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City of Arlington Health Plan Benefit

City of Arlington Health Plan Benefit. July 2, 2004. Overview. Introduction GASB Impacts Health Plan Benefit Alternatives. Health Benefit Change Drivers. Escalating health care costs City’s current plan design Workforce demographics Accounting and funding for post employment benefits.

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City of Arlington Health Plan Benefit

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  1. City of ArlingtonHealth Plan Benefit July 2, 2004

  2. Overview • Introduction • GASB Impacts • Health Plan Benefit Alternatives

  3. Health Benefit Change Drivers • Escalating health care costs • City’s current plan design • Workforce demographics • Accounting and funding for post employment benefits

  4. Recommendations • City hired the Hay Group to review the current health benefit and to consider: • How do our current benefits compare? • Where is the market going in the future? • Hay presented recommendations to achieve three goals: • Maintain Market Competitiveness • Reduce Upcoming GASB Liability • Moderate the Projected Increases in Health Benefit Costs to Address the Continuing Structural Deficit

  5. Recommendations • Impacts vary based on class of employee • Almost 1,000 active employees will see a net pay increase as their premiums drop • Remaining active employees and retirees will see an increase in their premiums

  6. Difficult Balance • Employee Impact • Benefit Competitiveness • Fiduciary Responsibility

  7. GASB

  8. Governmental Accounting Standards Board - GASB • Under Financial Accounting Foundation which controls GASB and FASB • Set standards for financial reporting for state and local governments • Recognized as authoritative by American Institute of Certified Public Accountants (AICPA) • State law requires that the City have an annual audit and issue financial statements • External auditors follow GASB

  9. Failure to Adhere to GASB • Auditors issue a qualified or adverse opinion (vs. unqualified) • Bond underwriters are regulated by SEC and require accurate financial information • City is subject to SEC anti-fraud provisions • City must disclose all material financial information

  10. Failure to Fund Retiree Health Benefit • Lack of funding must be disclosed to financial markets and rating agencies • Lowered city bond rating • Higher borrowing cost • As unfunded obligations grow – question as to “going concern” • Unable to issue bonds

  11. Health Benefit Alternatives

  12. Consideration of Alternatives Total Annual FY FY GASB GASB ’05% ’05$ Current $196M 20M 10% $1.3M All alternatives increase GASB liability and FY 05 cost $121M 11M 3% $300k Proposed

  13. Savings Estimates • Annual savings estimates presented in the June 15 presentation are calculated: • In Calendar Year terms • Across all funds • Representing “best case scenario” • Annual savings estimates represented in today’s discussion are calculated: • In Fiscal ‘05 terms • On General Fund impact only • Representing a conservative projection of outcome

  14. Savings Estimates • Critical Contributing Factors • Migration analysis (movement from or off respective plans) • Further evaluation of current year claim activity • Final Council decision on recommendations

  15. Plan Design Changes Compared to the Hay recommendations, maintaining the current benefit has the following impact: * A blank space indicates neutral or no impact.

  16. Prescription Drug Changes Compared to the Hay recommendations, maintaining the current benefit and/or adopting alternatives has the following impact: * A blank space indicates neutral or no impact.

  17. Rate Structure Changes Compared to the Hay recommendations, maintaining the current benefit and/or adopting alternatives has the following impact: * A blank space indicates neutral or no impact.

  18. Eligibility For Retiree Benefit Subsidy Compared to the Hay recommendations, maintaining the current benefit and/or adopting alternatives has the following impact: * A blank space indicates neutral or no impact.

  19. Contribution Philosophy - Employee Compared to the Hay recommendations, maintaining the current benefit and/or adopting alternatives has the following impact: * A blank space indicates neutral or no impact.

  20. Contribution Philosophy - Retiree Compared to the Hay recommendations, maintaining the current benefit and/or adopting alternatives has the following impact: * A blank space indicates neutral or no impact.

  21. Contribution Philosophy –Retiree Dependents Compared to the Hay recommendations, maintaining the current benefit and/or adopting alternatives has the following impact: * A blank space indicates neutral or no impact.

  22. Discussion

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