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HomeMy WebLinkAboutIR 7339 1 'INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7339 December 8, 1988 j too?r To the Mayor and Members of the City Council X Subject: Report on Sanus Plus Implementation ,411 This report outlines the rationale that was used in making the recent recom- mendations and decisions concerning the City of Fort Worth' s health insurance program. Finance The City of Fort Worth historically has provided its employees with an excel- lent health insurance program. In past years, it has been a challenge to find the financial resources which were necessary to fund the health insurance pro- gram. In 1983-1984, the City paid approximately 58% of the total cost of the plan and the employees contributed the other 42% through payroll deductions. Today, the City pays 80% of the cost and the employees contribute 20%. The total plan cost in 1983-84 was $6,789,000 and in 1988-89 it will be $16,551,000. Thus, while the total cost of the plan has increased almost 150%. the City (taxpayers) contribution has increased more than 225% while the contribution from employees has increased less than 20%. Policy Year City Contribution Employee Contribution 1983-84 $ 3,938,000 (58%) $2,851,000 (42%) 1988-89 $13,162,000 (80%) $3,389,000 (20%) The 1988-89 budget year was especially challenging. Health costs have esca- lated at an extremely rapid rate, and it appears that there will be no change in this trend in the near future. It is anticipated that costs will increase between 22-28% next year. Development of the proposed plan was begun in April , 1988. Many options were considered but the plan recommended by the staff/Council/retiree review team and approved by the City Council was determined to be the best choice, both financially and benefit-wise. The City's portion of the cost and the em- ployee' s contribution were the most important consideration. The plan also was designed to ensure each employee had the freedom to select the physician of their choice. The City' s financial obligation became even more important after the recent budget hearings. As you recall , the existing health insurance program was under-funded by $1 ,700,000 for plan year 1988-89. The City Council had indi- cated that since the City already was increasing its contribution to the plan by $2,000,000, they were reluctant to pick up the additional $1,700,000 short- fall . In the City Manager's recommended budget, it was proposed that employ- ees and retirees pick up the shortfall through increased dependent ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ­INFOI MAL REPORT TO CITY COUNCIL MEMBERS No. 7339 - P.2 To the Mayor and Members of the City Council December 8 , 1988 rocs Subject: Report on Sanus Plus Implementation contributions and increased payroll deductions. After much deliberation during the budget review process, the City Council decided to assume the en- tire $1,700,000 shortfall for the employees but directed that bids be taken for a new plan that would provide a schedule of benefits within the $16,551,000 budget. The new program' s cost is equal to the budget funds available in 1988-89. If any other plan had been selected, then either the City would have had to make additional contributions or City employees would have had to bear the addi- tional cost. The following is a summary of the new monthly cost breakdown between what the City pays and the employees pays toward this new plan: Monthly Cost City Pays Employee Pays Employee Only 1106.87 $ .00 Employee & Children 184.46 74.02 Employee & Spouse 200.48 90.88 Employee, Spouse & Child(ren) 240.51 103.21 The proposed plan also contains a provision which limits the rate increase next year to no more than 15% which could mean a savings of more than $3 mil- lion in insurance costs that would have to be budgeted for in the 1989-90 bud- get. Benefits The proposed New York Life/Sanus plan not only provides benefits similar to the existing Aetna plan, it also provides managed care benefits. The avail- able "managed care network" benefits in almost every case provides the City' s employees with better benefits than the existing plan. (It should be noted that certain benefit changes which become effective January 1, 1989 under the proposed New York Life/Sanus plan would have also been implemented even if the current Aetna plan were to remain in effect) . These changes are necessary to help control the cost of the plan. These changes in benefits are now considered to be standard provisions in almost all group insurance programs, Summary This change in the City' s health insurance plan is obviously a significant project and it is understandable that employees would be concerned when one of their major benefits is altered. But without question, changes must be made. Funds simply are not available to keep the health benefit plan status quo. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS --INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7339 - n a To the Mayor and Members of the City Council December 8, 1988 C9 X Subject: Report on Sanus Plus Implementation The changes made do not adversely affect the great majority of City employees. With the managed care plan, employees will actually be out-of-pocket much less than they were before. The 1,700 employees covered by the previous HMO plans will realize a reduction in their monthly cost for this new plan. All employ- ees will have a daily choice of which networks or non-network physicians they wish to use. This proposed plan does call for all employees to become more aware of their medical expenses and become more involved in helping control these medical expenses. This is a health benefit plan that compares favorably with other governmental and private sector employee packages. Employees will be encouraged to review the available material to fully understand how valuable the plan is to them, and we will continue to schedule as many meetings as needed for both employees and spouses. If you need additional information, it will be furnished upon request. "o OOL uglas Harman City Manager 6 DH:kc ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS