City setting aside
significant funds for debt retirement, pavement reconstruction, and building
rehabilitation and replacement,
2. The City has also had a practice in recent years of budgeting to create fund
reserves for future expenditures. Over the past decade this approach has
provided funds for future improvements in park playgrounds and shelters
(including, for instance, the Highland Park building reconstruction in 2011) and
landscape improvements at City Parks. The City has also specifically budgeted
for building replacement future infrastructure, and for expected losses of state
transfer payments (such as a set aside in 2012 to be used in 2013). Between
these first two items we have experienced significant growth in cash position
which has further increased investment income in support of our general fund
beyond what had previously been available to stabilize property taxes.
3. The City takes an aggressive approach to management and retirement of Debt
Obligations. Included is that we generally structure our debt with a rapid payoff
schedule and early calls (ability to retire the entire debt obligation with cash).
The City also finances many obligations internally in order to limit and time entry
into the bond market.
4. The City has made significant improvements in its Capital Planning and
infrastructure replacement programs. With the assistance of our initial citizen led
pavement management task force which later morphed into the Infrastructure
management task force we now have a fifty (50) year schedule for future
infrastructure repair and replacement. Our five year Capital Improvement
Program allows staff to plan and engineer projects within the first two years of the
plan. Increased emphasis has also been placed on receiving third party funding
for all of our major infrastructure projects.
5. The City spent $334,000 on fuel for its fleet in 2011. Aggressive management of
fuel use is important to our operating bottom line. As important in this era of
rapidly fluctuating fuel prices is pricing stability. This is why four years ago the
City of Cottage Grove played an active role in creation of a public sector fuel
purchasing consortium which now has over 40 participating governments and
school districts. We believe our average savings from market pricing exceeds
$50,000 per year.
6. The City has long been a market leader in health insurance redesign to the
benefit of our bottom line and also to that of our staff. We were among the first to
enter the Health Reimbursement Account insurance option and we created the
HDHP Health Savings Account option in the first year that it was legally available.
Beginning in 2011 our sole medical plan option is the HDHP HSA with an
employer funded HRA on top followed by an (ER /EE) 80/20 plan to fund the first
$11,600 in medical liability before Medica has medical exposure risk. While this
plan amalgam creates additional risk for the City which we fully fund the result
was that our premium for 2011 was reduced to $566,196 from the 2010 premium
of $913,855.
7. The City has been aggressive in seeking partnerships with other
governments to increase efficiency in service delivery. Our more recent joint
powers and service agreements include (note, in many cases we are providing
services to others or managing the buying of services with others to gain pricing
enhancements, in other cases we are receiving services from other
governments)
Afton, City of: Street Seal coating
Century College: EMS and Post Training
U
9.
Denmark Township: Building Inspections and Code Enforcement
Denmark Township: Street Seal coating
Grey Cloud Township: Ambulance services
ISD 833: Ice Arena and Recreation services
Inver Hills Community College: Paramedic Training
League of MN Cities: Property, Casualty and Work Comp Insurance
League of MN Cities: Storm water planning
Maplewood, City of: Hazmat Response Vehicle joint use
Metropolitan Airports Commission: Law Enforcement Personnel
Metropolitan Council: Transit District
Metropolitan Council: Sanitary Sewer Treatment
MN BCA: CJDN network access
MN High Speed Rail Commission: High Speed Rail Planning
Newport, City of: Building Inspections
Newport, City of: Street Seal coating
Red Rock Rail Coalition: Commuter Rail Planning
South Washington County Telecommunications Commission: Cable
administration
South Washington Watershed District: Storm water management
St. Paul, City of: Traffic Signal maintenance
St. Paul Park, City of: Building Inspections
St. Paul Park, City of: Street Seal coating
Washington County: Individual Sewage System Inspections Services
Washington County: Property Assessment
Washington County: 800 MHz radio system management
Washington County: Public Safety Communications Center
Washington County: Public Safety Records management
Washington County HRA: Section 8 housing program management
Washington County HRA: multi - family recreation programming
Washington County Sheriff: Code Red Joint Powers Agreement
Woodbury, City of: Sustainability Specialist services
The City pays close attention to performance metrics within its self created peer
group of 35 metro suburbs between 20,000 and 60,000 in population. We track
how we compare in operating spending, debt, staffing and the like, which
surprisingly is not generally the norm for these other communities. What this
provides to us is an ability to quickly gauge our operations compared to the
market so that adjustments, if necessary, can be implemented.
About ten years ago the City created the Economic Development Trust Fund
which receives revenues from donations, land sales, and similar activities of the
Economic Development Authority. This Trust Fund has provided the City with
access to cash, when necessary, to provide the opportunity to assist business
development in the Business Park and redevelopment districts within the
community.
10. Beginning in 1997 the City Council set a course of tax base growth and
diversification. At that time we had the lowest tax capacity per capita of any of
the 35 cities to which we compare (dead last). In 1997 the City optioned 40
acres within the business park that provided the opportunity to compete for and
win the corporate headquarters and manufacturing facility for Renewal by
Andersen. This has been followed by 13 additional plant locations plus two
expansions. This was followed in 2000 by creation of the Gateway Development
District. The result of development efforts has been significant growth in our tax
capacity such that we now compare favorably to the mean tc /capita among our
peers.
The City also benefits by a stability within the community beyond that of many
peer cities throughout the state. For instance, some financial metrics that are of
interest are:
Metric Cottage Grove
Minnesota
Unemployment (Nov /11)
4.8%
5.9%
Poverty Rate (2010)
2.2%
7.8%
Median HH Income (2010)
$87,547
$60,402
Among Owners
$90,529
$69,890
Among Renters
$43,641
$33,190
Home ownership rate (2009)
91.0%
74.9%
United States
9.0%
12.3%
$54,595
$63,664
$35,685
66.9%
Note: unemployment source: economagic.com
Poverty and HH income source: areavibes.com
Ownership rate source: US Census Bureau