Title
Employee Health Insurance Internal Service Fund Replenishment (B)
This item involves a request for the City Commission to approve transferring $1,167,000 from the General Insurance Internal Service Fund and $833,000 from GRU funds to replenish the fund balance of the Employee Health Insurance Internal Service Fund.
Explanation
The City maintains an internal service fund to provide employee health benefits which receives premium payments from the employer and employees of all City departments, including GRU, as well as the CRA. It pays out based on actual claims expenses for health care costs, including hospitalization, physician and specialist care, and prescription medications.
The City’s Risk Management department constantly monitors this fund and the benefits provided and over the past few years several modifications to the plan were made to help control the growth in claims cost experience, such as raising deductibles and instituting a separate prescription drug deductible.
As part of the five-year financial forecast, staff evaluated the rates required over the next few years to maintain the fiscal health of this fund and determined that, without a replenishment of fund balance, the premiums would need to increase by an amount which could reach 20% per year. This would result in increases to employees’ premiums between $40 and $147 per month depending on the plan selected (single to family). A $147 per month rate change for family coverage would reduce take home pay (assuming a 2% raise) for all employees making below $71,000 per year.
A one-time cash infusion of $2 million will allow this fund to maintain a reasonable reserve without requiring premium increases in excess of 10% per year.
So far this fiscal year, the plan’s costs have moderated, however the nature of health care claims is such that they are difficult to project and will vary significantly from month to month. If the fund experiences a similar loss in FY2017 as...
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