2016.12.19 CC Packet - Laserfiche WebLink

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CITY OF VA L— -EST. 1906 14669 Fitzgerald Avenue North, Hugo, MN55038 • (651) 762-6300 • www.ci.hugo.mn.us TO: Honorable Mayor Tom Weidt and Members of the City Council FROM: Finance Director Ron Otkin SUBJECT: City Contribution to Insured Employees Health Savings Accounts (HSA) DATE: For the City Council Meeting of December 19, 2016 DESIRED COUNCIL ACTION Motion to Approve One -Time Contributions to Insured Employees Health Savings Accounts HEALTH INSURANCE HISTORY Prior to 2012 the city purchased health insurance from Blue Cross Blue Shield of Minnesota (through a health insurance cooperative). This plan was a fee-for-service plan that, except for some office and prescription drug co -pays, covered virtually all health expenses incurred by city employees. Due to the expensive nature of this type of insurance, employees with family coverage were responsible for 60% of the monthly premium. By 2009 the total annual premium for all employees was $179,388 and the annual payroll deductions for family coverage had reached $36,420. To reduce costs for the employees as well as the city the City Council approved switching to a High Deductible Health Plan (HDHP) coupled with employee -funded Health Savings Accounts (HSAs). The total annual premium in 2010 for all employees dropped to $148,836. The Council agreed to use the savings by picking up 100% of the premium costs for all employees and their dependents. However, the employees were responsible for all out-of-pocket costs, including the deductible. In 2010 the annual deductible for single coverage was $1,500 and the deductible for family coverage was $3,000. SWITCH OVER TO HEALTHPARTNERS In the fall of 2011 the Finance Department solicited proposals for health insurance. Proposals were received from four (4) companies and the Council accepted the proposal submitted by HealthPartners, resulting in an immediate savings of $71,093 in 2012. Again, this was a HDHP coupled with HSAs. The annual deductibles stayed the same. INCREASING DEDUCTIBLES As a result of the Affordable Care Act, HealthPartners has been increasing the deductibles for HDHP plans. They have also made the employees responsible for an additional $500 per contract (over and above the deductible). Thus, employees with single coverage are now responsible for $2,500 per year in medical costs and employees with family coverage are responsible for $4,500. This amounts to a 55% increase in just 5 years.