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HomeMy WebLinkAboutR-86-0327J-86-386 RESOLUTION N0. 86 --327. A RESOLUTION AUTHORIZING THE INCREASE OF CONTRIBUTIONS TO THE GROUP BENEFITS SELF INSURANCE FUND FOR RETIRED EMPLOYEES OF THE CITY OF MIAMI CURRENTLY PARTICIPATING IN THE CITY'S HEALTH CARE PLAN. WHEREAS, the contribution levels currently established for the Self -Insured Health Care Plan for the City of Miami for retirees currently participating in that plan are not sufficient to maintain both a self-sustaining and actuarily-sound plan; and WHEREAS, the firm of Johnson & Higgins of Florida, Inc., after evaluating the contribution levels for retiree health benefits has determined that the contributions currently paid by those retirees are not sufficient to cover paid claims and expenses for the plan; and WHEREAS, it has been determined that after co -mingling the claims experience of the active employees in the plan with the claims experience of the retired employees in the plan that a contribution increase of 63.6% to the retirees' contribution is needed; and WHEREAS, the trustees of the self-insurance and insurance fund at their meeting of 3/27/86 voted unanimously to recommend that the City Commission adopt the contribution levels recommended by Johnson & Higgins of Florida, Inc. for the retired employees to provide for a sound fund; NOW, THEREFORE, BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA: Section 1. Effective as soon as administratively possible the following monthly rates will be used in determining contributions to the City's health care plan for retired employees: Retiree under 65 Dependent under 65 Retiree over 65 Dependent over 65 Current Rates $ 67.45 135.98 23.99 48.12 Revised Rates (63.6% increase) $110.35 222.46 39.25 78.72 M COMMISSION MEETING OF MAY 7 86127. PASSED AND ADOPTED this 7th day of MAY , 1986. PREPARED AND APPROVED BY: leee 44� ROBERT F. CLARK, DEPUTY CITY ATTORNEY APPROVEDe"'AS )TO FORM AND CORRECTNESS: . uvu%JpL.L% a a , XAVIER L. SUAREZ, MAYOR 8E--327_ CITY OF MIAM1, FLORIDA INTER -OFFICE MEMORANDUM Z? The Honorable Mayor & To: Members of The City Commission FROM: Cesar H. Odio City Manager DATE: MAY 11986 FILE: Group Health Benefits SUBJECT: Rate Increase - Retirees REFERENCES: ENCLOSURES: IT IS RECOMMENDED THAT THE ATTACHED RESOLUTION AUTHORIZING THE INCREASE OF CONTRIBUTIONS TO THE GROUP BENEFITS SELF INSURANCE FUND FOR RETIRED EMPLOYEES OF THE CITY OF MIAMI CURRENTLY PARTICIPATING IN THE CITY'S HEALTH CARE PLAN BE ADOPTED. Approximately 50% of the retired employees and their dependents currently participating in some form of group benefits plan are enrolled in the City Group Benefits Plan. The group consists of retired employees who were either represented by the AFSCME Bargaining Unit or were Managerial and Confidential employees at the time of their retirement. The claims paid in behalf of this group is currently in excess of the premium collected. The plan is paying approximately $116,000 per month in claims while collecting only approximately $67,000 per month in premium. In December of 1985, we requested the firm of Johnson & Higgins of Florida, Inc. to review the loss experience for the plan and recommend contribution levels. A copy of the summary of the Johnson & Higgins' report is attached. The consultant, when examining the various groups within the plans separately, found that retirees over the age of 65 had contributions levels which were deficient and should be increased by 302% and that the contribution levels of other retirees were deficient and should be increased by 25%. When the consultant co -mingled the retirees experience with the active employees in the plan, they recommended an overall contribution level increase of 63.6%. This increase has already been implemented to the extend permitted by bargaining agreement for active employees. The Trustees of the Self Insurance and Insurance Fund at their meeting of 3/27/862 voted unanimously to increase the contribution level for retirees participating in the program by 63.6%. This action to be implemented as soon as administratively possible after commission approval. The new monthly rates will be as follows: Current Rates Revised Rates ff (63.6% increase) Retiree under 65 $ 67.45 $110.35 Dependent under 65 135.98 222.46 Retiree over 65 23.99 39.25 Dependent over 65 48.12 78-?2 8f--327. Johnson & Higgins oI r ,urlda. Inc Telex 80 8aaa 9300 S. Dadeland Boulevard AnswerbaCK KEHODEN' MIA = PO. Drawer "J' Miami. Florida 33156 305 665 9261 OHNSON IGGINS Established 1845 rigrig H April 15, 1986 Mr. Donald Dunlap Assistant Finance Director City of Miami Risk Management Division P.O. Box 330708 Miami, Florida 33133 Dear Don: Re: PROJECTION OF RETIREE COSTS You asked us to evaluate the budgeted contribution levels for retiree health insurance and determine whether such contributions were sufficient to cover paid claims and expenses for the twelve month period commencing January 1, 1986. You also asked us to estimate how much additional budgeted monies would be required to make the retiree medical fund(s) self sufficient. You provided us with twelve months of retiree premium, participant population, claim data and fund expense data through September 30, 1985. We performed this calculation on December 18, 1985 and communicated the results to the City on December 24th. We found that the budgeted fund covering eligible retirees and their dependents over age 65 (who are entitled to Medicare) ought to be increased by 302%. The budgeted fund for all other retirees ought to be increased by 25%. When we combgled the combined retiree experience with the active employee plan experience, we found the combined increase to be 63.6%. The trend and margin assumptions were used in performing the projections are current and widely accepted within the underwriting community. We will be happy to discuss this rate evaluation with you at any time. Sincerely, Herbert C. Achtmeyer*-\ Vice President HCA/br 86" 327.