HomeMy WebLinkAboutAgenda - 09-01-1998 - 9borange County
Board of Commissionerm
Action Agenda Item Abstract
Meeting Dab: September 1, 1998
Action Agenda
Item No. ~_
Subject: Retlree HeaIM Insurance For ABC Board Employees
Department: Personnel Public Hearing: Vea_NO X
eutlget Amendment
Needed: Vu No X
Albehmengaf: Inbrmatlon Contact:
ABC Boartl Retiree HeaIM Elaine Holmes, Personnel Director
Insurance Report Extension 2550
Telephone Number:
Hillsborough ]32-8181
Chapel Hill 988>801
Durham 688-]331
Mebaire 22]-2031
Purpose: To revive a report prepared by Ma Oange Couny Personnel
Department on retiree heagh insurance provided by Me Orange
County ABC Boartl antl to consitler whether to rewmmentl the
ABC Boartl change its policy.
Background: In follow up to discussion of the Boats of Commissioners Chaiq
County Manager, ABC Boartl Chair and ABC General Manager,
Me Orange County Penwnnel DepeMront has tlevelopetl Me
attached report as to refiree healM insurence offeretl by the ABC
Board.ITia inclutles review of a policy change metle by Me
ABC Board eRective January 1, 1988 antl companaon of the
ABC BaaN's previous and current retiree health ineurence policy
with Orange County's policy.
In summary, prior to January 1, 1989 Me ABC Boartl provided
retiree heath insurance wverege to retiring employees with 15
years ABC service. For such employees the ABC BoaN paid
the full cost of Me individual rHiree's heagh insurance wverage.
Effective January 1, 1898, Me ABC BoaN changed gs Policy to
provitle retiree healM insurance coverage (on Me ABC Boats
group healM Insurance plan) to refiring employces wits 25 years
ABC service antl to require Me retiree pay the full cast of Me
coverage. With this change, the ABC Boartl atloptetl a
grentlbtherprovision. Untler this ABC employees who alreatly
had 16 years ABC service as of January 1, 1998 continuetl [o be
z
covered by the retiree health insurance policy in effect prior to
January 1, 1998. Employees as of that tlate who did not have
15 years service were caveretl under the new policy.
As a staff recommentlation, the report recommentls on the last
page that the ABC Board raviait the coveage of its retiree health
insurance policy as to employees of Ne ABC Boam as of
January 1, 1998. SpecNcelty the report recommentls that the
ABC Board censitler provitling coveage under the previous
retree health insurance policy to the seven employees as of
January 1, 1998 not inGUtled in the "9rantlfethel' ceverege
provitletl for the employees with 15 years service as of that tlate.
Tha ABC BOerd adopted the initial change in its retiree health
insurance for fscal conaitleretions, among others. If the ABC
Board atloptetl Ne staB recommaMation (or its retiree heakh
insurance, this coultl pave some fecal impact on the receipts
generated by the ABC BoaN for the Count' es noted in the
report.
A relatetl area which Personnel has explored antl has covered in
the report is the option for Me ABC B081d to participate in Ne
NoM Carolina Association of County Commissioners Heakh
Insurance Trust either as a member in its own right or as a
participant in the County's heakh insurence group.
Baeommendatlon: Basetl on the reasonable fecal impact antl given that Ne
recommentled policy change ie limihtl to seven ABC
empbyees, the Manager recommends Me Boats encaurege Me
ABC Boartl to exteiM Na application of Me grentlfather provision
k enacted when it changetl its retlree health insurance coverage
effegive January 1, 1998 so that k coven; all employees of the
ABC BOaltl as of January 1, 1998.
K:1p¢rs4edre~aGaatl¢C
NuguSt P<, 1999
avaclunevt
ABC Board Retiree Health Igsurence
Background
Effective Jwuary I,1998 Ne Orange Cowty ABC Board implemented a chmge m its
retiree hea1N iruurcnce policy for employtts rc['ving Gom service wish Ne Orange
CowryABC Board. Subsequent to Nat change, quenioru have arisen regarding the
impact of she change on cunmt ABC employ«s. In repome, Ne Orange Cowry
Personnel Deparvnmt was requested so:
o Review and compere Ne ABC reriree hWN iasmw« wiN Nat Orange Cowry
offers retiring Cowty employ«s.
o As«ss the actuarial impett of possible chwge N the ABC Board retiree hea1N
iuumv« covemge, ifadoprM by the ABC Board.
o Explore the option of the ABC Board obsiNng healN ituumn«coverage rtvough
the Cowry's healN imumvce Provider, the North Carolina Association of Counry
Commissioners (NCACC) BWN Isvswwce Tmst.
This report ssuvmadzes Ne resWU of that review.
ABC Redree Heuhh Ivaurwce Coverage
1. ABC Policy Chwue
Prior to Jwuary 1, 1998, the ABC Board Provided retiree hWN ivswesrce covemge
ro retying employee wiN IS years ABC service. For swh employ«s the ABC
Board paid Ne fWl cost ofthe ivdividW retiree's hWN insumvice coverage.
Efiecave Jmuary 1,1998 Ne ABC BOBrd chwged iu poliry m provide rcdrre hWN
~ urenoe covmaga (on the ABC Board Broup hWN uuurev« plan) m rotldng ABC
emPloytts wiN 25 Years ABC service and to require Ne rcshtt pay Nc fall cost of
the wvemge.
2. ABC "GmMfssher" Provision
With she Jwuary 1, 1998 policy chmge, Ne ABC Board adopted a "gmadfaNet'
provision. Und« this, ABC employees who already had IS years ABC service u of
]muary 1, 1998 arc cove d by tl+e Policy iv effect Pnor to lavuary 1, 1998. That is,
these employ«s wndvw m be eligible m participate w the AHC Board's retiree
health insurwce with IS years ABC service mN« Nan 25 avd the ABC Board
continues m pay Ne fWl tort of individual covemge. Also wrier Nis gmndfeNn
provision, employees already refired and receiving benefits wdm the previous policy
continue to be covered by the previous policy.
According m AHC Director Howard Pelson This above grandfather provision covers
14 of Ne ABC Board's 24 current employees.
Employees ofNe ABC Board who did not have 15 years ABC xrvice az oflanuary
I, 1998 arc not covered by Ne grandfaNer provision. Thex employees are covered
under Ne new ppllcY effective January 1, 1998. Of Na 26 cunmt ABC employees,
the grandfather provision did not cover 10. Of These 10 employees, xven were ABC
employees u of January 1, 1998, Ne policy change effective daze, and Nm were
hoed ader Net date.
Orevge Couvty ReWee Health Imurevee
Orange County ptvvidn rcdm hea1N msumvice coverage to rearing employs with 10
years Orange County service. For such employ«s Orange County psys Ne PoII cost of
Ne vWividuW retiree's heelN vuuran<e coverage and, ifappliceble, a poNOn ofthe
dependrnt's tort. Orange Cowry Wx provides revvee heWN insumn« kr employees
retiring az age 65 or olds wiN az lean five years Orange County xrvice or rearing on a
disability retirement wiN at lees[ five years Orange Cowry service. For Nex Jut two
types oteligible reams, Ne County pays one half Ne cos[ of cevemge
Compvruav of Aedm Health Ivsunvice Policies
Adazhment 1 competes N more derail the previous ABC Board reum hwlN vuurence
policy, Ne coven[ ABC Board policy end the coven[ Orange County policy.
Impvm of Estevdivg Cavenge of ABC GnvdfaOer Provision
1. ~g
On May 5, 1998, ABC Board Chair David WWmrs, ABC Dh«mr Howard P«moq
Orange Couvty Commissioners Cbair Margaret Brown, Couvty Mmmger lobo Link,
Orange Couvty Be«fits Mavaga Dazl«e /awbs aW Omvge County Petsotmel
D'vecmr Elaine Holmes met to discuss retiree heWN vumavice.
to Ne Mey 5 m«ang, it wu d«ided dot Ne Perormel sreffwoWd seek feNback
from Ne NCACC HeilN Ireumnce Trust Ne County's healN irismmme provider, ov
Ne ectuariW impact if the ABC Board extended its ream beWN istsmence
gtmdfazb« provision to include Ne ABC employ«s u of January 1,1998 who
presently ere not cavaed by dot provision.
Z. Covemee Imvact
The effect ofextending Ne grvndfazber provision woWd be Naz:
o All ABC employees az of Jmuary 1, 1998 (rather [hw Daly Nou with I S years
az o(Nat dale) would be eligible for retir« heahh insurance with I S years
service and
o The ABC Board would pay Ne full cost of [his coverage.
ABC employees hued after Iwuary 1, 1998 woWd be covered by Ne new policy
effecfive az of that date; that is, they would be eligible ro participate in the ABC
group health insurmce wish 25 years service by paying Ne fWl cost.
3. Svecifc Emvlovees Aff«ted
Prior to requesting the actuarial information from Ne NCACC HeWN Wumwe
Trust, Persowel smBObminW from ABC Direnor Pearson specific ~ rmatiov as m
Ne age, ABC urvice aW rethemem eligibility for Ne oven employces who wnWd be
affected by exrending Ne grwdfaN« provision Based on this, Pasowel pmjec[W
each employee's retirement eligibility date wd age ac rethemrnt if Ne employee
<ompleuM Ne IS years ABC service ne«ssary to qualify for ABC retiree health
ivurance wdrr Ne gwdfather provision. Persowel Nan provided Neu proj«tioru
to ABC Duxmr Pearson wM verifiM Ne aammny.
Attadwent 2 shows for We scum employ«s Ne fiscal year iv wldch each employs
would lust be eligNlem refve (wheNer a full urvioe reNemwt or w early
retirement) wiN IS Years ABC service. It Wu shows the emPloYce's age at
ret'vemmt and Ne yeah from Necwent date. For example, Ne fnn dnte ova of the
uvm employees woWd be eligible to retve is m fiscal year 2002-03 if the avployce
mvolvN worked wdl ~e ]0.
4. Feedb kfio the NCACC HeWNI T Plw Advwd
Persorvrel provided the information on dre seven employ«s Wong wiN iWbrrvafion
ov dw ABC Board retiree MWN iveuren« policy m the NCACC HeaIN Inaurev«
Trutt's Plw AdmiWmamr aM requested fecdbeck on N<acnunal impact ifthe
van employees were coved wder tlx ABC refuee hwlN imiuence grevdGther
provision.
Iv response m Ne Cowty's rrywsl, Gerry Green, Senior Vice PresidenVMewging
Ex«ufive fve Sedgwick Nobl<LOwmWes ofNe Carolisus, Ne Trust's hmlN ivsumv«
plan admiwanabr, advises az follows:
o Employ«s who rethe at age 65 or vld« arc covered by iMividuW Mdicare
Supplement Irisumnce and arc vot covered wder a group heWN Nsurwce plan.
Thus, Ne cost m the ABC Board for coverage for such a retiree is tlx cost oENe
individual Medicare Supplemem policy. Such coverage has no impact on Ne
ABC Board's group heWN imurwce rate.
Por example, ttuve o[dv seven employees (numbers 1, 2 wd 6) on Na
Anvchmwt 21ist would not be eligible ro retire wiN I S years ABC service writ
ages ]Q 69 and R mspeUively, if Nay worked m [hose dates. Thus Ne acs[ Nr
retiree heaN insurance coverage for these employee is the wst for individual
Medicare Supplement insomnce a~ the dime Ne employce b«omes eligible It haz
vo impaa[ on Ne group rate.
o Employees retiring before age 65 would be covered under Ne ABC BoaN's group
heaN Wsmance. Mr. Green advises Ne ABC Board could anticipate an impact of
about vine percent on its group redr« heaN insuran« rates for eazh such reN«
in addition to Ne cost for Ne coverege of the individual retiree. This is based on a
projection of Poe anticipated claims experirn<e. Socha rote impact woWd not be
experirn<ed upon fort oeveage, but on a subsequmt removal depending on Ne
aznial claims experience.
Eor example, employee three on Ne Attaclwem 21ist coWd retire at age 52 in
fscal year 200]-Og and be covered by Ne ABC retiree heelN huurm«, ifihe
employee completes l0 additional years of ABC Servi«. Based on this-inf W
year 200]-OS or iv Ne next year's removal - Ne ABC Board coWd anticipate a
rdne percent increa« W row cost £or group rniree heaN vuvrmrce, attribsnable to
this additional eligibility. Four of Ne xven employ«s coWd retie prior to age 65
wiN IS years ABC service at dates ranging fiom 10 to 23 years N Ne future.
5. ABC Buden Impact ofCOVeraae for Ne Seven Emvlovees
It is not possible to esdmaze Ne specific (alma con which might be incurred by
unending Ne retiree heWN wsurance coverage to Ne seven employs.
o First it is rot possible to projat whether dre employces will ranain employed by
tlx ABC Board writ Ne dates mdirated since Ness mend n lean five and uD to
23 years in Ne future. It is likely Nat at least some of tie employees woWd nW
remmn wiN Ne ABC Board unril the retirement eligibility date is reazhN.
o Second even Sit is assumed duteach employ«remWw employed and reties on
Ne date indicated, is is rot possible to projat the con ofgroup health ivurev«
end MNicare $upplwevt Wurance az least five coal up to 2J y«rs N Ne fvnsre.
In terms ofcmrevt mats and rates, tie current ABC amual individual cost Eor
covered retiree:
a On Ne goup heelN imurence, renges from about $2640 to $5,900 depeMing on
Ne employ«'s sex and age for a retiree age 65 or yowger aM
o On Ne Medicare$upplemrntis abom 81680 for an employee age 65 or older.
AccoNing to ABC Director Pearson, Ne ABC Board's 199]-98 cost for retiree hea1N
insurance was 8],420 for Ne four cunem retirees. Of tie four current retirees:
o These ere age 65 or older end receive the Medicare $upplemwt wvnage a[ a mtW
199]-98 ABC cost of Eg931 and
o Ove is on the group health inmrance at a mdl 199]-98 cost of E2,489.
Toml ABC operating expenses (pcrsomrel and non-persormel) for 199]-98 were about
$1.1 million.
Health Imurance for ABC Employee
1. Availability of Health Insurance for Retirees
One ofthe issues the ABC Board haz encowtered in considering retiree health
e is the evailebiliry of such insurance coverage. The ABC Board currently
has employee health insmance Uuough Kaiser Pemunente. This ivclWes coverage
for retirees. WiN its last renewal, Ne ABC Board advises it initially faced e
sigvificant ir~creese Gom KWen. Iv assessing Wtemetivea ABC D'vwmr Pearson
advises dmr he sought quotes from omtt health irvsumnce provides. He advise two
potwtiW Providers declined to 9uom coveage that included retirees. Sabsaluwdy
Kaiser was able to modify its redng meWOdology to provide for a leant Furey and
the ABC Board renewed its coverage though Kaiser.
2. MembersF~n in a N A He ~ a I urance Trull
The ABC Board has asked the County about the option of We ABC Board
participating N the County's health ivsmance Plan. In follow uP ro this Personrrel
mlked with admivishamrs for the health veumrice trust. They adviud that it is m
option for the ABC Boats:
a To participate d'vecdy ivthe NCACC HeWN [mumwz Trustar plan member
without being a part of We Cowry's group health insurance or
a Tobe included Nthe County's group heWN insumnce.
In terms of fie ABC Board particiPativg direcdY N the Trust Persomrel suggesad
the ABC Board obtain a quote from Ne Trost far such wvemge arts the Board has
dove so.
In respoace m the ABC Board request, the Trust has provided a rote quomtlon Io W<
ABC Board. The Trust based its quomdon on a 1Wy 1,1998 date. It quotM a ram
that is about 8 9 percent Idghn Nov the County's cmrem rote, bm is the same rote az
the Cowty would have bem charged for the Blue Cross Persoml Care Plan had its
health msmanw renewal date been 1Wy 1998. The Tr st ilso advises th<rc cutrcndy
are oNtt ABC Boards who are members afNe True.
J. ABCB dP C E I H INI
[n temps of the ABC Board employees becoming a part of the Cowty group heWN
e, Personnel explored with the Tryst Ne impacts ofsuoh coverage. The Trost
officials advise such parlicipa[ion could over lime increase Ne Cowty's health
ce claims expetlence. Since the Cowry's rotes rake accowr of its claims
experience, Ne Trurt advises Nat they believe inchtding Ne ABC employees would
rases Ne Cowry's health insurance rtes over what Ne Cowty woWd otherwise
experience. The Trust advises this is because the ABC group represrnts w older
population then Ne County group.
SmRRemmmevdaHOn
1. Retlme HeWN lrumance
The ABC Bomd action N essblishivg Ne wtiW gmvdfaNer provision for its retiree
health haumvce recogwsd the significant employm issues involved in making a
policy transition u tlds area. Employees W accepting employment and continuing
employment with the ABC Board have done so wiN Ne expmmdon ofthis benefit.
To this end it assutN benefit mvemge for employes who bed aheady'wested" W the
benefit by rea<hinB IS Years.
Given Ne employee mmidemtiom and the rclativ<ly limited impact of such
extension (Ne xven employees showy on AHechmrnt 2), Persowel recorvmevds the
ABC Board extend sbe application of its gmvdfatherprovuion so Hat it covers WI
employees ofthe ABC Board as of January I, 1998 mHser Has Providin6 Nis
<ovemge oNy to those who bad IS years ABC service on Nm date.
2. HeWN lmvrmxe
Sinn the ABC Board has the opdov ofpursuing NCACC HeWN Baumvce Ttta[
coverage on its own, it is remmmevd~ the ABC Board explore this opdov if it
desvesmmraider oNer heelN haurance Providem then its presmtprovider. givce
Ne Trust quote m the ABC Board pmvidd Ne same rate az the Cowry's rote woWd
have bens bed it sought renewal az of the same dare, there is no evident mat saving
for Ne ABC Bond tv parHcipare u Ne Cowry plw. Mormvtt, if the ABC Board
did participate in Hre Cowry plan, the Tres[ advises this coWd mcre,=^ the Cowty's
rotes overtime.
PipemUefvetabcrept.dm
August 10, 1998
Retiree Health Iasurauce
Bevefih Previow ABC Bwrd Pofiey Current ABC Bwrd Policy Current Orovge Couvty Yalicy
Policy Effective 9-14-93 1-1-96 9-1-9]
Date
Coverage For eligible anployas why No Change For eligible employees who retire directly
mire dvady from 6om employmrnt with Orange Couny
employment wilb [he ABC and regwn panicipazion within 30
Boats. calendar days ofthe last dam of
employment.
Employee IS years of ABC xrvice 25 years ofABC service I. 10 years of Orange Couvty xrvice, or
Eligibility
2. At age 65 with az least 5 years of
Orange County xrvice, or
3. On a disability retiremene with as least
5 years ofOmnge Counry service
Brnefit Provided The ABC BoaN covtiWtes The employee may participate in Ne group For Item I above, sbe Couvty wntribums
far iMividwl 100% of the cast. hralth iwumnce plan by paying Ne full 100°/. For Items 2 and 3 above, the
rrage priorm cart. 'Nre ABC BOaM does not pay any pan Counry contributes 50°/a of Ne cost.
age 65 of dse cost.
BewftprovideA At age 65, the ABC BOard The ABC Boats dues not pay any pan of At age 65 for ltemlabove, Ne Coumy
for individual conribues 100%ofthe tort Ne cast ofMdirare BUpplementiwumwe. conaibuses 100%of the cost nol to exceed
coverage at age 65 of Me6care Suppluvtat the amount it would pay for individual
iwumrce. employee coverage. For Items 2 and l
above, the County wntributes 50%.
GNMfaWer N/A 1. RMiremenl after l/INB wiN lS years of N/A
Provisiow - ABC smite w of 12131/9], tM ABC
employe Barad contributes 100% oftM cost for
eligibility end iMividual covaage uNil age 65. At 65,
benefit povidW the ABC BoW contributes 100% ofNe
cost of Medicare SupplemeN Iwurance.
Beaefib Pmbua AeC Board Policy Current ABC Board Policy Current Orange County Policy
2. Retiromrnt prior to 1/1196 wiN I5 Years
of ABC service, the ABC Boats
wntinues to pay IOOY ofthe cost for
iMividual wvemge wd at age 65
contributes 100°/ ofNe cost for
Medicare Supplement (so long as the
employ« does not b«ame eligible for
awth« health iwumnce plan).
Dependent The eligible rnir«'s No change For Item 1 above retirees, prior to the
Coverage depetMem may panicipaa by retiree reazhing age 65, Ne County
paying the fill con. contributes for depemem coverage ache
wet a9 w active employee; that iR
Ne Cowty pays 40%.
For w lam 2 wd J above, prior to the
retiree reazhing age 65, Ne Counry pays
20% of da wsl of dependent coverage.
After tM mtiree reazhes age 65, the '
Cowry makes no comribmion for
decendent cavemge.
Hea1N Plams Keiser Healfi Maintewv« No change Blue Cross Pref ed Provider Plan
Available Orgasdeafion (HMO) Blue Cross Personal Care Plw Q{MO)
Hwltluoureq Iw. (HMO)
Under egebs. tha rairee remains oo Ne
plw in which enrolled. Dmine open
erwllmwt, the mir« may change to
erwther plw wd add or drop dependents.
Over age 65: Medicare becomes primary
arW group health insumme ends.
Beoefila Pmiom ABC Board Polley Cume[ ABC Beard Polley Current Orange County Polity
Carreellmion of the retiree must not be No chafe If mires renuru to work with another
Coverege eligible or became eligible for AC LOCeI Govemmrntemployer ina
ocher group hWsh ivsutvvz position which offers participation N a
verage. Ifcovered by group health plan, Orange County cancels
another group hWth dre mire's heahh insurance which is not
insmanu PWi, the ABC reinnatd.
Bond r- -= hWth Nsmance
berrefits.
August 14, 1998
f:\pers\re[ire\abc-bdl.doc
Attachmm[ 2
ABC Employees As of January 1,1998
Not Covered By Refiree Health tvsuraoce Grandfather Provision'
Employee Fiscal Year iv which reach IS
yeah ABC Service vvd Flnt
Eligible la Refve" Age et
Retlremevt Yean From
Curreat Dah
1 2002-03 ]0 5
2 2003-04 69 6
3 300]-08 52 10
4 2009-10 ]2 12
8 2011-12 59 14
6 2019-20 50 22
o zozo-v so v
'Does no[ ivclude dose emPloYen hi d after Jmuary 1, 1998
"Full service or early refirement wlUChevm occurs fiat
a:\abcempsdoc
JWy 30, 1998