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HomeMy WebLinkAboutAgenda - 09-14-2010 - 3ORANGE COUNTY BOARD OF COMMISSIONERS • ACTION AGENDA ITEM ABSTRACT Meeting Date: September 14, 2010 Action Agenda Item No. ~_ SUBJECT• Employee Benefits Preliminary Recommendations and Update DEPARTMENT: Human Resources PUBLIC HEARING: (YIN) No ATTACHMENT(S): 1. The Impact of Health Care Reform on Orange County 2. Health Insurance Overview 3. Comparison of Fully-Insured vs. Self- Insured Health Care Coverage 4. Dental Insurance Overview 5. Flexible Spending Account Overview 6. Supplemental Benefits Overview 7. Leave Accruals Overview INFORMATION CONTACT: Michael McGinnis, HR Director, 245- 2552 Diane Shepherd, Benefits Manager, 245-2558 Clarence Grier, Financial Services Director, 245-2453 • PURPOSE: To provide the Board with an update on employee benefits and background information related to 2011 employee benefits renewal and leave accruals. BACKGROUND: The County provides permanent employees with an attractive and excellent comprehensive benefits plan including health, dental, life insurance, an employee assistance program, flexible compensation plan, supplemental retirement plans, and paid leave to permanent employees. For the past two years economic stresses have significantly challenged Orange County's ability to continue to maintain the level of benefits expected by our employees. In response, the County implemented a number of personnel services cost saving reduction programs, including suspension of the County 401(k) contribution to permanent employees, no salary increases (Merit or COLA), voluntary furloughs, instituted a hiring freeze and eliminated many vacant positions. Through these cost saving programs and cutting costs across the organization, the County has been able to retain all permanent employees. As the County reduces its total employee base at the same time that demand for County services is increasing, it is important to review ways to demonstrate the County's commitment to employees without significant increases in cost. The County benefits package helps attract and retain employees. Employees have shown their willingness to engage in healthy, or healthier, activities to keep health insurance benefits at • current levels and minimize their costs, as demonstrated by the 85% of employees who completed the Health Assessment between October 2009 and March 2010. Additionally, throughout 2010, the County held several successful wellness challenges, employee walking events, and a well attended Wellness/Employee Appreciation Day. Over 200 employees 2 attended group meetings to learn more about their benefits and how individual actions have an impact on the cost of health insurance. Human Resources also produced Wellness Weekly emails to provide details about benefits, county employees' health and regulatory communications. Articles in Orange Alive and discussions with employees and department directors further informed employees on how to use their health care most effectively. Staff was involved in presentations and discussions throughout the year with the Employee Relations Consortium (ERC) and its Pay and Benefits Committee to solicit their opinions regarding employee benefits. Both external and internal changes will affect employee benefits in 2011 more than in the past: Health Care Reform Legislation of 2010 National Health Care Reform was enacted in March 2010, with different elements becoming effective immediately and others in the next few years. Attachment 1 outlines the impact of Health Care Reform on the Orange County health care plans. Because the County's health insurance already provides many of the benefits which are mandated for employers, very few changes will be required immediately. Of benefit to Orange County, Health Care Reform will provide a benefit to Orange County by providing a reimbursement for 80% of certain medical costs through the Early Retiree Reimbursement Program. Reimbursement is available for claims beginning June 1, 2010 for pre-65 retirees covered by the County Health Plan, and must be used to offset actual increases in the cost of health insurance. Based on the County's past claims, it is estimated that the County may be eligible to receive approximately $150,000 over the next 18 months. Staff is preparing the application for this program. Broker Services To assist the County in plan design and cost containment measures related to benefits for 2011 the County decided to utilize the services of a benefits consultant. Mark III was selected after evaluating three brokers because of several factors including their extensive experience with local governments. They have agreed to provide these services at no consultant fees for 2011. Any compensation for providing these services for the first year will be derived from the potential enrollment of voluntary benefits as outlined in Attachment 6 below. Future fees, based on number of employees, will not exceed $2.00 per employee per month (approximately $20,000). The savings to our health care plan costs is expected to exceed that of their services, and will be particularly valuable as the County considers and possible implementation of aself-funded health insurance plan,. They will assist with supplemental benefits to County employees, assist with the integration of claims information with plan design and wellness activities, and provide Open Enrollment services. 2011 Benefit Plans Moving forward with plan implementation for 2011, the following benefits are being considered: C7 • 1. Health Insurance The County provides two fully-insured health insurance plans for employees, and pays the employee portion of coverage, as well as a subsidy for dependent coverage. An overview of the current plans, plan participation, and initial recommendations are described in Attachment 2. The County received 2011 renewal rates from the North Carolina Association of County Commissioners (NCACC) for our two fully insured health insurance plans at a total increase of 6.5%. This amount is within the 7% increase budgeted for FY 2010-11. 3 Renewal information, including a potential self-funding option, is provided on Attachment 3, • which also includes a comparison of fully-insured funding vs. self-insured funding. Staff is closely analyzing potential cost savings of self funding and will provide a recommendation shortly. The County has budgeted $6,338,000 for health insurance in Fiscal Year 2010-11. 2. Dental Insurance The County provides aself-insured dental plan through Delta Dental of North Carolina. The County pays all costs for employee coverage: claims and an administrative fee to Delta Dental. Dental claims are paid according to a Table of Allowances (TOA) unique to Orange County. In both 2009 and 2010, the County increased its levels of reimbursement for claims. The County has budgeted $251,600 for dental insurance in Fiscal Year 2010-11. An overview of the dental plan and suggested enhancements are shown on Attachment 4. 3. Flexible Compensation Plan The County provides a Section 125 Flexible Compensation Plan administered by Tucker Administrators. Attachment 5 shows participation and required changes for the Plan Year beginning December 1, 2010. This Plan consists of a) tax sheltering of health and dental premiums and b) two Flexible Spending Accounts (a medical spending account and dependent/child care spending account). The Spending Accounts enable employees to contribute money to a separate account. Employees save money because no income or Social Security taxes are deducted from on contributions made to the Flexible Spending Account(s),. The County pays the administrative costs when employees choose to contribute to a Flexible Spending Account. The County has budgeted $15,600 for these administrative costs in Fiscal Year 2010-11. As part of their services, Mark III will be assuming these administrative costs. • 4. Em to ee Assistance Pro ram EAP P Y 9 ~ ) Magellan Behavioral Health provides the County's EAP for County employees and their dependents. The EAP provides several services including confidential assessment and counseling services, 24/7 emergency services, and legal consultation. The EAP is a complement to services provided through the County Health Plan at no cost to employees or their dependents. Both employees and the County save when employees use the EAP instead of the County health insurance. We requested and have received a two year contract renewal, January 1, 2011-December 31, 2012 at the same rate as the 2009-2010 contract. The County has budgeted $15,500 for the Employee Assistance Program in Fiscal Year 2010-11. 5. Life/Accidental Death and Dismemberment Insurance The County provides an employer-paid life insurance benefit at the employee's annual salary (rounded to the next thousand dollars) with a maximum benefit of $50,000. Our three-year contract with MetLife ends December 2010. We successfully negotiated a new three year contract beginning January 2011 to December 2013 at the same cost (22.5 cents for every $1,000 of coverage for life and accidental death and dismemberment insurance) as the current contract. Employees are able to purchase additional term life insurance through this Plan. The plan continues to be administered through Mark III Employee Benefits. The County has budgeted $96,600 for health insurance in Fiscal Year 2010-11. • 6. Supplemental Benefits Orange County allows employees to purchase supplemental insurance benefits such as short term disability, cancer and hospitalization insurance through payroll deduction. Attachment 6 4 provides utilization information and initial suggestions related to enhancing County supplemental insurance benefits. • 7. Employee Leave Permanent, full-time County employees are currently provided leave in the following manner: T e of Leave Accrual Rate Sick Leave 8 hours er month throu hout em to ment Vacation Leave Monthly accrual based on years of service for each month the employee is in a status for'/2 of the month, ran in from 96 to 230.4 hours a ear Petty Leave 1.17 hours (70 minutes) per month; unused leave dissolves on June 30 of each ear Personal Leave 2 days per year received in January; unused leave dissolves on December 31 of each ear rorated for new em to ees based on 6 months As the County continues to move forward with automated time-keeping and self service programs, changes to leave accruals are recommended in order to increase efficiencies. These changes, as well as a summary of leave accruals provided by other. jurisdictions are shown in Attachment 7. Employee salaries are budgeted based on regularly scheduled work hours, regardless of whether that salary is for actual work, holidays, or paid leave. Only when employees separate from employment and are paid for vacation accruals (to a maximum of 240 hours) do the actual hours accrued become an expense to the County. • Employee benefits and compensation account for a large portion of the cost of providing services to the public. A key factor to employee retention is that the county remain competitive in employee compensation and benefits while also remaining aware of both current and past employment benefit expenses upon budget. Additionally, in establishing a benefit there must be a consideration of the financial impacts now, and the sustainability of such benefit going forward. Providing a benefit and then withdrawing it has substantial negative influences on employee morale. FINANCIAL IMPACT: There is no financial impact to this discussion. RECOMMENDATION(S): The Manager recommends that the Board discuss the update and background information related to employee benefits. Specific recommendations for consideration beginning January 2011 are that: • Staff research- the feasibility of changing health insurance funding from Fully-Insured to Self-Insured; • The County contribution to health insurance continues at current levels (100% for employee coverage; 52% subsidy for dependents, based on the lower cost plan) • Reimbursement rates increase for Dental Claims; • Staff research vendors for Supplemental Benefits; and • Current petty, personal, and vacation leave accruals be combined into one leave type; this combined leave is credited on a bi-weekly rather than monthly basis; and minimum • leave usage requirements end. 5 Attachment 1 Page • THE IMPACT OF HEALTH CARE REFORM ON ORANGE COUNTY Recent National legislation has made significant changes to the way employers administer health insurance, but will have minimal impact on Orange County in the next few years. The chart below shows the impact of the changes Health Care Reform (HCR) will have on Orange County employees and retirees for the next eighteen months. • Chan a in Le islation How Oran a Coun Will Be Affected Dependent coverage allowed for adult Dependents up to age 26, regardless of dependent children up to age 26. The student status, have been eligible to remain only exception is if the child is not on our health insurance since January eligible to enroll in other employer- 2010. Beginning January 2011, the provided coverage. definition of dependent will include married children er HCR. Elimination of pre-existing condition No impact; already part of our plan. exclusions for children under a e 19 Elimination of coverage rescissions No impact; already part of our plan. (cancellation of coverage) after someone has submitted medical claims. Elimination of lifetime maximum No impact; already part of our plan. covera a limits. Requires preventive care benefits be No impact; already part of our plan. rovided. Requires time and a private space be Effective immediately. Minimal impact; provided to nursing employees. Applies mothers are not required to be paid for this to FLSA non-exem t em to ees. time. Over the Counter (OTC) medications Our plan for 2011 will be changed to reflect require prescription to be eligible under this. Flexible S endin Account W2 for 2011 must report the value of 2011 W2s, issued in 2012, must be revised health covera a to include value of health insurance Provide Health Insurance to ALL Reduce temporary staffing hours to avoid employees working 30 hours or more a penalties week (not just permanent employees) effective 2014 A temporary, retiree health subsidy (Early Retiree Reimbursement Program) will be available to the County for claims beginning June 2010 for retirees age 55 or older who are not eligible for coverage under Medicare. Reimbursement is for 80% of health claims (medical, surgical, hospital, prescription drug and others to be defined) if they are. between $15,000 and $90,000. • Staff is working with NCACC and CIGNA to ensure the County can take advantage of this subsidy. • Attachment 2 HEALTH INSURANCE OVERVIEW • Page Two health. plans are contracted through the NCACC Health Insurance Trust and administered by CIGNA: a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO). Because of the higher coverage level, the cost of the HMO is higher than the PPO HMO PPO in network PPO out of network Office Visits (Primary $15 $15 70% after deductible Care of $500 is met Office Visits $30 $30 70% after deductible S ecialist of $500 is met Emergency Room Co- $150 $150 $150; 70% after Pay deductible if not a true emer enc Deductible $250-Applies to all $250--Applies to all $500--Applies to all other services, other services, services excludin lab work excludin lab work Co-Insurance None 10% up to 30%, up to $1,000/ ear $2,000/ ear Out of Network No Yes Yes Providers Allowed Individual Premium, effective Jan 1, 2011 $531.56 $509.14 Initial Renewal Total Family Premium, effective Jan 1, 2011 (County $1,594.66 $1,527.44 subsidizes at same rate for both tans Orange County health insurance premiums have doubled between 2002 and 2010. The current number of employees enrolled in each plan, past rate changes, and past plan changes to employee health insurance are shown below. • Attachment 2 Page • HEALTH INSURANCE OVERVIEW Health Plan Number Enrolled Total Active Retirees Employees Open Access Plus In-Network Co- Pay (HMO) 912 789 123 Open Access Plus Co-Pay (PPO) 125 110 15 The County currently pays 100% of the monthly premium for individual coverage for both the HMO and PPO plans. The County also subsidizes the premium cost for the employee's dependent coverage at 52%, based on the lower priced plan (which is the PPO plan). This practice was established several years ago to provide affordable and thus, accessible health insurance coverage for dependents (spouse, domestic partner, and/or children) to employees. This is particularly attractive to lower salaried employees for whom dependent health insurance coverage is a significant percentage of salary. Continuation of this level of subsidy maintains a "family friendly" feature that is highly valued by the 40% of employees with dependent coverage. • Employees with dependent coverage will see increases in their premiums this year. For 2010, the national health care trend (percentage increase in claims costs that actuaries expect to see in the next 12-month period) continues to increase at a rate of 10% over the previous year; Because of lower claims experience over the last 18 months the Orange County increase was trended to be closer to 7%. Based on this trending the FY 2010-11 budget included a 7% increase for health insurance. The renewal negotiations with NCACC are currently indicating that the rate for the same health insurance plans, with no plan design changes, will result. in an overall increase of 6.5% effective January 2011. Staff is also exploring self-insurance as an alternative to fully-insured funding for health insurance for consideration for 2011 which may also reduce the amount of the increase as well as increase cost containment measures. Staff has developed several renewal options, which each enhance current employee benefits: Renewal: The County pays the employee premium as in previous years, for both plans. Both HMO and PPO plan designs are renewed at the same level as 2010 with these enhancements: a) Coverage for hearing aids b) Coverage for dependents up to age 26 regardless of student or marital status as specified by health care reform legislation Option 2: The benefits are the same as in the Renewal; however, the change to self-insured funding reduces the overall cost. We are still discussing this option and present a sample • range below. • Attachment 2 HEALTH INSURANCE OVERVIEW Rate Changes The chart below lists past increases implemented by the NCACC Health Insurance Trust: Page • 1 Calendar % Monthly Cost of Monthly Increase in Coverage Changes to the Year Increase in Employee Only Employee Only Plan total Coverage coverage over previous premium year rate 2010 2.5% $499.00 (HMO) $13.12 $0 generics, increase in number of therapy visits, Minute Clinics 2009 7.9% $485.88 (HMO) $40.82 Addition of Health Advisor ro ram 2008 9.7% $445.06 (HMO) $39.42 Increased office visit co-pays $10/$20 to $15/$30 2007 1.9% $405.64 $7.40 2006 16.5% $398.24 $55.47 $250 deductible added to HMO 2005 -3.6% $342.77 -$12.84 2004 13.8% $355.61 $43.17 Increase in ER co-pay ($100 to $150 2003 25.0% $312.44 $62.50 2002 8.0% $249.94 $18.41 2001 18.9% $231.53 • Attachment 3 Page COMPARISON OF FULLY-INSURED VS. SELF-INSURED HEALTH COVERAGE Current Renewal Option 2 Estimated (Fully-Insured) Range* Self-Insured HMO $499 $532 $490-$603 PPO $478 $509 $473-$582 INDIVIDUAL MONTHLY PREMIUM COST: *Because the analysis for self-funding has not been completed, the table shows the range provided by the NCACC in the 2011 renewal. Since future claims costs are unknown, the final premiums will be determined by the risk the County is willing to take and the cost of stop loss insurance Orange County is currently fully-insured for health insurance. The County pays a set premium per member based on coverage level, and those premiums cover administrative costs, medical and prescription claims, and additional stop loss insurance. The County has no additional • liability; however, any portion of premium not spent for claims or administrative expenses remains with the NCACC. Away to reduce overall costs of health insurance is to change from fully-insured to self-insured coverage, in which case we would pay only the cost of actual claims plus an administrative fee per subscriber to a third party administrator, such as the NCACC. With the assistance of the NCACC and benefits broker Mark III, we are exploring the cost benefit of changing to aself-funded plan. C, Self-Insured Full Insured current fundin Lower, administrative charges and generally Pay fixed premiums regardless of claims lower costs as employer pays only the administrative costs, claims, and stop loss insurance for hi h claims Better control of cash flow-claims payment is Predictable costs as premiums are tied to the made onl when a claim is incurred. number of em to ees Full risks of monthly claims fluctuation are All risks are borne by the NCACC borne b the Count Orange County continues to benefit from No change CIGNA rovider discounts Orange County takes advantage of the savings County receives no fiscal advantage in a year to develop programs for our employees, not with low claims until the next year's renewal the entire pool, resulting in reduced claims over time. Not subject to all government mandates as full -insured tans Attachment 4 • DENTAL INSURANCE OVERVIEW Page Over the past few years we have been systematically increasing claim reimbursements to employees, rather than making a dramatic shift in costs. In 2009, Orange County increased reimbursements for Diagnostic and Preventive Services. In 2010, reimbursements for Basic Restorative Services (e.g., fillings) were increased. The reimbursements for major restorative services (crowns), Endodontics (e.g., root canals), Periodontics (e.g., gum disease), and extractions still lag. are reimbursed at 50%, a rate consistent with other employers. Because of the difference between County reimbursements and actual charges, employees pay an increasingly higher portion of charges for these services. Staff reviewed dental claims and determined that reimbursements for Endodontics, Periodontics, and Oral Surgery can be increased with little impact to the Dental Fund balance. Reimbursements for Major Restorative Services can be increased by 15%. At the end of FY 2009-10, the dental plan's fund balance was in excess of $300,000, and the fund continues to be robust. The administrative fee of $2.25 will increase to $2.55 per member per month (a total increase of $2,200/year) effective January 1, 2011. The fund will be able to absorb this budgeted increase of $.23 per employee per month as well as the anticipated increase in claims. • Su ested Plan Changes: gg • Increase reimbursement for Endodontics, Periodontics, and Oral Surgery to Delta Dental rates • Increase Major Services by 15% By making these two changes, the County can expect an increase of $38,000-$45,000 in claims over a 12 month period.. • 10 • Attachment 5 FLEXIBLE SPENDING ACCOUNT OVERVIEW Page Employees may now contribute a maximum of $3,000 to the Medical Spending Account and up to $5,000 to the Dependent/Child Care Spending Account each plan year. Participation nearly doubled since 2008, due largely to the addition of a pre-paid debit card for the Medical Spending Account in 2008. Number of Participating Employees Type of Account .2008 2009 2010 Child Care Spending 12 12 12 Account Medical Spending 95 138 178 Account Health Care Reform will impact the medical spending account when over-the-counter medications will require a prescription effective January 1, 2011. • As part of the agreement with Mark III, administrative costs for the Flexible Spending Accounts will be waived, for a cost savings of approximately $10,000. No plan design changes are suggested for 2011. 11 • Attachment 6 SUPPLEMENTAL BENEFITS OVERVIEW • Page County employees have been able to purchase income protection insurance through Colonial Life. No contract exists with Colonial Life. In 2010 we increased employee access to Colonial representatives, and employees increased participation by enrolling in 31 additional policies for all types of voluntary benefits. This increased participation was much lower than anticipated, with fewer than 12% of employees enrolling in short term disability policies. Staff suggests that. these benefits can be better communicated to employees through the use of another vendor. We are working with Mark III to determine the best products and communication plan to inform County employees regarding the value of supplemental benefits. We anticipate a change in vendors so that employees will be able to enroll in identical or better coverage at the same or lower cost effective January 2011. Number of Supplemental Benefits Policies Colonial Product 2009 2010 Short Term Disabilit 62 91 Cancer Insurance 16 20 Life Insurance Universal Life 4 2 Life Insurance Term Life 16 9 Accident Insurance 9 16 Critical Illness Insurance 1 1 Hos italization 2 2 Total Policies 110 141 • 12 Attachment 7 Page • LEAVE ACCRUALS OVERVIEW Based on Hill, Chesson and Woody Survey January 2010 (supplemented by other data) • • Current Vacation OtherLeave`/Year Accruals Da s Minimum Maximum Accrual accrual 3 days Family Leave, 2 Personal Leave Orange days, 14 hours Petty Leave, Civil Leave, 3 Count da s Funeral Leave 12 28.8 Cha el Hill 3 da s funeral leave 12 26 12 hours petty leave, 12 weeks of "Special Ralei h Leave" 12 24 Hillsborou h 3 da s funeral leave 12 26 OWASA 5 da s funeral leave er event 12 27 Carrboro 5 da s funeral leave 12 26 Ca 10 24 Civil leave for jury duty, military, educational Garner leave 10 5 days funeral leave, Floating holiday, Durham Management Leave for exempt ees; Volunteer Cit Leave, Parental Leave 12 26 Civil leave, administrative leave investigations, Durham Management Leave for exempt ees, Funeral Count leave 11 23.66 A ex Civil leave, milita leave 10 24 Holl S rin s 3 da s funeral leave 10 24 Fuquay- 4 hours parental leave; 24 hours/year for Varina funeral leave 10 20 Wake Forest 3 da s funeral leave 12 30 Wake Count Educational involvement 12 26 Granville Educational involvement, civil, military, Count educational 11.25 24.75 Morrisville 12 26 24 hours Funeral Leave per death, Parental Varies by Pinehurst Leave shift Guilford 4 hours Parental Leave, Management Leave Count for exem tees 12 24 13 Attachment 7 Page • LEAVE ACCRUALS OVERVIEW Suggested Changes: 1. Staff recommends combining petty, personal and vacation leave effective January 1, 2011 into a new category of Annual Leave. Currently, Personal and Petty leave accrue and must be used within two different time frames. With Annual Leave, no accruals will be lost; however, any leave exceeding 240 hours will continue to "roll" into sick leave as of January 31 each year. 2. Staff recommends leave accrue on a bi-weekly basis, during each pay period an employee works, rather than each month when the employee is in pay status for at least one-half the month. Accruals are currently tracked by departments on a monthly basis to ensure employees earn leave appropriately. This will be administratively burdensome when the County transitions to a bi-weekly timekeeping system because many pay periods overlap two months. The County timekeeping system will be able to automatically calculate leave accruals each pay period without any manual calculations. 3. Employees must use vacation or sick leave in increments of 30 minutes or more, Personal Leave in increments of 2 hours or more, and Petty Leave in increments of 15 minutes or more. Staff suggests that all minimum usages be eliminated so employees can use leave in any increment. • Adding 29.9 total hours a year, or 1.15 hours for 26 pay periods, to the existing vacation accrual rates, employees will begin earning the eliminated Personal and Petty Leave along with their current vacation leave on a bi-weekly basis. The chart below shows current and potential accruals. (Please note that 30 hours is not equally divisible by 26 pay periods.) There would be no change to the 240 maximum hours for annual leave for rollover to sick leave or payout at separation. Years of Orange County Service Current Accruals Per Year New Accruals Per Year Per Bi- Weekly Pay Period Less than 2 96.00 125.90 4.84 2 but less than 5 115.20 145.10 5.58 5 but less than 10 144.00 173.90 6.69 10 but less than 15 172.80 202.70 7.80 15 but less than 20 201.60 231.50 8.90 20 or more 230.40 260.30 10.01 •