The document discusses options for health insurance premiums for city employees for 2013. It provides background on changes made in previous years that reduced premiums. It then outlines 3 options for 2013: 1) a 2.5% premium increase split between employees and the city, 2) an 11.8% increase for employees, or 3) using $142,000 from an Early Retiree Reinsurance Program fund to avoid any increase. Staff recommends the third option to keep premiums flat using the available federal funds as intended. Council approval is sought to implement this option.

1. Health Insurance
September 18, 2012

2. Background
On November 15, 2011, City Council approved the Aetna
Exclusive Provider Option which named San Angelo
Community Medical Center as the exclusive
facility/physicians for in-network medical treatment.
This option allowed a reduction in employee/retiree
premiums for the 2012 calendar year and provided
additional savings in the self-insurance fund to build
the fund balance.

3. Background
At the last Council meeting the Budget Manager presented a slide
that demonstrated the result of these changes (EPO and
premium reductions).
The 2011/12 budget was created using the $16.50/mo single
employee/retiree low option premium, therefore requiring a
budget amendment to reflect the Council approved $13.20/mo
rate. When revenue is changed, expenditures must also
change. Holmes Murphy recommended waiting until 6 months
of claims data was available, prior to predicting any decrease in
claims expense.

4. Background
On December 20, 2011, City Council instructed staff to
utilize the $343,288 Early Retiree Reinsurance
Program (ERRP) funding for projected premium
increases and to offset claims.
Also in the fall of 2012, the Wellness Program began
with Health Risk Assessments and Health Screenings
for all employees covered by the City health
insurance.

5. Five Year History of the Fund
Beginning Balance Ending Balance
FY 07/08 $103,246 $519,969
FY 08/09 $581,490 $167,473
FY 09/10 $244,084 $307,019
(Closed City Pharmacy 12/09)
FY 10/11 $321,061 $970,861
(Out-Sourced City Clinic 1/11)
FY 11/12 $915,661 $1,560,857*
(Started Wellness Program &
Community Single Option)
*Through 8/31/12 & Excludes
ERRP funds.

6. What 2013 Brings...
If no changes would have been made to the plan design
for the 2012 plan year, the City and employee/retiree
contributions would experience an increase of 16.4%
for the 2013 plan year.

7. What 2013 Brings...
However due to trend and claims experience, the fund
will require a modest premium increase to offset trend.
This can be accomplished by:
1) a shared cost between the City and
employees/retirees equivalent to an increase of 2.5%
for the 2013 plan year

8. Increase Paid by Employees/Retirees & City
2013 Employee Contributions (Monthly)
E S C F
Low $13.53 $393.09 $255.09 $531.10
Medium $128.60 $621.95 $442.55 $801.35
High $205.27 $774.51 $567.52 $981.51
Retiree Low $13.53 $393.09 $255.09 $531.10
Retiree Medium $128.60 $621.95 $442.55 $801.35
Retiree High $205.27 $774.51 $567.52 $981.51
$ Increase
E S C F
Low $0.33 $9.47 $6.15 $12.80
Medium $3.10 $14.99 $10.67 $19.31
High $4.95 $18.67 $13.68 $23.65
Retiree Low $0.33 $9.47 $6.15 $12.80
Retiree Medium $3.10 $14.99 $10.67 $19.31
Retiree High $4.95 $18.67 $13.68 $23.65
• City contribution would go from $357.53 to $366.36/PEPM

9. What 2013 Brings...
2) a cost to employees/retirees equivalent to an 11.8%
premium increase

10. Increase Paid by Employees/Retirees
2013 Employee Contributions (Monthly)
E S C F
Low $14.75 $428.71 $278.20 $579.22
Medium $140.25 $678.30 $482.64 $873.96
High $223.87 $844.68 $618.94 $1,070.45
Retiree Low $14.75 $428.71 $278.20 $579.22
Retiree Medium $140.25 $678.30 $482.64 $873.96
Retiree High $223.87 $844.68 $618.94 $1,070.45
$ Increase
E S C F
Low $1.55 $45.09 $29.26 $60.92
Medium $14.75 $71.34 $50.76 $91.92
High $23.55 $88.84 $65.10 $112.59
Retiree Low $1.55 $45.09 $29.26 $60.92
Retiree Medium $14.75 $71.34 $50.76 $91.92
Retiree High $23.55 $88.84 $65.10 $112.59

11. What 2013 Brings...
or 3) utilization of $142,000 from the ERRP funds. This
would mean no increase in contributions for the City,
employees or retirees. Premiums would remain flat for
all tiers.

12. Increase Paid by ERRP
2013 Employee Contributions (Monthly)
E S C F
Low $13.20 $383.62 $248.94 $518.30
Medium $125.50 $606.96 $431.88 $782.04
High $200.32 $755.84 $553.84 $957.86
Retiree Low $13.20 $383.62 $248.94 $518.30
Retiree Medium $125.50 $606.96 $431.88 $782.04
Retiree High $200.32 $755.84 $553.84 $957.86
$ Increase
E S C F
Low $0.00 $0.00 $0.00 $0.00
Medium $0.00 $0.00 $0.00 $0.00
High $0.00 $0.00 $0.00 $0.00
Retiree Low $0.00 $0.00 $0.00 $0.00
Retiree Medium $0.00 $0.00 $0.00 $0.00
Retiree High $0.00 $0.00 $0.00 $0.00

13. Recommendation
Per the federal statute, the ERRP funds may be used to
reduce premium costs for an employer and/or plan
participants.
Staff and the Insurance Review Committee recommend
utilizing $142,000 in ERRP money to cover the deficit.
This would still leave a balance of $201,288 in ERRP
funds for future years.

14. Council Direction
Staff is seeking approval from the City
Council to utilize the ERRP funds (as
designed by the federal government) to
offset increases in premiums for the 2013
plan year, thereby leaving the premiums the
same as this year.