Special Board Meeting Packet - Three Valleys Municipal Water District

To:
TVMWD Board of Directors
From: Richard W. Hansen, General Manager
Date: December 8, 2010
Subject: Change in Responsibility for Employee Health Care Costs
For Action Fiscal Impact Funds Budgeted
Information Only Cost Estimate: $
Requested Action:
Recommend the Board adopt a policy whereby employees are responsible for 10% of their medical premiums.
Discussion:
Memorandum
As reported at the November 3 Finance Committee Meeting, medical premiums for 2011 are increasing
9-19%. These increases will be paid 100% by the District’s employees. In light of the medical premiums
increasing much greater than expected, the Board asked for a recommendation to defray some of these
costs from being completely absorbed by the employees. The District already realizes a tremendous
savings on employee costs as employees pay 7% of earnings towards PERS. Most agencies do not
require a contribution by employees.
The District currently provides a specific allowance to each employee to pay for medical, dental and
vision premiums. This plan was established in 2008 and the allowance amounts have not changed.
� Allowance > costs = employee is paid the difference as additional income
� Costs > allowance = employee pays the difference to the District
Staff’s main recommendation is to move towards a method where employees pay 10% of medical costs.
As premiums increase so will employee contributions. This method will also better allocate increased
costs based on family size. Other recommendations to coincide with this change:
� ACWA requires the District to pay 100% of the premium for a single employee in the least costly
plan. Thus a Kaiser employee who is single will have no out-of-pocket costs.
� The allowance method should remain in place for current employees who choose Kaiser until
costs exceed the allowances by 10% so they are not unduly impacted.
� Per ACWA requirements the District would continue to pay 100% of dental and vision premiums.
� To continue saving the District on medical costs, employees may opt out of the medical plan with
proof of comparable alternative medical coverage. The opt out would be calculated at 75% of the
average plan cost, not to exceed the least costly plan (Kaiser). Employees may also opt out
family members at 75% of the effective savings.
This recommendation would result in the premium increases for 2011 being paid 50% by the employees
and 50% by the District and could be accomplished within the existing FY 10-11 budget.