05-38 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
-
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, Agenda enda Item No.
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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
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