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HomeMy WebLinkAbout05-38 Resolution No. 05-38 RESOLUTION APPROVING A HEALTH INSURANCE OPT-OUT PROGRAM BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,ILLINOIS,that it hereby approves a Health Insurance Opt-Out Program effective March 1,2005 as the city's policy for permitting employees who have alternative health insurance coverage to discontinue participation in the city's health insurance plan, a copy of which program is attached. s/Ed Schock Ed Schock, Mayor Presented: February 9, 2005 Adopted: February 9, 2005 Vote: Yeas: 6 Nays: 0 Attest: s/Dolonna Mecum Dolonna Mecum, City Clerk CITY OF ELGIN HEALTH INSURANCE OPT-OUT PROGRAM The City of Elgin, as all employers, must deal with the continuing increase in the cost of health insurance. The City is aware that some employees may not need the Health insurance benefits received through the City because alternative coverage is available under a spouse's insurance plan. A new health insurance Opt-Out program is being offered to employees who have alternative coverage. Current employees who for the plan year discontinue participation in an existing City health insurance plan will receive a bi-monthly payment into a tax exempt Health Reimbursement Account in recognition of the City's insurance cost savings. Newly hired employees are also eligible for the program. Program Overview An employee who has an alternative source of health insurance coverage and wants to discontinue coverage under a City health insurance plan may do so during open enrollment (February). In return, the employee is eligible for a waiver payment which will be put into a tax exempt Health Reimbursement Account. Since having health insurance is vitally important, no employee will be allowed to waive/reduce existing coverage unless they can offer proof of coverage under an alternative health insurance plan. Employees desiring to participate in the Opt-Out program must complete a waiver form (copy attached) and submit it to the Human Resources Department during the month of February. Following the submission of the waiver application and verification of alternative insurance coverage, the current City health insurance coverage will terminate on the last day of February. An employee may qualify as a participant in the Opt-Out program during the plan year if HR is notified of a qualifying life-changing event (e.g., marriage) that provides them with alternative coverage,within thirty days of the event. Participants in the program will no longer have a bi-monthly deduction of the employee premium co-payments. The waiver payment is made over twenty- four (24) pay periods during the calendar year. Offering this program does not obligate the City to continue the program from year to year if it is not economically feasible or if in conflict with Federal or State law. The City reserves the right to increase or decrease the waiver payments plan year to plan year. Health Reimbursement Account A Health Reimbursement Account(HRA)is an account that is funded solely by the employer(in this case through the waiver payments). The funds roll over year to year and can be used after retirement or separation from the City. The funds can be used for eligible medical expenses, which are essentially identical to those eligible under the Flexible Spending Account. The HRA is administered by a third party who issues reimbursement checks to employees, similar to the Flexible Spending Account. Married Co-workers An employee whose spouse is also a City employee will not be eligible to participate in the program. Opt outs are intended to share savings between the City and the employee when another employer provides insurance. The opt out is available only to those employees who attest to insurance coverage elsewhere. Part-time Employees Permanent part-time employees who work an average twenty (20) hour per week schedule are eligible to participate in the Opt-Out program. Those employees participating in the Opt-Out program will not be eligible for sick days. New Employees New employees starting with the City after the beginning of a plan year may be eligible to participate in the opt-out program by declining health insurance coverage during the initial sign- in period. New employees must also offer proof of coverage under another health insurance plan. The waiver payment received will be prorated for the balance of the plan year(March 1 — February 28/29). Retirees The Opt-Out program is not available to retirees. Duration A waiver of health insurance is in effect for only one(1)plan year(March 1-February 28/29). If economically viable and not in conflict with Federal or State law, the City may authorize the program for the next calendar year. Employees desiring to continue in the Opt-Out program for the next calendar year must complete a new waiver form (with proof of alternative insurance coverage) during the month of February. Employees desiring not to continue in the Opt-out program MUST complete all required enrollment forms for City health insurance coverage at the next open enrollment period with coverage effective the start of the plan year. Separation If an employee participating in the Opt-Out program separates employment with the City during a plan year, waiver payments will only continue through the last payroll period employed. Re-Enrollment Re-enrollment to a City health insurance plan can only occur during the annual open enrollment period or within thirty (30) days of a life-changing event (e.g., spouse losing insurance coverage). Under a qualifying re-enrollment during the plan year, the waiver payment will cease in the payroll period that City health insurance coverage becomes effective. Effective Date The Opt-Out program will be offered for the 2005-2006 plan year and each plan year thereafter as approved. CITY OF ELGIN DISCONTINUE/DECLINE CITY HEALTH INSURANCE COVERAGE Plan Period March 1,2005—February 28,2006 I fully understand the health insurance benefits provided by the City of Elgin. I also understand the program opting-out from receiving such City coverage. I WISH TO DISCONTINUE MY COVERAGE FOR THE COMING PLAN YEAR I DECLINE TO ENROLL IN A CITY HEALTH INSURANCE PLAN(new employees) I understand that if I discontinue/decline health insurance, I WILL NOT be entitled to the same Health Insurance benefits the City provides enrolled employees for the coming plan year. I understand that I may re-enroll in a City plan during a plan year if I have a qualifying life- changing event (e.g., marriage). I also understand that in order to receive the waiver payment into a tax exempt Health Reimbursement Account, I must show alternative health insurance coverage. Participating employees will not have City health insurance benefits after the last day of February of this year. New employees declining City health insurance will not be enrolled in a City plan. By waiving participation in a City health insurance plan, I understand that, aside from a qualifying life-changing event, I can only re-enroll in a City health insurance plan during the annual open enrollment period with coverage effective March 1 of the next plan year. I understand that if I re-enroll under a qualifying event during a plan year, the opt-out payment will cease in the payroll period that City health insurance coverage becomes effective. I also understand that the City may amend or discontinue the program due to economic reasons or conflicts with Federal or State law and therefore I shall have no expectations of its continuation. Employee's Signature Date Please complete the following for your current health insurance coverage: Insurance Carrier Name: Policy/Group Number: Effective Date of Coverage: Subscriber/Member: Employer/Group: Person who can verify coverage: Phone Number of Verifying person: ATTACH A COPY OF APPLICABLE HEALTH INSURANCE CARD OR A LETTER VERIFYING COVERAGE IN ANOTHER HEALTH INSURANCE PLAN TO THIS WAIVER FORM. CITY OF ELGIN HEALTH INSURANCE OPT-OUT PROGRAM HEALTH INSURANCE OPT-OUT WAIVER PAYMENTS For the 2005-2006 Plan Year For the 2005-2006 plan year, the annual waiver payments (paid over 24 pay periods) are as follows: $2,000/year - .y OF ec'r C, •\j I , Agenda enda Item No. 0. 1 City of Elgin z ,1 u : E ,x/, L I 1°111 11 01, AO February 4, 2005 (� TO Mayor and Members of the City Council N rlpi FROM: Olufemi Folarin, Acting City Manager FINANCIALLY STABLE CITYGOVERNMENT EFFICIENT SERVICES. AND QUALITY INFRASTRUCTURE Gail Cohen, Human Resources Directo SUBJECT: Opt Out Program for Health Insurance PURPOSE The purpose of this memorandum is to provide the Mayor and members of the City Council with information to consider implementing a program that would permit employees to opt out of participating in the City's health insurance program. RECOMMENDATION It is recommended that the City Council approve implementation of a program that would permit riik employees to opt out of participating in the City's health insurance program. BACKGROUND The City of Elgin, as all employers, must deal with the continuing increase in the cost of health insurance. The City is aware that some employees may not need the Health insurance benefits received through the City because alternative coverage is available under a spouse's insurance plan. An Opt-Out program would be available to employees who have alternative coverage. Current employees who for the plan year discontinue participation in an existing City health insurance plan would receive a payment into a tax exempt Health Reimbursement Account in recognition of the City's insurance cost savings. A Health Reimbursement Account (HRA) is an account that is funded solely by the employer (in this case through the waiver payments). The funds roll over year to year and can be used after retirement or separation from the City. The funds can be used for eligible medical expenses, which are essentially identical to those eligible under the Flexible Spending Account. The HRA is administered by a third party who issues reimbursement checks to employees, similar to the Flexible Spending Account. Newly hired employees would also be eligible for the program. Since having health insurance is vitally important, no employee would be allowed to waive/reduce existing coverage unless they offered proof of coverage under an alternative health insurance plan. An opt out program benefits both the City and the employee. The employee does not have to pay for unnecessary insurance coverage and obtains an account that can be used for health care Opt Out Program February 4, 2005 Page 2 expenses. The City saves the cost of the insurance premium for the employee. Since the opt out amount will be pre-tax, the City saves cost of associated taxes and pension contributions. The proposed program details are attached. An initial opt out amount of $2,000 is proposed. The HRA administrator has not yet been selected, however staff is requesting Council's approval of the program at this meeting in order to give employees as much time to investigate whether the opt out program is appropriate for them. GROUPS/INTERESTED PERSONS CONTACTED Several employees have indicated an interest in participating in such a program. yVA... FINANCIAL IMPACT Based on the annual premium cost for Single HMO coverage of $3,030.96 the annual savings -net of the $2,000 opt out payment- would equal $1,030.96 per employee. If the annual premium cost for Family PPO coverage, $13,790.28, was eliminated as a result of the apt out program, the net savings to the City would equal $11,790.28 per employee. There are sufficient funds available in the Health Insurance Fund, account numbers 635-0000-796.53-08 (Medical Claims- $4,250,000); 635-0000-796.50-04 (HMO-$1,650,000) to make contributions into an HRA for participating employees. LEGAL IMPACT ALTERNATIVES 1. Implement an opt out program. 2. Do not implement an opt out program at this point in time. Respectfully submitted for Council consideration. GAC Attachment r