HomeMy WebLinkAboutAgenda CC 07.09.2013 WorkshopNotice of Meeting of the
Governing Body of the
City of Georgetown, Texas
JULY 9, 2013
The Georgetown City Council will meet on JULY 9, 2013 at 3:00 P.M. at the Council Chambers, at 101 E.
7th St., Georgetown, TX
The City of Georgetown is committed to compliance with the Americans with Disabilities Act (ADA). If you
require assistance in participating at a public meeting due to a disability, as defined under the ADA,
reasonable assistance, adaptations, or accommodations will be provided upon request. Please contact the City
Secretary's Office, least four (4) days prior to the scheduled meeting date, at (512) 930-3652 or City Hall at
113 East 8th Street for additional information; TTY users route through Relay Texas at 711.
Policy Development/Review Workshop -
A Update on the implementation of the City’s proposed Self-insurance Plan -- Micki Rundell, Chief
Financial Officer
B Presentation of the 5 Year City of Excellence Business Plan for discussion and possible direction to
staff -- Paul E. Brandenburg, City Manager and Micki Rundell, Chief Financial Officer
Executive Session
In compliance with the Open Meetings Act, Chapter 551, Government Code, Vernon's Texas Codes,
Annotated, the items listed below will be discussed in closed session and are subject to action in the regular
session.
C Sec. 551.071: Consultation with Attorney
- Advice from attorney about pending or contemplated litigation and other matters on which the
attorney has a duty to advise the City Council, including agenda items
- Rivery Update
- LCRA Update
- CTSUD Update
- Discussion regarding approval of a settlement agreement for the DNT Construction Claim on the SE1
Arterial Project
Sec 551.074: Personnel Matters
- Status of the City Attorney position
Adjournment
Certificate of Posting
I, Jessica Brettle, City Secretary for the City of Georgetown, Texas, do hereby certify that this Notice of
Meeting was posted at City Hall, 113 E. 8th Street, a place readily accessible to the general public at all
times, on the _____ day of _________________, 2013, at __________, and remained so posted for at least
72 continuous hours preceding the scheduled time of said meeting.
__________________________________
Jessica Brettle, City Secretary
City of Georgetown, Texas
July 9, 2013
SUBJECT:
Update on the implementation of the City’s proposed Self-insurance Plan -- Micki Rundell, Chief Financial
Officer
ITEM SUMMARY:
On May 22, BeneTex Group, the City’s benefit consultant and City staff presented a workshop on the option
for the City to move towards a self-funded insurance program beginning in January 2014. That workshop
outlined the mechanics of self-insurance and identified the advantages and disadvantages of such a
program. Council recommended that staff move forward in developing an implementation plan for the
2013/14 Annual Budget.
This workshop will review the key elements and mechanics of self-insurance, as well as, present an
implementation plan for adopting a self-funded program in the upcoming budget.
As a reminder, the City of Georgetown, like many other employers, has experienced fluctuations in
healthcare costs and continual changes in the networks of doctors available to employees over the past 5
years. Currently, the City pays over $2.8M in premiums for its current, fully insured plan. The cost for
renewal under the current policy won’t be known until September 2013, and could be as high as 20%, 30%
or even higher, in light of mandated increases related to the new Health Care Reform Act. Staff and the
consultants believe that a self-funded program would allow the City better control of its costs going forward,
while providing a better, more consistent level of service to our employees.
Staff recommends approving the implementation plan as an action item on the regular July 9, 2013 Council
Agenda, and approve the inclusion of a 25% increase in health insurance costs and related staff position
included in the 2013/14 Annual Budget. This item was reviewed and recommended by the General
Government and Finance Advisory Board (GGAF) at their July 26 meeting.
FINANCIAL IMPACT:
In a self-funded or self-insured plan, the City will assume the financial risk for providing healthcare benefits
to its employees. In practical terms, the City will pay for claims out-of-pocket as they are presented instead
of paying a pre-determined premium to an insurance carrier for a fully insured plan. “Stop-loss” insurance
would then be in place to cover claims considered catastrophic in nature, thus capping the claims exposure.
The 2013/14 Annual Budget includes a 25% increase for health insurance. These funds, along with
employee contributions will be set aside in a new Internal Service Fund for paying claims and managing
costs. If a deficit balance is realized at the end of the fiscal year, the City will allocate funding from other
sources and build its Self-Insurance reserve over a 3 year period if necessary. Due to the daily/weekly claims
and cash reconcilement, a dedicated accounting specialist is requested in the 2013/14 Annual Budget to
manage this process and related internal workload. Added training in HHEPA and other reporting
requirements will also be necessary.
SUBMITTED BY:
ATTACHMENTS:
Self Insurance Presentation
Cover Memo
Item # A
6/28/2013
1
City of Georgetown
Self-Insurance
Implementation Plan
City Council Presentation
July 9, 2013
1
Review of “Self-Insurance”
• City assume all or portion of risk for health
benefits
– City pays claims up to “stop loss policy
deductible”
• City retains funds if claims < than budgeted
• City will customize plan design
2
Attachment number 1 \nPage 1 of 11
Item # A
6/28/2013
2
Self-funded Terms
•Administrative Fee:
– Charged for claims adjudication, billing, eligibility,
customer service, plan document maintenance,
access fees, & managed care
•Setup Fee:
– 1-time charge for input eligibility & benefits for
plan administration
•Expected Claim:
– Total claims underwriter expects in 1policy year
•Actuarially determined from City’s past claims
experience
3
Self-funded Terms (continued)
•Specific Stop Loss Insurance:
– Protects when eligible claims paid during policy
year on any 1 individual exceed specific liability
limit
• City reimbursed by insurance company for amount
exceeding specific deductible
•Aggregate Stop Loss Insurance :
– Equals 125% above expected claims level
• Claims that exceed level reimbursed by Stop Loss
carrier at end of the policy year
• 125% = Aggregate Attachment Factor; percentage
can vary, but 125% is most common
4
Attachment number 1 \nPage 2 of 11
Item # A
6/28/2013
3
Aggregate Stop Loss Insurance
• Protects City from eligible claims that exceed
the annual Aggregate Liability Limit
– Total Liability “CAP” for the entire City
participates
• Claims > then Aggregate Liability Limit reimbursed by
Insurance Carrier
5
Unexpected Claims
• Specific/Individual Stop Loss: Shock Loss
– An abnormally large/unexpected claim
• Severe accident or illness
– Insurance companies build margin into premium to
help offset financial impacts caused by shock loss
• Stop Loss Insurance protects against
excessive claims by limiting risk
– On any individual covered by the Plan
– City reimbursed 100% for any individual who has
met the deductible in remainder of policy year
6
Attachment number 1 \nPage 3 of 11
Item # A
6/28/2013
4
Unexpected Claims
• Aggregate Stop Loss
– Multiple “Shock Loss” claims by individuals
covered by the Plan
– “Caps” potential costs if multiple events occur
7
The amount funded but not reimbursed ($150,000) will
apply toward the Annual Aggregate Deductible.
Example of how a $225,000 claim would be handled:
Employer pays
the deductible
amount:
$150,000 If the individual
Stop Loss
Deductible is
$150,000…
…the Insurance
Company pays the
excess over the
deductible amount:
$75,000
8
Attachment number 1 \nPage 4 of 11
Item # A
6/28/2013
5
Advantages include:
• Federal Tax Savings
– New health care tax doesn’t apply to self-insured
plans
• Savings estimated at $150,000
• State Tax Premium
– Carriers build costs into premium for total funded
plans
• 2% or $60K in savings
• Retention
– Administration less expensive without sacrificing
services
• Ability to customize plans
9
Advantages include:
• Added cash flow
– Potential interest earning on balances
• Reduced margin to the insurance
companies
– Savings now stays with the City
– It’s “our money”
• Ability to make employees better aware of cost
effective health care
• Develop/expand added incentive programs
–Wellness Program Discounts
10
Attachment number 1 \nPage 5 of 11
Item # A
6/28/2013
6
Disadvantages include:
• Risk Assumption
– City assumes risk between anticipated claim
level and Stop Loss level
• Asset Exposure
– City exposed to liability due to legal action
against self-funded plan
• Can be assigned to carrier for fee
• Fiduciary Responsibility
– City is responsible
• Proper accounting and controls are essential
11
Self-Funded Summary
• Provides long-term stability
• Opportunity to control cost & retained savings
• Can customize plan to fit City needs
• Not subject to mandated state & federal taxes
• Not required to cover Essential Health
Benefits mandated by PPACA
• Can bid Stop Loss coverage independently of
provider
– Thus minimizing disruption to employees
12
Attachment number 1 \nPage 6 of 11
Item # A
6/28/2013
7
City of Georgetown
Self Insurance
Implementation Plan
13
Cost Impacts / Issues
• Current year usage high
– Several large claims impact renewal of existing
plan/coverage
• Estimated 20-25% increase anticipated
• Impacts related to PPACA
– Insurance companies are preparing for
implementation in 2014
• Higher medical/administrative costs are anticipated
• “Including” higher margin in renewal rates to offset
potential risks
14
Attachment number 1 \nPage 7 of 11
Item # A
6/28/2013
8
Cost Impacts / New Fees
• Additional mandated fees regardless!
– Patient centered Outcome Research Fee
• $2.00 per member annually
• Funds “best practices”
– Transitional Re-insurance Fee
• $5.25 per month for each individual covered within the
Plan
• If self-funded….
– Fees must be tracked and remitted to government
– Fully funded plans will pass on these through
higher premiums
15
Implementing the Plan
• City budget includes 25% increase in costs
from PY
– Confirms “Self Funded” Plan
• City retains Aetna as plan administrator
– Quote 125% of anticipated claims
• August /September time frame
• Based on historical & actuarial formula
• Network coverage/service rates best
• No disruption for employees
– Aetna will quote Stop Loss
• Can “bid” that element if costs seem higher then
projected 16
Attachment number 1 \nPage 8 of 11
Item # A
6/28/2013
9
Implementing the Plan
Once quotes are received:
• City develops rates / plan features
– Negotiates w/ carrier and determines employee
contribution rates
• Opportunity to set rates to impact behavior
– Possibly higher rates from tobacco users
• September / October time frame
– Contracts with carrier approved by City Council
• Plan effective January 1, 2014
17
Administering the Plan
• Claims / employee issues managed by carrier
– Included in Administrative Fee
– No change in service to employee
• Amount paid is sent to City for reimbursement
– City reconciles payments and wires funds
• Weekly reimbursement
• Cash management
– Additional accounting specialist needed to
manage process
• Also track reimbursement for any Stop Loss claims
18
Attachment number 1 \nPage 9 of 11
Item # A
6/28/2013
10
Funding the Plan
• Both budgeted & employee contributions
recognized in “Self Insurance Fund”
– After January 1
• Depending on usage:
– Fund could run “negative” for FY 2013/14
– Internal funds used to offset
– Cured over 1 to 3 years
• “Sweep” excess from various funds to the Self
Insurance Fund
19
Conclusion
• Health insurance rates will continue to
increase
– No matter if City self-insures or not
• Self-insurance offers City best opportunity to
manage costs while providing highest quality
of service to employees
– Potential savings realized over time
– Stability of carrier/rates
• Recommended by GGAF at their June 26
meeting
20
Attachment number 1 \nPage 10 of 11
Item # A
6/28/2013
11
Next Steps
• Recommend Self-Insurance Plan
– Council Action – affirm implementation plan
– Include funding in 2013/14 Budget
• Including added staff for program processing
• Determine plan administrator - September
– Current provider Aetna – no change for employee
• Prepare Stop Loss Bid - September
• Negotiate rates w/ carrier – September/Oct
• Develop employee rates for 2014
– Open enrollment early November
21
Questions?
22
Attachment number 1 \nPage 11 of 11
Item # A
City of Georgetown, Texas
July 9, 2013
SUBJECT:
Presentation of the 5 Year City of Excellence Business Plan for discussion and possible direction to staff --
Paul E. Brandenburg, City Manager and Micki Rundell, Chief Financial Officer
ITEM SUMMARY:
The workshop will include:
1. Background of City's business and financial planning process
2. Review of City of Excellence and 5 Focus Areas – Economic Development, Public Safety, Signature
Destination, Transportation, and Utilities
3. Review of 2012/13 accomplishments
4. Overview of 5 year financial outlook and assumptions
The 5-year financial plan has been developed as a PLANNING TOOL for the City in forecasting financial
capacity for the period ending 2018. The model includes programs and costs associated with meeting the
Council’s goals and objectives in implementing the City of Excellence through the 5 focus areas identified
by Council at its September 2012 visioning session. Revenues are projected as conservative but
attainable. Uncertain new revenue sources are not included. The purpose of this tool is to identify the funding
gap for Georgetown becoming the “City of Excellence” by 2018. It is not intended to “balance” those out
years.
The City’s 2013/14 Annual Budget is related to this Plan, yet independent of this process. The Budget is
appropriating and managing a single year’s programs and financial costs, whereas, the Fusiness Plan is an
outcome based planning tool. The 2013/14 Budget is the new base line of the Plan and is considered
“balanced” within the model. The Plan assumes an “all in” approach as an outcome with the target being
implementation of the City of Excellence goals and the 2030 Plan.
Staff has developed an extensive financial model that is the basis for this financial portion of the business
plan. This presentation will be an overview of the results of the Plan and provide a framework of
opportunities that are available to help in managing the financial outcomes.
This planning tool lays the groundwork for identifying strategies and policy decisions that will mitigate the
funding gap between current revenues and what is needed to achieve the City of Excellence at the lowest
possible cost (tax rate).
FINANCIAL IMPACT:
SUBMITTED BY:
Cover Memo
Item # B
City of Georgetown, Texas
July 9, 2013
SUBJECT:
Sec. 551.071: Consultation with Attorney
- Advice from attorney about pending or contemplated litigation and other matters on which the attorney has
a duty to advise the City Council, including agenda items
- Rivery Update
- LCRA Update
- CTSUD Update
- Discussion regarding approval of a settlement agreement for the DNT Construction Claim on the SE1
Arterial Project
Sec 551.074: Personnel Matters
- Status of the City Attorney position
ITEM SUMMARY:
FINANCIAL IMPACT:
SUBMITTED BY:
Cover Memo
Item # C