JANUARY
9, 2003, 11:00 A.M.
The City Council of
the City of Abilene, Texas, met in Budget Workshop at 11:00 a.m.,
immediately following the Regular City Council meeting on January 9,
2003 in the City Council Chambers
of City Hall. Mayor Grady Barr was present
and presiding with Councilmen Norm Archibald, Kris Southward, Anthony Williams,
John Hill, and Councilwoman Kay Alexander. Also present were City Manager Larry Gilley,
Assistant City Managers Michael Morrison and Kathy Merrill, City Attorney
Sharon Hicks, Acting City Secretary Debbie Hurley, and various members of the
City staff. Councilman Jimmy McNeil was
absent.
City Manager Larry Gilley recognized
Scott Payne, Risk Manager. Mr. Payne
distributed handouts and reviewed for Council the self-insurance fund as
follows:
Self-Insurance
fund
·
Established
in 1979.
·
Provides funding for:
·
Self-insured
employee/retiree medical and prescription drug program.
·
Self-insured
workers' compensation program.
·
All
areas of potential liability.
·
Excess
Workers' Compensation insurance coverages.
Self-Insurance
fund
Self-Insurance
fund
·
Provides funding for other miscellaneous programs and
benefits:
1. Employee
Assistance Program
2. Wellness
Program
3. Life
Insurance
4. Personal
Accident Insurance (PAI)
5. Flexible
Spending Account Administration
6. Dental
Plan
7. Vision
Plan
Liability Exposures
·
General Liability (GL)
·
Auto Liability (AL)
·
Employment Practices Liability (EPL)
·
Police Liability
·
Errors & Omissions (E&O)
·
Directors & Officers (D&O)
·
Professional Liability
·
FY 97/98 - $94,271
·
FY 98/99 - $248,807
·
FY 99/00 - $64,374
·
FY 00/01 - $67,020
·
FY 01/02 - $111, 388
·
10
year average: $130,662 per year.
Excess Insurance (premium amounts):
·
Stop Loss - $388, 365 (54%↑)
·
Excess Property - $150,015 (52%↑)
·
Excess Comp - $86,027 (292%↑)
·
Boiler & Mac. - $10,727 (15%↑)
·
Airport Liability - $8,450 (10%↑)
·
Employee Fidelity - $2,8990 (n/c)
·
Special Events - based on # of events (base rate
increased by 12%)
Workers' Compensation
·
FY 97/98 - $625,607
·
FY 98/99 - $538,998
·
FY 99/00 - $701,434
·
FY 00/01 - $592,810
·
FY 01/02 - $689,684
·
10
year average: $591,491
Employee/Retiree Medical Care (Medical Costs)
·
FY 98/99 - $4,523,000
·
FY 99/00 - $4,678,000
·
FY 00/01 - $4,147,980
·
FY 01/02 - $5,155,360
·
14% increase since FY 98/99
Employee/Retiree Prescription Drug Expenses
(Prescription Costs)
·
FY 98/99 - $941,952
·
FY 99/00 - $1,100,000
·
FY 00/01 - $1,242,000
·
FY 01/02 - $1,302,000
·
18%
increase since FY 99/00
Combined Medical & Drug Costs
·
FY
98/99 - $5,490,000
·
FY 99/00 - $5,778,000
·
FY 00/01 - $5,390,000
·
FY 01/02 - $6,457,000
·
TOTAL
- $23,115,000
Total Health Care vs. Revenue
|
·
Combined Costs: |
·
Total Revenue: |
|
·
FY 98/99 - $5,490,000 |
·
FY 98/99 - $4,425,000 |
|
·
FY 99/00 - $5,778,000 |
·
FY 99/00 - $4,480,000 |
|
·
FY 00/01 - $5,390,000 |
·
FY 00/01 - $4,899,000 |
|
·
FY 01/02 - $6,457,000 |
·
FY 01/02 - $4,995,000 |
|
·
TOTAL
- $23,115,000 |
·
TOTAL
- $18,799,000 $4,316,000 deficit over past 4 years |
Health Plan Employee Costs vs. Revenue
|
FY 00/01 |
FY 01/02 |
|
Employee
Contribution: $1,307,135 |
Employee
Contribution: $1,332,949 |
|
City
Contribution: $2,839,
960 |
City
Contribution: $2,849,700 |
|
TOTAL - $4,147,095 |
TOTAL - $4,182,649 |
|
Employee Cost: |
Employee
Cost: |
|
TOTAL - $3,942,962 |
TOTAL - $4,146,161 |
|
Net: $204,133 |
Net: $36,488 |
Health Plan Retiree Costs vs. Revenue
|
FY 00/01 |
FY 01/02 |
|
Retiree Contribution: $655,680 |
Retiree Contribution: $725,850 |
|
City
Contribution: $0.00 |
City
Contribution: $0.00 |
|
TOTAL - $655,680 |
TOTAL - $725,850 |
|
Retiree Cost: |
Retiree Cost: |
|
TOTAL - $1,378,724 |
TOTAL - $2,191,821 |
|
Net: ($723,044) |
Net: ($1,465,971) |
Self-Insurance Fund Balance
·
$8,978,204 as of October 1997
·
$5,763,021 as of March 2002
·
36%
decrease in reserves
Retiree Coverage
·
FY 99/00 - $1,053,000 deficit in Retiree Group
·
FY 00/01 - $723,000 deficit in Retiree Group
·
FY 01/02 - $1,465,971 deficit in Retiree Group
·
3 year total deficit of $3,241,971
·
99.42% of total City deficit is the result of health
plan payments on behalf of the Retiree Group.
Retiree Coverage Medicare vs. Non-Medicare
·
FY 01/02 Average monthly cost per Medicare Eligible
Retiree: $312.70
·
FY 01/02 Average monthly cost per Non-Medicare Eligible
Retiree: $1,436.83
·
Non-Medicare Eligible 359% more expensive than Medicare Eligible
Trends
·
Continued double digit increases in the cost of medical
care and prescription drugs.
·
Continued premium increases in first dollar and excess
coverages.
·
Shrinking markets - no coverage available at any
price.
·
Aging workforce and growing retiree group.
Impact on FY 03/04 Budget and Beyond
·
Increase in the
City funding amount for health care:
· Increased to $246 per employee per month for FY 02/03 ($490,000)
· Increase to $291 per employee per month for FY 03/04 ($600,000)
·
Increase in the
amounts paid by employees for
health care:
· Increased the employee's monthly contribution by approximately 5% across the board for FY 02/03 ($66,650)
· 5% increase again for FY 03/04 ($70,000)
·
Increase in the
amounts paid by Medicare eligible retirees for health care:
· Increased monthly contribution paid by Medicare eligible retirees by approximately 10% across the board for FY 02/03 ($46,800)
· 10% increase for FY 03/04 ($43,100)
·
Increase in the
amounts paid by Non-Medicare eligible retirees for health care:
· Non-Medicare eligible retirees will pay the equivalent employee contribution plus the City's contribution ($62-$71 per month increase). Increase will happen over a 2 year period ($81,100 for FY 02/03)
· Similar increase for FY 03/04 ($75,700)
·
What do we do
about Retiree coverage?
· No coverage for retirees?
· No coverage until retiree turns 65?
· Continued rate increases?
· Medicare Supplemental Coverage?
·
Cost of Excess
Coverages (Property, Workers' Compensation, Stop Loss)
· Can we afford it? Can we afford not to have it?
· Higher retention levels and deductibles?
· Restrictions and scrutiny.
Mr. Payne concluded his presentation by stating the following conclusions: 1) the cost of employee and retiree health care will continue to be a major issue, 2) the increased cost of medical care and the growing number of retirees will continue to make funding retiree coverage a challenge, and 3) cyclical nature of the insurance markets for excess coverage will establish new, higher-priced "norms".
Discussion among Council and staff included: 1) high claims due to catastrophic illnesses; 2) retiree coverages; 3) the projected rate increase just covering the cost increase; 4); the potential of catastrophic lawsuits, etc. depleting funds faster; 5) looking at measures to gain control of the insurance issues; 6) the positive actuarial report being based on present rather than future projections; and 7) the prediction that if the current rate, as reflected in Mr. Payne's report, continues in five years the City will be completely out of funds.
Mr. Gilley stated today's presentation was for
informational purposes and that no Council action is required.
The Council thanked Mr. Payne for the presentation, commended him on his work with the City, and wished him well as he takes a position with the City of Denton.
There being no further business, the meeting was adjourned at 11:50 a.m.
_____________________________ ______________________________
Debbie Hurley Grady
Barr
Acting City Secretary Mayor