03-12-08 Council Agenda - Laserfiche WebLink

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515 Little Canada Road, Little Canada, MN 55117-1600 (651) 766 -4029 / FAX: (651) 766 -4048 www. ci.little -canal a. nm. u s MEMORANDUM TO: Mayor Blesener and Members of the City Council FROM: Joel Manson, City Administrator DATE: March 7, 2008 RE: Health Savings Account (HSA) in conjunction with High Deductible Health Insurance Plan MAYOR Bill I llesmwr COUNCIL Rick Montour Barbara Allan John Reis Michael McGraw ADMINISTRATOR Joel R. :liaison As you are aware, full -time City employees will be offered two options to choose from for health insurance coverage. These options are: HealthPartners Choice 15 -80% Plan (current plan in place); HealthPartners High Deductible Health Plan $2200/$4400/100 %. For employees who choose the high deductible plan, the proposal is to couple this plan with a Health Savings Account (IiSA) that can be used to satisfy deductible requirements on a pretax basis. Given the individual employee's exposure for the first $2,200 of medical costs as well as the premium savings that would be realized under the high deductible plan, it is staff's proposal that the City provide an annual contribution of $2,200 to the employee's HSA account. It should be noted that the deductible is $2,200 per person and $4,400 per family, and the employee will be responsible for the deductible over the City's contribution to the I-ISA. Again, the $2,200 HSA contribution for each employee would be funded from the City dollars allocated for employee health insurance. Employee premium contribution rates were set such that there would be no increase in costs compared to budgeted cost of the traditional plan. In order to allow employees to start off with a balance in their HSA account, staff is proposing that the City make an initial deposit of $1,100 in each account with the remaining funds deposited monthly at $100 per month over the next 11 months. (Initial deposit 4/1/08, $100 monthly deposits beginning 5/1/08, plan year ends 3/31/09.) It should be noted that the City is at risk for the initial deposit since the funds would not be recoverable should an employee leave the City's within six months. This is similar to employees having the ability to use the salary dollars they have allocated toward their Medical Flexible Spending Accounts before the money is withheld from their paychecks. However, it is felt that given the small and stable City staff, that risk is small.