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HomeMy WebLinkAbout09-24 Resolution No. 09-24 RESOLUTION APPROVING AN AMENDMENT TO THE HEALTH INSURANCE OPT-OUT PROGRAM BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that Olufemi Folarin, City Manager, be and is hereby authorized and directed to execute an amendment to the Health Insurance Opt-Out Program adopted on March 1, 2005 which increases the benefit to $3,000 for the period of March 1, 2009 through February 28, 2010 for employees who have alternative health insurance coverage to discontinue participation in the city's health insurance plan, a copy of which is attached hereto and made a part hereof by reference. s/Ed Schock Ed Schock, Mayor Presented: February 11, 2009 Adopted: February 11, 2009 Omnibus Vote: Yeas: 5 Nays: 0 Attest: s/Diane Robertson Diane Robertson, City Clerk AMENDMENT TO THE CITY OF ELGIN HEALTH REIMBURSEMENT ARRANGEMENT THIS AMENDMENT to the City of Elgin HRA Plan is adopted by City of Elgin (the "Employer"), effective as of the date set forth herein WHEREAS, the Employer desires to amend Plan's definition of Section 5.04 in the Adoption Agreement-Eligible Spend-Down Expenses; NOW, THEREFORE, effective March 1, 2009, the definition of Item 9, Available Benefits in the Adoption Agreement in the Plan is amended as follows: The annual contribution and maximum reimbursement from current year contributions are increased from $2,000 to $3,000. The co-insurance claims are changed from "$0.00-$2,000" to "0.00-$3,000." IN WITNESS WHEREOF, and as evidence of the adoption of the amendments set forth herein, the undersigned officer of the City of Elgin has executed this Amendment to the Plan, this 11th day of Febuary, 2009. CITY OF ELGIN By: '�A - N. Olu em! blarin, •ty Manager F:\Legal Dept\Agreement\Health Reimbursement-Amendment.docx E �" L 0 0, January 22, 2009 G0 I 1 �'r ni l TO Mayor and Members of the City Council N "o o l FROM: Olufemi Folarin, Acting City Manager FINANCIALLY C*NT SERVICE.. RNMENT EffK1EN75EFNKEti. AND OUAUTY INFRASTRUCTURE Gail Cohen, Human Resources Director 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 increasing the benefit of the City's health insurance "opt out"program. RECOMMENDATION It is recommended that the City Council approve increasing the health insurance "opt out" benefit for full time employees from $2,000 to $3,000. BACKGROUND In 2005, Council approved establishment of an Opt-Out program for employees who have alternative coverage. Current employees who for the plan year discontinue participation in an existing City health insurance plan receive a payment into a tax exempt Health Reimbursement Account,totaling $2,000, 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. 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 expenses. The City saves the cost of the existing insurance premium. Future increased premiums will also be saved as a result of shifting associated claims expenses to another insurance carrier. Since the opt-out amount will be pre-tax, the City saves cost of associated taxes and pension contributions. Gallagher Benefits, the City's health insurance consultant, reviewed the program as part of the health insurance plan renewal. The recommendation to increase the amount was based on their Opt Out Program Increase January 22, 2009 Page 2 review of industry practices and the opportunity to complement the existing health insurance plan with both short and long term cost savings. Currently, 51 full time employees participate in the opt-out program. In order to encourage higher participation, it is recommended that the opt- out amount be increased from $2,000 to $3,000 for a trial period this policy year. If participation in the opt-out program is disappointing, or if the increase otherwise proves to be not cost effective, the opt-out amount will be adjusted accordingly. GROUPS/INTERESTED PERSONS CONTACTED None FINANCIAL IMPACT There are currently 51 full time employees in the-opt out program. Assuming these employees remain out of the City's insurance program, the cost of the-opt out program will increase from $102,000 to $153,000. Based on the annual premium cost for Single HMO coverage (the least expensive option) of $3,260.64, the annual savings net of the $3,000 opt out payment would equal $260.64 per employee. If the annual premium cost for Family PPO coverage (the most expensive option), $17,240.16, was eliminated as a result of the opt-out program, the net savings to the City would equal $14,240.16 per employee. There are sufficient funds available in the Health Insurance Fund, account numbers 635-0000-796.53-08 (Medical Claims-$6,310,000) and 635-0000-796.50-04 (HMO-$1,791,000) to make contributions into an HRA for participating employees. LEGAL IMPACT None ALTERNATIVES 1. The City Council may choose to increase the opt out program payment amount for the period of March 1, 2009—February 28, 2010 from $2,000 to $3,000. 2. The City Council may choose not increase the opt out program payment amount at this point in time. Respectfully submitted for Council consideration. GAC Attachment OF ESC ��' �\�� City of Elgin Memorandum ���-IfLDF�b Date: February 16, 2009 To: Gail Cohen, Human Resources Director From: Jennifer Quinton, Deputy City Clerk Subject: Resolution No. 09-24, Regarding the amendment to the Health Insurance Opt-Out Program Enclosed please find the above referenced agreement. Please distribute to the appropriate parties and if needed, retain a copy for your records. If you have any questions please feel free to contact our office 847-931-5660 and we will do our best to assist you. Thank you.