Rancho Palos Verdes City Council
   

TO: HONORABLE MAYOR AND COUNCILMEMBERS

FROM: CITY MANAGER

DATE: AUGUST 19, 2003

SUBJECT: CALPERS HEALTH INSURANCE

RECOMMENDATION:

Adopt Resolution No.___ ELECTING TO CEASE TO BE SUBJECT TO THE PUBLIC EMPLOYEES’ MEDICAL AND HOSPITAL CARE ACT.

BACKGROUND:

More than 100 public agencies throughout the state have been seeking independent quotations in recent months to determine whether or not they can purchase health insurance coverage at rates lower than the California Public Employees’ Retirement System (CalPERS) is offering. Last year CalPERS rates rose an average of 26% and for 2004 another 17% increase has been projected.

Since CalPERS offers health insurance at the same rates throughout the State, without considering regional differences in health care costs or demographics of the insured agencies, there can be significant inequities. For instance, in Southern California where health care costs are about 8-10 percent lower than the rest of the State, an agency can probably reduce their health care insurance costs significantly by looking outside the CalPERS System.

DISCUSSION:

Staff has now completed a review of proposals for health insurance that are equal or better than our CalPERs plans, but are less expensive. The City will be able to offer an HMO plan, the Kaiser Plan, a PPO and possibly a hybrid plan that combines some of the elements of an HMO with a PPO. The primary provider will be Blue Shield, an A rated insurance carrier. A spreadsheet comparing the costs and benefits of the proposed new health insurance plans with the existing CalPERS plans is attached.

The plans have been discussed with the employees and have elicited a generally positive response. Obviously, employees with dependents want to know that their costs will not increase and everyone wants equal or better coverage. Our broker has assured us that these employee objectives can be met. We have also advised our employees that the new health plans will not be effective until January 1, 2004 and in the next few months we will work out the final details of the new plans with the goal of making them even better and less expensive to both the City and the employee than the initial rate spreadsheet indicates.

As noted in the attached letter from CalPERS, the City must make an election to terminate their contract with the State health program by August 22, 2003. Once the City makes this election, an application for reinstatement may not be accepted for up to five years.

FISCAL IMPACT:

The cost savings for the initial year (January 1, 2004 through December 31, 2004) of the new health insurance plans is estimated at about $30,000 or an approximate 10% savings. Obviously, the actual final cost to the City will be based on which plan each employee chooses. However, it is unlikely that most employees will opt for a plan much different than the one they are currently enrolled in.

Respectfully submitted,
Les Evans
City Manager

Attachments: Resolution
Letter from CalPERS
Comparison of the Current and Proposed Health Plans