Ordinance No. 6,774Published In: THE BAYTOWN SUN 930923-1
Friday, October 1, 1993
Friday, October 8, 1993
ORDINANCE NO. 6774
• AN ORDINANCE ADOPTING A BUDGET FOR THE ENSUING FISCAL
YEAR, BEGINNING OCTOBER 1, 1993, AND ENDING SEPTEMBER 30,
1994, IN ACCORDANCE WITH THE CHARTER AND ORDINANCES OF
THE CITY OF BAYTOWN; AND PROVIDING FOR THE PUBLICATION
AND EFFECTIVE DATE THEREOF.
WHEREAS, the City Manager of the City of Baytown has submitted
to the City Council a budget estimate of the revenues of said City
and the expense of conducting the affairs thereof for the ensuing
fiscal year, beginning October 1, 1993, and ending September 30,
1994, and which said estimate has been compiled from detailed
information obtained from the several departments, divisions, and
offices of the City containing all information as required by the
Charter of the City of Baytown; and
WHEREAS, the City Council has received said City Manager's
estimate and held a public hearing thereon as provided by
Section 44 of the Charter; and
WHEREAS, after full and final consideration of the public
hearing and after certain revisions to the proposed budget, it is
the opinion of the Council that the budget as revised should be
approved and adopted; NOW THEREFORE
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN,
TEXAS:
Section 1: That the budget estimate of the revenues of the
City of Baytown and the expenses of conducting the affairs thereof,
for the ensuing fiscal year, beginning October 1, 1993, and ending
September 30, 199.4, as finally submitted to the City Council by the
City Manager of said City (a copy of which is on file in the City
Clerk's office) be, and the same is in all things, adopted and
approved as the budget estimate of all the current expenses as well
as the fixed charges against said City for the fiscal year
beginning on the 1st day of October, 1993, and ending September 30,
1994.
Section 2: That the sum of TWENTY-THREE MILLION FOUR HUNDRED
THIRTY-TWO THOUSAND SEVEN HUNDRED SIXTY-FIVE AND NO/100 DOLLARS
($23,432,765.00) is hereby appropriated out of the General Fund for
the payment of Operating Expenses and Capital Outlay of the City
Government.
Section 3: That the sum of TWO MILLION FOUR HUNDRED SIXTEEN
THOUSAND ONE HUNDRED SEVENTY-FOUR AND NO/100 DOLLARS
($2,416,174.00) is hereby appropriated out of the Solid Waste Fund
for the Operating Expenses and Capital Outlay of the municipally
owned Solid Waste Collection System.
• Section 4: That the sum of THIRTEEN MILLION TWO HUNDRED
EIGHTY --EIGHT THOUSAND ONE HUNDRED NINETY-ONE AND N0/100 DOLLARS
($13,288,191.00) is hereby appropriated out of the Waterworks and
Sanitary Sewage System for operating costs and for the purpose of
930923-1a
• paying the accruing interest and redeeming the Serial Bonds as they
mature on the Waterworks and Sanitary Sewer Fund Debt Service
Bonds.
Section 5: That the sum of ONE MILLION ONE HUNDRED SIX
THOUSAND THREE HUNDRED NINETY-SEVEN AND N0/100 DOLLARS
($1,106,397.00) is hereby appropriated out of the Municipal Garage
Fund for the Operating Expenses and Capital Outlay for Municipal
Garage Service System.
Section 6: That the sum of FIVE MILLION TWENTY-THREE THOUSAND
TWO HUNDRED FOUR AND N0/100 DOLLARS ($5,023,204.00) is hereby
appropriated out of the General Fund Debt, Service for the purpose
of paying the accruing interest and redeeming the Serial Bonds as
they mature on the General Fund Debt Service Bonds.
Section 7: That the City Manager is hereby authorized to
transfer any unencumbered appropriation balance or portion thereof
between general classifications of expenditures within an office,
department or agency, in accordance with Section 68 of the Charter.
Section 8: The City Manager shall have the authority to
increase a department's line item budget by the amount equal to
outstanding purchase orders as of September 30, 1993, to be
appropriated out of the Fund Balance.
Section 9: This ordinance shall be and remain in full force
and effect from and after its passage and approval of the City
Council, and it shall be published once each week for two (2)
consecutive weeks in the official newspaper of the City of Baytown.
INTRODUCED, READ and PASSED by the affirmative vote of the
City Council of the City of Baytown, this the 23rd day of
September, 1993.
C.
PETE C. AL ARO, Mayor
ATTEST:
i
CL;;A�ft;GORE,. eClerk
�WACIO RAMIREZ, SR , ity Attorney
kgsU a-W9-23-"ad00BU aEr
MEMORANDUM
Sept. 23, 1993
IS TO: Missy Davidson, Human Resources
Eileen Hall, City Clerk
Monte Mercer, Director of Finance
FROM: Bobby Rountree, City Manager
SUBJECT: 1993-1994 Health Care Issue
The 1993-1994 budget year was highlighted by the cost of health care and
"Who should pay?" President Clinton revealed his National Health Care Plan on
Wednesday, 22, 1993. The administration provided several options to the City
Council regarding whether the employee and retiree should pay a portion of the health
benefits, and if so, how much. The future liability to the City for retiree benefits was
also discussed. The existing retirees felt they were "promised" that they would never
have to pay for their health care. Documentation provided by the administration
indicated differently. The final decision regarding health care for retirees and
employees was:
1. As of October 1, 1993, the employee and retiree will begin paying
$20.00 per month towards their health care benefits. This is in addition
to the cost of the dependents.
2. The City will discontinue financial support of health care benefits for
retired employees who are hired after October 1, 1993. Benefits will be
offered in accordance with state law. This will eliminate the City's
future financial liability regarding health care benefits for retirees who
were hired after October 1, 1993.
3. Due to the uncertainty of the national health care program, the absence
of any GASB requirements for cities, and a difficult budget year, action
on establishing a fund to offset the future financial liability was
postponed. This issue will continue to be worked this next year.
In summary, health care costs and future liability issues are not going away.
We will be addressing this subject each year during the budget session. Employees
and retirees may be required to pay more for health care in future years. The health
care pian will change as needed or required to keep it financially solvent.
THIS MEMO IS BEING WRITTEN IN AN EFFORT TO DOCUMENT THE HEALTH CARE
ISSUE FOR FUTURE REFERENCE. IT IS TO BE (1) ATTACHED TO ORDINANCE NO.
930923-1, WHICH ADOPTS THE 93-94 BUDGET, AND (2) ATTACHED TO THE
MINUTES OF THE SEPTEMBER 23, 1993 COUNCIL MEETING, (3) AND FILED IN THE
HUMAN RESOURCES DEPARTMENT.
cm/memoslHealthCare
MEMORANDUM
September 13, 1993
0
TO: Mayor and Council Members
FROM: Bobby Rountree, City Manager AR
SUBJECT: Health Care Alternatives
Ala
Attached are several alternatives regarding Health Care Benefits. The
alternatives are based on the proposed $43.70 per month employee/retiree cost which
will generate a total of $319,884. The far right of each alternative indicates the
monthly amount the City and the employee/retiree will contribute. The "Total Funds"
is the amount the City will be required to contribute on an annual basis.
Re -cap of health benefits funding:
The City currently contributes $2,115,408; the employees/retirees currently
contribute $327,957 for their dependent coverage. The budget proposes to fund the
projected deficit in the following manner:
City's Contribution * $345,461
Emp/Ret. Contribution * 319.884
$665,345
*Includes $59,500 proposed budget reduction
Alternatives I, II & III - 2% salary increase effective 4-1-94
Alternatives 1V, V & VI - 2% salary increase effective 10-1-OW4?3
Alternatives VII, VIII, IX & X - No salary increase
Alternative XI - City contributing total cost
Alternative XII - Salary increase of $20.00 across the board
cm/health/HealthCereAlter
0
0
City of Baytown
Recap of Alternatives for Health Benefits
RATE ADJUSTMENT REQUIRED
General
Water &
City
Employee/
Fund
Sewer
Sanitation I
Cost
Retiree
Alternative 1
2% salary increase 4/1
0.0085
0.0129
0.0556
13.70
30.00
Alternative it
2% salary increase 4/1
0.0110
0.0163
0.0710
23.70
20.00
Alternative 111
2% salary increase 4/1
0.0136
0.0196
0.0864
33.70
10.00
Alternative IV
2% salary increase 10/1
0.0135
0.0212
0.0900
13.70
30.00
Alternative V
2% salary increase 10/1
0.0160
0.0246
0.1054
23.70
20.00
Alternative VI
2% salary increase 1011
0.0186
0.0279
0.1209
33.70
10.00
Alternative VII
No salary increase
0.0086
0.0113
0.0519
33.70
10.00
Alternative VIII
No salary increase
0.0061
0.0080
0.0365
23.70
20.00
Alternative IX
No salary increase
0.0048
0.0063
0.0288
18.70
25.00
Alternative X
No salary increase
0.0035
0.0046
0.0211
13.70
30.00
Alternative XI
No salary increase
0.0112
0.0147
0.0673
43.70
0.00
Alternative XII
Salary increase $20 ACB
0.0104
0.0137
0.0630
23.70
20.00
Altematiai._.::;= >:
Cost of 2% salary increase
for employees effective 4/1
City of Baytown
Alternatives for Health Benefits
General Water & Total City Employe
Fund Sewer Sanitation Funds I Cost Retiree
113,500 30,480 6,420 150,400
Cost of supplementing health
79,495
16,858
3,931
100,284
13.70
30
Total Cost
192,995
47,338
10,351
250,684
Rate impact
0.0085
0.0129
0.0556
General
Water &
Total
City
Employee/
Alternative li:'.: `.
Fund
Sewer
Sanitation
Funds
Cost
Retiree
Cost of 2% salary increase
for employees effective 4/1
113,500
30,480
6,420
150,400
I
Cost of supplementing health
137,521
29,163
6,801
173,484
23.70
20
Total Cost
251,021
59,643
13,221
323,884
Rate impact
0.0110
0.0163
0.0710
General
Water &
Total
City
Employee/
Alternative ill :-
Fund
Sewer
Sanitation
Funds
Cost
Retiree
Cost of 2% salary increase
for employees effective 4/1
113,500
30,480
6,420
150,400
'Cost of supplementing health
I
Total Cost
Rate impact
195,546 41,468 9,670 246,684 33.70
309,046 71,948 16,090 397,084
0.0136 0.0196 0.0864
10
C
Alfematiare t�f�_';!,'
Cost of 20/0 salary increase
for employees effective 10/1
Cost of supplementing health
Total Cost
Rate impact
Alternative V
Cost of 2% salary increase
for employees effective 10/1
Cost of supplementing health
Total Cost
Rate impact
Alternative VC::::>..
Cost of 2% salary increase
for employees effective 10/1
Cost of supplementing health
Total Cost
Rate impact
0
City of Baytown
Alternatives for Health Benefits
General Water & Total City Employe
Fund Sewer Sanitation Funds i Cost Retiree
227,000 60,960 12,840 300,800
79,495
16,858
3,931
100,284 13.70
306,495
77,818
16,771
401,084
0.0135
0.0212
0.0900
General
Water &
Total City
Fund
Sewer
Sanitation
Funds v Cost
227,000 60,960 12,840 300,800
137,521
29,163
6,801
173,484 23.70
364,521
90,123
19,641
474,284
0.0160
0.0246
0.1054
General
Water &
Total City
Fund
Sewer
Sanitation
Funds I Cost
227,000 60,960 12,840 300,800
195,546 41,468 9,670 246,684 33.70
422,546 102,428 22,510 547,484
0.0186 0.0279 0.1209
Retiree
K]
Retiree
10
AlternativeVi
No employee salary increase
Cost of supplementing health
Total Cost
Rate impact
Alternative VIII
No employee salary increase
Cost of supplementing health
Total Cost
Alternative IX
No employee salary increase
Cost of supplementing health
Total Cost
Rate impact
Alternative X
No employee salary increase
City of Baytown
Alternatives for Health Benefits
General Water & Total City Employe
Fund Sewer Sanitation Funds I Cost Retiree
0 0 0 0
195,546
41,468
9,670
246,684 33.70
Total Cost79,495
195,546
41,468
9,670
246,684
173,484 23.70
0.0046
0.0211
0.0086
0.0113
0.0519
6,801
General
Water &
Total City
Fund
Sewer
Sanitation
Funds Cost
0
0
0
0
Total Cost79,495
108,508
137,521
29,163
6,801
173,484 23.70
0.0046
0.0211
0.0048
137,521
29,163
6,801
173,484
Water &
Total City
0.0061
0.0080
0.0365
Funds I Cost
General
Water &
Total City
Fund
Sewer
Sanitation
Funds 1 Cost
0 0 0 0
108,508
23,010
5,366
136,884 18.70
Total Cost79,495
108,508
23,010
5,366
136,884
0.0035
0.0046
0.0211
0.0048
0.0063
0.0288
��
General
Water &
Total City
Fund
Sewer
Sanitation
Funds I Cost
0 0 0 0
10
nployee/
Retiree
Retiree
251
Retiree
Cost of supplementing health
79,495
16,858
3,931 100,284 13.70 301
Total Cost79,495
16,858
i
3,931 100,284 j
Rate impact
0.0035
0.0046
0.0211
��
City of Baytown
Altematives for Health Benefits
if
<ative
General
Water &
Total
City
Employee/
Aim XE "
Fund
Sewer
Sanitation
Funds
Cost
Retiree
No employee salary increase
0
0
0
0
Cost of supplementing health
253,572
53,773
12,539
319,884
43.70
0
Total Cost
253,572
53,773
12,539
319884
Rate impact
0.0112
0.0147
0.0673
General
Water &
Total
City
Employee/
Altemative al
Fund
Sewer
Sanitation
Funds
Cost
Retiree
Employee salary increase ($20 ACB)
99,880
21,181
4,939
126,000
Cost of supplementing health
137,521
29,163
6,801
173,484
23.70
20
Total Cost
237,401
50,343
11,740
299,484
Rate impact
0.0104
0.0137
0.0630
if
GM Retirees
To Be Charged
For Insurance
Plan to Cut Health Costs
Would Raise Premiums
For Certain Managers
By JOSEPH B. WHITE
Staff Reporter of Tex WA" SrRic r inuRNAL
DETROIT — General Motors Corp.,
struggling to contain medical costs that
average nearly $1,500 a vehicle, will for the
first time charge retirees premiums for
health insurance. And GM is raising the
medical premiums it already charges
many active management personnel.
GM's decision to deduct as much as SI
a month from salaried retiree pension
I checks and as much as S25 more a month
from active white-collar employees' pay-
checks comes as the auto giant is girding
for a battle over health-care costs with the
United Auto Workers. The move also will
reverberate in Washington, where the
Clinton administration is gearing up to win
passage of a national health-care program
aimed at reining in medical -cost infla-
tion.
In the absence of a national health-care
j I alternative, GM President John F. Smith
Jr. has vowed that GM will press its 267,000
blue-collar workers to join GM's 73,000 U.S.
salaried staffers in sharing the burden of
I escalating health costs. GM took a S21
i billion charge in 1992 to reflect its massive
j liability for retiree medical benefits. Its
I continuing medical costs per vehicle are
more than double those of rivals Ford
Motor Co. and Chrysler Corp.
But the UAW has vowed to fight any
I assault on its medical benefits, which
cover hospital charges from the first dol-
lar. The UAW and GM will negotiate a new
national labor agreement this fail, but only
after the union reaches a pattern -setting
I deal with Ford. If Ford abandons its effort
to wring concessions from the UAW on
f medical coverage, that would strengthen
the union's hand going into talks at GM.
Mr. Smith, meanwhile, risks undermin-
ing morale among a salaried staff already
! besieged by three years of canceled bo-
THE WALL STREET JOURNAL THURSDAY. SEPTEMBER 9. 1993 A3
❑uses. repeated management shuffles and
job cutbacks. GM's 102.000 salaried re-
tirees are sure to protest GM's decision to
start charging them premiums, which
could be as high as 5107 a month for family
coverage under a health maintenance or-
ganization.
I'm sure there are folks who are
I unhappy with any increase, but it's still a
very competitive package," a GM spokes-
man said.
GM's salaried retirees were warned
last year that they could begin paying
I premiums for health coverage. GM said in
letters mailed earlier this weep that as of
Jan. 1. 1994, an individual retiree on
Medicare who also enrolls in an HMO will
pay a maximum premium of $20 a month.
' A retiree not eligible for Medicare could
pay a maximum of S39 a month for HMO
coverage. A retiree with dependents and
no Medicare could pay as much as 5107 a
month for HMO coverage, or 531 a month
for GM's regular "enhanced" insurance
package.
Active employees who select Ghi's "ba-
sic" coverage won't pay a monthly pre-
mium, but their annual deductibles and
copayments could be as high as 52,500 for
an individual and S5,000 for a family. In
1992, the maximum annual out-of-pocket
payment for an individual was S750.
GM salaried workers who enroll in a
Preferred Provider Organization could pay
maximum monthly premiums of 5160 a
month for a family in 1994, up from a
maximum of $140 now. Dental coverage,
which had come without a monthly pre-
mium, now will cost a white-collar worker
with a family S5 a month.
0
City of Baytown
Funding Alternatives for Health Benefits
Increase property tax rate
to $.74 per $100 0.003
Increase sanitation rate 0.014
Property & liability ins savings
67,486
2,601
29,163 4,200
137,521 29,163 6,801 1
Alternative II General Water &
Fund Sewer Sanitation
Housing Authority Funds for
Capital acquisition
Increase sanitation rate
Property & liability ins savings
137,521
-5910 0
0.014 ` 7 '; 2,601
29,163 4,200
137,521 29,163 6,801 1
0
0
G
MEMORANDUM
September 7, 1993
TO: Mayor and Council Members
FROM: Bobby Rountree, City Manager,
SUBJECT: Health Care Plan
The cost of health care is not only a current budgetary issue, but a future one
as well. Although limited, the following plan will begin to address the issue. I have
attached the August 18 memo "Health Benefit Issues" and will be referring to Issues
1, 2, 3 and 4.
Proposed Plan:
1. Share the cost of the projected deficit for the 93-94 budget between the City,
employees, and retirees. This will also establish an additional revenue stream
for future funding (Issue No. 1).
Discontinue City support of health care benefits for retired employees who are
hired after October 1, 1993. Benefits will be offered in accordance with state
law. This will eliminate the City's future financial liability regarding health care
benefits for retirees who were hired after October 1, 1993 (Issue No. 4).
The third element of this plan is the most difficult because of the future
uncertainty. It addresses the existing employees and their health care benefits
upon retirement (Issue Nos. 2 & 3). The "window" proposed under Issue No.
2 could be initiated or even expanded, but the cost to the employee cannot be
guaranteed. At this time, I recommend that existing employees, upon
retirement, continue to be treated as current retirees. However, we need to
establish a process (similar to a retirement fund) by which funds are allocated
on an annual basis to fund the future retiree health care costs. During the next
year we will continue to work on a health benefit plan for current employees
who may retire from the City. Action on these two issues can be postponed
due to the uncertainty of the national health care program, the absence of any
GASB requirements for cities, and a difficult budget year. The future financial
liability still exists.
1rwr4w
Page 2
In summary, the City can pay for the total cost of employee health benefits or
the cost can be distributed equitably as possible among the City (taxpayers), the
employees, and the retirees. Council must make that decision each year when
adopting the budget. We need to remain competitive in the job market, but at the
same time, be fiscally responsible.
Health care costs and future financial liability issues are not going away. We
will be addressing this subject each year during the budget process. The national
health care program may or may not be in effect this next year. This too, will impact
our costs. This proposed plan will not solve our health care problems, but it is a step
in addressing the issue.
Enclosure
cm/cm/health/HeelthGueftn
MEMORANDUM
0 August 18, 1993
TO: Mayor and Council Members
FROM: Bobby Rountree, City Manager
SUBJECT: Health Benefit Issues
In an attempt to simplify a complicated subject,
benefits into four issues. Although all are intertwined, haveseparated
an be taken on lth care
separately.n them
Issue #1: Funding the proposed deficit - The City currently contributes $2,115,408;
the employeesiretirees currently contribute $327,957 for their dependent coverage.
The budget proposes to fund the projected deficit in the following manner:
City's contribution $287,936
Employees' contribution 271,359
Retirees' contribution 101
$665,345
Disadvantages: - Retirees on fixed income required to contribute.
Employees required to contribute without receiving a pay
increase resulting in less take home pay.
Low morale for employees.
Advantages: - The cost increase is shared by all involved.
Increase revenue stream to fund health care.
Options:
(1) Share the cost of the projected increase, as indicated, or some other
combination.
(2) City fund the total amount, which will require reducing the proposed
budget or increasing revenue (tax or fee increase).
Memorandum
Page 2
Proposed Alternative for Issue #1: •
I• I have identified three areas in the budget that can be eliminated:
1. Salary Study $25,000
2. Library literacy Program 14,500
(funded by CDBG)
3. Dispatch Recorder 20,000
$59,500
II. If the deductible is changed from $300 to $500 for the empioyees and the
retirees, the estimated claims reduction would be $60,000.
The total of I and II is $119,500. If the $119,500 is deducted from the
empioyeesiretirees contribution, the monthly premium for all employees and retirees
will be reduced to $35.50 monthly (pre-tax approximately $29.00).
If the $300 deductible remains unchanged, the monthly premium for all employees
and retirees will be $43,70 monthly (pre-tax approximately $35.00)
Issue ,=2: Providing health care benefits for future retirees who are currently
employed by the City. A "one-year window" has been proposed for those who are
considering retirement prior to 10-1-94. They will be treated the same as current
retirees.
Disaavanrages: The City may lose experienced employees sooner than
anticipated.
Future financial liability will increase by allowing additional
employees to retire under the existing system.
Advanrages: Existing employees retiring prior to 10-1-94 will have an
Opportunity to retire under the same program as the existing
retirees.
Issue =3: Current employees who retire after October 1, 1994, will pay the City
contribution plus the employee contribution (currently monthly - $234 employee or
$519 ernpioyee and dependant).
0
0
Memorandum
Page 3
Disadvantages: - The City could lose employees to other organizations who
may have more beneficial retiree health benefit plan.
Low morale for employees.
Advantages: - Future financial liability will be reduced.
Increase revenue stream to fund health plan.
Issue #4: Employees hired after October 1, 1993, will be offered health benefits plan
at cost upon retirement.
Disadvantages: - Employee hiring and retention may suffer.
Advanrages: - Future financial liability is eliminated.
Summary - Issue #1 must be addressed. The projected deficit for 93-94
requires some method of funding.
Issue #4 must be addressed. Future financial liability increases as
long as the City funds or subsidizes the future retirees health
benefits.
Issue #2 & 3 - Action on these two issues can be postponed;
however, the future financial liability still exists. The City's
responsibility may change because of the uncertainty of the
national health care program. (Refer to top of page 1-46 and
page 1-54 of budget document.)
Cmlemihe eitn/He alth9enlht Issues
MEMORANDUM
August 18, 1993
TO: Mayor and Council Members
FROM: Bobby Rountree, City Manager/� Q� �\
SUBJECT: Health Benefit Issues
In an attempt to simplify a complicated subject, I have separated the health care
benefits into four issues. Although all are intertwined, action can be taken on them
separately.
Issue #1: Funding the proposed deficit - The City currently contributes $2,115,408;
the employees/retirees currently contribute $327,957 for their dependent coverage.
The budget proposes to fund the projected deficit in the following manner:
City's contribution $287,936
Employees' contribution 271,359
Retirees' contribution 106.050
$665,345
Disadvantages: - Retirees on fixed income required to contribute.
Employees required to contribute without receiving a pay
increase resulting in less take home pay.
Low morale for employees.
Advantages: - The cost increase is shared by all involved.
Increase revenue stream to fund health care.
Options:
(1) Share the cost of the projected increase, as indicated, or some other
combination.
(2) City fund the total amount, which will require reducing the proposed
budget or increasing revenue (tax or fee increase).
U
Memorandum
Page 2
Proposed Alternative for Issue #1:
I. 1 have identified three areas in the budget that can be eliminated:
1. Salary Study $25,000
2. Library Literacy Program 14,500
(funded by CDBG)
3. Dispatch Recorder 20,000
$59,500
H. If the deductible is changed from $300 to $500 for the employees and the
retirees, the estimated claims reduction would be $60,000.
The total of I and II is $119,500. If the $119,500 is deducted from the
employees/retirees contribution, the monthly premium for all employees and retirees
will be reduced to $35.50 monthly (pre-tax approximately $29.00).
If the $300 deductible remains unchanged, the monthly premium for all employees
and retirees will be $43.70 monthly (pre-tax approximately $35.00)
Issue #2: Providing health care benefits for future retirees who are currently
employed by the City. A "one-year window" has been proposed for those who are
considering retirement prior to 10-1-94. They will be treated the same as current
retirees.
Disadvantages: The City may lose experienced employees sooner than
anticipated.
Future financial liability will increase by allowing additional
employees to retire under the existing system.
Advantages: Existing employees retiring prior to 10-1-94 will have an
opportunity to retire under the same program as the existing
retirees.
Issue #3: Current employees who retire after October 1, 1994, will pay the City
contribution plus the employee contribution (currently monthly - $234 employee or
$519 employee and dependant).
0
0
Memorandum
Page 3
Disadvantages: - The City could lose employees to other organizations who
may have more beneficial retiree health benefit plan.
Low morale for employees.
Advantages: - Future financial liability will be reduced.
Increase revenue stream to fund health plan.
Issue #4: Employees hired after October 1, 1993, will be offered health benefits plan
at cost upon retirement.
Disadvantages: - Employee hiring and retention may suffer.
Advantages: - Future financial liability is eliminated.
Summary - Issue -'1 must be addressed. The projected deficit for 93-94
requires some method of funding.
Issue #4 must be addressed. Future financial liability increases as
long as the City funds or subsidizes the future retirees health
benefits.
Issue =`2 & 3 - Action on these two issues. can be postponed;
however, the future financial liability stili exists. The City's
responsibility may change because of the uncertainty of the
national health care program. (Refer to top of page 1-46 and
page 1-54 of budget document.)
zmtcmiheatth/HealthBenefitlssues
MEMORANDUM
August 18, 1993
TO: Mayor and Council Members
FROM: Bobby Rountree, City Manager m
SUBJECT: Health Benefits Communication
In an effort to give Council examples of how health benefits are communicated
to employees, the following historical information has been assembled:
1. Memo dated May 3, 1976, establishing times and dates for insurance
meetings and stating booklets will be distributed.
2. City of Baytown Employee Handbook 1978 - TMRS and Supplemental
Retirement document. Retiree insurance is not mentioned because it
was not offered at that time.
3. Memo dated September 13, 1982, explaining $50.00 support for retiree
insurance by the City.
4. City of Baytown Employee Handbook 1982 - Since booklets are not
printed each year, you see handwritten the $50.00 for retiree insurance
by the City.
5. Three letters dated October 12, Oct. 18, and Oct. 18, 1984 -
Oct 12 - Announces that retirees will be treated the same as current
employees and no longer have to pay the $19.07 amount towards their
health insurance.
Oct. 18 - Announces that those covered by medicare will no longer pay
the $5.13 and that the current policy treats the retiree the same as
current employees.
• Oct. 18 - Retirees with dependent coverage, under the current new
policy, treats retirees the same as employees and they will receive free
personal coverage just like the employee.
Memo
Page 2
6. City of Baytown Benefit Plan 1990 - Top of third page outlines the •
employers statement concerning modifying or terminating the plan.
It appears that the council in 1984 opted to treat the retiree the same as the
employee with regard to health insurance. The health insurance was paid for the
employee, therefore it was paid for the retiree. It also appears that "plan changes
may occur" has been communicated throughout the years.
ankmM*nM /Haakh8*nC*nvn
I•
M E M 0 R A N D G M
TO: ALL DEPARTMENT DIRECTORS
Y -A
PROMLARRY PATTERSON,,PERSONNEL DIRECTOR,
SUBJECT:INSURANCE BOOKLET DISTRIBUTION
DATE: MAY 3, 1976
The Massachusetts Mutual Insurance booklets are now ready for
distribution. Distribution will be handled in group meetings
by Dan Savage and/or myself with groups of employees. This
type of distribution procedure will allow employees a chance to
ask any questions they may have regarding insurance coverage.
Attached is a schedule of times and places meetings will be held.
Please ensure your employees are informed of these and have the
opportunity to attend one.
C
AA-rK ...... . �
TIME
DAY
DATE
2:00
Monday
May 3
7:30
Tuesday
May 4
11:00
Tuesday
May 4
3:30
Tuesday
May 4
7:00
Wednesday
May 5
2:00
Wednesday
May 5
7:30
Thursday
May 6
7:30
Friday
May 7
PLACE •
Poiite,.Station
Municipal Service Center
Civic Center Building
Parks & Rec. Work Shed
Municipal Service Center
City Hall Bldg., Conf. Rm.
Municipal Service Center
Municipal Service Center
"Sens An SCPP[Zl EMLL RETTZOO r
The Texas :anicipal Retirmmt System to which you wail contribute as a
city employ" will help you provide for your old age or for dependmts
Spon your death.
The seems ltnnici_al Retirement Systas cost, on a monthly basis, is 5Z of
your first $500 of Salary or $25.00. When you become eligible for retirement
and apply for it, :he City of Baytown matches the total amount of your
deposits on a two for one basis. Your monthly annuities upon retirement
will be determined basad on your deposits and those matching funds.
To be sl:gibls for service retirement. an employee must meet the following
criteria: (1) 15 wars of service and 60 years of age; (2) 25 years of
service and 30 years of age; (11) 28 years of service: or (4) 14 wars
of service and 65 years of age.
The City of Baytown offers a supplemental retirement plan for those employees
who are noc eligible for TMS or wno wish to add to their retirement package.
To enroll is chis plan, employees must be employed by the City of sa+toun for
a period of ::x souths or more. Enrollment is conducted around Karen 1 0:
eWA year. -ctner is:ormacion on the suppiamencal retirement Tian you
should contact :he ?ersosnal Office.
JOB RELIT_^_` ^'?QTS ARD wORRMAW S CO:PGA' A-104
An employee is�'%%rsd in .he line of duty &hail receive Workman's C:pensati=n
benefits ci leave. Workman's Compensation benefits shall be euPPle-
mnnted by -he Ci:7 as necessary to ensure that employees not employed as a
Police Ota:ar orFi-efighter receive full salary for a period of sit months
and s disabled e:,loyee vho is employed as a Police Officer or Firefighter
receives salary for a period of one year. :"hereefter. mar supplemental
benefits Stall be reduced as prescribed in the applicable progress.
CLLSS1rT= ='T ?CBrTz"M
Each posi:i:c of :i:y service is contained within the classification. pian.
This plan stews a gonerai description of the position y duties, 4.:a1ifi:a:ioos.
sed fob . -+'+ss.
These do:__:.:_s allow each employee a better underatsmding of the required
tasks o: :he_r p.ss:ico. _. also allows the supervisor such an uaderstaadig,
thereby, s' _g supervision.
These eiusif::szi: s also auov each employee a general source from which :o
understand vase :sy must do concerning upgrading their shills and qualifica-
tions to e --rants :teir p zootibility.
PF4DBMC"
Every zee ee;�i:yee shall to required to successfully =ylete a ;robatiorary
period of tiz yrs.
Depart==: ass =1 supervisors ah -11 use the probationary period :o closely
observe s=.i evsi:=.e tte work and fitness of empicyees azz to enr=L-age a9.st-
meats :::sit ,:-a and :!:e city service. Cnly those em-,ioyees who most
aecoptab:e s:s_a=:s !uring probationary periods shall be retained it suc-1
positicz.
An ampie}ee :___.r pr:bation shall have no right := appesi ezcet: :z he
grouacs zroaibited by lav or RS def_=__ try _=e terser el.
Civil strr :s .:ss.
CITY OF BAYTOWN
MEMORANDUM
T0: Fritz Lanham, City Manager
FROM: Richard Hare, Personnel Director
S
BJ:
Health Insurance Support
for Retirees
D
TE:
September 13, 1982
REF: RH/335/82
With rising health care costs a significant factor in
c r retirees' fixed budgets it becomes increasingly apparent
t at assistance from the City would enhance their financial
s atus. This type of support should be limited to those
a ready participating in the current group policy contract
d meeting the following criteria as a "retiree":
An employee is eligible for retirement if the employee
has completed at least 28 years of service with the City
of Baytown, or 20 years of service and age 50, or 10
years of service and age 60 upon separation from City
service.
The criteria given is consistent with the eligibility
riteria for the Texas Municipal Retirement System. Admini-
tratively an employee presently participating in the health
nsurance group policy would be eligible if they also meet
he criteria stated above. Subsequently all individuals
eparated from the City for retirement and meeting the criteria
tated above would be eligible for health insurance support
avments if they elect upon separation from the City to
anticipate in the health insurance group policy.
Over the next five years, given that all those presently
mploved reached retirement age and retired according to
he minimum criteria, a support payment .of $50 per retiree
ould cost the City a total of $22,800 in FY87-88. This is
ompared to an original cost of $4,200 in FY82-83. It is
nlikely that participation will grow from 7 employees the
irst vear to 38 in the fifth year. Most employees do not
etire as soon as they meet the minimum requirement. A
ore reasonable estimate would be 18 participants and a cost
f $10,800. This represents an annual rate of growth of 21%.
•
•,, .,,,A
t . _ _ J t
77 }}� r
� � }a c t l.�� LTi � ,'�J'� .: l A � 1 � I � f� � �"
•
Life. insurance in an asanmt equal to your annual earnings adjusted to the nest
lower multiple of $1,000.00 is included in the group policy at no cost to the
apioyee. Details nay be obtained from the Personnel Office.
Both the group hospitalization and life insurance cover the employee in eases
of illness, accidents, or death, whether the employee is on or off the job.
IMPLOyses who retire be" the option, at a cost to thmm, to continue tbeir
group health insurance. Group life insurancs in the am of $3.000.00 is pro-
sPbr the City. ,ti.e C �'` ar 1 f .e. , i1 t {� 4 o so.ov pus rro eFb
,SP [' ge0rV4-(,f(rj.,fv/a, A t4-.
The Texas Municipal Retiremmnc System, to which you will contribute as a
city employee, will hely you provide for your old age or for dependents
upon your death.
You contribute to the Texas Municipal Retirement System on a monthly basis
S; of your gross salary. When you become eligible for retirement and apply
for it, the City of Baytowe matches the total amount of your deposits on a
two for one basis, your monthly annuities upon retirement will be deter-
mined based on your deposits, these matching funds. and interest.
To be eligible for service retirement, an employee must meet the following
criteria: (1) 10 years of service and 60 vears of age; (2) 25 years of
service and SO years of ago; (3) 2E years of service.
JOE RELATED INJURIES AND WORKMAN'S CONFENSATION
An eRlopea injured in the line of duty shall receive Workman's Coepeaaacion
bsnsfits and injury leave. Workman's Compensation benefits shall be supple-
mmeted by the City as meosssary to erasure that employees not employed as a
Police Officer or Firefighter receive full salary for a period of six months
and a disabled employee who is amPloyed as a Police Officer or Firefighter
rmaives full salary for a pariod;of one year. Thereafter, any suppla�saCal
benefits
shall
.,bee red ed as proscribed in the applicable programs. �( f «,4'-%U
�LtsslFs fraTloN OF t c� CAft �,c,�.� C&OA, r� d"y mOCAU
off" 464
Zaeh position of city service is contained within the classification plan.
This plan allows a general description of the position by duties, qualifita-
time. and job families.
These definitions allow each employee a better understanding of the required
tasks of their position. It also allows the supervisor such an understanding,
thereby, enhancing supervision.
These classifications also allow each eaployse a general source from which to
understand what they mast do concerning upgrading their skills and qualifiea-
tisns to enhance their promotibility.
PRORATION
Every new employee shall be required to successfully complete a probationary
period of six months.
Department heads and supervisors shall use the probationary period to closely
observe and evaluate the work and fitness of employees and to encourage adjust-
ments to their jobs and the city service. Only those employees who meet accept-
able standards during probationary periods shall be retained in such position.
An employee failing probation shall have no right of appeal except on the
grounds of discrimination prohibited by law or as defined by the Personnel/
Civil Service rules.
PERFORMANCE EVALUATION
Each employee shall receive periodic performance evaluations. :hese evalua-
tions will usualiv be on an annual basis. Performance evaluations are designed
to help supervisors and eeplovees measure how well work is being performed and
to provide a tool for management decisions regarding merit increases, training,
assignment. promotion, and retention of employees. Every emplovea will receive
a copy of their performance evaluation and be allowed an opportunity to discuss
October 12, 1984
•
The City Council has recognized the plight of many
of our retirees which have found it difficult to
maintain their health insurance coverage even with
the advantage of being in the city health insurance
pool.
For the last several years, the city has paid $50 each
month toward your health insurance coverage. This
left a remainder of $19.07 for you to pay. This year
the cost for health insurance is going up to $88 per
month. The City Council felt the $38 monthly premium
that you would have to pay was too great and has now
adopted a new policy.
All retirees presently in our
shall now be accorded the
benefit as current employees.
Ray anything for your coverage.
benefit will be welcomed by
in our plan.
health insurance plan
same health insurance
You no longer have to
We are sure that this
all retirees presently
The basic health insurance plan remains the same and
we will update you concerning any changes that may
occur in the near future.
Best regards,
Richard Hare
Personnel Director
RH:sk
0
October 18, 1984
The City Council has approved a new policy regarding
retiree health insurance benefits. Prior to this
year, the council authorized the payment of $50 per
month to offset health insurance cost of retiree's
presently in our plan. In your case because of your
coverage under medicare, the $50 per month was
adequate to cover supplemental health insurance with
Prudential, however, with the new rates you would have
to pay $5.13 per month to continue supplemental
coverage.
This was unacceptable to the City Council, therefore,
they adopted our current new policy which treat
retirees presently in our plan the same as current
employees. You will continue to pay nothing for your
health insurance coverage.
Best regards,
Richard Hare
Personnel Director
RH:sk
•
October 18, 1984
The City Council recognizing the increasing cost to
retired employees to cover their dependents and
themselves for health insurance, have changed their
health insurance benefit. Previous to this change,
the city supplemented your coverage by $50 per
payment. This left a remainder of $141.66 ner month
to be covered by the employee or $118.53 if the
employee was also under medicare.
The health insurance re -rate would have resulted in
a 20% cost increase to the retirees. This was
unacceptable to the City Council. The current new
policy treats retirees the same as employees for
health insurance coverage. Now, all retirees
presently under our health insurance plan will receive
freepersonal covera a and will 12ay only 20% of the
cost of covering their dependents. This cost will
remain $29.42 per month from October 1984 through
Seotember 1985.
We should receive payment no later than the first week
of each month. You can prepay your premium if you
wish.
Best regards,
Richard Hare
Personnel Director
RH:sk
0
GROUP
BENEFITS
PLAN
•
0
0
City of Baytown intends the plan to be permanent, but since future
conditions affecting your employer cannot be anticipated or foreseen,
City of Baytown reserves the right to amend, modify or terminate the
plan at any time, which may result in the termination or modification
of your coverage. Expenses incurred prior to the plan termination will
be paid as provided under the terms of the pian prior to its
termination.
Special Situation, Extension Of Coverage
If a dependent child is physically or mentally handicapped on the date
coverage would otherwise end, the child's eligibility will be extended
for as long as the handicap continues, and the child continues to
qualify for coverage in all aspects other than age. The plan may
require you at any time to obtain a physician's statement certifying the
physical or mental handicap.
If a physician certifies that a person is totally disabled on the date
coverage would otherwise end, expenses directly relating to the
disabling condition will continue to be eligible for consideration until
the earliest of the date the total disability ends, the date maximum
benefits have been paid, the date following 90 days of extended
benefits, the date the person becomes covered under another group
health plan or the date the plan ends.
4
0
MEMORANDUM
August 11, 1993
TO: Mayor and Council Members
FROM: Bobby Rountree, City Manager 13
SUBJECT: Health Benefit Options
I. 1 have identified three areas in the budget that can be eliminated or postponed.
The funds from these areas can be applied to the health benefits cost of the
non-exempt employees, fire fighters, and patrol officers. This will reduce the
monthly cost from $42.00 to $21.00 (pre-tax $17.00), thus giving the
employees on the lower end of the pay scale some relief to the increased costs.
The exempt employees and higher ranked police and fire employees will
continue to pay the $42.00 per month.
Areas eliminated or postponed:
1. Salary Study $25,000
2. Library Literacy Program 14,500
(funded by CDBG)
3. Dispatch Recorder 20,000
$59,500
11. If the deductible is changed from $300 to $500 for the employees and the
retirees, the estimated claims reduction would be $60,000. If this amount
were applied to the retirees monthly premium, it would be reduced from $100
per month to $45.00 per month per retiree.
III. If the deductible is changed from $300 to $500 and the $60,000 claims
reduction is added to $59,500 budget eliminations, it will total $119,500. If
the $119,500 is deducted from the employees/retirees contribution, the
monthly premium for all employees and retirees will be $35.50 (pre-tax
approximately $29.00)
Item III is more equitable for all employees and retirees; however, Items I & 11
provide additional relief to the employees on the lower end of the pay scale and
the retirees.
c m/cmi b ua getiH eaithOptiona
•
MEMORANDUM
MAYOR AND CITY COUNCIL
FROM: BOBBY ROUNTREE, CITY MANAGER e:1I
SUBiE—CT: HEALTH BENEFITS INFORMATION
AUGUST 9, 1993
I. The following is a summary of the Employee/Retirees health
benefits:
_. Change from traditional benefit plan to a managed care
program utilizing a Preferred Provider tiTetwork (PPO)
contracted wit"" C:,st Care. Benefits are paid at 80%s for
"in network" services and 60% for "out of network"
services.
2. Current employees will be required to contribute $42.00
per month for Health Benefits (approximately $33.00
pre-tax basis). Dependent coverage will remain the same.
3. City's contribution to the dental coverage will be
eliminated. Employees may choose a PPO plan offered, or
stay with existing plan and pay the full cost of $10.22
per month.
4.
S.
Existing retirees and those who retire prior to 10/1/94
tone year window) will contribute $100.00 per month.
Co -payments will be reduced in future years as follows:
IN NETWORK
19X/90748 /20
19/25
199/30
Current employees who
total of the employee
active employee rate -
OUT OF NETWORK
1993/94
60/40
1994/95
55/45
1995/96
50/50
retire after 10/1/94 will pay the
and City's contribution, of an
currently $234.00 per month.
• _ . Future retirees =red after 10/1/93 will be allowed to
continue on the City's coverage but will pay the full
premium costs.
Benefits and cost are subject to change in the future.
II. Brief history of retiree benefits:
October 1981 - Retirees allowed to continue coverage at their
expense. (Prior to the date, retiree coverage
not offered.)
October 1982 - Retiree coverage supplemented by the City at a
flat rate of $50.00 per month.
October 1984 - Retiree coverage paid for by the City at look
level.
III. The following is a listing of area cities and cities near
Baytown's size:
Cities that do not pay for retiree health benefits:
Killeen
Bryan
College Station
Abilene
Odessa
Beaumont
Bellaire McAllen
Galveston
League City
Pasadena✓
Webster
Mont Belvieu
Cities who share health benefits costs with retirees:
Midland
Carrollton
Richardson
Tyler
La Porte ✓
Cities who pay for retiree health benefits:
Deer Park'/ *Victoria
Longview
*Nov. 1 - will share benefit costs.
cm/cm/budget/HealthBenefits
•
•
I:ig M: : ;��#w
THE PURPOSE OF THIS SECTION IS TO DISCUSS THE HEALTH CARE PLAN
CHANGES AND COST FOR THE CITY, EMPLOYEE, RETIREES AND FUTURE
RETIREES.
FEC.
It is no secret that America faces a health care crises. State and federal lawmakers are
flooded with demands to fix the health care system. There is no quick fix or easy solutions.
The City of Baytown has always offered the traditional health care benefits to its
employees and retirees. In some of my discussions with local hospital administrations, I was
told that traditional plans like the city's are "paying for everyone else". In other words, most
companies are going to managed care programs of some type, and those who do not, are
supplementing those who do. A study indicates that companies in Houston with traditional
health care insurance pay 28% higher premiums than the national average. Although only an
example, this is indicative of the health care cost in our area.
Currently, the city contributes $2,115,408 annually for employee/dependent and
retiree/spouse coverage. The employees and retirees contribute $327,957. This totals
$2,443,365. If the proposed plan changes are implemented, our projected medical claims for
93-94 are . The reasons for the increase include escalating medical costs, increased
number of c dims users, a large number of catastrophic claims hi
Y g p (high risk pregnancies, kidney
transplant, heart and lung conditions, and several long term cancer cases, etc.)
In an effort to resolve this issue, several members of the staff and I have done extensive
research and review of our program and other types of programs. We have met with and
discussed options with:
1. First Health - The Health Care Affordable Network who is the PPO Network for
the Goose Creek School District; Q -
2. Cost Care Network - Exxon's PPO Network; ,
3. Memorial Healthnet - San Jacinto Methodist Hospital PPO Network;
4. BayCoast Medical Center and San Jacinto Methodist - We have met with both
administrators and staff, listened to their proposals, and discussed their role in the
City's program.
PAt
r -
party administrators:
First Health
Boon -Chapman
Emperion
PALICO
Provident
;�G ,
Healthcare Affordable
Cost Care
Emperion
Managed Health Care
CAPP Care
After thorough review of our benefit needs, services provided and cost consideration, we
are recommending the services of Cost Care (Exxon's current PPO Network). The most cost
efficient way to utilize Cost Care is to pair their service with claims administration/payment by
Philadelphia American Life Insurance Company (PALICO). The Cost Care Network includes
San Jacinto Methodist, BayCoast Hospital, as well as 27 additional hospitals in the Houston area.
Most importantly, Cost Care includes six (6) of the top ten hospitals utilized by City employees.
The employeeiretiree may continue to use his/her family physician. The network is utilized at
the point of referral to a specialist or hospitalization. Therefore, the employees are not in most
cases, required to change physicians in the event their family physician is not in the network.
The Cost Care Network currently provides the following:
1. The employeetretiree may continue to use his/her family physician;
2. The employee/redree may choose either of Baytown's San Jacinto Methodist or
BayCoast Hospitals;
Other Major Houston area hospitals include:
Texas Children's Hospital
Sunbelt Regional Medical Center
Diagnostic Center Hospital
Humana Hospital - Clear Lake
St. Joseph Hospital
Women's Hospital of Texas
St. Luke's Hospital
Bayshore Medical Center
M.D. Anderson
Memorial NW, SE, SW & NE
University of Texas Medical -Galveston
3. There are over 800 Specialty Physicians participating in the Cost Care
Network.
1-42
Any specialist used by the employeelredree not currently in the network will have an
opportunity to become a member of the network through a recommendation process,
provided the doctor agrees to contract discounts.
._.
cuRRENT' .YEE RATES
The current employee will be responsible for a portion of the premium. The chart below
indicates the employee and City contribution.
f
EMPLOYEE
EMPLOYEE
EMPLOYER
EMPLOYER
PRESENT
PROJECTED
PRESENT
PROJECTED
�,yr !A`
q� Ake,
COST
COST
COST
COST
_ vr"
E[ OWYEE ONLY
$ 0.00
$ 42.00
$160.00
$192.00
EV1P, 1-2 DEP
$82.50
$124.50
$362.72
1394.72 -
EMP, 34 DEP
$86.64
$128.64
$362.72
$394.72
EMP, 5+ DEP
$90.76
$132.76
$362.72
$394.72
The pre-tax payment of premiums offsets the stated cost from the real cost. The true
cost to employees because of the preferred tax treatment is reduced.
Example:
$42 premium = approximately $33 real cost in the 20% tax bracket
PLAN CHANGES
Implementation of Preferred Provider Organization (PPO) network.. PPO referral is
initiated with specialists referral and hospital admission. Primary care (family)
physicians services are not affected.
•
•
Benefits are paid at 80% of reasonable and customary charges for "in network"
services Benefits are paid at 60% for "out of network" services
Per hospital admission deductible for "out of network" provider - $300
1-43
• A Mail Service Prescription Drug Program will be implemented on a cast -neutral
basis. The Mail Service Program will allow for employees to order up to a 90-
day
aday supply of maintenance medication with a minimal co -payment. Maintenance
medications are drugs taken on a regular or long-term basis. A few examples of
maintenance medications are those for high blood pressure, arthritis, heart
conditions, and diabetes. The Mail Service Prescription Drug Program represents
a positive step toward effective health care cost management while providing a
quality prescription program for employees and their dependents without having
any impact on the plan. Eligibility and payment services will be provided by
PALICO and will require no involvement from the City of Baytown.
• The City funding for dental coverage will be eliminated. Two separate plans will
be offered:
1) If an employee chose to remain on the City's present dental plan the full
premium would be paid by the employee. Cost are as follows:
2) Denticare pian is a PPO network same type as the health plan. Denticare
offers approximately the same coverages at a discounted rate of 25 % less than
Usual and Customary charges. Employees must seek service from dentist
participating in the Network. At present time their are only two Baytown dentists
in the network. Cost for the Denticare plan is listed below:
EMPLOYEE ONLY $ 5.50
EMP, 1-2 DEP $ 16.50
EMP, 34 DEP $ 23.50
EMP, S+ DEP $ 28.50
1-44
EMPLOYEE
EMPLOYEE
EMPLOYER
EMPLOYER
PRESENT
PROJECTED
PRESENT
PROJECTED
COST
COST
COST
COST
EMPLOYEE ONLY
$ 0.00
$10.22
$10.22
$ 0.00
EMP, 1-2 DEP
$15.66
$25.88
$10.22
$ 0.00
EMP, 34 DEP
$16.44
$26.66
$10.22
$ 0.00
EMP, S+ DEP
$17.24
$27.46
$10.22
$ 0.00
2) Denticare pian is a PPO network same type as the health plan. Denticare
offers approximately the same coverages at a discounted rate of 25 % less than
Usual and Customary charges. Employees must seek service from dentist
participating in the Network. At present time their are only two Baytown dentists
in the network. Cost for the Denticare plan is listed below:
EMPLOYEE ONLY $ 5.50
EMP, 1-2 DEP $ 16.50
EMP, 34 DEP $ 23.50
EMP, S+ DEP $ 28.50
1-44
•
1 114 24 4.13 DQ1 DI j V k7l
Currently there are 85 City of Baytown retirees under the existing health benefits plan.
Forty-eight of these are under age 65 and not yet eligible for Medicare coverage. This group
represents a sizable financial liability to the plan. The liability is twofold; 1) Claims Costs
and 2) Future Liability.
1) CLAIMS COST
Of the $2,861,784 of claims paid during the previous 12 months (medical claims only), the
average monthly claim cost per retiree under 65 amounts to $1,045 while the average
monthly claim cost per active employee amounts to $356. Of the $1,447,035 claims paid
during the first 6 months of the 1992193 policy year (medical claims only), claims totaling
5410,283 were paid on behalf of retirees under 65. The retirees under 65 represent 7% of
the total covered under the plan and over 28 % of the claim dollars for this 6 month period.
2) FUTURE LIABILITY
Continuing to provide retiree medical benefits carries a future liability. The real cost for
claims over the remainder of each retiree's life time is $564,722 which in today's dollars
would require the City to invest $207,257 per retiree in an annuity to pay for future medical
costs. These figures are derived actuarially assuming a retiree age of 58 and life expectancy
of 84 years. Similar calculations would have to be made for each current retiree and each
future retiree if the City continues to pay for the retiree medical coverage.
The City has utilized a pay as you go philosophy in paying retiree health benefits. This
philosophy recognizes expenses when they are paid, rather than at the time the liability is
incurred. In order to properly fund the retiree health benefit cost, monies would need to be
budgeted each year the employee works, similar to a pension fund.
j
a-
L r
1
1 h
i
mandates for measurement of the obligation and accrual of cost during tilt .irking life cf
the employee. The GASB (Governmental Accounting Standards Board) has deferred
adoption of mandates similar to FASB 106 until other reporting issues have been fully
addressed. GASB is expected to adopt these similar guidelines in the near future.
Regardless of the time frame for adoption of these accounting deadlines, the important issue
is having the resources necessary to pay our bills.
FJM" IlITG RFTYRY-MR:
• RATES FOR EXISTING RETIREES (and existing
employees who retire prior to 10-1-94)
RETIREE
RETIREE
EMPLOYER
EMPLOYER
PRESENT
PROJECTED
PRESENT
PROJECTED
COST
COST
COST
COST
UNDER 65 REr
$0.00
$100.00
$160.00
$509.28
1-2 DEP
S82.50
$182.50
$362.72
$1018.56
OVER 65 RET
$ 0.00
$100.00
$160.00
-0-
0-
1-2
1-2 DEP
$82.50
$182.50
$362.72
-0.
• Spouse of existing retiree will continue to be eligible for City of Baytown health benefits
-- (premium paid by retiree) until spouse is eligible for medicare. At the time the -spouse is
eligible for medicare, the City will discontinue tion. Retiree must remain on the
City's coverage to maintain spouse's coverage until spouse reaches age 65 and is medicare
eligible.
• If the spouse of a retiree becomes widowed, the spouse continues at same premium payment
of a retiree only rate.
• Active employees with dependent coverage will be allowed to continue this coverage upon
retirement. No dependents will be added after the active employee retires. In the case of
two employees that are married to each other and they both retire, one may be added as a
dependent. If an active employee chooses to leave City employment before being vested and
their spouse is a retiree of the City they will be eligible to be covered under the retiree's
health plan as a dependent.
-46
is
0
• Reduce co -payment for existing and future retirees and spouses as follows:
IN NETWORK
OUT OF NETWORK
1993/94i 80/20 1993/94 60/40
1994/95-. 75/25 1994/95 55/45
1995/96 70/30 1995/96 50/50
F07'URE RETiRF.FC, hired prior to 10/1/93 (Current Employees)
• RATES FOR FUTURE RETIREES, hired prior to 10/1/93
Current employees retiring after 10-1-94 below the age of 65 with minimum of 10 years of
City of Baytown service will remain eligible for the City's health benefits coverage by
paying the total of the employee and City's contribution. (Retiree true premium $609 vs
active $234 and with retiree true dependent cost $1,218 vs active $519). They will be
allowed to remain on the plan if they so elect for payment of the full active employee rate.
RETIREE RETIREE EMPLOYER EMPLOYER TOTAL
PRESENT PROJECTED PRESENT PROJECTED RETIREE
COST COST COST COST COST
RETIREE ONLY $ 0.00 $ 42.00 $160.00 $192.00 $234.00
RETREE +DEP $82.50 $124.50 $362.72 $394.72 ;519.22
• Reduce co -payment for existing and future retirees and spouses the same as existing retirees,
• If the spouse of a retiree becomes widowed, the spouse continues at same premium payment
of a retiree only rate.
• Active employees with dependent coverage will be allowed to continue this coverage upon
retirement. No dependents will be added after the active employee retires. In the case of
two employees that are married to each other and they both retire, one may be added as a
dependent. If an active employee chooses to leave City employment before being vested and
their spouse is a retiree of the City they will be eligible to be covered under the retiree's
health plan as a dependent.
age 65. If the retic - _hat reaches age 65 opts off the City's plan and doesn't continue to pay
the premium, the spouse will be dropped from coverage.
FUTURE , hired after 10/1/93
Upon retirement employees hired after 10/1/93 will be eligible to continue medical coverage
under the City's plan in accordance with State Law which allows the City to charge the
actual cost.
MEDICAL DISABILITY RETIREES: (Usually young in age with dependent families)
Under the age of 65 will retain same benefits as active employees until age 65 is attained.
cw=aP cvHealdmn Revised 7/28M
1-48
•.
ir maimliolvaa%do=1i a
Unfunded retiree health benefit liabilities up 81 %: GAO
e•. me
companies
not funder
companies
eliminate b
he Gene
estimates
piover reti.
:,ow total
billion for
5155 billion
GE1SEi-
-The cost of
ucai benefits that
Have promised, but
, is rising even as
continue to cut or
'ai Accounting Office
hat unfunded em-
ee health liabilities
$412 billion—S257
ctive employees and
for retirees.
That's an 81% increase from
total liability of $227 billion—
including $127 billion in un-
funded benefits for active em-
plovees and $100 billion for re-
tirees—in 1988.
Rising health costs contributed
to that increase, as did more
early retirees and longer life ex-
pectancy, noted Donald C.
Snvder. an assistant director in
the GAO's human resources divi-
sion.
"Because early retirees (under
This article is an accurate description
of the retiree health care dilemma.
4 K1
• Business Insurance
7-19-93
age 65) are not yet eligible for
Medicare. employers pay three to
four times more for their health
care than for retirees" covered
by Medicare. the report noted.
Relatively few employers have
taken the drastic step of termin-
ating retiree health benefits. The
GAO. citing several consultant
surveys, estimates that up to 3% 1
of emoiovers have terminated
benefits for current retirees and
3% to 5% have done so for future
Continued on page 20
GAO repvrt-
Continued f rom page 2
retirees.
But nearly 70% of empiorers
either have or pian to in the next
year raise retiree premium con-
tributions or otherwise alter
their retiree health pians, accor-
ding to a forthcoming report
from A. Foster Higgins & Co.
And another recent survey of
216 plans found that half are in-
creasing retiree contributions.
That study, by William M.
Mercer Inc.. indicated that 34%
of retirement plans now have
tighter eligibility standards,
while 26% have caps on company
contributions.
Mercer concluded that future
retirees stand to lose the most -
from an overall cutback in em -
plover -provided retirement
plans. Approximately 22`.'a of re-
tiree health plans in the study
have done away with coverage
for at least some future retirees
and/or their spouses.
Retiree benefit cuts generally
have passed court muster. the
GAO noted. Courts generaily
have given emoiovers a green I
light to alter or terminate retiree
health care benefits as long as
they had reserved the right to do
so in plan documents.
Employers' freedom to cut
benefits means retiree health i
benefits are not secure, the GAO
said. "Our review of available
data and health benefit consul-
tant studies showed that retiree
health benefits are not secure
under the present employer- 1
based system because under cer-
tain circumstances they can be
changed whenever and as em-
ployers deem necessary," the re-
port said.
As Congress considers various
health reform proposals. it.
should pay particular attention
to retirees. especially those
under 65 not vet eligible fort,
Medicare. who could lose their
coverage, the report added.
The Clinton administration. as
part of its still -evolving reform
proposal. has been examining
what emoiovers` responsibilities
will be to provide health care
coverage to retired workers. No
final decisions have been made.
Copies of 'Retiree Health Plans:
He
Benefits Not Secure
Under Emaiover-Based System.
are avatiable from the U.S. Gen.
eral Accounting Office. P.O. Bos
6015. Gaithersburg, Md. 20877,
202-275-6241. The rust conn :s
free: additional copies are S2
each. Checks should be maae out
to the Superintendent of Docu-
ments. Soectiv report :Vo. GAO/
HRD-93-12!.
Shifting Burden
AG=10" too a a- -1 A►N1f,�aeallaaftalal�fbatw M i
caesaltm4 �e■Ai� #atllhl � Stosw M sem'
ing not�Stl rile linmatialfwlramaaantpteysse� .
Raised Raised Imxessed
*""a" tfmWayees *MIND""
copayment tee portion of deductible
for health that premium
insurance payment
SOUITS: Fluatneaa d Legal ReMnS mc...Aaditan. Conn.
Health care benefits for retirees are eroding in many ways and at a
considerable pace, according to a telephone survey of 1,057 employee
aencnt managers and 200 employees by Newark. N.J.-based account-
MIZ firm KPMG Peat Marwick.
In recent years, many employers have terminated retiree medical
'enefits, the survey finds. Specifically, the percentage of mid-size
e•npiovers i those with 200.999 workers I offering retiree health bene -
its fell from 44 percent in 1991 to 37 percent in 1992. while the
:ercentage of large employers (1.000-4.999 workers) offering retiree
coverage deciined from 56 percent to 52 percent. In contrast. retiret
coverage remained constant at 72 percent among "jumbo" empiover
those with -4.000 or more workers).
In addition to cutting benefits. employers are limiting their heals]
benefits liability by tightening eligibility standards. For example, th-
-eport says, many emplovers have begun implementing length-oi
service requirements. or increasing the minimum years of servic
nplovees must have before they can receive benefits.
_ _AEAU OF NATIONAL AFFAIRS. INC.. wasntnaton. Q.C. 20037
..r -AA 1
Samat>±TMA ; I A/49.2
A *=W News Repw PeM6
Aad Their slobs iaOgton.
EixidaaodFaesaeier
IiFJICrB•81�13is�Mpt♦ttwe 1
aataataastti�pn.
11101Z an how d sa9s�tlsvaataa: !
1[mttr, ewmao.et"U"I a as%n no
year. 111133110t as 111 rota m Ise0. foots. ow I
a am peew 011-131,91ltltr "A aid 11511ft 1
empblleea 1111bei Par 1IN — s for alepm- f
dinar' tare, bops for a Inioar limb 1
ka 1193 reap Ihis rnr't M�pba.
Prorate erapbytsa' btenh red eters befr 1
efll matt were up an a"" s m in the I
lean erand sept- 36. rommrea with a 4.4961
rite the wenoafs rear. tare Labor Depart• f
fent urs. Nabow food eatx= mmma I
of 12% to 13% thrum 199& but bm" for I
swtpedMt nses milli. RaOWW emp wm I
to bete pal prermmba. a Teau Icon axe- 1
PW trammed Its CM ria! to 9% to 1492 !tam I
1L5% Ib 1991. and sen toil meeaae m 1993.
C=qftu Sam's haaUhq==W M -r
eluate pe+aaed bt f9� gad � bd rt 7 !
'pfeatame" to say da tinct spool a 11
loader aoeoal. sw Ufa dsarmr
idm ffaprte. I
I1 NErIr CRUGES ata is teen rot
maywa as aasrear.
tilalhC rtes vW tote! arms tW hail d
the 138 slSmbtsa atatfgsd sraeeti�eas 1
Gbueesl m PI "'e compelr■tl"Esia i
swdftm Ailleiiinr In *=a Vans t
sat year. t+tfq► us stn t>tiaaps !atom I
p mmkwby lhllaotiat amptmm: f
ITS arw alio rrm mmt ON as 0% Will I
teats! swum or INTO Pmers s. About I
Iss pmmat no Ptatdeat elect aeon ata
WE am IbOI I will raft! OM M laza
sed lift emebyea' bMthe mm
In a aepum ommy of 134 =eoui ea by I
wanni m WIIDam lienar. 2M nue uwv
a ll fednoe emvwrw sum beelfHa in lei. I
A mace 4% VW Iris Ieem. An oruer
podds ie>aoasowbr0ltte CWILmoeed r
lest ala Sean !wire N1111eee ofaa waw
epiplorea: 48% report dadia- H tn-
mum tett Year• down trumns 1111991.
Rtoeidec that a CIT.Wo I
W0= d 25v W or mm seal mda bum Im aneffla
able b IUMM tl lmleeea fad thea dem Me bill ttbo t'
that: (1) a reclt+ee vft is eftdie for heft twiram it, mn'ao
emp ow is hoc ettoble (2) the t Nw= I=i be MMMUM U
,em 3tlatj pry for the wyaW (4) the am mor toric' list
mpmm to Mir., if (5) the toy msr awe the n
the a =ai cost a( the temee s heahh Mrlk!= sad (6) a can thx
v'Ida stlbtatusWiv sirm or hear nmee hunt olmmv
from the bill's PrOVOOOL
.Z-15 -43
Pi7 I
gg
200001 6, Edllo"•Cw MO NOW Aa "M
1" L Ss" AMOOMMO PWOOMr Mos ShOmM, Ed for
M WmMaM MwiWV EdNor Tsoulass.l6Nca Ed dor
Hea-1-th care alliance
welcome first step.
THE NEW FOUND ALYUNCE between President Bill Clinton
and the country's governors is welcome, if for no other reason
than because the White House door was closed for so long.
But we hope that Mr. Clinton, and frankly Mrs. Clinton as well. is
not just making noises of friendliness to his former gubernatorial
colleagues and is truly serious about trying to straighten out
America's health-care mess.
Health care is at the top of everyone's agenda these days, and
states have been trying to deal with the problem: of cost and care
for many years. Medicaid alone has been. ova vhelming state gov-
ernments. From a 6% share of state spending in 1980, the oast of
Medicaid has increased to 14% of
the budgA 4n.1991 and is projected
MNItl�'Qir�'isatlh�- to be 2M by i99b. Mr. Clinton cer-
1 op,oe.rwryaws tainly Imows . about that, having
been a g-Mernar• mrech longer than
he has been a president.
As we have' often noted, it is the
states and the counties that are
Wilkohm P ��WNIOf feeling the. massive budgetary
pinch sosniting from a morass of
�• reguiatims _and an inarticulate vi-
saxt of what health can should be
and whom it should serve. Mr.
Clinton took a long stride in trying to ww with states by announc-
ing that conditions for federal health waivers needed for state pro-
grams will be loosened And Mrs. Clinton added three governors to
her task force to help.
What the president and Mrs. Clinton's task force should do next is
watch what is happening beyond the Beltway where a number
of programs may portend the future.
Health-care reform is happening in the states: Florida, Georgia,
Minnesota, Pennsylvania. Oregon and Vermont among others, have
plans ranging from insurance regulation to managed cue, rationing
and state -funded insurance.
•
if the Clintons want to get ahead on this issue, the place to look is
outside Washington. D.C. Keeping an eye on the states that are
moving ahead should be first priority.
�-sr
Post Retirement Healthcare Liabilities Estimated as of 12/1992 •
Co. Name
# at
Actives
# of
Retirees
Retsree Health
Obrication
Obligation
Per EE
American Brands
39,900
Not Rep
$275,400,000
$6,892
Ameritech
76,967
49,900
$2,500.000.000
$19,7061
Arco
27,700
Not Rep
$600,000,000
$21,6611
Armco
9.200
15,700
$700,000,000
$28,1121
AT&T
317,100
138,500
$6;000,000,000
$13,1691
Atlantic Ener
2,0;32
Not Rep
$100,000,000
$49,213
Baltimore Gas & Elec
9,000
Not Rep
5900,000,000
533,339
Bell Atlantic
75,700
Not Rep
$7,5501000,000
$20,476
Beg South
96,084
39,500
$2,000,000,000
$14,751
Boeing
159,100
Not Rep
$1200,0001000
$7,5421
CaterpHim Inc
38,669
Not Rep
$2.400,000,000
562,065 �
Comsat
1,645
414
$40,300,000
$19,5731
Can Edison
19,087
Not Rep
$600,000,000
$31,4351
Contin Bank
4,500
Not Rep
$87,000,000
519,3331
Dow Chem
62,200
Not Rep
$9501000,000
$15,2731
DuPont
133,000
Not Rep
$4.000,000,000
$30,075
Enron Corp
7,000
Not Rep
$94,000,000
$13,4291
Exxon
101,000
Not Rep
$1,000.000,000
$9,9011
Gen Electric
284,000
165,000
$2,700,000,000
$6,013
Gen Motors
531,000
Not Rep
$22,200,000,000
$41,808
GTE
162,000
Not Rep
$3.100,000,000
$19,136'
IBM
344,396
60,905
$2,200,000,000
$5x428
Long Island Light
6,600
2.100
$3501000,000
$40,230'
Mobil
67,000
Not Rep
$600.0001000
$8,015'
Monsanto
39,281
18;000
$1,200,000,000
$20,049
NW Nat Gas
1,276
Not Rep
$8.000,000
$6,270
NYNEX
89,900
Not Rep
$5,000,000,000
$59,595
Occidental Petroleum
24,700
Not Rep
$600,000,000
$24291
Owens Coming
17,300
Not Rep
$344,000.000
$19,884
Pacific Gas & Elec
26,700
Not Rep
$1,200,000,000
$441944
Pacific Telesis
71,877
40.000
$2,540,000,000
$22,346
PepsiCo
338,000
Not Rep
$700,000,000
$2,071
Pub Ser Co of Colamdo
6,565
2,375
$145,000,000
$16219
Rockwell
87,004
Not Rep
$1.50010001000
$17,241
Sears
413,500
Not Rep
$2,540,000,000
$6,046
Southern Cos
30,402
Not Rep
$700,000.000
$23,025
southwestBell
61,200
Not Rep
$3,000,000,000
$49,020
Texas Utilities
15,262
Not Rep
$310,000.000
$20,312
TRW
71,300
Not Rep
$750,000.000
510,519
US West
65.829
Not Re
$3,000.000.000
S45,573
, Avo Obligation Resorted Per Emotovee
517,707
41 . .
Pr
Post Retirement Heaitbeate Liabilities (Estimated as of 1211992
Co. Name
* of
Actives
# of
Refinws
Retinae Health
ObIloation
Obligation
Per EE
American Brands
39,900
Not Rep
$275,000,000
$6,892
Ameritech
76,967
49,900
$2,500.000AW
$19,706
Arca
27,700
Not Rep
$600,0001000
$21,661
Armco
9,200
15,700
5700.000A00
$28,112
AT&T
317,100
136,500
$6,000,000,000
$13,169
Atlantic Ener
2,032
Not Rep
$100,0001000
$49,215
Baltimore Gas & Elec
9,000
Nat Rep
=00,000x000
$33,335
Beit Atlantic
75,700
Nat Rep
$1,550.000,000
$20,476
Bell South
96,084
39,500
$2.000,000,000
$14,751
Boeing
159,100
Not Rep
;7.200,000,000
$7,542
Caterpillar, [no
38,669
Not Rep
$2,400,000,000
$62,065
Comsat
1,645
414
$40,300,000
$19,573
Can Edison
19,087
Not Rep
$600,000,000
$31,435
Contin Bank
4,500
Not Rep
$87,000,000
$19,333
Dow Chem
62200
Not Rep
$950,0001000
$15,273
DuPont
133,000
Not Rep
$4,000,000,000
$30,075
Enron Corp
7,000
Not Rep
$94,000,000
$13,429
Exxon
101,000
Not Rep
$11000000,000
$9,901
Gen Electric
284,000
165,000
$2,700,000,000
A13
Gen Motors
531,000
Not Rep
$22,200000,000
$41,808
GTE
162,000
Not Rep
$3,100,000,000
$19,136
IBM
344496
60,905
$2,200,000,000
$SAM
Long Island Ught
6400
2,100
$350,000,000
$40,230
Mobil
67200
Not Rep
$600.000,000
$8A15
Monsanto
39,281
18,000
$1,200,000AW
$20"
NW Nat Gas
1,276
Not Rep
$8,000,000
$6,270
NYNEX
83$W
Not Rep
$5,000,000000
$59,595
Occidental Petroleum
24,700
Not Rep
56001000,000
$24,291
Owers Coming
17,300
Not Rep
5344,000,000
$19,884
Pacific Gas & Elec
25,700
Not Rep
$1,200,000,000
$441944
Pacific Telesis
71,877
40,000
$2,500,000.000
$22,346
PepsiCo
338,000
Not Rep
$7000001000
$2,071
Pub Ser Co of Colarado
6,565
2,375
$145,000,000
$16,219
Rockwell
87,004
Not Rep
$11500,0001000
$17,241
Sears
413,500
Not Rep
$2,500,000,000
$6,046
Southern Cos
30,402
Not Rep
$700,000.000
$23,025
i Southwest Bell
61,200
Not Rep
$3,000,000,000
$49,020
i Texas Utilities
15,262
Not Rep
$310,000,000
$20,312
TRW
71,300
Not Rep
$750,000.000
S10,519
US West
65.829
Not Re
$3,000.000,000
$45.573
Ava Obligation Retorted Per Emolovee
517.707
0
ftW aY6 Edl 4n4Ch t 91■ who ftew r
ftW& Bohm AssocM Plat w Mwamb■4 Edlor
� /111■ssa. Manpiq Edlor TW =Mss4 Wsws Edbr
Health care alliance
welcome first step.
THE NEW FOUND ALIJMC'E betanin President Bili Clinton
and the country's governors is welcome, if for no other reason
than because the White House door was closed for so long.
But we hope that Mr. Clinton, and frankly Mrs. Clinton as well, is
not just malting noues of friendliness to his former gubernatorial
colleagues and is truly serious about trying to straighten out
America's health-care mess.
Health care is at the top of everyone's agenda these days, and
states have been trying to deal with the problems of cost and care
far many years. Medicaid alone has been ova whelming state gov-
ernments. From a 6% share of state spmding in 1980, the cost of
Medicaid has increased to 14% of
the budget in 1991 and is projected
. NNab1to be 28% by 1995. Mr. Clinton on% -
WP everpm t tainly kwm . about that, having
been a governor. much longer than
he has been a president.
As aro haver often noted, it is the
states and the counties that are i
feeling the massive budgetary
0001 =-.40ofW pinch resulting from a morass of
regulations.and an ils■rticuis vi-
sion of what health care should be
and wham it should serve. Mr.
Clinton took a long stride in trying to woeic with states by announc-
ing that conditions for federal health waivers needed for state pro-
grams will be loosened. And Mrs. Clinton added three governors to
her task force to help. ;
What the president and Mm Clinton's task force should do ne=t is
watch what is happening beyond the Beltway where a number
of programa may portend the future. -
Health-care reform is happening in the states: Florida, Georgia,
Minnesota, Pennsylvania. Oregon and Vermont amon others, have
plans ranging from insurance regulation to managed care, rationing .
and state -tended insurance.
If the Clintons want to get ahead on this issue, the place to look is
outside Washington. D.C. Keeping an eye on the states that are •
moving ahead should be fust priority.
•
Shifting Burden
Aoeomme lea aaaManaaa95aeaFad��aaaalaaaalar[fhera m a
eaanlaafa�
110WI a $nell-
my am **$ Moa r GWM":
Reis" Raised Inmasdd
a11p1oYM *111""yees efnpforeea
cos"Ment fee porden of deductible
for neaftn the premum
insttanet payment
=aunx: auf,n*n & Loam Reoons inc..:Aaeapn. Conn.
Heal h care benenrs for retirees are eroding in many ways and at a
considerable pace. according to a telephone survev of 1.057 employee
benefitmanagers and 200 empiovees by Newark. N.J.-based account-
ing fir, KPMG Peat Marwick.
In recent years. many employers have terminated retiree medical
.-enefit . the survey finds. Specifically. the percentage of mid-size
e:npiov rs (those with 200-999 workers ot3ering retiree health bene.
-its fell from 4d percent in 1991 to 37 percent in 1992, while the
,ercen ge of large ernpiovers (1.000-4.999 workers) offering retires'
Covera a declined from 56 percent to 52 percent. In contrast. retires
zoveratre remained constant at 72 percent among "jumbo" empiover!
those ith 5.000 or more workers).
In a dition to cutting benefits, employers are limiting their heald
aencfi liability by tightening eligibility standards. For example. thr
,eport says, many employers have began implementing length-oi
*ervice rea_uirements. or increasing the minimum vears of servic
nploy es must have before they can receive benefits.
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Unfunded retiree health benefit liabilities
By JERRY GEISEL
HNGTON—The cost of
-e: medical benefits that
companies have promised. but
not funded, is rising even as
companies continue to cut or
eliminate benefits.
'l'he General Accounting Office
estimates that unfunded em-
piover retiree health liabilities
now total $412 billion -5257
billion for active employees and
3155 billion for retirees.
That's an 81% increase from
total liability of $227 billion—
including $127 billion in un-
funded benefits for active em-
ployees and $100 billion for re-
tirees --in 1988.
Rising health costs contributed
to that increase, as did more
early retirees and longer life ex-
pectancy, noted Donald C.
Snvder. an assistant director in
the GAO's human resources divi-
sion.
"Because early retirees (under
This article is an accurate description
of the retiree health care dilema.
9/
Business insurance
7-19-93
up 81 %: GAO
age 65) are not yet eligible for
Medicare, employers pay three to
four times more for their health
care than for retirees" covered
by Medicare. the report noted.
Relatively few employers have
taken the drastic step of termin-
ating retiree health benefits. The
GAO. citing several consultant
surveys. estimates that up to 3`ro 1
of emniovers have terminated
benefits for current retirees and
3% to 5% have done so for future
Continued on page 20
GAO report
Contmued from pave 1
retirees.
But nearly 70% of empioyers
either have or plan to in the next
year raise retiree premiumco
tributions or otherwises,
their retiree health pLana
ding to a forthcoming report
from A. Foster Higgins & Co.
And another recent survey of
216 pians found that half are in-
creasing retiree contributions.
That study, by William M.
Mercer Inc., indicated that 34%
of retirement plans now have
tighter eligibility standards,
while 26% have caps on comoany
contributions.
Mercer concluded that future
retirees stand to lose the most -
from an overall cutback in em -
plover -provided retirement j
plans. Approximately 22% of re-
tiree health plans in the study
have done away with coverage
for at least some future retirees
andlor their spouses.
Retiree benefit cuts generallv {
have passed court muster. the
GAO noted. Courts generally
have given empiovers a green
light to alter or terminate retiree
health care benefits as long as
they had reserved the nght to do
so in plan documents.
Employers' freedom to cut
benefits means retiree health i
benefits are not secure. the GAO
said. "Our review of available
data and health benefit consul-
tant studies showed that retiree t
health benefits are not secure
under the present empiover- F
based system because under cer-
tain circumstances they can be
changed whenever ana as em -
plovers deem necessary," 'he re-
port said.
As Congress considers various
health reform proposais. it,
should pav oarticuiar attention i
to retirees. especially those
under 65 not yet eligible fort
Medicare. who could lose their
coverage, the report added.
The Clinton administration. as
part of its stili-evoivuig reform
proposal. has been examining
what emniovers' responsibilities
will be to provide health care
coverage to retired workers. No
final decisions have oeen made.
s
Copies of "Retiree Health Plans:
Health Benefits Not Secure
Under Emviover-Based Sustem.
are avatiaole front the U.S. Gen-
eral Accounting Office. P.O. Bos
60I5. Gaithersburg, .lid. 208
202-275-6241. The itrst cop M,
free: additional costes are a_
each. Checks should be maae oui
to the Supennrenaertt of Docu-
ments. Specify report No_ GAO:
HRD-93-I25.
age 65. If the retiree that reaches age 65 opts off the City's plan and doesn't continue to pay
the premium, the spouse will be dropped from coverage.
RET M.. hired after 10/1/93
• Upon retirement employees hired after 1011/93 will be eligible to continue medical coverage
under the City's plan in accordance with State Law which allows the City to charge the
actual cost.
DISABILITY RETIREES: (Usually young in age with dependent families)
• Under the age of 65 will retain same benefits as active employees until age 65 is attained.
-W=bt*eVNaWMM Revised 7128/93
•
1-48
• Reduce co -payment for existing and future retirees and spouses as follows:
! IN NETWORK
OUT OF NETWORK
1993/941 80/20 1993/94 60/40
1994/9, 75/25 1994/95 55/45
1995/96 70/30 1995/96 50/50
1~'[TI'M RETMEES, hired prior to 10/1/93 (Current Employees)
• RATES FOR FUTURE REMM, hired prior to 10/ 1/93
Current employees retiring after 10-1-94 below the age of 65 with minimum of 10 years of
City of Baytown service will remain eligible for the City's health benefits coverage by
paying the total of the employee and City's contribution. (Retiree true premium $609 vs
active $234 and with retiree true dependent cost $1,218 vs active $519). They will be
allowed to remain on the plan if they so elect for payment of the full active employee rate.
RETIREE
RETIREE
EMPLOYER
EMPLOYER
TOTAL
PRESENT
PROJECTED
PRESENT
PROJECTED
RETIREE
COST
COST
COST
COST
COST
RETIREE ONLY $ 0.00
$ 42.00
$160.00
$192.00
$234.00
RF'P[RFF. +DEP $82.50
$124.50
$362.72
$394.72
$519.22
• Reduce co -payment for existing and future retirees and spouses the same as existing retirees.
• if the spouse of a retiree becomes widowed, the spouse continues at same premium payment
of a retiree only rate.
• Active employees with dependent coverage will be allowed to continue this coverage upon
retirement. No dependents will be added after the active employee retires. In the case of
two employees that are married to each other and they both retire, one may be added as a
dependent. If an active employee chooses to leave City employment before being vested and
their spouse is a retiree of the City they will be eligible to be covered under the retiree's
health plan as a dependent.
0
CJ
mandates for measurement of the obligation and accrual of cost during the working He cf
the employee. The GASB (Governmental Accounting Standards Board) has deferred
adoption of mandates similar to FASB 106 until other reporting issues have been fully
addressed. GASB is expected to adopt these similar guidelines in the near future.
Regardless of the time frame for adoption of these accounting deadlines, the important issue
is having the resources necessary to pay our bills.
* V 19 D1
RATES FOR EXISTING RETIREES (and existing employees who retire prior to 10-1-94)
Spouse
RETIREE
RETIREE
EMPLOYER
EMPLOYER
PRESENT
PROJECTED
PRESENT
PROJECTED
COST
COST
COST
COST
UNDER 65 RET
$ 0.00
$100.00
$160.00
$509.28
1-2 DEP
$82.50
$182.50
$362.72
$1018.56
OVER 65 RET
$ 0.00
$100.00
$160.00
-0-
0-
1-2 DEP
1.2
$82.50
$182.50
$362.72
-0-
0 -
Spouse of existing retiree will continue to be eligible for City of Baytown health benefits
--- (premium paid by retiree) until spouse is eligible for medicare. At the time the -spouse is
eligible for medicare, the City will discontinue tion. Retiree must remain on the
City's coverage to maintain spouse's coverage until spouse reaches age 65 and is medicare
eligible.
• If the spouse of a retiree becomes widowed, the spouse continues at same premium payment
of a retiree only rate.
• Active employees with dependent coverage will be allowed to continue this coverage upon
retirement. No dependents will be added after the active employee retires. In the case of
two employees that are married to each other and they both retire, one may be added as a
dependent. If an active employee chooses to leave City employment before being vested and
their spouse is a retiree of the City they will be eligible to be covered under the retiree's
health plan as a dependent.
1-46
RE 11 BENEF115
Currently there are 85 City of Baytown retirees under the existing health benefits plan.
Forty-eight of these are under age 65 and not yet eligible for Medicare coverage. This group
represents a sizable financial liability to the pian. The liability is twofold; 1) Claims Costs
and 2) Future Liability.
1) CLAIMS COST
Of the $2,861,784 of claims paid during the previous 12 months (medical claims only), the
average monthly claim cost per retiree under 65 amounts to $1,045 while the average
monthly claim cost per active employee amounts to $356. Of the $1,447,035 claims paid
during the first 6 months of the 1992/93 policy year (medical claims only), claims totaling
$410,283 were paid on behalf of retirees under 65. The retirees under 65 represent 7% of
the total covered under the plan and over 28 % of the claim dollars for this 6 month period.
2) FUTURE LIABILITY
Continuing to provide retiree medical benefits carries a future liability. The real cost for
claims over the remainder of each retiree's life time is $564,722 which in today's dollars
would require the City to invest $207,257 per retiree in an annuity to pay for future medical
costs. These figures are derived actuarially assuming a retiree age of 58 and life expectancy
of 84 years. Similar calculations would have to be made for each current retiree and each
future retiree if the City continues to pay for the retiree medical coverage.
The City has utilized a pay as you go philosophy in paying retiree health benefits. This
philosophy recognizes expenses when they are paid, rather than at the time the liability is
incurred. In order to properly fund the retiree health benefit cost, monies would need to be
budgeted each year the employee works, similar to a pension fund.