Item Coversheet
City of Independence
BILL NO. 21-762Res.No:          6690

Agenda Title:

21-762 - A Resolution setting rates for the City's Self-Insurance Health Plans.

Staff recommends approval.
Executive Summary:

The Stay Well Health Advisory Committee was established to serve in an advisory capacity to the City Manager for the City’s Self Insurance Stay Well Fund. The Fund pays the health insurance costs for Employee and Retirees’ under age 65 and their dependents. The Committee works closely with the professional Human Resources staff and the City's consultants to develop recommendations for the City Manager to consider.

The Committee has recommended to the City Manager, a premium increase of 10% to the City and members of both OAP1 and OAP2 Staywell plans midyear to be effective July 1, 2021.

This past year has been challenging due to the tremendous amount of economic uncertainty. The Plan experienced a $1.7 million deficit between July 1 and December 31, 2020. Latest estimates from CBIZ, the City's health plan advisor, has identified a potential total deficit to the Staywell fund of $2.8 million at the end of the calendar year. To fund this deficit, a rate increase of up to 16% would be needed.

The City has identified $1.85 million from America Recovery Plan (ARP) grant funds to replenish the funds from last calendar year. The City has also identified $2.0 million in ARP funds to subsidize the deficit for the 2021 calendar year. The $2.0 million subsidy from ARP funds was originally identified as an amount that could lower the rate increase needed from 16% to 5%. There are additional ARP grant funds identified to also subsidize the Plan, if needed, for the 2022-2023 fiscal year.

The Committee's initial recommendation (Attachment 1) was to increase the rates 10% for both OAP1 (the City’s PPO plan) and OAP2 (the City’s consumer-driven plan).

In reviewing year-to-date performance through April of each plan, OAP1 is operating at a loss of $2.95M while OAP2 is operating at a surplus of $240,000. With 170 participants, OAP2 is subsidizing OAP1 by approximately $1,400 per participant. Based on this information, the City Manager asked the Stay Well Committee to revaluate their recommendation to increase the premiums for both plans (see Attachment 2). The Committee considered this request at the May 26 meeting and did not modify their initial recommendation of increasing premiums for both OAP1 and OAP2 (see Attachment 3). The premium increases will generate approximately $1.5M for OAP1 and $225,000 for OAP2.

The Resolution directs the City Manager to implement the premium changes and to work with the Committee to develop recommendations for redesign of the Plans prior to open enrollment to ensure ongoing financial sustainability of the Fund.

Fiscal Impact:

The total increase for the City share of rate increase is $1,331,683 for a total of $12,391,969 in total health insurance costs. The City plans to use an additional $3,850,000 million from the American Recover Act to assist with the increase, pending City Council approval of proposed American Recovery Act spending plan and adopting 2021-2022 proposed budget.

Department:          City Manager's OfficeContact Person:          Adam Norris

Finance DepartmentApproved
City Clerk DepartmentApproved
Finance DepartmentApproved
City Managers OfficeApproved
City Clerk DepartmentApproved

Council Action:          Council Action:         

April 2021 Stay Well Recommendation (Attachment 1)Backup Material
Manager response to Staywell 5.19.21 (Attachment 2)Backup Material
Staywell response to City Manager 5.26.21 (Attachment 3)Backup Material