Finance Supplemental 6 16 17MIAMIBEACH
FINANCE AND CITYWIDE PROJECTS COMMITTEE
SUPPLEMENTAL MATERIAL
Commission Chambers, 3RD Floor, 1700 Convention Center Drive
JUNE 16,2017 AT 1:00 PM
Committee Members
Commissioner Ricky Arriola, Chair
Commissioner Joy Malakoff, Vice Chair
Commissioner John Alem6n, Member
Commissioner Micky Steinberg, Alternate
SUPPLEMENTAL MATERIAL FOR ITEMS 7 AND 14
OLD BUSINESS
7. Discussion Regarding The North Beach Town Center Redevelopment Proposal,
lnvolving City-Owned Parking Lots, Made By North Beach Town Center
Development, LLC, An Affiliate Of Pacific Start Capital, LLC
Commission ltem C4C, May 17,2017
(Sponsored by Commissioner Malakoff and Co-sponsored by Commissioner Arriola)
Eva Silverstein, Tourism, Culture, and Economic Development Director
Kathie Brooks, Assistant City Manager
Sfafus.' ltem enclosed.
NEW BUSINESS
14. Discussion Regarding A Review Of Recommended Changes To The Gity's Self-
Funded Health lnsurance Plan For The October 2017 Plan Year
Commission ltem C4l, June 7,2017
(Human Resources)
Michael Smith, Human Resources Director
Status; ltem enclosed.
1
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sEVEN
2
MIAMIBEACH
City of Miomi Beoch, I200 Convenlion Center Drive, Miomi Beoch, Florido 33139, www.miomibeochfl.gov
TO:
FROM:
DATE:
SUBJECT:
BEACH TOWN CENTER DEVELOPMENT, LLC (NBTCD); SAID PROPERTIES
LOCATED AT 6995 BYRON AVENUE AND 6960 HARDING AVENUE, MIAM!
BEACH, FLORIDA, CONSISTING OF APPROXIMATELY 31,375 SQUARE
FEET (C!TY PROPERTIES), AND 6957 & 6965 BRYON AVENUE AND 6948,
6956 & 6964 ABBOTT AVENUE, MIAMI BEACH, FLORIDA, CONSISTING OF
APPROXTMATELY 30,500 SQUARE FEET (NBTGD PROPERTIES).
BACKGROUND
At its November 18, 2008 meeting, the Finance and Citywide Projects Committee, authorized
the Administration to approach City National Bank to explore a joint development agreement, or
a land swap, for one of the preferred parking garage sites identified in the North Beach Town
Center Plan (adopted July, 2007).
The Administration subsequently held numerous discussions with representatives from City
National Bank. Discussions ended because City Nationalwas engaged in developing numerous
new branch locations and was not ready to consider development proposals.
ln March 2017, an entity controlled by North Beach Town Center Development, LLC ('NBTCD")
purchased all the sites owned by City National Bank. NBTCD is interested in developing a
mixed-use projec't within the North Beach Town Center, and has approached the City regarding
exchanging various properties in the area to facilitate its development, and provide the City with
municipal parking and (at City's option) worKorce housing.
ANALYSIS
The City is the owner of two (2) properties located at: 1) 6995 Byron Avenue, Folio #: 02-3211-
002-0950, consisting ol 12,625 square feet (.29 acres), and currently utilized as Parking Lot
P80, containing 30 parking spaces; and 2) 6960 Harding Avenue, Folio #: 02-3211-002-0910,
consisting of 18,750 square feet (.43 acres), and currently utilized as Parking Lot P&4,
containing 53 parking spaces ("City Properties" or "Subject Sites 1 and 2") (collectively, the "City
Properties"). The City Properties are outlined in red, and identified as Numbers 1 and 2 on
Exhibit "A," attached hereto.
Finance and Citywide Projects
Jimmy L. Morales, City Manager
June 16, 2017
A DISCUSSION
PROPERTIES BETWEEN THE
TTEE MEMORANDUM
THE POTENTIAL EXCHANGE OF
oF MrAM! BEACH (CITY) AND NORTH
3
Finance and Citywide Projects Commiftee Memorandum
North Beach Tattn Center
June 16,2017
Page 2 of 3
North Beach Town Center Development, LLC ("NBTCD') is the owner of five (5) properties
located at: 1) 6957 Byron Avenue, Folio #: 02-3211-002-0990, consisting of 6,250 square feet
(.14 acres); 2) 6965 Byron Avenue, Folio #: 02-3211-002-0970 (south half only), consisting of
6,250 square feet (.14 acres); 3) 6948 Abbott Avenue, Folio #: 02-3211-002-1010, consisting of
6,000 square feet (.14 acres); 4) 6956 Abbott Avenue, Folio #: 02-3211-002-1020, consisting of
6,000 square feet (.14 acres); and 5) 6964 Abbott Avenue, Folio #: 02-3211-002-1030,
consisting of 6,000 square feet (.14 acres) (collectively, the "NBTCD Properties"). Said
properties are outlined in blue, and identified as Number 3, on Exhibit '4," attached hereto.
The City received a term sheet from NBTCD, attached hereto as Exhibit "8" ("Term Sheet"), for
the exchange of the above referenced properties. The Administration met with representatives
from NBTCD on June 1,2017, to discuss the proposed terms.
NBTCD is proposing a mixed-use development including retail, office, residential and parking,
between Byron and Harding Avenues. NBTCD will construct and convey to the City a public
parking garage with at least 270 spaces. Additionally, NBTCD and the City will explore building
up to three (3) floors of workforce housing above the parking garage.
As further described in Section B of Exhibit 'B' (Term Sheet), attached hereto, the fee
ownership of the properties between Byron and Abbott Avenues will be divided into Parcels A
and B. ParcelA and Parcel B will be joined together via a Covenant in Lieu of Unity of Title CtL.
Parcel A will be owned entirely by NBTCD. Parcel B will have ground floor retail owned by
NBTCD. The City will own the parking garage ramp that starts at the ground floor and the
parking garage situated above the ground floor on Parcel B. The parking garage ramp will also
serve as ac@ss to NBTCD's parking garage located on Parcel A. NBTCD will pay its
proportionate share of maintaining the ramp and any other commonly used facilities such as
elevators and stairways, etc. An Easement and Operating Agreement will identify the
commonly used facilities and will provide for easements and cost sharing.
The proposed conveyance of the City Properties is subject to compliance with:
(1) Section 1.03(bX4) of the City Charter, which requires approval by 4t7th
vote of the Planning Board, and 6/7'n vote of the City Commission; and
(2) Sections 82.36 through 8240 of the City Code ("Sale or Lease of Public
Property").
NBTCD proposes the exchange as an "even swap", with no monetary consideration trading
hands. The Administration has ordered, at NBTCD's expense, an appraisal of the respective
City and NBTCD Properties to assist in analyzing the proposed transaction. Appraisal of the City
Properties is required pursuant to Section 82-39(b) of the City Code, unless waived by 5/7th vote
of the City Commission (finding that the public interest would be served by such waiver).
The proposed exchange cannot be predetermined to have no monetary consideration until the
market values of the properties are determined in the context of the proposed development.
The proposed transaction would be subject to, amongst other things, the results of the appraisal
and the City receiving fair market value for the exchange of the properties which, likely, would
include additional compensation to the City since the combining of the properties would allow for
more intense development. The appraisers have been instructed to consider the current and
4
Finance and Cityvtide Projects Commiftee Memorandum
Nofth Beach Tantn Center
June 16,2017
Page 3 of 3
future zoning districts (TC-1 and TC-3 for the Subject Sites), including implications such as
maximum FAR, maximum height and main permitted uses. The appraisal should be finalized by
the end of this month.
As further described in Section C(5) of the Term Sheet, NBTCD has proposed that the parking
spaces in the City garage be metered but allow for two (2) free hours of parking. At this time,
the Administration is generally receptive to this concept, so long as there is a contribution from
the developer and/or tenants towards the garage revenues. While there is a similar parking
arrangement at the sth & Alton Municipal Garage (G8) regarding the first two (2) hours ol
parking; additional research needs to be performed to determine the best policy for this location.
Additionally, in the event the demand for parking decreases in the future, and/or the parking
spaces are not fully utilized, the City would reserve the right to convert the parking area to
alternative uses.
CONCLUSION
The Administration is seeking a preliminary recommendation from the Finance and Citywide
Projects Committee regarding the potential exchange of the properties.
Exhibits:A Subject SitesB Term Sheet
JLM/KGB/ES/MMM
F:\ATTO\AGUR\r\ilEMOS\North Beach Town Center Memo (0&12-17).docx
5
Exhibit A
6
Exhibit "A"
(Subiect Sites)
7
Exhibit A
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8
Exhibit B
9
A.
Term Sheet - 7l't Street Town Center Development
The Proiect
l. The City currently owns the five parcels outlined in red on Exhibit "A" which contain 83 surface
parking spaces.
2. North Beach Town Center Development, LLC ("NBTCD") owns or controls the parcels outlined
in yellow on Exhibit "A."
3. The proposed project is a mixed-use development including retail, office, residential and parking
on two blocks between Byron and Harding Avenues. City to convey its five parcels to NBTCD
and NBTCD to convey to City a parking garage with at least 270 spaces above the ground floor
retail between Byron and Abbott Avenues.
Pronerty Division
The fee ownership on the property between Byron and Abbott Avenues will be divided as follows:
l. Parcel A, which will consist of ground floor retail use, upper floor commercial uses and parking
on the second floor, shown in red on Exhibit "B."
2. Parcel B, which will consist of ground floor retail use, the parking garage access ramps and the
parking garage, shown in yellow on Exhibit "B." The parking garage in Parcel B will contain at
least 270 parking spaces and may contain workforce housing on the top of Parcel B at the option
of the City.
Parcel A and Parcel B will be joined together via a Covenant in Lieu of Unity of Title ("CIL") and the City
and NBTCD will join in an Easement and Operating Agreement as required by the CIL. Parcel A will be
owned entirely by NBTCD. Parcel B will have ground floor retail owned by NBTCD and the City will
own the parking garage ramp that starts at the ground floor and the City will own the parking garage
situated above the ground floor on Parcel B (as shown in yellow on Exhibit "B"). The parking garage ramp
will also serye as access to NBTCD's parking garage located on Parcel A. NBTCD will pay its
proportionate share of maintaining the access ramp and any other commonly used facilities such as
elevators and stairways, etc. The Easement and Operating Agreement will identify the commonly used
facilities and will provide for easements and cost sharing.
B.
C.Terms
1.
2.
-r-
4.
The exchange of property between the City and NBTCD is an "even swap," i.e. there is no
monetary consideration trading hands.
NBTCD and City will explore building up to three (3) floors of affordable/workforce housing plus
associated parking on top ofParcel B.
Construction. NBTCD shall construct the entire project. The City shall pay NBTCD for its
proportionate share of the costs of construction, design, engineering and other soft costs of the
Parcel B parking garage, including workforce housing (if requested by City). NBTCD will be able
to build the parking garage at a lower cost than the City could build it for and without the property
swap the City could never build more than the 83 spaces that currently exist.
Ownership under the future project will be as outlined in Section B above.
The City controlled parking spaces will be metered but allow for two free hours of parking.5.
l.41900429.61
10
Exhibit B
Ground floor plan
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Exhibit B
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Exhibit B
Third and fourth floor plan. Each of the two commercial floors on floors 3 and 4 contain two
floors of parking, for a total of four floors of parking (e.g. 3,{, 38, 4,{, 4B).
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Exhibit B
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15
MIAMIBEACH
Cityof Miami Beach, ITOO Convention Center Drive, Miami Beach, FL 33139, www.miamibeachfl.gov
MEMORANDUM
TO:Finance and City Wide Projects
FROM: Jimmy L. Morales, City Manager
DATE: June 16,2017
SUBJECT: Discussion Regarding The City'Health lnsurance Plan and Proposed
Changes for the 2017-18 Plan Year
BACKGROUND
Health Care Cost (Trends)
Medical and pharmacy inflation have averaged anywhere between 5 - 10% annually over the
last decade. The City's health plan has experienced roughly 2.3o/o
"noual
trend from 2008 -2017 in medical inflation and 6.3% in pharmacy inflation during the same time period.
Pharmaceutical trend is more predictable and the frequency of claims will typically increase in
close approximation with national pharmacy trend. Additionally, pharmaceutical costs are less
influenced by an employer's location whereas medical claims are highly influenced by the cost
of care in a specific area. lt should be noted that while the City's health plan has experienced
some years where a greater number of high cost claimants created a deficit, overall, medical
inflation has been below average for a significant period of time.
Administrator
ln June of 2016, pursuant to RFP No. 2016-086-WG for Health Plan Services and Benefits to
the City of Miami Beach Active Employees, Dependents, and Retirees, the City contracted with
Cigna Health and Life lnsurance Company ("Cigna") to provide the dayto-day administration of
the City's medical plan through an Administrative Services Only ("ASO") agreement. Prior to
this agreement, Humana had been providing health care services to the City in some capacity
for approximately 20 years. By selecting Cigna, the City will realize multiple layers of cost
savings:
o A $229,650 (6-month MedicalASO credit in the first year (2016-17)o Over a three year period, Cigna Medical ASO fee will save the City approximately
$558,000 in administrative services expenses (City paid approximately $910,000 to the
previous ASO provider)o Medical Claims Savings estimated to be $101,000 annuallyo Pharmacy Claims Savings estimated to be $533,000 annually. Employees and Retirees have a great access to healthcare providers under the Cigna
Open Access Plus ("OAP") network
It has always been the City's practice to provide choice to its employees in various plan options,
while providing a broad national network of physicians, hospitals and other medical providers.
Upon the selection of Cigna, and with very little time for plan design changes in 2016, the
Administration decided to minimize the number of plans offered from five to three, and create an
additional tier for Employee +1. We worked with our benefits consultant and actuary, Gallagher
COMMITTEE
We are committd to proiding excellent public seruice and safety to all who live wo* and play in our ibrant topicaL histoic community.16
FCWPC Memorandum
Proposed Health Plan Changes 2017118
Page 2 of 9
June 16, 2017
Benefits Services ('GBS'), the Finance team, and the Budget team to project the health plan
costs and made assumptions of where employees would migrate taking into account the new
plan offerings.
H istorical Plan Rates/Participation
Oct 2014 - Seot 2015
HMO Low Total Rate Employee City
Single
EE+1
Familv
5611.23
N/A
Sr,srs.sr
s140.66 s470.s7
N/A N/A
s506.80 s1,008.71
HMO Hirh Total Rate Employee City
Single
EE+1
Family
sL,23O.74
N/A
s3,051.22
s6rs.sz s61s.37
N/A N/A
s1,s2s.61 s1,s2s.61
PPO Low Total Rate Employee CiW
Single
EE+1
Familv
Sgzs.r+
N/A
s2,270.4t
S46z.s7 546257
N/A N/A
S1,13s.21 S1,13s.20
PPO Hieh Total Rate Employee CiW
Single
EE+1
Family
5L,176.64
N/A
52,887-24
ss88.32 ss88.32
N/A N/A
sL,443.62 51,443.62
POS Total Rate Employee City
Single
EE+1
Familv
sL,25L.92
N/A
s3.105.86
Sozs.so S62s.96
N/A N/A
51,553.43 $1,553.43
Oct 2015 - SeDt 2016
HMO Low Total Rate Employee City
Single
EE+1
Familv
56tt.24
N/A
S1,s1s.s2
s140.66 s470.s8
N/A N/A
s506.80 s1,008.72
HMO Hich Total Rate Employee City
Single
EE+1
Family
s1,353.82
N/A
s3,356.36
s0z6.gr s0z6.sr
N/A N/A
s1,678.18 s1,678.13
PPO Low Total Rate Employee City
Single
EE+1
Familv
S1,017.66
N/A
s2,497.46
ss08.83 ss0s.83
N/A N/A
5L,248.74 it,zce.tz
PPO Hish Total Rate Employee City
Single
EE+1
Familv
S1,o59.oo
N/A
s2,598.52
sszs.so sszg.so
N/A N/A
5t,299.26 5L,299.26
POS Tota! Rate Employee City
Single
EE+1
Familv
5t,377.L2
N/A
s3,417.56
s688.s6 s688.s6
N/A N/A
S1,708.78 S1,70s.78
Plans prior to 2016117
Plan Year
Gurrent Plan Offerings
OAP ln Network (H
17
FCWPC Memorandum
Proposed Health Plan Changes 20'17118
Page 3 of 9
June 16,2017
Oct 2016 - Seot 2017
OAP ln Total Rate Employee City
Single
EE+1
Familv
56!4.24
s1,289.90
S1.781.30
SL47.7o S466.s4
s310.16 Sgtg.tq
ss:z.r+ $!,249.t6
OAP
Standard
Total Rate Employee City
Single
EE+1
Family
s1,068.56
52,244.00
s2,622.36
ss34.28 ss34.2S
5L,!22.o0 5L,t22.oc
S1,311.1s Sr,srr.r:
OAP
Premium
Total Rate Employee City
Single
EE+1
Familv
S3,036.56
s3,588.44
St,44s.96 5722.98 5722.98
S1,s18.28 S1,518.28
5L,794.22 5L,794.22
Back in 2013 both the FCWPC and the Budget Advisory Committee (BAC) reviewed the
components of the medical insurance plans to ascertain where they could make changes to the
health plan for efficiencies and savings to the self-insurance fund. Recommendations at the
time were: (See LfC ffi91-2013 - 2014 Premium Cosfs for the City of Miami Beach Self-tnsured
Medical Plan for Active Employees and Retirees; Attachment "A')
o The City's health plan should remain self-funded;. The City's premium plans (Premium HMO, Premium PPO and POS) should be
eliminated;o The Standard HMO and Standard PPO should be replaced with HMO and PPO plans;. Prescription coverage should be carved-out and provided by a separate prescription
drug benefit manager or administrator ("PBM" or "PBA");. Offer a high deductible health care plan ('HDHP') and a Medicare advantage plan for
post-65 retirees;o Change the City's calendar plan year to a fiscal plan year; and. Explore ways to share the plans' premium costs more equitably among employees'
Below is a summary of the City's actions taken on the above recommendations over the past
few years:
o The City's health plan has remained self-funded and in fact is functioning very well, and
has yielded a surplus with a projection through the second quarter of plan year 2016117
of $2.23 million for the full year. We expect the surplus might diminish slightly through
year-end. However, unless the health plan experiences a significant increase in high
cost claimants or a significant increase in the frequency of claim activity, the projected
surplus of $2.23 million to end the year is accurate based on the data that is known
presently.
18
FCWPC Memorandum
Proposed Health Plan Changes 20'17118
Page 4 of 9
June 16,2017
o ln 2016117 plan year, when the City moved to Cigna, the Administration eliminated the
Premium HMO and POS plans. Prior to the changes, the City offered five (5) plan
designs that were in effect for a variety of reasons. The number of plans offered
exceeded what most employers offer for a population of the City's size. More than 85%
of the City's health plan members were enrolled in just one plan, the Standard HMO,
which was evidence that five plans and the choice associated with this offering was not
being used.
o With employees given the option of three (3) plans and not five (5), with the inclusion of
an employee + 1 option, and through the Wellness program and educational efforts by
the City, these changes have provided employees with a clearer understanding of their
benefit plan options and the opportunity to cover just one (1) family member rather than
having to select "family" coverage even though they might only have one (1) family
member/dependent. These changes have produced dividends as previously mentioned
in that the health plan is currently experiencing a surplus.
o The Standard HMO Plan was replaced with Cigna's OAP ln-Network Plan that added
access to the Baptist Network.
. In 2016 the City solicited standalone offers for ASO Services, Pharmacy Benefit
Management, EAP, and Stop Loss/Reinsurance Coverage. The Pharmacy Benefit
Management was awarded to Cigna's PBM independently as recommended by the
BAC.
For the 2017118 Plan Year, the Administration is proposing a HDHP to be offered by
Cigna as an additional plan offering. Many large employers have already implemented
HDHP's and have realized the benefits of implementing a health plan solution such as
this when done correctly.
ln 2015, the Administration changed the plan year from calendar to fiscal plan year.
An additional change to the City's health plan was in 2016117 when the Administration
restructured the tiers from two (2) choices to three (3). Many employers have moved to
a three (3) or four (4) tier arrangement which allows for a more equitable method of
distributing cost and risk.
For the 2017118 Plan Year, the Administration is proposing an increase in the
employee's contribution for Employee + 1 and Employee + Family tiers. A significant
savings was realized by employees that elected Employee + 1 in the 2017118 plan year
and employees that elected Family coverage only experienced a moderate increase in
premium. Typically when an employer converts the health plan from 2tier to 3-tier,
Employee Only and Family coverage becomes more expensive. The City in conjunction
with Budget and Finance made the decision to absorb this additional cost in the 2017118
plan year. However, increases in subsequent years should be made judiciously to
balance this equation albeit moderately. This is the reason behind this
recommendation.
Based upon these recommendations, the projected health plan total cost is $21.95
million in plan year 2017118. The current projection estimates that plan year 2016117
will have a total cost of $19.7 million. lt should be noted that the projection in 2015 for
19
FCWPC Memorandum
Proposed Health Plan Changes 20'17118
Page 5 of 9
June 16,2017
plan year 2016117 was $20.9 million and the health plan has experienced more positive
results than expected. However, as the City has a self-funded health plan, a surplus
can easily be eliminated with several high cost claimants and that many times a health
plan will regress to the mean. (See GBS Funding Proposal for 2017/18 - Aftachment "B")
Despite the number of choices available, active employees who elect to be covered by the
health care insurance provided by the City, most cluster around the OAP (previously known as
the HMO) because of cost. The OAP plan is ideal for individuals who seek lower-cost health
services overall or for those who prefer the guidance of a trusted physician in all their healthcare
choices. Aside from having to choose providers in the network, there are few other limitations.
Currently, the City subsidizes 760/o of the premium for the Employee Only Tier and Employee +
1 Tier of the OAP ln-Network Plan. The Employee Family Plan receives aTOo/o City subsidy.
Conversely, retirees who have the same options, elect to choose the Standard and Premium
PPO plans, despite the higher premiums and lower City subsidies. The City's PPO model does
not contain a gatekeeper or PCP referral and has an out-of-network beneflt. PPO plans aim to
restrain overuse of medical services while allowing patients more flexibility in their choice of
physicians and specialists. lf you choose a provider outside of the network in a PPO, you'll pay
more out-of-pocket, at least until you reach your plan's deductible. Both the Standard and
Premium PPO plans receive a 50o/o premium subsidy. (The City is required by the terms and
conditions of various collective bargaining agreements to subsidize a minimum of 50% of the
total premium for a Standard HMO plan.)
Cadillac Tax
On December 18, 2015, Congress passed and the President signed a two-year delay of the 40
percent excise tax on high-cost employer-sponsored health plans, also known as the "Cadillac
Tax." While the tax was originally non-tax deductible, the December 2015 changes make it tax
deductible for employers who pay it. With the new administration, no regulations have been
issued to date. Therefore, the Administration working with GBS remains aware of what could
become due in 2020.
The Cadillac Tax analysis prepared by GBS in 2015 estimated that the City might pay between
$1.3 million - $1.6 million intaxes in 2018. Because of the updatestothe City's health plans in
2016117 and the proposed changes for 2017l18, GBS projects the City will pay approximately
$176k - $229k in 2020. !n the illustration prepared by GBS, there are three trend assumptions,
5o/o, 8o/o, and 10%. The City's two richest plans (PPO Standard and Premium) will reach the
Cadillac Tax threshold by 2020. The OAP ln-Network has considerably more time before it
would approach the taxation thresholds. Also, since the formal rules regarding the tax have not
been written yet, we're not sure to what degree the final regulations will allow for retiree
populations, demographics, and a host of other issues in an attempt to normalize the tax. (See
GBS Cadillac Tax Analysis - Attachment "C")
Proposed Plan - Active Emplovees
The proposed health plans for October 1, 2017118 have several new components, a HDHP with
a HSA, a smoking surcharge (with offerings of smoking cessation program), a wellness credit
for those employees participating in the City's Go365 Wellness program, and a one-time paid
premium of $250 to employees who are not enrolled in the City's health plans.
o HDHP are prevalent in many health plans in the USA. Governmental entities are
continuing to add an HDHP option at an increasing rate. When implemented correctly,
20
FCWPC Memorandum
Proposed Health Plan Changes 20171'18
Page 6 of 9
June 16, 2017
with adequate education to employees and actuarial oversight, HDHPs can produce
favorable results. A HDHP is a consumer-driven health plan with a higher deductible
than a traditional insurance plan. These plans encourage employees to shop for the
most economical options, thereby providing cost savings to the employee and the City.
The monthly premium is usually lower, but you pay more healthcare cost yourself before
the Plan starts to pay its share (your deductible). A HDHP can be combined with a
Health Savings Account (HSA), allowing you to pay for certain medical expenses with
money free from federal taxes. The !RS defines a HDHP as any plan with a deductible
of at least $1,300 for an individual or $2,600 for a family. An HDHP's total yearly out-of-
pocket expenses (including deductibles, copayments, and coinsurance) can't be more
than $6,550 for an individual or $13,100 for a family. The limit doesn't apply to out-of-
network services. The biggest benefit of implementing a HDHP is the upfront savings to
the employee in the form of reduced premium payments.
. Our wellness program, which officially began in January 2016, powered by Go365
(formerly known as Humana Vitality) is off to a great start! By the end of March 2017,
we had 17o/o of employees that completed health assessments, and 12.8o/o completed
biometric screenings. Those are awesome numbers for a new program. The
Administration is proposing a wellness credit to those employees who are engaged in
monthly activities and have reached silver, gold and platinum status in the program.
o Smoking Cessation Program - According to the Center for Disease Control (CDC), 18%
of adults in the US are smokers. Tobacco users typically have 30 to 40% higher annual
healthcare costs than nontobacco users. The City's Wellness Program, Go365, as well
as Cigna offers assistance to smokers who want to quit. Cigna has a Lifestyle
Management Program free to City employees. Employees can engage with a
counselor/coach via phone or online, create a personal quit plan with a realistic quit
date, and get the support they need to kick the habit for good. The City will be hosting a
series of Smoking Cessation seminars as well. Humana Go365 also offers life coaches
to assist employees. Additionally, many of the prescribed tobacco cessation drugs, both
FDA-approved and over-the-counter, have been added to the U.S. Preventative
Services Task Force list of covered services under preventive care.
. Under the Affordable Care Act (Obamacare), there is a federal mandate that all
individuals must have healthcare coverage. Currently there are approximately 200 City
employees that are not enrolled in the City's health plan. However, since Obamacare
has not been repealed as yet, we are confident that these employees have healthcare
coverage through other means (prior employment, spouse's insurance, military, etc.).
Therefore, the Administration is proposing a $250 one-time stipend to those 200
employees, primarily since this cost is significantly lower than the average cost of
providing healthcare coverage to these individuals.
Below is an illustration of the 2017118 health plans, rates and enrollment:
21
FCWPC Memorandum
Proposed Health Plan Changes 2017118
Page 7 of 9
June 16,2017
Assumptions and features of the proposed HDHP and other components of the health ptan:
% of Actives Choose HDHP 20%
HDHP Deductible Option 52500/55000
HSA Match Single 51,000
HSA Match EE + 1 52,000
HSA Match Family 53,000
Wellness Credit S40
Wellness Credit % Part, 35o/o
Smoker Penalty SZS
Smoker %Part. !%
Employees not in Health Plan 200
Employee Payment 5250
Oct 2017 - Sept 2018 - Fundlng Rates & Contrlbutlons - tltustratlve HSA Match
clwHDHP/HSA Enrollment Total Rate Emolovee City
Single
EE+1
Familv
L25
35
64
5466.82 540.00
sgao.:z s12s.00
51,353.79 Ssso.oo
5426.82
Sass.gz
s1,003.79
S83.33
S166.67
s2s0.00
224 s387,000
OAP ln Enrollment Total Rate Emplovee City
Single
EE+T
Family
499
L40
257
s6t4.24 5L47.70
s1,289.90 s410.16
51,781.30 Sogz.r+
s466.s4
5879.74
s1,149.16
895
OAP Standard Enrollment Total Rate Emplovee City
Single
EE+1
Familv
19
4
6
$L,257.26 s628.63
s2,64Q.28 s1,640.28
s3,10s.40 sz,ros.+o
s628.63
s1,000.00
S1,ooo.oo
29
Total LL49
EE ONLY HDHP ETECTION
- s2s00 DEDUCTTBLE
EE+l HDHP EI"ECTION.
$3s(x, DEDUCTIBLE
FAMITY HDHP ELECTION.
$5OOO DEDUCTIBTE
ANNUAL PREMIUM S +so.oo s 1,500.00 S +,zoo.oo
EE PREMIUM SAVINGS s t,zgs.zo S z,qzt.gz S g,g8s.og
CITY HSA MATCH S 1,ooo.oo s 2,000.00 S 3.ooo.oo
TOTAT SAVINGS TO EE
OVERTHEOAP.IN PIAN $2,285,20 s s,42,-.92 S 0,38s.6s
22
FCWPC Memorandum
Proposed Health Plan Changes 2017118
Page 8 of 9
June 16,2017
Next Steps
The Administration is working to provide employees and retirees with an annual open
enrollment period beginning August 14, 2017 - September 1, 2017. During this open
enrollment period, HR Benefits staff will provide employees and retirees with information
regarding the City's benefit programs, and the opportunity to make any changes to their
coverage. Changes made by employees and retirees during the open enrollment period take
effect October 1,2017.
Once a decision is made on the plans that will be offered to our employees and retirees, the
Administration will work with Cigna and GBS to draft communication materials that illustrate the
updated plans and their premiums. The anticipated timeline is provided below:
Recommendation
The proposed changes would require $14,712,498 City funding. The benefits self-funded
program has a surplus of $10.2 million as of September 30, 2016, the closing fund balance
represents 231 days of claims, which is nearly four times the 60-day safe harbor that Office of
lnsurance Regulation ("OlR') insist on. Therefore, the Administration proposes to prefund the
City's benefit contributions in 2017118 by using $2 million from the existing surplus to offset any
budget constraints with regard to the proposed changes. This total may be adjusted in
accordance with the final elections which are made by the City's workforce during open
enrollment. (See FY2016 Actuarial Memorandum filed with State OtR- Attachment "D")
Week Task
1
June 28th
Item referral from FCWPC to Full Commission for Approval of City's Health
Plan Proqram for October 1.2017118 Plan Year
2
Julv 3d
Work with GBS and Cigna to complete plan design changes and prepare
Summary Plan Documents.
3
Julv 1Oth
Complete Open Enrollment Booklets for Employees and Retirees.
4
Auoust 4th
Mail Open Enrollment Booklets to Retirees along with invitation to attend
Health & Wellness Fair.
5
August 11th
Annual Health & Wellness Fair for Employees (their spouses/partners) and
Retirees at the Fillmore - Jackie Gleason Theater. Health, Dental, Vision
and other Ancillary Benefit Representatives will be present to answer
questions and provide additional information to Employees/Retirees as they
consider their choices for the Open Enrollment election.
6
August 14th -
September 1tt
Open Enrollment period. Employees and Retirees will be able to make their
benefit selections either by Munis ESS (Employee Self-Service) or come in
person to the lT Training Room where HR Benefit and Cigna
Representatives will be available to assist with their choices.
7
September 5th
HR Benefits staff will compile all open enrollment selections and prepare
data files to be transferred to the various health vendors.
23
FCWPC Memorandum
Proposed Health Plan Changes 2017118
Page 9 of 9
June'16,2017
The Administration has worked closely with GBS over the years to incorporate the
recommendations from the BAC and FCWPC that provide employees and retirees with group
health coverage that is reasonable, affordable, and that seeks to improve the health of our
employee and retiree health plan population. The Administration recommends that we move
forward with implementing the changes to our health plan offerings, which includes combining
the features of the Standard and Premium PPO plan, adding a High Deductible Plan with an
HSA, instituting a Smoker's Penalty, providing a Wellness Credit to those employees who have
reached Silver, Gold or Platinum status in the Go365 Wellness Program, and providing a one-
time $250 stipend to employees who either decline coverage or have coverage available
elsewhere.
Attachments
JLM/MT/MS
FIHU[,lA$all\Sonh Brilges\BENEFITS\FCWPC - Health lnsunance Plan 2017-18.docx
24
g MIAMIBEACH
OFFICE OF THE CITY MANAGER .
No. Lrc * ill-\ot3
Mayor Matti Herrera.Bower and
FRoM: Jimmy Morales, City Manager
DATE: October 25,2013
' SUBJECT: 2014 Premium Gosts for the of Miami Beach Self-lnsured Medical Plan
for Active Employees and Reti
The purpose of this Letter to Commission (LTC) is to provide an update on projected health
insurance premiums effective January 1, 2014, as requested by the Finance and Citywide
Projects Committee (FCWPC).
BACKgROUNp
On August 29,2012, the Committee of the Whole as part of the Mayor and City Commission's
proposed budget for FY 2012113, discussed the premiums paid by the City and its enrofied
active employees and retirees for health care insurance. Subsequently, on October 9, 2012, the
Administration provided members of the City Commission supplemental information via LTC
#259-2012 regarding the City's self-funded healthcare plans' experience from inception in 2009
through August 2012. The information for each individual plan and enrollment group included:
'medical plan enrollment by active employees, pre-age 65 and post-age 65 retirees; total
monthly medical plan premiums; total claims paid; medical plans'fixed costs; total medical plan.
expenses and the loss ratio (the percentage of claims paid and plan costs for the premium
collected). As part of the discussion, staff was requested to evaluate a premium rebate for
plans where premiums were in excess of actual experience costs.
ln LTC #3Og-2O12, dated November 28, 2012, the Administration reported on the potential
impacts that a premium rebate could have on the City's group health plans. The City's benefits
consultant, Gallagher Benefit Services (Gallagher) advised against such a rebate primarily for
two reasons: (1) enrollment in the City's self-funded plan is too small to be statistically sound,
with few participahts and high claims expenses leading to fluctuating loss ratios; and (2) such a
premium rebate could violate Federal laws, such as the Americans with Disabilities Act, as the
City could be perceiVed as penalizing employees who need medical care and rewarding those
who do not.
^
The Administration reported in LTC #069-2013, dated February 28,2013, on the anticipated
impact of the Patient Protection and Affordable care Act (PPACA) on the city's medical
insurance plans. To date, the PPACA has: (1) removed lifetime dollar limits from all plans,; (2)
increased the dependent child coverage age to 26; (3) eliminated pre-existing conditions lrs a
reason to deny coverage to dependent chiliren to dgd ig; (a) provided for in-nEtwork preveftive
care coverage at no cost; (5) required form W-2 reporting of the employer's share of the hdalth
care iniurance premium costs; (6) provided for simple language benefit summaries; (7)
decreased medical flexibie spending account maximums; (8) imposed the comparative
We ore cqnmild to ptovidng excellent public seMce ond so[e\ lo oll who live, work, ond ploy in out vibronl, toPicol, hislotic communitY.
R[: Cii:!VED
LETTER TO COI\MASI6NI.I{ II: I2
CITY CLEIii'I,5 t]FF II]E
City Commission
25
:
LTC - 2014 Premium Costs for the City of Miami Beach Self-lnsured Medical Plan for Active Employees
and Retirees
'Page 2 |
October 25,2013
effectiveness fee, effective July 31, 2013, which requires employers to pay $1.00 per covered
individual based on the average number of covered individuals in the previous plan year; and
(9) required employers to provide employees with information regaiding the insurance
exchanges, which the City provided on September 27,2013.
The Committee of the Whole referred the matter to the Budget Advisory Committee (BAC) for
their review and recommendations regarding efficiencies and cost savings.
BUDGET ADVISORY COMMITTEE (BAC} RECOMM EN DATIONS
The Administration and Gallagher provided the BAC with alternatives to the City's current
medical insurance plan options. The Committee reviewed the cost components of the medical
insurance plans to ascertain where they could be reduced, and identified cost saving options
such as changes in plans' benefits coverage to reallocate cost sharing between the City and
enrollees; compared the City's medical plans to other employers (both in private and public
sectors) to search for plan efficiencies; and reviewed the self-funded plan experience of other
employers based on their individual filings with the State.
!n summary, the BAC recommended:
. The City's group health plan should remain self-funded;
. . The City's three premium plans, (Premium HMO, Premium PPO and POS) should be
eliminated;
. The Standard HMO and Standard PPO should be replaced with HMO and PPO plans
recommended by Gallagher. These plans would increase the employees' out-of-pocket
expenses and, therefore, result in lower claims costs;
. Prescription coverage should be removed from the Humana plan and provided by a
separate prescription be.nefit manager;
o Offering a high deductible health care plan and a Medicare advantage plan for post-65
retirees; and
.. . Change the City's calendar plan year to a fiscal plan year.
FTNANCE AND CtTyWtpE PROJEGTS .COMMTTTEE (FCWPC) RECOMMENDATIONSI
This information was presented to the members of the FCWPC during the July 8, 2013,'
meeting. During the discussion, members expressed concerns over the BAC's
recommendations. Although these recommendations would result in cost savings to the City,
they would also result in reductions in benefits and increased out-of-pocket costs for. employees
and retirees, as they added.new first dollar deductibles and increased copayments and premium
costs.
As noted in the July 8, 2013, FCWPC memorandum, the City's cunent plans were piojected to
incur at least a 10 percent, or $1.7 million, cost increase in FY 2013114 assuming the plan
increase was implemented October 1,2013. lf the BAC recommendations were implemented,
the City's medical plan costs would have decreased by 4.3 percent, or $2.4 million, as shown in
the table below:'
26
LTC.-.2014 Premium Costs for the City of Miami Beach Self-lnsured Medical Plan for Active Employees
and Retirees
Page 3
October 25,2013
Fiscal Year 2014 Projections
Self-fuided
Current Plan
Design
(No Chanoesl
BAC
Recommended
Chanoes
CosU
(Savings)
Proiected Medical Claims'$12.496.696 $10,777,714 ($1.718:982)
Projected Pharmacy
Claims'$4,230,904 $3,368,614 ($862,290)
Administration/Disease
Manaoement3 $714,454 $894,885 $180,431
Re-insurance - Specific
and Aqoreoate4 $1,099,065 $1,098,092 ($e73)
Total Estimated Self-
Funded Expense $18,541,393 $16,139,305 ($2,402,088)
Current Fundinq $16.858.099 s16.858.099 0
Funding $
lncrease/Decrease $1,683,294 ($718,794)($2,402,088)
Funding %
lncrease/Decrease 10.00/o -4.3o/o -14.3%
1 Gallagher's claims prolections based on proprietary discount tables and ad.iusted for the proposed plan designs.
2 prescription Corporation of America identified as the pharmacy benef( adminlstrator under the proposal under a transparent pass hrough
arrangement of all pharmacy rebates and ingredient cost savings.
3 Humana continues to be the benefit plan adminrstrator but no rebate io oftset, ptoducing a slaghtly higher administrative fee.
4 Symetra continues to provide reinsurance coverage.
ln addition to'the BAC's recommended plan changes, members of the FCWPC discussed the
disparities in the cost sharing among the City's three premium plans, HMO, PPO and POS, in .
whiCh the City pays 50 percent of the premium cost for both employee only and family
coverage, and the Standard HMO and Standard PPO plans, in which the City pays 75 percent
of the premium for employee only coverage and 60 percent of'the premium for family coverage.
There was also concern that the premium plans have higher premiums cost and annual rate
increases than the stindard plans, when the loss ratios (the percentage of plan costs to
premiums collected) are lower than the loss ratios for the standard plans. lt was noted during
the discussion however, that the claims cost for the premium plans is higher as a consequence
of better plan coverage which results in lower employee out-of-pocket expenses.
At the end of the discussion, there was agreement that the BAC recommendations did provide
cost savings to the City but.that reductions in coverage provided by those changes resulted in
greater oui-of-pocket expenges for employees. ln summary, employees would spend more for
fewer choices and lower benefits.
The Committee's perspective was that historically public employees are provided better group
health insurance benefits than those in the private sector to offset differences in wages and
other benefits. This discussion resulted in the recommendation to continue with the City's
current group health oPtions.
The Administration was further directed to explore ways to share the plans' premium costs more
equitably among employees. Currently, the City subsidizes the highest dollar value for the
piemium ppO -plan.'Further, while a lower subsidy, tl;re Standard PPO is also significantly
27
LTC - 2014 Premium Costs for the City of Miami
I
each Self-lnsured Medical Plan forActive Employees
and Retirees
. Page 4
October 25,2013
:
higher than the Standard HMO, Premium HMO and POS plans.
ANALYSIS
A comparison of the current monthly premiums reflecting the employees' monthly premium, the
.. City subsidy and the total plan premium is provided in the table below:
2013 Monthly Health Plan Premium Cost Share
Plan
' Emolovee Onlv Coveraoe Familv Coveraqe
Employee
Cost
City
Subsidv
Monthly
Premium
Employee
Cost
City
Subsidv
Monthly
Premium
Standard
HMO $134.72 $329.84 $464.56 $472.26 $679.60 $1,151.86
Standard
PPO $261.70 $640.72 $902.42 $908.00 $1,306.O4 $2,214.64
Fremium
HMO $381.74 $381.74 $763.48 $946.40 $946.40 $1,892.80
Premium
PPO $763.90 $763.90 $1,527.80 $1,874.46 $1,874.46 $3,748.92
POS $425.06 $425.06 $850.12 $1,054.86 $1,054.86 $2,109.72
.The standard plans were added to'the City's medical plan offerings in 1991 in an effort to
reduce the City's skyrocketing health care costs. To encourage enrollment in these .plans,
which have higher oui-oFpocket expenses, the City's premium subsidy was raised.
At the September 11, 2013, City Commission meeting, the City Commission accepted the
recommendations from the FCWPC, with the exception that the change aligning the plan year
with the City's flscal yearwould be effective'October 1,2014. As a result, due to the timing
difference and the delay in the premium increase from October 1, 2013 to January 1, 2014, lhe
premium increase effective January 1,2014 is 12.5 percent instead of the anticipated 10
percent.
Foilowing direction from the City Gommission, the Administration worked with Gallagher to
create two premium scenarios in addition to the base scenario, which reflects the method of
increase previously used by the City. Each scenario is based on an increase of 12.5 percent for
the plan year, which begins January 1,2014. The scenarios are as follow:
1. Base Scenario is centered on a 12.5.percent across the board in.r""r" to the 2013
rates, for both the City and employee contributions. The current City subsidy levels are
maintained for each of the five plans.
. 2. Scenario 1 provides for a flat dollar equivalent City subsidy for each of the plans for
active emptoyees ($423.70 for employee only and approximately $1,016.88 for family
coverage). lndividual plan increases for the combined City and employee premiums are
' based on the plan's loss ratio (claim costs versus premiums collected). While this
reflects the approach recommended by the FCWPC, it is in conflict with the City's
collective bargaining agreements. The City's subsidy for retirees decreases from 50
percent to a range of 30 to 40 percent.
B
28
LTC - 201.4 Premium Costs for the City of Miami Beach Self-lnsured Medical Plan for Active Employees
and Retirees
Page 5
October 25,2013
, 9. Scenario 2 is based on active employee contributions that are 50 percent or less of the
total premium. lndividual plan increases for the combined City and employee premiums
are based on the plan's loss ratio (claim costs versus premiums collected).
Scenarios 1 and 2 reflect changes to the City's premium subsidy for both active employees and
retirees..
Base Scenario
ln this scenario, the City's subsidy percentage is maintained at current levels, continuing a
subsidy program that remains disproportionately higher for the PPO plans than the HMO plans.
Therefore, this scenario does not meet the FCWPC and City Commission's direction to rate by
plan experience and provide a City dollar subsidy that is uniform across all plans, as plan loss
ratios are not considered in determining the annual premium increases incurred by each
individual plan.
Under this base scenario, the calendar year 2014 monthly rate charged to active employees
(and the City) for the Standard HMO plan increases by $16.84, the lowest of all the plans. The
most significant increase occurs in the employee cost and City subsidy for the Premium PPO
plan which goes up by $234.31 per month.
Scenario 1
This scenario is based on the direction received from the FCWPC and the City Commission,'whereby the premiums are experience rated, meaning plan loss ratios were considered. Those
plans with low loss ratios incurred lower premium increases and the inverse was also true.
Premiums for active employees were set to represent a flat dollar City subsidy equivalent, such
that, the dollar value of the City's portion is similar for all plans; approximately $400 for
eniployee only coverage and $1,000 for family coverage. . Compared to the Base Scenario,
under Scenario 1 the City's cost remains constant for all plans and coverage levels resulting in a
savings to the City while shifting more of the plan premium costs to the employee.
Under Scenario 1 the monthly premiums paid by active employees for the Premium PPO family
coverage decreases by $230.30 when compared to the 2013 rates, and when compared to the
Base Scenario, the employee cost decreases by $464.61. This decrease in cost to the
employee can be attributed to the use of experience rated premiums.
The highest monthly active employee increase in 2014 is for the Premium HMOfamily coverage
where the monthly premium goes from the current $946.40 to $1,795.30. Compared to the
Base Scenario, under Scenario 1 the employee's cost increases by $730.60. This increase in
cost to the employee is attributed to both the flat City's subsidy and the use of experience rated
premiums.
Under this Scenario, the City's subsidy toward retiree premiums also changes. Currently, the
City provides a subsidy of 50 percent of the total premium costs across al[ plans and coverage
levbls. Scenario 1 decreases the City's subsidy to 40 percent to 30 percent.
Monthly premium rates charged to retirees range from a decrease of $172.56 for the Premium
ppO finiity coverage from the current monthly cost of $1,1U.21 to $991.65. The highest
29
LTC - 2014 Premium Costs for the City of Miami Beach Self-lnsured Medical Plan for Active Employees
and Retirees
Page 6' October 25,2013 I
increase occurs in the Premium HMO family coverage where the monthly premium increases
$740.91 from the current $946.40 to $1;687.31. When comparing the costs of Scenario 1 to the
Base Scenario, the retiree costforthe Premium PPO famity coverage decreases $318.09 and
Premium HMO cost increases $662.61. These changes in costs are directly attributable to the
use of experience rated premiums and the City's change in plan subsidy.
This scenario results in large increases for the Premium HMO and employee contributions that
exCbed 50 percent for all plans with the exception of the Standard HMO with employee
contributions at 25 percent. The rb-tiree contributions are also high for all plans with a 70 pbrcent
premium increase in the Premium PPO for pre-65 retirees. Although the employee costs under
the Base Scenario increase across all plans, the increases still occur under Scenario 1 due to
the reduction in the City subsidy.
While apparently more equitable due to each employee receiving the same subsidy level, this
scenario is provided for information purposes only as such a scenario would violate the
collective baigaining agreements among the City, the American Federation of State, County and
Municipal Employees (AFSCME),'Government Supervisors Association of Florida (GSAF) and
. Communication Workers of America (CWA), all of which require the City to pay at least 50
percent of the premium cost for eligible employees. Should the City elect to pursue the lowei
percentage subsidies provided by this scenario, the City would be required to bargain with each
collective bargaining unit.
Scenario 2
This scenario is also based on the direction received from the FCWPC and the City
Commission, whereby the premiumS are experience rated and those plans with low loss ratios
incurred lower premium increases and those plans with high loss ratios incurred higher premium
increases.
The City subsidy for active employees ranges from a high of 77 percent for the Standard HMO
employee only coverage to 50 percent for the Premium PPO, Premium HMO and POS plans,
wnie providing a retiree premium subsidy ranging from 30 percent.to 50 percent. Under the
Base Scenario, the City subsidy is set at 50 percent for all plans with the exception of the two
plans that provide lower coverage levels, the Standard HMO and Standard PPO plan, with City
subsidies of 75 percent for employee and 60 percent for family coverage.
It should be noted that the City has already adopted a change to reduce subsidies for future
retirees. Employees hired after 2006, earn a healthcare premium subsidy of $10 or $25 per
month, per yeai worked, based on whether they are covered by the general or the police and
.fire pension plan., For example, a general employee hired after 2006 who worked for 30 years
prioi to retiring, would earn a $300 per month subsidy toward'his or her health care insurance' premium. Th; policy decision made in 2006 will eventually move the City toward a point where
all retirees get a siipenO based on their years of service rather than a percentage of the
premium. The subsidy for retirees originally hired before 2006 is significantly more generous.
The retiree subsidiei proposed for pre-2b06 employees as of January 1,2014, remain
significantly more generous than for post-2006 employees.
Under this scenario there is a decrease of $543.94 in the monthly rates charged to active
emptoyees for famity coverage in the Premium PPO plan. n9t'::-iTeloyees with family
cor"rjg" in the POS plan wil[incur a monthly premium increase of $376.87. When we review
these Costs increases'against the Base Scenirio, family coverale under the Premium PPO plan
decreases $778.2S wil"ifamily coverage under the POS plan increasing $245.01. This change
30
LfC - 2014 Premium Costs for the City of Miami Beach Self-lnsured Medical Plan for Active Employees
and Retirees
PageT
October 25,2013
in cost is directly related to using experience rated premiums as the Premium PPO had a very
low claims to premium collected cost and the POS had a high claims to premium cost.
Retirees enrolled in the Premium PPO retiree and family coverage will see a reduction in their
monthly premium of $11.73. Retirees enrolled in the Premium HMO retiree and family coverage
will see the most significant change in their monthly premiums with an increase of $740.91, from
the current monthly premium of $946.40 to $1,687.31. When we compare this Scenario to the
Base Scenario, the saving are greater for the Premium PPO $246.04 due to the use of
experience rated premiums even though the City is only providing a 30 percent subsidy for the
plan. While the increase for the Premium HMO when compared to the Base Scenario is a bit
lower at $622.61, the cost impact to the retiree is significant. The least expensive plan, and the
one with the most active employee enrollment, the Standard HMO, is provided a subsidy of 77
percent for employee coverage and 67 percent for family coverage to encourage employees to
participate in a health care plan. With this increased subsidy, the monthly employee premium
cost is reduced from the current $134.72 to $129.64 for employee only coverage and from
$472.26 to $467.09 for family coverage. When compared to the Base Scenario, the employee
sees a savings of $21 .92 tor employee only coverage and $64.20 for family coverage due to a
greater City subsidy of 75 percent and 60 percent respectively,
This scenario also provides a reduction in monthly premium costs to active employees in the
Premium PPO plan. Active employee with employee only coverage will see a reduction in their
current monthly premium of $763.90 to $542.23, a reduction of $221.67. Similarly, active
employees enrolled in the family coverage will see a reduction of $543.94 from the cunent
monthly premium of $1,874.46 to $1,330.52. These savings are also seen when comparing the
scenario against the Base Scenario in which there is a savings of $317.16 for employee only
coverage and $778.25 for family coverage, which is directly related to the use of experience
rbted premiums.
Additionally, as required by the PPACA, effective January 1,2014, employees who are provided
group health coverage through their employers, and who do not qualify for health care coverage
fnrough the federal Marketplace, must enroll in a health care plan or incur a tax penalty. Due to
its low employee only cost, participating in the Standard HMO plan will assist employees in
meeting this requirement.
Of the three premium scenarios, this scenario meets all the FCWPC and City Commission
recommendations: providing premiums based on the actual cost of the individual plan, not
based on an average cost of all plans; maintains affordable premiums through the Standard
HMO plan and shares the premium costs of the plan more equitably among all plans.
N.EXT STEPS
The Administration is working to provide active employees and all retirees with an annual open
enrollment pr-iriod beginning November 4, 2013 and ending November 14, 2013. During this
annual open enrotlmdnt period, staff provides employees and retirees with information regarding
the City's benefit programs, and the opportunity to make any changes to their coverage.
Changes made by employees and retirees during the open enrollment,period take effect
January 1,2014.
-prior to the enrollment period, the Administration will begin the annual enrollment piocess
including drafting communication materials and providing notification to all employees and
retirees regarding any changes to monthly premiums. The anticipated timeline is provided
below.
31
LTC -2014 Premium Costs for the City of Miami Beach Self-lnsured Medical Plan for Active Employees
and Retirees
Page 8
October 25,2013
Week Task
1
October 14h - 18th
Draft enrollment materials incorporating new premium rates;
managerial review.
2
October 21't - 25tn
Forward enrollment materials to Central Services for printing and
binding; collat6 and label enrollment packages.
3
October 28th -
November 1tt
Distribute enrollment packages: (1) active employees, through
department payroll coordinators; (2) retirees, via U.S. mail.
4and5
November 4m - 14th
HR Benefits Division staff meets with employees and retirees to
discuss options and gather completed enrollment materials.
6 and {2
November 16th -
December 27e
Review enrollment requests for accuracy, follow-up with enrollees if
there is information missing; enter enrollment information in Eden
Payroll System to reflect the appropriate payroll premium for the
coverage elected; manually enroll employees and.retirees via web
access to each carrier for plan identification cards to be distributed
prior to January 1, 2014; test payroll to ensure plan contributions
are employee enrollments are correctly loaded.
CONCLUSION
The Administration has worked closely with Gallagher to incorporate direction from both the
FCWPC and City Commission to continue to provide employees and retirees with group health
insurance coverage consistent with current options and to share the different premium costs.
more equitably.
Of the three premium scenarios presented, Scenario 2 best meets the directive of the FCWPC
and the City Commission, by continuing to provide the City's current group health care plan
options; considering each plan's loss ratio by increasing premiums based on the cost of claims
and continuing a City subsidy where employees pay 50 percent or less of the premium for any
plan. As a result, these premium changes will be incorporated in the 2014 open enrollment
period scheduled to begin in a few weeks.
Staff is available to meet with you one-on-one to address any questions or concerns that you
may have regarding any of the premium scenarios and/or the City's group health plan. Please
coniact Kathie Brooks, Assistant City Manager, at extension 6249 to arrange a time that is
convenient for you.
h 'E(JLM/*6B/su-vcnac
F:\l'IUMA\$all\BENEF|TS\LIC\2014 Health Care Premiums 1 0''l 6-1 3.docx
32
BASE SCENARIO
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39
Scope
The City of Miomi Beoch ("the City") provides heolth insuronce to its employees through
o self-funded heolth plon currently odministered by Humono ond AvMed ond dentol
insuronce to its employees through o self-funded plon odministered by Metlife.
Effective October 1,2016 both medicol ond dentol will tronsition to CIGNA. Florido
Stotute I 12.08 requires self-funded plons sponsored by locol governments to submit on
onnuolfiling to the Florido Office of lnsuronce Regulotion ("OlR") documenting plon
experience ond finonciol position. The filing must include on octuoriol memorondum
signed by o certified octuory thot opines on ihe octuoriol soundness of the plon. This
memorondum is iniended to comply with thot requirement for the l2-month period
covering October 1,2015 through September 30,2016.
I hove performed the colculotions for the City's self-funded heolth plon ond supervised
ond reviewed the preporotion of the ottoched reports. ln my colculotions, I hove relied
on informotion provided by the City's Benefits ond Finonce deportments ond on doto
provided by the plon's odministrotors. I hove not oudited this doto but I hove
performed tests io ossess the doto's consistency with prior yeors ond overoll
reosonobleness, ond I believe the doto is sufficient for the purposes of this onolysis.
Background
For medicol insuronce, in the 2015115 plon yeor the City offered o menu of two HMOs,
two PPOs, ond o POS plon for octive employees ond retirees. These plons chonged
only slightly under the CIGNA progrom effective October 1,2016. The dentol plon is o
PPO (employees olso hove o fully insured DHMO option) ond both of those were
reploced by comporoble CIGNA products beginning October 1,2016 os well.
Premiums for the medicol plons were revised io reflect o 3-tier structure - previously the
rotes were on o 2-tier bosis.
Credibility
The City's self-funded plon currently covers opproximotely 2,800 employees, retirees,
ond dependents. Given the size ond stobility of the City's populotion, I believe thot the
City's experience is ,l00% credible.
Arthur J. Gol:ogher & Co.
i-leslil :c<rre Anolytics Consuliing
2255 Glodes Rd., Ste 200E. Bor:o Roion FL 33431
Phone: 561 .998.6/5:; - fox: .561.998-573i
@ 20I 7 GALLAGHER BENEFIT SERVICES, INC
w.AJG.COM
40
Developmenl of Cloim Reserves
lncurred medicol ond phormocy cloims for fiscol yeor 2016 were developed by odding
poid cloims to the chonge in the cloim reserye. The closing cloim reserye wos
estimoted using the Development method. Becouse the completion foctor for
September 2016 cloims is so low, incurred cloims for thot monih were estimoted using
the Completion method. The some method wos used for setting the deniol reserve.
I believe the Development is oppropriote for this plon becquse cloim log potterns hove
been reosonobly stoble ond o review of runout from prior periods suggesis thot our
previous esiimotes hove been reosonoble. A copy of our IBNR model in excelformot
hos been included wiih this filing.
The reserve estimote does not include ony explicit morgin.
Development of Premium Equivalents
Premium equivolents for oll medicol plons were developed bosed on projected
expenses under the CIGNA progrom. With o significont goin in 2015116 ond with the
expected improvement in controct terms under CIGNA, we project o goin lor 2016/17
even with no premium increose so no increose wos deemed necessory for 2016117 .
Smoll pricing chonges were mode to occommodote the chonge from 2 tiers to 3 tiers.
Our method for developing recommended premium increoses is os follows.
o We project incurred cloim expenses for the roting period by colculoting per
copito costs for historicol periods ond odjusting them forword to the roting period
for ossumed trend, plon chonges, ond lorge cloims.o We project fixed costs by ossuming reosonoble increoses to current rotes ASO
rotes ond reinsuronce premiums (or octuol renewol proposols if they ore known).
We olso include internol City expenses thot ore ollocoted to the heolth plons.
For FY 2017, CIGNA included o fee credii of opproximotely $230,000 ond thot hos
been reflected in our forecost os well.. For medicol insuronce, we include fees poyoble under the Potient Protection
ond Affordoble Core Act ("PPACA"). These fees include the Potient Centered
Outcomes Reseorch lnstitute ("PCOR|") fee ond the Tronsitionol Reinsuronce fee.
o We combine these projected costs to get the totol projected plon expense. We
compore thot to the current onnuolized revenue bosed on current enrollment
ond premium equivolent rotes ond determine the rote oction necessory to bring
the revenue in line with ihe projected expenses. ln this cose, the projected
revenue of the current rotes, odjusted for the 3-iier rote structure, wos more thon
sufficient to cover expected costs in the 2Ol6/17 yeor, ond we project increoses
of 4.0% in 2017118 ond 8.0% in 2018/19 would be necessory for the plon to breok
even.
Arthur J. Gollogher & Co.
i leolthcore Anolytics Cottst.tl ling
2255 Giocles Rd.. Sie 200f, Boco Rcrton, i'L 33431
Phone: 561.998.6755 - Fcsx: 561 .998.(:731
O 20I7 GATLAGHER BENEFIT SERVICES, INC
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We hove included o cloim summory thot shows ihe monthly enrollment ond cloims from
Jonuory 2009 through September 2016. At the bottom of the exhibit, we show
summories by colendor ond fiscol yeors, ond the onnuol ond inception to dote
overoge onnuol increoses in per copitol cloim cosis. The plon experienced very
unfovoroble cloims though much of 201 I due to o jump in lorge cloims, but since ihen
cloims hove been much more stoble.
The City reserves the right to chonge the level of City funding reflected in the 3-yeor
forecost thot is port of this filing. Foctors such os ongoing lobor negotiotions ond plon
experience will offect octuol contributions.
Other Income and Expenses
There ore miscelloneous income (Medicore Port D RDS subsidy) ond expenses ollocoted
to the fund, but they hove generolly been lorgely offsetting. We hove ossumed the RDS
subsidy will remoin flot in future yeors.
Historical Data
We hove included tobs colled "oct_exp" ond "loss rotios" in the "COMB
documentotion" file, showing the octuol ond expected cloims in recent yeors os well os
the loss rotios for the some period ond the projected loss rotio for 2016117. Actuol
cloims hove been consistently of or below expected in recent yeors, os medicol trends
hove been lower thon expected. The incurred loss rotios hove ronged from 77% lo 88%,
ond the forecost for 20] 6117 is for o loss roiio of 86.5%. These loss rotios hove resulted in
o continued increose in the plon surplus, os the morgin for covering fixed costs hos
been much lorger thon the octuol costs. For this reoson, we feel the loss rotios
ochieved ond the expected loss rotio f or 2016/17 ore reosonoble ond opproprioie.
Medical Trend
For the three yeor forecost, we ossumed on onnuol combined medicol ond phormocy
trend of 8.0% ond o dentol trend of 6.0%. These trends ore bosed on our experience
with other clients in this oreo, os well os published survey results. The plon's octuol
overoge onnuol compound trend hos been lower thon these estimotes, olthough o
portion of thot is due to plon chonges.
Surplus
The plon entered the 20,l 5/16yeor with o surplus of over $7.3 million. During the l2-
month period covered by the filing, the plon hod o goin of over $2.2 million. As o result,
the plon closed the September 30, 2016 reporting period with o surplus of $9.6 million.
This equotes to 208 doys of cloims, which comfortobly exceeds the OIR sofe horbor of
50 doys.
A,rfhur J. Gollogher & Co.
l-leolthcore Anolylics Corrsr.rliing
2255 Glo<les Rcl.. Ste 200E, Boco Rcion, FL 33431
Phone: 561 .998.6755 * Fcx: .56i.998.6731
O 20I 7 GATLAGHER EENEFIT SERVICES, INC
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We project onother goin of over $900,000 for the 20.l 6/17 plon yeor. Bosed on the
occumuloted surplus os of September 30, 2016, the budgeted funding for the 2016117
plon yeor ond the expected expense for the yeor, it is my opinion thot the City's self-
funded heolth plon is octuoriolly sound.
Reliance
I relied upon finonciol reporting, enrollment, ond premium informotion provided by the
City of Miomi Beoch ond on cloim log informotion provided by Humono, AvMed, ond
Metlife in preporing this onolysis. ln my opinion, the doto provided wos odequote for
the purposes of ihis onolysis.
I believe thot the procedures ond methods used in the exhibits to report post results ond
project future results ore reosonoble ond hove been cqlculoted using sound octuoriol
principles. The projections ore bosed on ossumptions thot I believe ore reosonoble in
oggregote, but future experience is likely to vory from these ossumptions, ond the
differences moy be moteriol.
Qualifications
l, Glen R. Volk, om o Member of the Americon Acodemy of Actuories. I meet the
Acodemy quolificotion stondords for rendering this stotement of octuoriol opinion. I om
not owore of ony relotionship between myself or other members of my firm ond the City
thot could creote o conflict of interest thot would impoir, or oppeor to impoir, my
objectivity.
I further certify thot I hove prepored this filing in occordonce with:
. ASOP No. 5, lncurred Heolth ond Disobility Cloims
e ASOP No.8, Regulotory Filings for Rotes ond Finonciol Projections for Heolth Plons
o ASOP No.23, Doto Quolity
o ASOP No. 31, Documentotion in Heolth Benefit Plon Roiemoking
Pleose let me know if you hove ony questions obout this filing.
Glen R. Volk, FSA, MAAA
Area Vice President & Consulting Actuary
Jantary 23.2017
Date
Adhur J. cqll(,gher & Co.
Heclihccre Anclylics Consr,iliing
2255 Giodes Rcl., Sie 200E, Boco Rcton, FL 33431
Phone: 56,} .998.6755 * fox: .161 .998.673 i
@ 2017 GALLAGHER BENEFIT SERVICES, INC
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