TO: Mayor and City Council
FROM: Kevin Sing, Director of Finance
SUBJECT:
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Approval of Group Health, Dental, Vision, and Life Insurance Renewal for Active Employees
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BACKGROUND:
The City provides group health, dental, vision, and life insurance benefits (“benefits”) to its employees. Benefits are governed by ordinance for non-union employees and by collective bargaining agreements for union employees. The City provides insurance for approximately 120 non-union employees/officials, 725 union employees, and 745 retirees.
The purpose of this agenda item is to renew the contract with Blue Cross Blue Shield for health, dental and vision, and adopt benefits for active employees. Retiree benefits will be reviewed in a future separate action. The City has seen positive results both financially and in employee/official satisfaction to the changes we made in 2025. Positive financial results are supported by the average claim per covered member. The new $500 and $750 deductible plans were an average of $5,435.71 per covered member, while the legacy $250 deductible plan was $8,047.23 per covered member. Based on this information, we have calculated that the City saved between $250,000 and $500,000 by implementing the new plan designs. This cost savings is supported by the shift to virtual visits and primary care doctors versus immediate care and emergency room visits.
Blue Cross Blue Shield is estimating that our cost in 2026 will increase by 11.79%. Included in this cost increase is the cost of claims administration, prescription drug rebates, and the cost of stop loss coverage for claims more than $240,000 per covered individual.
Renewal of Claims Administration and Stop Loss Coverage.
The current fee structure for Blue Cross Blue Shield consists of administration fees for processing claims, stop loss premiums, and life insurance premiums. Stop loss is insurance coverage to cap the City’s exposure for medical claims to $240,000. If a covered member’s total claims exceed $240,000, stop loss coverage will pay the amount above $240,000. The medical renewal is increasing from a credit of $0.50 to a cost of $2.91 per covered member. Dental and life costs are the same as 2024. Detailed costs are attached to this memo.
Coverage
Staff reviewed the current vision benefit and are recommending that the benefit be updated to a more traditional vision plan for those who select the $500 or $750 deductible plans. The proposed vision benefit provides employees with lower rates on exams, coverage for lenses, and allowances for frames and contacts. This plan uses the EyeMed vision network and is managed by Blue Bross Blue Shield. Unlike the current benefit, this benefit is a fully insured vision plan. The City will pay premiums based on the census enrolled. Our broker has negotiated a 4-year rate guarantee for the plan. With the current collective bargaining agreements, this benefit can only be offered to non-union employees. A comparison of the plans is attached to this memo. The cost impact of offering the new vision plan is minimal at $15.00 per member. To fund this benefit, we propose eliminating the Hinge Health benefit which has low utilization. The elimination of Hinge and addition of vision will save the City nearly $30,000.
CONCLUSION:
Approval of this item will renew employee insurance for 2026.
RECOMMENDATION:
recommendation
Based on the above, it is recommended that the Mayor and City Council approve the Group Health, Dental, Vision, and Life Insurance Renewal for Active Employees as outlined above.
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