Travis County Commissioners Court
June 28, 2005
Item 34
34. Consider and take appropriate action on fy 06 employees' health care coverage issues: a. Select benefit plan funding option 7 or 8; b. Increase the voluntary supplemental life maximum from $125,000 to $200,000; c. Amendment to the t-flex plan to provide participants with a 2 ｽ month grace period at the end of each plan year as now allowed by the irs regulations. Let's start with c, miss wilson, you are here on that one, right?
>> um ... Recently the i.r.s. Reviewed it's long standing position that all funds that were put into a flexible spending account during a plan year had to be spent in the plan year. Based on the application of -- of interpretations that have -- that are consistent through various other provisions of the code, they have reached the conclusion that it -- that it would not be inconsistent with the law which prohibits deferred compensation from being included in cafeteria plans for them to allow a plan year to be 14 and a half months. When this agenda item was written initially, we were talking about the full two and a half months being put into our plan and administratively after the -- after the -- the agenda item was put in, it became clear that a two-month extension would be or grace period would be better than two and a half for implementing. When you look at this and say, oh, this means that instead of having to spend the money I put in over the 12-month period, within the 12-month period, it means that I would have 14 months in which to spend it. It sounds like what could be bad about that? Apparently there are some tax ramifications that could be bad that make it more complicated. And so it's not a just straight up, but of course we do this sort of thing. One of 'em, none of them currently have -- create complications or problems with what we have as benefits now. One of them is in relation to the application of a health savings plan and -- I mean health savings account. If you have a health savings account and this -- this grace period in your flex period, then the amount that you could put into your health savings account is limited to the 10 months when the grace period is not in existence. And it is reduced by one-sixth to -- to pro rate it for the period of time that you have it. There is some discussion about this being a good idea for us to consider in the future. But we can come back and reamend the plan not to include the grace period or we can just our health savings accounts to accommodate what's required by the law. It could be in that period of time between now and when we got a health savings account, the i.r.s. Could figure it out and decide this is not a problem. So far they have said you do have to accommodate. Second thing from a practical standpoint, 99.9% of the time it's not going to be a problem is in relation to the dependent care. If you put money in -- well, you can only get $5,000 in tax-free money to go towards the payment care each year. If you were to put $5,000 in, in year one, only spend 4500 of it, spend the other 500 in the grace period, in that second year you would also have money in your -- you could also have money in your plan and if you were to spend the full five thousand from the second year, you would end up being taxed on 500 of that 500 from the previous year, 5,000 from the second year because you are only allowed the 5,000 from a tax-free source. So there are little complication that's could be confusing to -- to employees, but in the time i've gotten here, we've had one or two cases where gee I didn't know my sister was going to come to visit for the summer, I didn't have to put my child care, I have got this money left over kind of a thing. So that's about the frequency with which we're going to have something adversely impact the health care, child care, because most of the time they put in exactly what they are going to need or even less, take it out immediately, it's not a situation there's going to be any left over. If there were it could be a complicated issue. There's one or two other frrks a legal perspective -- from a legal perspective things that could happen, but they don't apply to benefits now. Two administrative issues that you would want to consider, I would leave that to dan and alicia to discuss.
>> good morning, alicia perez, executive manager for administrative operations. On this particular item, barbara, we just received and the court we just received some information from seridian, our administrator for this program. We had asked them about fees. They sent us information, I think it still needs some work. We need to talk to them for some clarification of the fees or the charges that we would incur by extending the grace period. We would like to postpone it for a couple of -- or at least one week to try to get that clarification.
>> well, I guess -- my concern not that we shouldn't do it one way or the other, but my understanding from all of the employees that we cover for the health benefits, Travis County retirement, I understand there's about 650 persons, employees that use the flex plan option. I guess if this was to be modified, where they would get additional time added on to what they are dealing with right now, how do we echo sentiment to say, yes, I want it or no, I don't. Has there been any kind of survey, explanation done so those persons of the 650 employees that we have under the flex option have they been notified or are they going to be notified, what's the deal?
>> no, we haven't done a survey, Commissioner. This law has some twists to it, even with what barbara was mentioned to. Seridian with a conference call with the i.r.s. And their document says there's an opportunity that you don't have to extend the 2 and a half month extension to dependent care. The other data said you couldn't limit it. We are still trying to shake out all of the nuances here before we tell employees what's available. Because right now we don't want to mising firm them.
>> okay. I see what you are saying. I saw it on here, I thought since it was on the agenda, there was an action that needed to be taken on c. Of --
>> we thought so, too. Until we received the information this morning from seridian that made things as clear as mud again.
>> okay.
>> so we will have to clarify that and bring it back to you.
>> right. So well how -- well I guess my next question then is where are you in that conversation of discussion whereby you will be able to bring item c back to the Commissioners court?
>> we believe next week, if not maybe a couple of weeks. Depending on the responses to our questions.
>> okay.
>> should we have it on next week.
>> next week or two weeks.
>> I would say two weeks, judge.
>> two weeks, judge.
>> that's July 12th.
>> okay.
>> two weeks, good. [indiscernible]? You are here for the discussion? Two weeks from now? Okay. All right. Should we take b next or a?
>> b is easy, let us go ahead and go through that.
>> good luck. [laughter]
>> this is a good thing.
>> have we noticed a there's no recommendation [indiscernible]
>> okay.
>> b is increase the voluntary supplemental life maximum from $125,000 to $200,000.
>> what we are trying to do judge is increase the maximum for the employees on their supplemental life. Right now the maximum supplemental life that an employee may purchase, it's 100% voluntary, it's $125,000. We would like to increase that maximum to $200,000 or four times their annual salary. The rates that they are paying per thousand will remain the same. So if someone increases their supplemental life insurance to the $200,000, they will see an increase in their rates, but they are paying the same amount per thousand that they have been paying.
>> what is that?
>> what happened to this life insurance after you leave Travis County?
>> it is portable. At the time you either leave or retire, Travis County in most cases. Their rates that you pay, however, are not the same. They are substantially higher if you choose to port your coverage either as a terminated employee or as a retiree. But it is available to you in most cases.
>> move approval of b.
>> second.
>> discussion? All in favor? That passes by unanimous vote. Now a.
>> now we come to the selection of a plan for -- for employee health care benefits for fy '06. This is a one-year proposal. Usually we bring the health care benefits premiums and the plan to the court on an annual basis. If you recall last week when we discussed this, the plan will essentially stay the same. No changes in co-pay, no changes in co-pay for pharmaceuticals. And the hospitalization and out of pocket maximum for individuals will remain at 1500 and at 3,000 per employees. We have 3 plans, the epo, which most people recognize as that as an hmo, which pays 100% of major medical health care costs, the ppo, which is a -- which is a 90/10 plan, meaning that the plan will pay 90%, the employee 10%, again maximum of 1500 per individual, 3,000 for out of pocket. And then the co-insured epo, which is the most affordable plan, but a very, very good basic health care plan that's an 80/20 plan has a $400 deductible, after that it is an 80/20 plan, 80% is paid by the health -- by the health fund and 20% by the employee with a 1,500-dollar maximum. Again, very good and affordable health insurance. So we do see some increases in health insurance this week. I mean, this year. The most significant were experienced by individuals in epo which again is what we would call a premium plan, pays 100% of all major medical cost there. The cost per employee this is the only plan that we charge the employee any premium for, employee only health care is fully covered by Travis County for the ppo and the co-insured epo, paid by the employer 100%. The epo because it is a rich plan, employee only went from $60 to $94, an increase of about $34 or 57%. You have also saw increases in all the different tiers and that is where employees will cover a dependent, whether it be a spouse, children, or just one child or a spouse and children. Those -- ought those categories or tiers, both in plan seven and eight have increased. Significant increases both in plan 7 and 8 have been seen by the employees or retirees under the age of 65. We talked about the reasons why that's more reflective of the actual expenses. When you are 65, medicare comes in, they cover the majority of the costs, the fund does not have to do that. If you are under 65, retired, much smaller pool, 121 people, the cost is spread between them and they have very high, the highest health care expenses of any other group. When you are an active employee, you have got over 3,000, I think 3600 people in the pool, again spread among those people, that include children, that are less expensive to ensure than adults and the -- the costs are not seen as much. So you have that group that are retired, but under the age of 65, which saw the largest increases. And then you have a -- of course your retiree. Both retirees under and over age 65, the epo plan the richest plan did see the largest increases. In terms of cost, your option 7 is less cost for the employees, but about $550,000 more than what you have budgeted for this item. And your -- and your preliminary budget. Option 8 brings it in right around the amount of the preliminary budget. But it passes on the cost to the employees. You heard from your employees last week in terms of their preference. The employee committee benefits committee yesterday, their final recommendation to the court and they didn't have a recommendation in looking at this and hearing from employees was the adoption of option 7, with it being funded outside the two percent that has been set aside in the preliminary budget for pay increases. Their recommendation was not to tie the two together.
>> we don't have to act on the second part of that, but we need to have 2, 7 or 8 I guess is where we are. Because I think in terms of how we fund it, we need more analysis and discussion.
>> uh-huh.
>> if we end up at the same place, I think it ought to be after we at least have tried to improve our situation. It does strike me that some of these increases, though, are fairly substantial in -- and kind of hit the -- hit hardest the employees who can least afford it. It's not a whole lot of money if you make $20,000, but the increase is substantial. And if you have -- if you have a dependent spouse or child, it really does get up there. At some point, I think we ought to analyze if you take 2%, the money that it amounts to, put it into the program, you know, what would be the impact on employees? Inmate -- end up being about the same, but I think we ought to look at that. Because if -- I don't know whether a majority of the employees would benefit from that approach more than 2%. You know, rolled into the salary, whether it's taxed or not. Or not. But I left the public hearing thinking at least we should analyze how we fund whatever option we choose a bit further and try to do a little better. And if we cannot, then we simply have to face that reality.
>> uh-huh.
>> there are -- if I understand you correctly, judge, you want to look at the total amount, which is I think a little bit over $2 million for the 2%, 2-point -- christian? Do you know what that number is? Anyway, it's a little bit over 2 million.
>> more than that --
>> dollars.
>> -- my suggestion is that we choose 7 or 8 today, but spend a couple of weeks figuring out how we fund it. The employee contribution, we have to decide on the funding approach today? Do we have to?
>> if you decide 7 or 8 today, you know that there's $550,000 that you have to fund from someplace. Where you take it from, we can wait and figure that out. The important thing is that the premiums do not change at this time. We may be able to take some of that money and do a supplemental pay with it. We have to go to open enrollment by July 20th, 21st, so it's a short time.
>> what's the drop dead date on choosing between option 7 or 8?
>> today,.
>> today?
>> today. We sent that calendar out. I would point out, judge. I think we need to look a -- to do a lot of work on this. The co-insured epo, which is by the way the insurance that I take, I wouldn't recommend it if I had not already had some personal perience and it's worked out very good. It's very, very affordable. The co-insured epo is employee and one adult, $155 per month. That increase to that plan is only $5 per month in what they paid last year. The -- the employee and child, the proposed rate, the proposed rate for fy '06, it's $23, that's cheaper than chip in a lot of place, that is only a dollar increase. If you look at other plans, other epo, ppo and come insured epo, I think that you will find that the increases have not been that significant. The money for ppo adult and employee, the ppo only went up $7. The employee --
>> what page are you on?
>> page 4.
>> page 4. If you look at the bottom in the red, that will tell you the actual dollars that those went up. We have the significant increase is in the epo, that's where we pay 100% of all major medical costs, that's where we really do have more people with -- with risk aversion and perhaps illnesses going into that because of the fear of -- of being sick and not having the coverage, but I would remind employees that your maximum out of pocket is 1500 per employee and 3,000 per family. And none of these plans are going to cover or change what you pay for medication or what you pay for office visits. In fact, if you go with the co-insured epo you save money in office visits. Yeah. The 5 -- the office visit is $5 less, so there's some good choices on -- on the epo which is where the majority of employees are and again it's that risk aversion, it's a premium plan and yeah it -- it has gone up significantly because of the cost of health care.
>> so there's nothing wrong with the come insured -- co-insured epo, still a good plan.
>> it's a good plan and it's an economical plan depending on your particular health planning. If you are planning to have knee surgery next year, or a baby, you have got to figure what your $400 are compared to the premium that you are paying for your family on the -- on the epo. And do the math and see which works out better. But $400 you have to pay at the beginning and then you have to -- to pay an 80/20 to maximum of 1500. The ppo is even better. That's a 90/10 plan with a lower deductible. $200 deductible. But it just depends on -- on how many people you are insuring, how the numbers work out. We need to do a bert job of -- a better job of talking to employees, helping them actually put the pencil to paper and figuring out which would be the -- the best because if you have an ill child, absolutely, epo may be the best for you. But it could be the ppo works out because the premiums are so much lower.
>> alicia --
>> there's good choices. We have done a very, very good plan I think in providing choices and providing also levels of -- of costs for employees.
>> at what point is the ep ongoing to be at -- at the point of where we need to -- to move away from that to [indiscernible]
>> I think in 07 we will look at that seriously. By '08 I think the court will be provided with some choices. We have another plan that we will working on, the health savings account, which may provide a very good benefit, especially for younger employees that -- that can tolerate a high deductible, are willing to save money and be able to then to take it wherever they go. And so I think that we have another couple of plans coming forward. We want to be able to develop those at the time that we -- that we -- that we make a recommendation not to have any po.
>> I think --
>> with regards to Travis County or any other entity has gotten to be such an expensive plan that they are slowly being replaced with larger cost sharing. Written of the things, the figures that you are looking for on page 4, actuarially determined amounts. If you artificially affect what those premiums are, just perpetuate an ongoing inequity between plans, striving with the court's approval, try to -- to distinguish the separation of those plans by what their actual costs are, so what you are looking at here really is what the epo is costing the county in the way of claim payments versus premium pay in.
>>
>> [one moment, please, for change in captioners]
>>
>> ...have everybody been afforded the opportunity to look at the difference between -- have they really had a chance to exhaust and look at these plans and I guess that's what they are going to have to do during this period. But I want to make sure before we act, I would like to feel comfortable that all the employees that -- in Travis County have actually had an opportunity to look at these plans, these three plans and examine them very closely. Have we had that type of response from the employees of Travis County?
>> based on what we heard at the employee hearing, we have just put together, and I met with staff this morning to begin our department by department approach to explain all three plans, the intraka cyst about it, flexible spending, almost similar to what we do at new employee orientations when we go through each plan individually and explain in detail what those plans encompass and the cost sharing involved and so forth. So that would be starting this week with the various departments.
>> also dan, i'd like to say the plans have not changed. These are the same plans we've had in place for several years. We'll be happy to sit down with anyone during open enrollment in h.r. Or in their department and walk them through. If they want more information or if they want to do the math, we can certainly help them.
>> move approval of option 7.
>> option 7 basically, alicia, has a shortfall of how much?
>> about 550,000.
>> and if these numbers stay the same, that means the county would pick up an additional 550,000?
>> yes, sir.
>> the county's share would be 1.9 --
>> it's the 1.933, that's the number.
>> that includes the 550.
>> judge, just to get on the record, we would like to mention with option 7 the active employee composite rate would be $609.
>> I知 sorry, would you repeat that, dan?
>> the composite rate for the active employee for budgeting purposes would be $609. The under 65 retiree would be $1,010 composite. And the over 65 would be $286. We would like to have that on the record and charles just reminded me.
>> so the composite rate is what?
>> 609 for oplgs 7.
>> the --
>> composite rate is the average amount or the amount that Travis County pays per employee. That will cover all the subsidies to dependents and the employee health care.
>> that's the Travis County payment?
>> yes, sir.
>> exclude employee or retirey contribution? Okay. Christian?
>> for what it's worth, you put the auditor's second revenue estimate on consent, but that revenue estimate would change your wording, I would submit, from shortfall because, for what it's worth, I believe if you vote for option 7, at 1.9 million, give ten auditor's second revenue estimate, with we can come forward with a balanced budget. There will still be lots of things that you want to do that you won't be able to afford, but this will not cause the kind of challenge that you once thought.
>> what amount was in the budget somewhere that we received?
>> 1.3. We have assumed that -- if you believe that option 7 is the right thing to do, that is 500 and some odd thousand dollars more, but we have additional resources that are non-tax resources in the auditor's second revenue estimate, and we can make this work.
>> sounds good to me.
>> but the county's additional contribution still leaves the employees with the same financial hit that they had before when we had the public hearing?
>> yes, sir, and on the e.p.o., it is significant. On the rest of the programs, p.p.o., co-ininsured, it ranges from 3 to 5% on option 7. Where you have the big hit is those under the age of 65. Those are -- that's --
>> open enrollment starts when?
>> 38, 53%.
>> July 21st.
>> open enrollment starts July 21st.
>> yes, sir.
>> what would keep us from coming back next week and changing these figures if we wanted to?
>> just trying to get everything, all the mailings for the retirees together and getting them ready to get out and i.t.s. Has to bill these rates.
>> in preparation of those materials?
>> and being able to explain to employees what rate structure there is no place for them to begin --
>> if they are going down, they will be gleeful, not --
>> depends on how much it --
>> enough to take additional time to increase the employee contributions. My goal is to see if there is a way to see if we can decrease it. The ones I know will jump for joy.
>> were you specifically talking about those under 65, judge?
>> I wasn't specifically talking about any of them. I was just talking about employees and retirees. What's the drop-dead rate on preparation of materials that you need? You need some time to be able to know specifically what to put in the materials. Because the drop -- is the drop-death date on that today?
>> today.
>> all right. If today is impossible, next Tuesday is not --
>> but I would only --
>> you're making an offer we can't refuse.
>> will you get that much done between now and next Tuesday? Do you plan to finish this between now and next Tuesday?
>> we wanted to get the word out to employees. I知 not -- I guess I知 not sure --
>> if they are [inaudible] we've got another week. If it doesn't change and leave it where it is and tell employees, I guess they have to live with that. But if next Tuesday we drop that amount, you think they will be disappointed?
>> I doubt they will be disappointed, judge, but I go back to what I mentioned earlier that artificially affect the rates that are actuarily determined, it only exacerbates the situation for the future.
>> I heard you when you said that.
>> it's the pleasure of the court. We work for you.
>> I think we owe it to ourselves to take a good look at it and if there's nothing we can do, there's nothing we can do.
>> I知 not going to be here next week, but I made the motion.
>> I think we ought to go ahead and do that. But what I知 saying is we ought not close the door. It may be even if we put it on the agenda next week we sadly say and look at it and have concluded we cannot improve it. I just think we ought to leave the door open.
>> that's a real good point, judge.
>> any more discussion of the motion?
>> no.
>> motion is to approve this basically. With these numbers. All in favor? That passes by unanimous vote. And what I will do is meet with y'all and p.b.o. And et may be that -- the meeting will be tomorrow or the next day.
>> okay.
>> I知 not expecting miracles, but I am sensitive to concerns that were expressed and I think we ought to --
>> judge, we're going to have this back on the agenda next week. And if the numbers change [inaudible] then we could go ahead and deal with that decrease. Otherwise it just moves forward. We've done what we did today and the numbers didn't change.
>> we'll change the wording so it will be exactly what we'll look at.
>> exactly.
>> okay.
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Last Modified:
Tuesday, June 28, 2005 5:23 PM