April 27, 2011

CALL TO ORDER - At 5:00 P.M.


Satish Hiremath, Mayor
Mary Snider, Vice Mayor
Bill Garner, Councilmember
Barry Gillaspie, Councilmember
Joe Hornat, Councilmember
Steve Solomon, Councilmember
Lou Waters, Councilmember




Human Resources Director Betty Dickens gave an overview of what staff had worked on and to reinforce the recommendation for benefits.  CBIZ, the town’s Health Insurance Broker, also attended the session and were available to answer questions. 

Ms. Dickens stated staff had reviewed three different components: 
- Benefits
- Employee contribution for retirement (ASRS) and (PSPRS)
- Pay compensation

On July 1, 2011, each employee would have to start contributing a larger percentage to their retirement.  She stated the current budget proposal would not include COLA’s or bonuses toward employee compensation, making it the third year employees had not received a pay increase.  

Ms. Dickens stated United Healthcare has proposed a match to the recommendation of the 2% of the 90/10 adjustment renewal rate.  Staff recommended remaining with United Healthcare for health insurance.

CBIZ broker Oscar Diaz spoke to the Council regarding premium increases nationwide and increased liability for insurance carriers.  Speciality drugs had entered the marketplace and shortfalls had been made up by providers through the commercial buyers.  Trend increases had been running 11-12% per year which CBIZ had kept a close eye on for the town.

Employee Medical Benefits

Councilmember Bill Garner asked Mr. Diaz if the Governor passed a bill that would allow other insurers to come in, what type of impact would that bring and how many bidders were there initially.

Mr. Diaz stated there were six bidders.  He said consolidation had slowed down in Arizona.

Councilmember Garner stated the town’s loss ratio came back at 77% and asked for clarification.

Mr. Diaz exclaimed that the loss ratio was calculated by taking claims paid by the insurance company compared to the amount of premiums paid by employer.  Anything under 80% was favorable.  United Healthcare loss ratio favorability is 79% and the additional 21% was made up of administrative costs.  Within that figure was the 2% profit.

Councilmember Garner asked if there was steady decline in loss ratio since the 80/20 split.

Mr. Diaz stated there had been a small decline.

Councilmembers Waters asked if there was any good news.

Mr. Diaz explained that through the negotiations, United Healthcare came back with no increase.

Councilmember Waters asked if the administrative savings would be significant by staying with United Healthcare.

Mr. Diaz stated the soft costs would be for administration to process all the changes.  The real impact would be felt by the employees.  

Councilmember Solomon asked what the total cost for insurance would be at 80/20 and 90/10 co-insurance split for Aetna and United.

Finance Director Stacey Lemos stated the total for the current renewal was about $2.1 million dollars for the 80/20 plan.  To go to a 90/10 plan, there would be an increase of around $43,000.

Vice Mayor Snider asked if staying with the same carrier would be beneficial. 

Mr. Diaz responded that longevity did have its merits, however, due to cost increases, companies shop around on a yearly basis.

Councilmember Garner stated that 20% of the employees had met the deductibles.

Councilmember Hornat asked if the employee could select either the high or the low dental plan and if the town’s contribution would stay the same.

Ms. Dickens confirmed the town’s contribution would stay the same.

Councilmember Garner asked for an explaination of what the benefits would be for having a health savings account.

Mr. Diaz stated it was to encourage individuals to put their own dollars into a pre-taxed basis.  By having employees participate with their own dollars they would become better consumers of healthcare.  An education process would be necessary in order to inform employees of all the benefits that a health savings account would offer. 

Mayor Hiremath asked for clarification about the $500.00 deductible.  If the deductible would stay the same, it would cost the employee more for a 90/10 plan and less than for an 80/20 plan.  

Mr. Diaz stated that it could cost the insurance company more, which would mean that employees could pay more for insurance premiums.  

Councilmember Garner talked about the employees who actually paid the deductible and how it affected them. 

Ellen Galloway from CBIZ explained that there would be a $500.00 deductible under both plans and then the co-insurance would kick in.  Every employee who incurred a service that was subject to a deductible co-insurance would have to pay the first $500. 

Vice Mayor Snider asked if both plans had a fourth quarter rollover for the deductible if the limit wasn't reached.

Ms. Galloway stated no. 

Councilmember Gillaspie asked what the maximum out of pocket expense would be for employees.

Ms. Galloway stated it is $2500 dollars. 


Oro Valley resident Mona Gentz commented on the cost of percentage paid by the town and compared it to other municipalities and encouraged that town employee's share the cost.  

Oro Valley resident Bill Gentz, a former Human Resources Executive, advised to help control escalating costs by having employees contribute to the health system.

Councilmember Solomon asked staff about other municipalities that were surveyed and the Town Clerk distributed the League’s annual report that showed what municipalities within the state were doing.

Ms. Dickens stated that a majority of the municipalities within the state were providing 100% for employees and a variety of percentages for dependents and families.

Councilmember Solomon asked what would the percentage be if the town would go from 100% to a 90%.

Finance Director Stacey Lemos gave an overview of the amount that would be saved if the town would cover 90% for the employee and 50% for the dependant coverage.  The savings would amount to approximately $370,000 a year in all funds and around $280,000 a year in the General Fund.

Councilmember Gillaspie asked about lowering the employee portion to 90% and leaving family at the 75%.

Ms. Lemos stated it would save the town approximately $250,000 town wide and $175,000 savings from the General Fund. 

Councilmember Solomon asked about the timeline to making a final decision.

Ms. Dickens stated that a decision as soon as possible would be best because if there were changes, staff would have to assemble the new material for employee distribution.

Councilmember Solomon asked if the Town were to stay with the current provider, would there be any concern about the timeline.

Town Attorney Tobin Rosen stated that the town would have to give at least 14 days written notice regarding changes to the policy.

Mayor Hiremath stated that these were difficult times and employees had not received raises.  He felt that consideration should be given to them for the work they did.

Vice Mayor Snider had requested a survey from other municipalities in Pima County of co-insurance rates and the 90/10 option would be in line with what other municipalities offered.

Councilmember Solomon felt that the town should stay at the 80/20 option and hold it at a zero increase to employees.

Mayor Hiremath stated that the Town Manager’s Budget was balanced with the 100% employee contribution and the 90/10 percentages.  Nickel and diming the staff wiykd not benefit the community.

Councilmember Hornat stated if the town could maintain what they had and not spend more money on benefits that would be the preferable way to go.

Councilmember Garner stated that at 90/10, the town would incur additional costs.  He would like to give staff direction at looking at health savings account.

Vice Mayor Snider agreed with Councilmember Garner regarding looking into health savings accounts.

Councilmember Hornat stated if the town would go to the 90/10 option it would cost $43,000.

MOTION:  A motion was made by Councilmember Hornat and seconded by Councilmember Solomon to maintain 80/20 option with United Healthcare as recommended by staff.

MOTION carried, 7-0.

MOTION:  A motion was made by Mayor Hiremath and seconded by Councilmember Solomon to retain the 100% of the employee only medical premium cost.

MOTION carried 7-0.

MOTION:  A motion was made by Mayor Hiremath and seconded by Vice Mayor Snider to maintain the 100% dental and 75% dependent coverage.

MOTION carried, 7-0.

MOTION:  A motion was made by Mayor Hiremath and seconded by Councilmember Hornat to maintain the current ancillary benefits.

MOTION carried, 7-0.

MOTION:  A motion was made by Councilmember Hornat and seconded by Councilmember Waters to maintain coverage at participation rate of 80/20.

MOTION carried, 6-1 with Mayor Hiremath opposed.


Councilmember Garner, with a second by Councilmember Waters requested that Human Resources Director explore health savings accounts as another opportunity for healthcare for next fiscal year 2012/13.

Vice Mayor Snider stated they would be both offered and the choice would be up to the employee.

Councilmember Gillaspie would like to see the cost comparison.

Vice Mayor Snider stated that CBIZ would be able to provide those figures.


:  A motion was made by Vice Mayor Snider and seconded by Councilmember Hornat to adjourn at 5:53 P.M.

MOTION carried, 7-0.