2013 Rpt of AC to ATM - Laserfiche WebLink

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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM The following points summarize the main aspects of employee health insurance under the agreement be- tween the Town and the coalition of employee bargaining units reached in February, 2012, which covers Town and School employees. • The Town transferred its employee and retiree subscribers to the GIC as of July 1, 2012 and, per GIC rules, is committed to remain a participating municipality for at least 3 years, i.e., through the end of FY2015. • Each benefits-eligible employee and retiree may choose a plan from the GIC plan menu. • The premium contribution rate split returned, for most plans, to the levels that existed before the most recent health benefits contract negotiated in 2010, i.e., to 85% for the Town and 15% for ac- tive employee subscribers and 80%/20% for retirees (but see the discussion below about the HRA and Part B subsidies). • Two Health Reimbursement Accounts (HRAs) desired by employees were established. • A Medicare Part B subsidy is provided to retirees. • The HRA and Medicare Part B subsidies are funded by contributions from both the Town and ac- tive employees and retirees. The Town has no obligation to continue this funding beyond the con- clusion of FY2015. Funding for the HRA and the Medicare Part B subsidies comes from several sources. 1) The Town made a one-time payment of an amount of$1,120,000 (equal to 25% of the anticipated savings accruing in the first year after transferring to the GIC) to an employee mitigation fund. The one-time payment was included in the $21,000,000 FY2013 adopted budget for health insur- ance. 2) Each year, the Town will contribute to the mitigation fund the amount of subscriber premium contributions that differ from what subscribers would have paid using the premium contribution rate split in effect before the 2010 agreement. For plans with a higher subscriber premium contri- bution rate (e.g., indemnity plans) that difference is added to the fund and for plans with a lower subscriber premium contribution rate (e.g., retiree Medicare supplement plans) the difference is withdrawn from the mitigation fund by the Town. This contribution is cost neutral to the Town as it is equal to the excess amount collected in subscriber premium contributions! 3) Additional funding was provided by a transfer of a portion of the Health Insurance Claims Trust Fund equal to the premiums paid by employees but not spent to cover claims under Lexington's pre-GIC self-insured health plan. That portion of the HICTF would otherwise have been returned to the employees. Projecting Health Benefits Costs and Enrollments: Under the GIC, Lexington's actual claim history is only one of many factors that must be taken into account in projecting costs. Lexington's costs are now driven by the GIC rates which reflect the overall GIC claims history as well as how our subscribers i The proportion of the premiums to be paid by the Town for the duration of this agreement, 85% for active employees and non-Medicare retirees and 80% for retirees in Medicare supplement plans, is the same as that paid prior to the 2010 agreement. This is the same proportion that the Town would have paid if it had unilaterally elected to join the GIC. The agreement sets premium contribution percentages by the employee and retiree subscribers to 25% for high-cost indemnity plans and, 15% increasing to 18% in year 3 of the agreement, for all other plans. Amounts equal to the contributions in excess of 20% for Medicare retirees and in excess of 15% by other subscribers will not be used for premiums but will go into the mitigation fund. In addition, to compensate for the decrease in retiree contribution split for Medicare supplement plans from amount prior to the 2010 agreement, the difference between 15% and 20% will be withdrawn from the mitigation fund in years 1 and 2, and the difference between 18%and 20%will be withdrawn in the third year of the agreement. 12