Work Session

Mayor and Council Work Session December 1, 2015 Agenda "A diverse, business-friendly, and sustainable community with clean, safe and strong neighborhoods." "Providing the most efficient and highest-quality services as the municipal location of choice for all customers." "We must apply ourselves to our task with the same resolution, the same sense of urgency, the same spirit of patriotism and sacrifice..." Franklin Delano Roosevelt 4:00 PM WORK SESSION 4:00 PM 1. Proclamation: World AIDS Day 4:05 PM 2. Recognition of Government Finance Officers Association (GFOA) Award for Budget Preparation 4:10 PM 3. 2016 and 2017 Pavement Preservation Program 4:25 PM 4. Bridge Program 4:35 PM 5. FY15 Comprehensive Annual Financial Report (CAFR) 5:10 PM 6. FY17 Health Care Program 5:45 PM 7. Community Action Council CITY ADMINISTRATOR'S COMMENTS MAYOR AND COUNCIL COMMENTS ADJOURN  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Proclamation: World AIDS Day Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates:  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Recognition of Government Finance Officers Association (GFOA) Award for Budget Preparation Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates:  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: 2016 and 2017 Pavement Preservation Program Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates: ATTACHMENTS: File Name Description pp_pt_1_of_2.pdf 2016 & 2017 Pavement Preservation Program pp_pt_2_of_2.pdf 2016 & 2017 Pavement Preservation Program  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Bridge Program Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates: ATTACHMENTS: File Name Description bridge.2015.pdf Bridge Program bridge.pt_2.pdf Bridge Program  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: FY15 Comprehensive Annual Financial Report (CAFR) Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates: ATTACHMENTS: File Name Description CAFR_Presentation_Memo_FY15_12-01-2015.pdf Memo FY15 CAFR Review  C I T Y OF H A G E R S T O W N, MARYLAND Michelle Hepburn Director of Finance 301-739-8577 X160 To: Valerie Means, City Administrator From: Michelle Hepburn Date: December 1, 2015 Subject: FY15 Comprehensive Annual Financial Report (CAFR) The Finance Department will be joined by our independent auditing firm, SB & Company, LLC to present the City’s audited financial statements for FY15. We will be presenting the FY15 Comprehensive Annual Financial Report (CAFR) to the Mayor and City Council on Tuesday, December 1, 2015. The presentation will provide an overview of the City’s financial health at the end of FY15 including:  Financial analysis o General Funds o Enterprise Funds  Factors affecting financial condition and long-term planning  Budgetary analysis  SB & Company, LLC’s comments and recommendations The preparation of this report would not have been possible without the dedicated efforts of the entire Finance Department. Special recognition is extended to Rana Rose for the sense of commitment and dedication displayed during the FY15 audit and CAFR preparation. If you have any questions, please let call me at extension 160.  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: FY17 Health Care Program Mayor and City Council Action Required: No formal action is requested at this time. Discussion: Financial Impact: Recommendation: Motion: Action Dates: ATTACHMENTS: File Name Description Health_Care_12.1.2015_Work_Session.pdf Packet Memo CBIZ_Health_PPT_Discussion_12.1.2015.pdf Presentation Health Care Review December 1, 2015  COH Employee Medical/Rx Premium History Weekly Employee Medical Premiums Level 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2014-15 2015-16 2015-16 Medical Employer Employer Employee 3.52 3.52 23.45 23.45 23.45 23.45 23.45 124.32 23.45 129.46 Employee 65.49 65.49 65.49 65.49 65.49 65.49 65.49 238.45 65.49 249.03 +1 Family 109.47 109.47 109.47 109.47 109.47 109.47 109.47 305.30 109.47 319.74 Plus 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2014-15 2015-16 2015-16 Medical Employer Employer Employee 2.62 2.62 2.62 2.62 2.62 2.62 2.62 113.13 2.62 117.16 Employee 46.37 46.37 46.37 46.37 46.37 46.37 46.37 185.15 46.37 193.21 +1 Family 74.50 74.50 74.50 74.50 74.50 74.50 74.50 231.45 74.50 242.10 2 Total Health Plan Costs – Three Years Active Employees and Retirees July 2014 - June 2015 Total PPO/Rx Total Claims Paid (net of stop loss and other refunds) $5,751,816 Administrative Fees + Stop Loss Premium $551,513 Total Cost (Claims + Fixed Costs) $6,303,329 Fixed Costs as a % of Total Cost 8.7% Average Enrollment 663 Total Cost Per Employee Per Year $9,507 Increase from Prior Year 12.6% July 2013 - June 2014 Total PPO/Rx Total Claims Paid (net of stop loss and other refunds) $5,015,124 Administrative Fees + Stop Loss Premium $566,091 Total Cost (Claims + Fixed Costs) $5,581,215 Fixed Costs as a % of Total Cost 10.1% Average Enrollment 661 Total Cost Per Employee Per Year $8,444 Increase from Prior Year -4.3% July 2012 - June 2013 Total PPO/Rx Total Claims Paid (net of stop loss and other refunds) $5,272,305 Administrative Fees + Stop Loss Premium $523,448 Total Cost (Claims + Fixed Costs) $5,795,753 Fixed Costs as a % of Total Cost 9.0% Average Enrollment 657 Total Cost Per Employee Per Year $8,822 Increase from Prior Year 12.7% 3  Health Plan Costs – Active Employees  The health plan cost per active employee increased significantly after a drop in costs in 2013 City of Hagerstown Active Employees Medical/Rx Per Employee Per Year Costs Vs. Trend $13,800 $13,352 $12,800 Health plan costs have $11,800 $11,796 $11,540 $11,478 $11,279 increased 9.9% $10,800 $10,874 per year on PEPY Cost $10,401 average over $9,887 $9,800 the past five years $8,924 $8,800 $8,591 $8,570 $8,239 $8,488 $8,100 $7,800 $8,094 $7,604 $7,581 $7,608 $6,800 2006 2007 2008 2009 2010 2011 2012 2013 2014 Plan Year Trend Source: Mercer National Survey of Employer COH Actives Medical PEPY Sponsored Health Plans, 2014 (Government Employers) Medical Trend PEPY Source: Mercer National Survey of Employer-Sponsored Health Plans, 2014 (Government Plans, PPO) 4  Long-Term Cost Projections • If no plan design or employee/retiree contribution changes are made Jul14 - Jun 15 Jul15 - Jun16 Jul16 - Jun 17 Jul 17-Jun18 Jul18-Jun19 Jul19-Jun20 Jul20-Jun21 Actual Projected Projected Projected Projected Projected Projected Active Employees Health Plan Costs $4,995,056 $5,423,524 $5,919,557 $6,393,121 $6,904,571 $7,456,937 $8,053,492 Retiree Health Plan Costs $1,447,690 $1,563,505 $1,688,586 $1,823,672 $1,969,566 $2,127,132 $2,297,302 City's Contributions to Retiree HRAs $288,000 $288,000 $288,000 $288,000 $288,000 $288,000 $288,000 Waiver Credits $72,800 $72,800 $72,800 $72,800 $72,800 $72,800 $72,800 Estimated Excise Tax $0 $0 $0 $0 $0 $56,000 $162,000 Total Costs $6,803,546 $7,347,830 $7,968,942 $8,577,594 $9,234,937 $10,000,868 $10,873,594 Less Employee Contributions ($1,120,026) ($1,120,026) ($1,120,026) ($1,120,026) ($1,120,026) ($1,120,026) ($1,120,026) Less Retiree Contributions ($195,217) ($195,217) ($195,217) ($195,217) ($195,217) ($195,217) ($195,217) Net Cost to City $5,488,303 $6,032,587 $6,653,699 $7,262,351 $7,919,694 $8,685,625 $9,558,351 Annual Increased Cost to City ($) $544,284 $621,113 $608,651 $657,344 $765,931 $872,725 Increased Cost to City (%) 9.9% 10.3% 9.1% 9.1% 9.7% 10.0% Assumes no changes to employee/retiree contributions Assumes that the excise tax on high cost health plans impacts the City in 2020  Potential Level Plan Changes • Changes to the deductible, out-of-pocket maximum, coinsurance, and office visit copays can provide plan savings Current Benefits Alternative 1 Alternative 2 Alternative 3 Level Plan Level Plan Level Plan Level Plan In-Network Out-of-Network In-Network Out-of-Network In-Network Out-of-Network In-Network Out-of-Network Deductible $100/$250 $250/$750 $250/$625 $500/$1,500 $500/$1,250 $750/$2,250 $1,000/$2,500 $1,500/$4,500 Out-of-Pocket Maximum $1,250/$2,500 $1,500/$3,000 $1,500/$3,000 $2,000/$4,000 $2,000/$4,000 $2,500/$5,000 $2,000/$4,000 $3,000/$6,000 Coninsurance 100% 70% 90% 70% 90% 70% 80% 60% Office Visits $20 copay 70% $ 25 copay 70% $ 25 copay 70% $30 copay 60% Retail 30 days - Retail 30 days - Retail 30 days - Retail 30 days - Rx $6/30/45 $6/30/45 $6/30/45 $6/30/45 Retail 90 days - Retail 90 days - Retail 90 days - Retail 90 days - $18/90/135 $18/90/135 $18/90/135 $18/90/135 Mail 90 days - Mail 90 days - Mail 90 days - Mail 90 days - $9/45/66 $9/45/66 $9/45/66 $9/45/66 Estimated Savings ($167,750) ($230,320) ($371,250) Eliminate Waiver Credit ($78,000) ($78,000) ($78,000) Total Possible Savings ($245,750) ($308,320) ($449,250) Itemization of Various Plan Changes (and estimated savings) Possible Plan Savings Options Estimated Savings Increase Deductibles Increase deductible from $100/$250 to $150/$375 ($15,000) Increase deductible from $100/$250 to $250/$625 ($35,000) Increase deductible from $100/$250 to $500/$1,250 ($75,000) Increase deductible from $100/$250 to $1,000/$2,500 ($125,000) Reduce In-Network Coinsurance Change in-network coinsurance from 100% to 90% ($75,000) Change in-network coinsurance from 100% to 80% ($150,000) Increase Out-of-Pocket Maximum (in conjunction with a coinsurance change) Increase out-of-pocket maximum to $1,500/$3,000 ($37,000) Increase out-of-pocket maximum to $2,000/$4,000 ($64,750) Increase Office Visit Copays Increase Office Visit Copay from $20 to $25 ($15,750) Increase Office Visit Copay from $20 to $30 ($31,500) Eliminate Level Plan and Only Offer Plus Plan ($360,000) Eliminate Waiver Credit ($78,000) Cut Waiver Credit in Half ($10 / week) ($39,000)  Future Healthcare Considerations • Projected annual increases range from 9 – 10% • Need to consider modifying plan design in preparation for 2018 excise tax • Employees/retirees pay 8.9% of claim costs through deductibles, copays, and coinsurance • Increase focus on wellness/prevention to address chronic condition claim costs • Eliminate waiver credit – No longer prevalent practice – May impact affordability requirement under the ACA  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Community Action Council Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates: ATTACHMENTS: File Name Description CAC_Board.pdf Memo CAC_Board_Description.pdf Program Details