HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 5/30/2000 (3) * PLEASE NOTE: Since the Glendale City Council does not take formal action at
the Workshops, Workshop minutes are not approved by the City Council.
MINUTES
CITY OF GLENDALE
CITY COUNCIL WORKSHOP
May 30, 2000
1:30 p.m.
PRESENT: Mayor Scruggs, Vice Mayor Eggleston, and Councilmembers
Goulet, Lieberman, Martinez, and Samaniego.
ABSENT: Councilmember McAllister
ALSO PRESENT: Martin Vanacour, City Manager; Ed Beasley, Assistant City
Manager; Peter Van Haren, City Attorney; and Pamela Oliveira,
City Clerk.
1. HEALTH CARE INTERNAL SERVICE FUND
CITY STAFF PRESENTING THIS ITEM: Ms. La Verne Parker-Diggs, Human
Resources Director; and Mr. Art Lynch, Finance Director.
The renewal of the employee benefits program for the 1999-2000 plan year resulted in
a rate increase that was shared between the City, employees and retirees. After
discussion of the benefit renewal issues with the Mayor and City Council, direction was
provided for staff to examine health care benefit costs and to examine health care
strategies for present and future years. At today's workshop, staff presented a plan to
assist in funding future health care cost increases.
Based on this direction, an actuarial study was conducted to determine projected costs
of the current medical, dental and vision benefits over periods of three, five and ten
years. The purpose of the actuarial study was to help the City obtain a clearer picture
of anticipated cost fluctuations and to project funding levels necessary to meet the
future of health care costs. (In addition, stabilizing the annual changes for the City of
Glendale and its employees was of vital importance.)
Actuarial study projections were prepared based on the development of (1) employee
and retiree population; (2) changes in inflation affecting health care costs; (3) utilization
of the benefit plans; and (4) cost sharing strategies between the employer and the
employees.
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The results of the actuarial study have provided the City of Glendale with a framework
for developing a long-range health care plan including cost and funding issues. Key
recommendations of the plan focus on (1) addressing and studying health care cost
increases, (2) reviewing the employee/employer cost sharing for cost increases facing
the City, (3) methodologies for developing a financial model that smoothes necessary
health care increases over multiple years, (4) pursuing strategies to reduce prescription
drug costs, examining the rate structure to determine where it should be modified, (5)
evaluating benefit provider policies and procedures for opportunities to reduce costs
over time, and (6) using remaining benefit contributions to build savings in a separate
fund.
Various policy issues were also examined, including comparing the level of employer
funding to other comparable Arizona cities. Results showed that Glendale was in the
middle of the range.
The determination to utilize the actuarial services of William M. Mercer, Inc. was made
since they had a vast knowledge of City of Glendale healthcare issues. On January 12,
2000, the results of the actuarial study were presented to the Management Team.
At the February 3, 2000 meeting, the Employee Health Care Task Force reviewed the
results of the actuarial study. As part of developing a funding strategy to prepare for
future costs, the committee recommended the establishment of the employee Health
Care Internal Service Fund. Benefit premiums not utilized to pay claims or
administrative fees would go into the fund. The Committee also agreed to identify and
implement opportunities for reducing benefit plan costs.
At the March 17, 2000 Employee Health Care Task Force meeting, the committee
approved revisions to the medical plan that resulted in no rate increase for the 2000-
2001 plan year. With Council direction through budget adoption, the $250,000 initially
proposed for rate increases for the 2000-2001 plan year could be deposited into an
employee Health Care Internal Service Fund for use in stabilizing future rates.
Finance staff did preliminary work to create a Health Care Internal Service Fund to
begin tracking costs on July 1 , 2000 and to earmark the use of health care money. This
fund was incorporated into the structure of the proposed 2000-2001 budget considered
by Council for adoption.
The results of the actuarial study were reviewed and analyzed by the City's employee
benefits staff, the finance and budget directors, executive management team and the
Employee Health Care Task Force during several meetings.
Funding the Health Care Internal Service Fund requires that additional money for this
Internal Service Fund be derived from unused benefit premiums contributed by the
employees and the City. After the claims and administrative fees for each plan year
have been finalized, any unused premiums would remain in the Health Care Internal
Service Fund.
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This item was presented to Council for review and a request to provide staff direction as
outlined.
Vice Mayor Eggleston asked for an explanation of the employee Health Care Internal
Service Fund. Mr. Lynch explained that money used for premium payments would be
placed into a separate account, which cannot be used for other general fund expenses.
He stated that this money would only be used to settle the payment of claims or
premiums associated with the City's medical policy. He noted that any amount left over
would remain in the fund so that, when premiums increase, the amount of increases
that would be necessary from an appropriations standpoint would be smaller.
Vice Mayor Eggleston asked if the premiums with Blue Cross/Blue Shield fluctuate a lot.
Mr. Lynch stated that, although they do fluctuate somewhat, Human Resources
personnel have worked hard to negotiate rates that help reduce costs.
Vice Mayor Eggleston asked if buying prescriptions through the mail would be
encouraged. Mr. Lynch stated that part of the Healthcare Committee's strategy was to
enhance the education process so people know that they can get a volume of
medication at a cheaper price by utilizing mail order services.
Ms. Lupe Sierra, Employee Benefits Manager, noted that cost saving measures like the
mail order program result in savings to both the employee and the City. She stated that
they had already received comments regarding the ease of use and cost effectiveness
of the program.
Councilmember Lieberman attested to the savings that can be realized utilizing the mail
order program. He asked Mr. Lynch if they foresaw a day when the employee would be
asked to contribute directly into the program as well. Mr. Lynch stated that the
anticipated funding through unused premiums would not be large dollar amounts,
especially initially. He said that there could be a time when an employee would have to
contribute.
Councilmember Lieberman noted that there have been unbelievable changes in terms
of the Internet over the past eight years. He asked if they would include increases in
their budget or assess employees with a surcharge as the remaining balance
deteriorates. Mr. Lynch stated that they are currently funding those additional costs
through a combination of general fund monies and employee increases.
Councilmember Martinez asked if the monies would earn interest if expenses were not
at the projected rate. Mr. Lynch replied that they would. He stated that the real benefit
is being able to identify cost trends and excess monies to ensure that they work
specifically to offset the employee and employer portions of health care costs.
Councilmember Goulet asked if other cities were establishing similar accounts to
control funds. Mr. Lynch replied that the City of Glendale is ahead of some of the other
municipalities.
Dr. Vanacour asked if they were close to what the Council would like to see.
Mayor Scruggs expressed her appreciation for the information she had received from
Mr. Charlie McClendon, Budget Director, with regard to questions she had. She
expressed her opinion that it was an appropriate way to move forward.
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Mr. Van Haren introduced Tamica Stone, the new Assistant City Attorney.
Dr. Vanacour introduced Mr. Mark Burdick, an intern on loan to the City Manager's
Office from the Fire Department..
ADJOURNMENT
The meeting was adjourned at 2:15 p.m.
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