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HomeMy WebLinkAboutAgenda - 06-19-2012 - 7bORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 19, 2012 Action Agenda Item No. --7_ % SUBJECT: Amendment to the Orange County Personnel Ordinance Article IV, Section 28 -36, Health Insurance DEPARTMENT: Human Resources PUBLIC HEARING: (YIN) No ATTACHMENT(S): 1. Current Orange County Personnel Ordinance Effective with the FY 2011 -12 Budget: Article IV, Section 28 -36 2. Amended Orange County Personnel Ordinance Effective with the FY 2012 -13 Budget: Article IV, Section 28 -36 3. Additional Employee and Retiree Data INFORMATION CONTACT: Sharon Goode Laisure, Interim Human Resources Director, 245 -2552 Annette Moore, Staff Attorney, 245 -2317 Diane Shepherd, Benefits Manager, 245- 2558 PURPOSE: To consider and approve an amendment to the Orange County Personnel Ordinance Article IV, Section 28 -36, Health Insurance regarding retiree health coverage for employees hired on or after July 1, 2012. BACKGROUND: Orange County provides health insurance to retirees who have completed a specific number of years of Orange County service, described in the current Personnel Ordinance, Attachment 1. At age 65, retirees enroll in Medicare and leave the County's group health insurance. The cost for Medicare supplements is typically less than 50% of the cost of the group health premium, but the County will pay up to 100% of the cost of the group health premium for Medicare supplements. The combination of increased health care costs, greater longevity among retirees, and higher numbers of retirees has resulted in a County liability for unfunded future retiree health insurance of almost $63 million. Without intervention, the cost of retiree health benefits will soon exceed the cost of active employee health care as more employees retire AND the cost of the benefits increases. In 2012, the Board of County Commissioners discussed retiree health insurance liability at the March 1, April 24, and June 7 budget work sessions. In 2008, the Personnel Ordinance was amended to stop subsidizing the cost of retirees' dependent health insurance. The current Personnel Ordinance (Attachment 1) includes highlighting of the areas that are proposed for changes. The amended Personnel Ordinance (Attachment 2) incorporates the proposed changes, which would apply only to employees hired on or after July 1, 2012 and would: o Increase the eligibility requirement from a total of ten years Orange County service to twenty continuous years of Orange County service for a retiree under age 65 retiring with a service retirement; 2 • Increase the eligibility requirement from a total of five years Orange County service to ten continuous years of Orange County service for a retiree age 65 or older OR an employee retiring with a disability retirement; • Reduce the cap on the amount the County will pay for post -65 benefits to 50% of the amount paid for active employees' health insurance (compared to the current 100 %); and • Require any retiree eligible for Medicare due to disability or age to enroll in Medicare Parts A and B and end enrollment in the County's group health insurance. The average age of Orange County employees is now 45.7, and the average age of retirees is 59.5 years. Attachment 3 shows two charts: 1) the number of Orange County retirees between January 1, 2008 and June 30, 2012, and 2) a comparison of eligible employees under the current and amended requirements. The amended Personnel Ordinance will not affect employees until those hired after July 1, 2012 begin to retire, and the proposed changes will enable the County to demonstrate a commitment to reducing its future liability. FINANCIAL IMPACT: The cost of changing the Personnel Ordinance will have no financial impact until employees hired after July 1, 2012 meet the requirements for retiree health insurance. RECOMMENDATION(S): The County Manager recommends the Board amend the Orange County Personnel Ordinance Article IV, Section 28 -36 as provided in Attachment 2, which would become effective July 1, 2012. 3 Attachment 1 Current Personnel Ordinance Sec. 28 -36. - Health insurance. It is the policy of Orange County to provide permanent employees both full -time and part -time (regularly scheduled at least 20 hours each workweek) with group health insurance. The cost to the employee for group health insurance is determined each year. Employees also have the option, at additional expense, to cover the employee's spouse, dependent child(ren), domestic partner as defined in policy, and /or family. (a) Effective Date. Coverage is effective on the first day of the month following the date of employment. (b) Retiree Health Insurance. The County provides retiree health insurance and contributes toward the cost of this for eligible employees. a _ , Hasat� east i:en years of. totaLOrange'.County Senr>Pik a permanent employ _- _ (2) Eligibility Period to Elect Participation in Retiree Health Insurance. To participate in retiree health insurance, the eligible retiree must be retiring directly from Orange County and request such participation within 30 calendar days of the last date of employment. (3) Retiree Health Insurance Plans Available. a. For an eligible retiree under age 65: 1. The retiree is covered under one of the County's group health insurance plans. The retiree remains on the County group health insurance plan in which enrolled at retirement. During any subsequent annual enrollment period, the retiree may change to another County health insurance plan as well as add or drop dependents. b. For an eligible retiree age 65 or older: 1. Medicare becomes the primary insurer and the County becomes the secondary insurer. County group health insurance ends. The retiree enrolls in Medicare Part A and Part B and pays the cost. The County provides Medicare supplement insurance, as specified in this Ordinance. (4) County Contribution for Retiree Health Insurance a. Effective July 1, 2008, Orange County will not subsidize the cost of retiree dependent health care for employees hired after July 1, 2008. 91 4 for mdividual/dependent coverage for current emgtoyees The retiree pays the cost for any group health insurance or Medicare supplement coverage for the retiree or the dependent costing more than the County contribution. If the retiree waives coverage, the County provides no cash payment in lieu of such coverage. (5) Payment of Premiums for Which the Retiree Is Responsible. The retiree pays Orange County any required premiums monthly. With appropriate notice, the County terminates coverage when premiums are more than 30 days past due. The health insurance provider bills the retiree directly for any Medicare supplement coverage for a dependent. (6) Dependent Under Age 65 at Death of Eligible Retiree. Upon the death of the retiree enrolled in the County retiree health insurance, the County offers a dependent on group health insurance continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The dependent is eligible for such coverage for up to 36 months (or until attaining age 65) provided the dependent pays the full cost of this coverage. (7) Eligible Retiree Returning to Work in NC Local Government. If the retiree returns to work with another North Carolina Local Government employer in a position which offers group health insurance coverage (whether the employee elects it or not), Orange County cancels the retiree's health insurance coverage through Orange County and such coverage may not be reinstated. (c) COBRA Coverage. Under the Consolidated Omnibus Reconciliation Act (COBRA), Orange County continues health care coverage to persons who would otherwise lose coverage under a health care plan due to specific events provided the employee, covered spouse, domestic partner as defined in policy, and /or dependent child agrees to pay, and pays, the cost of this coverage. (1) When coverage ceases due to termination or reduction in hours of employment, the employee, covered spouse, domestic partner, and /or dependent child is entitled to up to 18 months of coverage. (2) If the employee, covered spouse, domestic partner, or dependent child is determined disabled under Social Security at the time of termination or reduction in hours, he or she is entitled to purchase coverage for up to 29 months. (3) The spouse, domestic partner, or dependent child of an employee is entitled to up to 36 months of coverage if any of the following occurs: a. Death of the covered employee b. Divorce or legal separation of the covered employee from the employee's spouse or termination of a domestic partner relationship C. A covered employee becomes entitled to Medicare benefits A covered dependent is no longer a dependent. (Ord. of 06 -07 -1976, eff. 08 -01 -1976; 09 -16 -1997, Art. IV § 7.0, eff. 09 -01 -1997; 09 -21 -2004, eff. 01 -01 -2005; 06- 24 -2008, eff. 07 -01 -2008) ORD-2012-028 Sec. 28 -36. - Health insurance. Z Attachment 2 It is the policy of Orange County to provide permanent employees both full -time and part-time (regularly scheduled at least 20 hours each workweek) with group health insurance. The cost to the employee for group health insurance is determined each year. Employees also have the option, at additional expense, to cover the employee's spouse, dependent child(ren), domestic partner as defined in this Ordinance ffsl+ey, and /or family. (a) Effective Date. Coverage is effective on the first day of the month following the date of employment. (b) Retiree Health Insurance. The County provides retiree health insurance and contributes toward the cost of this for eligible employees. (1) Employees Eligible. a. A Permanent Employee €l+gibil+ty employed on or before June 30, 2012 is eligible for retiree health insurance if he or she retires from Orange County and meets one of the following criteria: 1. Has at least ten years of total Orange County Service as a permanent employee. 2. Is age 65 or older and has at least five years of total Orange County Service as a permanent employee. 3. Is retiring on a Disability Retirement and has at least five years of total Orange County Service as a permanent employee. b. A Permanent Employee employed on or after July 1, 2012 is eligible for retiree health insurance if he or she retires from Orange County and meets one of the following criteria: 1. Has at least twenty consecutive years of Orange County Service as a permanent employee. 2. Is age 65 or older and has at least ten consecutive Years of Orange County Service as a permanent employee. 3. Is retiring on a Disability Retirement and has at least ten consecutive years of Orange County Service as a permanent employee. (2) Eligibility Period to Elect Participation in Retiree Health Insurance. To participate in retiree health insurance, the eligible retiree must be retiring directly from Orange County and request such participation within 30 calendar days of the last date of employment. (3) Retiree Health Insurance Plans Available a. For an eligible retiree under age 65.- 4, The retiree is covered under one of the County's group health insurance plans. The retiree remains on the County group health insurance plan in which enrolled at retirement. During any subsequent annual enrollment period, the retiree may change to another County health insurance plan as well as add or drop dependents. b. For any eligible retiree eligible for Medicare due to age 65 OF elder or disability. 4—Medicare becomes the primary insurer and the County becomes the secondary insurer. County group health insurance ends. The retiree enrolls in Medicare Part A and Part B and pays the cost. The County provides Medicare supplement hospitalization and provider insurance and prescription coverage, as specified in this Ordinance. (4) County Contribution for Retiree Health Insurance a. Effective July 1, 2008, Orange County will not subsidize the cost of retiree dependent health care for employees hired after July 1, 2008. b. For an eligible retiree under Section (b)(1)a.1. with ten yeaF6 of total , the County subsidizes the cost of retiree health insurance as follows: Retiree /Dependent Health Plan Type Retiree Dependent Supplement` Supplement* Retiree under 65 Group Health Plan 100% • Dependent under Group Health Plan 52% 65 • Dependent 65 or Medicare Supplement None over Retiree 65 and over Medicare Supplement 100% • Dependent under Group Health Plan None 65 • Dependent 65 or Medicare Supplement None over c. For an eligible retiree, under Sections (b)(1)a.2 and (b)(1)a.3 age 65 e FetiFing on a disability FetiremeRt, with five yeaFs, but less than ten yea the County subsidizes the cost of retiree health insurance as follows: Retiree /Dependent Health Plan Type Retiree Dependent Supplement" Supplement* Retiree under age 65 Group Health Plan 50% • Dependent under Group Health Plan 26% 65 • Dependent 65 or Medicare Supplement None over Retiree 65 or over Medicare Supplement 50% • Dependent under Group Health Plan None 65 • Dependent 65 or Medicare Supplement None over 8 d. For an eligible retiree under Section (b)(1)b the County subsidizes the cost of retiree health insurance as follows: Retiree Health Plan Type Retiree Supplement* Dependent Supplement" Retiree under 65 Group Health Plan 100% None Retiree 65 and over or Medicare Supplement 100% None Medicare eligible Retiree under 65 Prescription Coverage Disability Retirement under age 65 between Group Health Plan 50% None 10 -20 years of total Orange County service Retiree 65 and over Medicare Supplement 50% None with between 10 -20 Prescription Coverage years of total Orange County service *The County pays the percentage shown of the cost not to exceed the amount it contributes for individual /dependent coverage for current employees. For employees hired on or after July 1 2012 the County cost may not exceed 50% of the amount it contributes for individual /dependent coverage for current employees. The retiree pays the cost for any group health insurance or Medicare supplement coverage for the retiree or the dependent costing more than the County contribution. If the retiree waives coverage, the County provides no cash payment in lieu of such coverage. (5) Payment of Premiums for Which the Retiree is Responsible. The retiree pays Orange County any required premiums monthly. With appropriate notice, the County terminates coverage when premiums are more than 30 days past due. The health insurance provider bills the retiree directly for any Medicare supplement coverage for a dependent. (6) Dependent Under Age 65 at Death of Eligible Retiree. Upon the death of the retiree enrolled in the County retiree health insurance, the County offers a dependent on group health insurance continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The dependent is eligible for such coverage for up to 36 months (or until attaining age 65) provided the dependent pays the full cost of this coverage. (7) Eligible Retiree Returning to Work in NC Local Government. If the retiree returns to work with another North Carolina Local Government employer in a position which offers group health insurance coverage (whether the employee 9 elects it or not), Orange County cancels the retiree's health insurance coverage through Orange County and such coverage may not be reinstated. (c) COBRA Coverage. Under the Consolidated Omnibus Reconciliation Act (COBRA), Orange County continues health care coverage to persons who would otherwise lose coverage under a health care plan due to specific events provided the employee, covered spouse, domestic partner �'� defined in may, and /or dependent child agrees to pay, and pays, the cost of this coverage. (1) When coverage ceases due to termination or reduction in hours of employment, the employee, covered spouse, domestic partner, and /or dependent child is entitled to up to 18 months of coverage. (2) If the employee, covered spouse, domestic partner, or dependent child is determined disabled under Social Security at the time of termination or reduction in hours, he or she is entitled to purchase coverage for up to 29 months. (3) The spouse, domestic partner, or dependent child of an employee is entitled to up to 36 months of coverage if any of the following occurs: a. Death of the covered employee b. Divorce or legal separation of the covered employee from the employee's spouse or termination of a domestic partner relationship c. A covered employee becomes entitled to Medicare benefits d. A covered dependent is no longer a dependent. (Ord. of 06 -07 -1976, eff. 08 -01 -1976; 09 -16 -1997, Art. IV § 7.0, eff. 09 -01 -1997; 09 -21 -2004, eff. 01 -01 -2005; 06 -24- 2008, eff. 07 -01 -2008) 10 Attachment 3 Additional Employee and Retiree Data Number of Orange County Retirees by Year Year of Retirement # of Retirees 2012 7 (as of 6/30/2012 2011 20 2010 26 2009 50 2008 23 2007 9 2006 6 Comparison of Employees Meeting Current and Future Eligibility for Retiree Health Benefits 10 year 20 years total years continuous of service service Number of Employees Eligible 91 64 to Retire