Glendale Retiree Medical - Background Information

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Click here to watch the Tuesday, October 6, 2015 meeting of the City Council 

Click here for the Tuesday, October 6, 2015 report to City Council

Report regarding unblending medical insurance premium rates between active Glendale City employees and retired City employees effective June 1, 2016 and the authorization of subsidies for existing retired employees currently participating in the City's retiree medical insurance plans who meet specific criteria. 

 

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CITY OF GLENDALE
TOTAL IMPLIED SUBSIDY PAID BY CITY
ANNUALIZED
(Source: John E. Bartel, Bartel & Associates)

  • 2010/11      $1,952,000
  • 2011/12      $2,405,000
  • 2012/13      $2,562,000
  • 2013/14      $2,762,000*
  • 2014/15      $3,086,000*
  • 2015/16      $3,426,000 (projected)*
  • 2016/17      $3,893,000 (projected)*
  • 2017/18      $4,326,000 (projected)*
  • 2018/19      $4,700,000 (projected)*
  • 2019/20      $5,161,000 (projected)*
  • 2020/21      $5,702,000 (projected)*
  • 2021/22      $6,227,000 (projected)*
  • 2022/23      $6,670,000 (projected)*

 

*Extracted from June 3, 2014 Actuarial Valuation, slide #38 by John E. Bartel, Bartel & Associates

 


Letter from Director of Human Resources

November 24, 2015

Dear Retiree,

I hope you are doing well as we head into the holidays.  The last few months have been very busy relative to retiree medical insurance, and I wanted to take this opportunity to remind you of some upcoming deadlines if you are considering any immediate changes to your medical insurance plan.

If you are considering changing plans right now to ones available in the private market or through Keenan & Associates, the City’s health benefits broker, please be aware of the following deadlines, which are defined by Federal law: 

  • Early Retirees:  Open enrollment for the various pre-Medicare insurance exchanges, Covered California and/or Keenan Direct runs through January 31, 2016
  • Medicare Retirees: Open enrollment for Medicare plans, including the Keenan Futuris Care program runs through December 7, 2015.  (Medicare Retirees will have the additional option of switching to the Keenan Futuris Care Plan during the City’s open enrollment period in April 2016 for a June 1, 2016 effective date.) 

Retirees considering moving off the City plan are strongly encouraged to contact our representatives from Keenan & Associates to explore these options and compare costs.  Keenan & Associates has set up informational call centers to address your questions. 

For Early Retirees, the Keenan Direct program provides direct access and assistance to the various insurance exchange programs, including Covered California.  The number for Keenan Direct is

1-855-359-7354.    For Medicare Retirees, the Futuris Care program offers a diverse set of highly affordable insurance exchange options, with numerous Medicare Advantage and Medicare Supplement programs.  The number for Futuris Care is 1-888-616-7130. 

Retirees choosing to leave the City’s medical insurance plan will need to complete and submit the Benefit Declination/Termination of Coverage form available at www.glendaleretireemedical.com prior to the effective date of the change.  Completion of this form will insure that the existing coverage and billing ends in a timely manner.

As mentioned in previous correspondence, it is essential that you compare the overall costs of any new plans with the projected costs of existing City plans, particularly in light of the subsidies that have been approved through the 2016 calendar year (Temporary Transitional Subsidy), as well as the Lower Income Subsidy for those who qualify.  You may find that, at least for the duration of the temporary subsidy, even the unblended City plans post-June 1, 2016 may continue to be the more affordable option, particularly for Medicare Retirees and Early Retirees in the “Single” category.  These subsidies only apply to those staying on the City’s medical insurance plans.

Thank you again for taking the time to read this letter.  If you have questions, please feel free to contact us.  Please note that the www.glendaleretireemedical.com website continues to be updated with information on this subject.  You may also contact the Benefits Desk of Human Resources at 818-548-2110.

Sincerely, 

Matt Doyle

Director of Human Resources

 


Letter from Director of Human Resources

October 16, 2015

Dear Retiree, 

Thank you again to all who attended the various informational meetings over the past month regarding changes to the retiree medical programs. The feedback and input received at the meetings, as well as emails, letters and other communications was extremely valuable in putting forth a proposal that will hopefully provide an additional degree of flexibility, and ease the transition to the process of unblending the medical insurance rates.

To summarize, on October 6, 2015, the City Council took action to unblend medical insurance premium rates between active and retired employees effective June 1, 2016, which is the date of the annual medical insurance renewal. As has been previously communicated, this action will have a significant effect on medical insurance rates from June 1, 2016 going forward. The rates that are being paid today, however, will remain the same, and will not change until June 1, 2016.

Subsidies and Transitional Support

As a means of attempting to ease the burden of these changes in the medical insurance rates for retirees, the City Council adopted a series of measures designed to provide retirees with an additional degree of flexibility and savings.  These measures are as follows:

Temporary Transitional Subsidy – June 1, 2016 through December 31, 2016: The Temporary Transitional Subsidy will be available to all retired employees who remain enrolled in one of the City’s retiree medical plans, and will provide a subsidy to bridge the gap between the amount of the blended insurance rate and the unblended rate from June 1, 2016 through December 31, 2016. The amount of the subsidy is up to $200 per month if your total household income exceeds $100,000 per year; or up to $300 per month if your total household income is below $100,000 per year. The income threshold includes all household income including taxable and non‐taxable pension income, subject to verification. The Temporary Transitional Subsidy is designed to provide additional time at a reduced rate to further consider available options.

Lower Income Retiree Subsidy – Effective January 1, 2017: The Lower Income Retiree Subsidy will be available effective January 1, 2017 for retirees who remain enrolled in one of the City’s retiree medical plans, who had a minimum of ten years of salaried service time with the City. This subsidy will provide up to $200 per month for retirees with a household income of $50,000 per year or less (subject to verification), to bridge the gap between the amount of the blended insurance rate and unblended rate. This ongoing subsidy will be available to retirees meeting the above criteria for a duration as follows: retirees falling under one of the “enhanced” PERS retirement formulas (2.5% at 55 for Miscellaneous, or 3% at 50 for Safety) are eligible for the subsidy until eligibility for Medicare at age 65; retirees who retired prior to the “enhanced” PERS retirement formulas would be eligible beyond Medicare age.

Medical Insurance Mobility: Historically, retirees who have left the City’s retiree medical insurance plan have been prohibited from returning. Due to concerns and apprehension some retirees have expressed about leaving the City’s medical plan in favor of a non‐City plan, the City is allowing, on a going-forward basis, retired employees to return to one of the City’s retiree medical insurance plans if they opt out of the City’s plan and are dissatisfied. Retirees choosing to return to a City plan would only be able to do so during the appropriate open enrollment period and would pay an unblended medical insurance premium rate, notwithstanding the aforementioned subsidy programs. A retiree returning to one of the City’s plans would have to show evidence of medical insurance coverage immediately prior to their requested return. This provision will only apply to existing retirees currently on the City’s retiree medical insurance plan, and would preclude those retirees who had left the City’s plan prior to August 1, 2015, with the exception of those retirees who enrolled in the Futuris Care program prior to August 1, 2015.

Medicare Part A Reimbursement: Historically, the City has reimbursed Medicare‐aged retirees who are not eligible for free Part A coverage for their Medicare Part A costs only if they remain in one of the City’s retiree medical insurance plans. The City Council action changed this restriction. So now eligible retirees can continue to receive the Part A reimbursement regardless of what plan is selected including non-City plans.

This change will allow further mobility and flexibility in enabling retirees to make choices without jeopardizing the existing Part A reimbursement benefit. This provision will only apply to existing retirees currently on the City’s retiree medical insurance plan, and would preclude those retirees who had left the City’s plan prior to August 1, 2015, with the exception of those retirees who enrolled in the Futuris Care program prior to August 1, 2015.

Options For Retirees

At this point, retirees have several options in addressing the new unblended rate structure:

Remain on the City’s Plan: You may choose to remain on your existing medical insurance plan and transition to an unblended rate effective June 1, 2016. If you choose this option, you do not need to take any action at this point. Your medical plan and current rates will remain in effect now, but the rate will be modified upon the renewal on June 1, 2016. The Temporary Transitional Subsidy will be applied to the new rate effective June 1, 2016 (the amount of which will depend on your household income), and will remain in effect until December 31, 2016.  Subsequently, the Lower Income Retiree Subsidy will begin for those eligible.

Select Another City Plan: You may choose to enroll in a different, lower-cost City medical insurance plan upon next year’s June 1, 2016 medical insurance renewal. If you choose this option, you do not need to take any action at this point; however, during the City’s open enrollment which starts in April 2016, the change of plans would need to occur.  The Temporary Transitional Subsidy will be applied to the new rate effective June 1, 2016 (the amount of which will depend on your household income), and will remain in effect until December 31, 2016.  Subsequently, the Lower Income Retiree Subsidy will begin for those eligible.

Explore Alternatives to the City’s Plan: You may choose to explore non‐City medical insurance plans available in the private market or through Keenan & Associates, the City’s health benefits broker. If you explore these options, the open enrollment periods, as defined by Federal law, are November 1, 2015 through January 31, 2016 for Early Retirees; or October 15, 2015 through December 7, 2015 for Medicare Retirees. (Medicare Retirees will have the additional option of switching to the Keenan Futuris Care Plan during the City’s open enrollment period in April 2016.) The aforementioned Temporary Transitional Subsidy and Lower Income Subsidy will not apply to non-City plans; however, the Medicare Part A reimbursement will continue to be available.

Alternatives to City Plan

If you explore the non‐City medical insurance plans, we strongly advise that you compare the overall costs of any new plans with the projected costs of existing City plans, particularly in light of the aforementioned subsidies. You may find that, at least for the duration of the temporary subsidy, even the unblended City plans post‐June 1, 2016 may continue to be the more affordable option, particularly for Medicare Retirees and Early Retirees in the “Single” category.

Retirees considering moving off the City plan are strongly encouraged to contact our representatives from Keenan & Associates to explore these options and compare costs. Keenan & Associates has set up informational call centers to address your questions.

For Early Retirees, the Keenan Direct program provides direct access and assistance to the various insurance exchange programs, including Covered California.  The number for Keenan Direct is 1‐855‐359-7354. For Medicare Retirees, the Futuris Care program offers a diverse set of highly affordable insurance exchange options, with numerous Medicare Advantage and Medicare Supplement programs. The number for Futuris Care is 1-888-616-7130. We encourage you to explore these options both now and in the future to insure you have as much information as possible to help navigate through these important health care decisions.

Eligible For Subsidies

With regard to both the Temporary Transitional Subsidy and Lower Income Subsidy programs for those choosing to remain on the City plans, additional information will be forthcoming regarding verification of the household income thresholds and billing. Because modification to the medical insurance rates and establishment of the subsidies will not take effect until June 1, 2016, the additional time will be used to establish the procedures for verification and billing.  Again, further information will be forthcoming.

Thank you again for taking the time to read this letter. If you have questions, please feel free to contact us. Additionally, the www.glendaleretireemedical.com website continues to be updated with information on this subject.

Sincerely,

Matt Doyle

Director of Human Resources

 


Letter from City Manager

September 29, 2015

Dear Retiree,

Thank you again to all who attended the various informational meetings over the past month regarding the proposed changes to the retiree medical programs.  The feedback and input received at the meetings, as well as emails, letters and other communications was certainly valuable and helpful to me in determining a course for future proposed actions.  I again want to convey my appreciation to all of you who provided constructive input, ideas and challenges that kept the level of discourse on a positive plane and truly gave me pause to look at this complex and highly sensitive issue from a number of different perspectives.  To that end, I want to assure you that we have listened to your concerns and continue to have great empathy and appreciation for the effect these changes will have on your future insurance needs.

To the many of you who took the time to explore alternatives to the City’s retiree medical plans, either through the exchanges provided through Keenan & Associates or some other means, we are very pleased that so many of you were able to find options and services that will meet your ongoing medical insurance needs. 

To those who wish to remain on the City’s retiree medical insurance plans, we are proposing a series of modifications to our original “unblending” proposal which we believe may ease the burden of this transition for many of you.  These measures are designed to provide an additional degree of flexibility and time in addressing these important decisions.  The proposal to unblend effective June 1, 2016 remains unchanged.  However, the following additional measures are being proposed and will be part of the City Council action on October 6, 2015:

  • Temporary Transitional Subsidy – June 1, 2016 through December 31, 2016:  The Temporary Transitional Subsidy will be available to all retired employees currently enrolled in one of the City’s retiree medical plans, and will provide a subsidy to bridge the gap between the amount of the blended insurance rate and the unblended rate from June 1, 2016 through December 31, 2016.  The amount of the subsidy is up to $200 per month if your total household income exceeds $100,000 per year; or up to $300 per month if your total household income is below $100,000* per year.   *The income threshold includes all household income including taxable and non-taxable pension income, subject to verification.  The Temporary Transitional Subsidy will provide additional time at a reduced rate for you to further consider available options.
  • Lower Income Retiree Subsidy – Effective January 1, 2017:  In light of the addition of the above Temporary Transitional Subsidy, the originally-proposed Lower Income Retiree Subsidy would take effect January 1, 2017, following the completion of the temporary subsidy, and remain on an ongoing basis.  If you recall, the Lower Income Retiree Subsidy would be available for retirees currently enrolled in one of the City’s retiree medical plans, who had a minimum of ten years of salaried service time with the City.  This subsidy will provide up to $200 per month for retirees with a household income of $50,000* per year or less (subject to verification), to bridge the gap between the amount of the blended insurance rate and unblended rate.  *The income threshold includes all household income including taxable and non-taxable pension income, subject to verification.  This ongoing subsidy would be available to retirees meeting the above criteria for a duration as follows:  retirees falling under one of the “enhanced” PERS retirement formulas (2.5% at 55 for Miscellaneous, or 3% at 50 for Safety) are eligible for the subsidy until eligibility for Medicare at age 65; retirees who retired prior to the “enhanced” PERS retirement formulas would be eligible beyond Medicare age.
  • Medical Insurance Mobility:  Historically, retirees who have left the City’s retiree medical insurance plan have been prohibited from returning.  Due to concerns and apprehension some retirees have expressed about leaving the City’s medical plan in favor of a non-City plan, the City is proposing, on a going-forward basis, allowing retired employees to return to one of the City’s retiree medical insurance plans if they opt out of the City’s plan and are dissatisfied.  Retirees choosing to return to a City plan would only be able to do so during the appropriate open enrollment period and would pay the applicable unblended medical insurance premium rate, notwithstanding the aforementioned subsidy programs.  A retiree returning to one of the City’s plans would have to show evidence of medical insurance coverage immediately prior to their requested return.  This provision will only apply to existing retirees currently on the City’s retiree medical insurance plan, and would preclude those retirees who had left the City’s plan prior to August 1, 2015.
  • Part A Reimbursement:  Historically, the City has reimbursed Medicare-aged retirees who are not eligible for free Part A coverage for their Medicare Part A costs only if they remain in one of the City’s retiree medical insurance plans.   The City is proposing to change this restriction and allow eligible retirees to continue receiving the Part A reimbursement regardless of what plan is selected including non-City plans.  This will allow further mobility and flexibility in enabling retirees to make choices without jeopardizing the existing Part A reimbursement benefit.  This provision will only apply to existing retirees currently on the City’s retiree medical insurance plan, and would preclude those retirees who had left the City’s plan prior to August 1, 2015.

It is our hope that these modifications to the original proposal allow greater time, flexibility and ease the transition to the unblended status.  If you have questions, please feel free to contact us.  Additionally, the www.glendaleretireemedical.com website continues to be updated with information on the subject.

Thank you again.

Sincerely,

Scott Ochoa

City Manager

 


Letter from Director of Human Resources

September 9, 2015

Dear Retiree,

Thank you to all who attended the September 3, 2015 informational meetings regarding the proposed changes
to the retiree medical programs. The feedback and input we received was certainly valuable in helping to
determine a course for future actions. For those unable to attend, the City has set up a webpage containing all
of the materials and handouts from these meetings. Simply access www.glendaleretireemedical.com for this
information and any further updates on the subject. Very shortly, a video of the presentations used in the
meetings will be uploaded.

I also wanted to take this opportunity to remind retirees of the upcoming informational meetings hosted by
Keenan & Associates specifically focusing on alternative plans available to both Early Retirees and Medicare
Retirees. Representatives from Keenan Direct, Futuris Care and the various insurance carriers will be available
to present information, answer questions and explore specific options to best meet retirees’ needs. The meetings
will be held on Thursday, September 17 and 24, 2015 at the Glendale Civic Auditorium, located at
1401 N. Verdugo Rd. in Glendale. The specific dates, times and location for these meetings are as follows:

Medicare Retirees: Thursday, September 17, 2015 at 10:00am Civic Auditorium Upper Level
• Early Retirees: Thursday, September 17, 2015 at 2:00pm Civic Auditorium Upper Level
• Medicare Retirees: Thursday, September 24, 2015 at 10:00am Civic Auditorium Lower Level
• Early Retirees: Thursday, September 24, 2015 at 2:00pm Civic Auditorium Lower Level

 
If you have not already done so, you may RSVP for any of the above meetings by either emailing
Retiree@glendaleca.gov or leaving a message at 818-548-3799. Please indicate your name, the number of
attendees and which session you will be attending.

Many retirees who met with the representatives from Keenan & Associates and the insurance carriers at the
September 3rd meeting were favorably impressed with the options, services and information available. We hope
to see you there.

Sincerely,

Matt Doyle

 


Letter from City Manager 

August 20, 2015

Dear Retiree,

I hope this letter finds you happy and healthy, enjoying a well-earned retirement.  I am writing to advise you of dynamics impacting the City’s health insurance program, and hopefully direct you to the information and access to services that will give you peace of mind regarding this important topic.

The City of Glendale is moving to unblend retiree and current employee health insurance rates, effective June 1, 2016.  To this end, it is essential that you examine the information enclosed with this letter and take note of important upcoming health insurance selection windows.

As a public servant in California, you know that change is constant and oftentimes crises force the evolution of services and programs.  From Prop 13, to the recessions of the early 1980s and 1990s, to ERAF, to Props 218 and 26, to the Great Recession and the dissolution of redevelopment, resources for local government in particular have been constrained and eroded.  The aftermath of the financial meltdown of 2008, and the resulting impact on CalPERS (and thus municipalities like Glendale), has brought about financial disclosure requirements on cities’ long-term liabilities.  And with these disclosures comes the operational and ethical obligation to address the challenges they present.

Government Accounting Standards Board (GASB) pronouncement No. 45 requires cities to calculate and disclose their Other Post-Employment Benefits (OPEB) liability.  In the City of Glendale’s case, this is the financial liability created by the City’s practice of allowing retirees to participate in the City’s health insurance program, and have their insurance premiums subsidized by the pool of current employees (because, generally, younger people cost less to insure than more mature people).  Equalizing the rates among retirees and current employment creates what is referred to as an “implied subsidy”, which is the basis of the City’s OPEB liability.  As of today, Glendale’s OPEB liability is calculated at $229 million and growing.  The City has historically taken a pay-as-you-go approach in dealing with this liability and you, as a retiree, were able to enjoy the benefits of these blended rates.

GASB No. 75 changes the paradigm significantly.  Under this pronouncement, in FY 2017/18 the City will actually have to book this OPEB liability on its balance sheet.  Without a prefunded pot of money to offset this huge liability, our Comprehensive Annual Financial Statement will log more than a quarter billion dollar loss of value.  Just as difficult, the City is working with its bargaining groups to bring to an end the practice of blending rates.  That said, I fully recognize that even if we successfully bargain away the practice of rate blending from tomorrow’s retirees, there is still a large OPEB liability remaining due to today’s retirees.

For several years now, the City has worked to identify practical solutions to address this challenge.  Unblending the insurance pools and rates is the surest and fastest means of abating the OPEB liability; however, such an action would generally result in significant increases in retiree insurance premiums.  Yet here is where this point in time is different than other challenges we have faced in the past.  The Affordable Care Act (commonly referred to as “Obamacare”) has presented a very effective counterbalance to many of the negative impacts of GASB No. 75.  Indeed, this policy arena is meaningfully different than it was only a couple of years ago.  To help further ease the transition from blended to unblended rates, the City is also offering a means-tested subsidy for lower-income retirees that, coupled with the buying power found in the insurance market today, will hopefully facilitate a smoother, less-painful transition.

In the enclosed packet, you will find several important pieces of information.

 

I recognize how difficult, frightening and aggravating this discussion might be for you.  Looking back on a career of public service in California, it certainly can feel that it has been one hardship after another.  That said, however, I am certain that as you reflect on your career and the sea changing events that impacted it, you will understand and believe that it gives neither the City Council, nor the staff, nor me any satisfaction or peace to continue whittling away at the practice of blending which has historically been afforded to our current and former employees.  Rather, I would hope and expect that you too might take heart in knowing that our actions are focused on continuing a legacy of exceptional and adequately-funded service to the residents and businesses of Glendale.

Respectfully,

CITY OF GLENDALE

Scott Ochoa

City Manager