CITY COUNCIL AGENDA ITEM
Memo Date: September 16, 2024
Agenda Date: September 24, 2024
Prepared By: Tammy Gemmati, Administrative Services Director
Through: Stockton Whitten, City Manager
Requested Action:
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Approve a multi-year renewal of United Healthcare Medicare Advantage Plan for eligible retirees 65 and over from January 1, 2025 to December 31, 2025 and payments to eligible retirees for Medicare Part B reimbursement. FY2025 Expenditures are Pending the Adoption of the FY2025 Budget.
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BACKGROUND:
On November 24, 2009, the Cocoa City Council created Resolution 2009-150, amending Resolution 2008-133 which requires Medicare eligible retirees to elect the City’s selected Medicare Insurance Plan for health insurance coverage. The resolution also requires Medicare eligible retirees to elect both Medicare Parts A & B. Although, Medicare Part A is at no cost to the retiree, the City reimburses eligible retirees on a quarterly basis for the cost of Medicare Part B. The City also pays the Medicare Advantage United Healthcare (UHC) premium for eligible retirees.
Due to hospital limitations in the local area, on June 23, 2015 Council approved a multi-year contract from September 1, 2015 to December 31, 2015, to replace the previous provider of Aetna for Medicare Advantage Plans with United Healthcare (UHC). Since that time the City has had renewed annually with UHC covering the 2016 - 2024 plan years. Medicare plans are regulated by the Centers for Medicare and Medicaid Services (CMS).
The Medicare Advantage Plan with UHC for the 2024 calendar plan year is currently $386.12 per covered member. The City’s initial renewal had a 30% increase, which would have increased the monthly rate to $501.90. Due to CMS initiative and the Inflation Reduction Act, there are several significant changes being implemented for plan year 2025, specifically around Part D benefits. The following are key changes that will be impacting all Medicare Prescription Drug Plans:
• CMS is implementing a $2,000 Out-of-Pocket Maximum
• The coverage gap phase, also known as the "donut hole", is eliminated.
• CMS is implementing a payment plan option for individuals with high-cost medications
• Reduction in insulin prescription costs
• The low-income subsidy program (LIS or “Extra Help”) is expanded to 150% of the federal poverty level.
Gehring Group assisted in negotiating plan changes with the renewal, which resulted in a 19.2% increase to the premium, bringing it to $460.40. Medicare Carrier alternatives were evaluated by Gehring as well. Humana provided a quote which was slightly lower in premium but that carrier has very limited hospital coverage in Brevard County. Therefore, it would not be in the City’s best interest of changing carriers for the little savings. Other Medicare Carriers declined to quote based on the CMS changes being made in the market. It is recommended to accept the UHC plan renewal with the plan changes. Upon Council approval, retirees will have an Open Enrollment period and be notified of the plan changes and the rate increase from $386.12 to $460.40.
This equates to a total annual premium of $558,005 based on the current enrollment of 101 retirees and/or spouses. A portion of the Plan premiums are paid by retirees and/or retiree survivor spouses to cover any non-City paid premiums, which currently accounts for 22 of the enrollees. The City’s budgetary portion of the premiums are also split by General Fund and Water/Sewer Fund based on the retiree. The enrollment varies when retirees become Medicare eligible from the Cigna Plan or in some cases we have retiree deaths during the year.
The annual premium costs do not include the quarterly reimbursements of Medicare Part B to eligible retirees. The current 2024 standard Medicare Part B premium amount is $174.70 per month. Medicare sets the Part B rates on a calendar year basis and the 2025 calendar year rates have not been set and Staff has estimated a premium increase in the proposed budget.
Summary of FY2025 estimated budget expenses based on current enrollment for retirees paid by the City:
|
Fund |
UHC Medicare Plan |
Part B Reimbursement |
FY25 Total |
|
General |
$353,587 |
$147,587 |
$501,174 |
|
Water/Sewer |
$99,447 |
$41,509 |
$140,956 |
City Staff and the Gehring Group considered the renewal projections, the overall satisfaction with the plan on the part of the retirees and recommends to accept the renewal offer from United Healthcare for the Medicare Advantage Plans for the 2024-2025 plan year. Attached to the agenda is the evaluation summary.
STRATEGIC PLAN CONNECTION:
Containing the City’s health insurance costs for current and retired employees helps maintain financial sustainability for the City. Additionally, this aids in improving employee retention to help retain employees at the City of Cocoa for a long tenure.
BUDGETARY IMPACT:
Budgeted Yes/Partial
In the proposed budget for FY 2025 estimated, however, the amount may change throughout the year based on enrollments.
Amount Requested $501,974
Account Number 001-1600-513.23-02
Account Name Insurances/Medicare Part B
Amount Requested $140,956
Account Number 421-4010-536.23-02
Account Name Insurances/Medicare Part B
This renewal is a multi-year expenditure that will include nine months from Fiscal Year 2025 and three months of Fiscal Year 2026. The Medicare Advantage Plan is for the plan members at age 65 or older. Retirees under age 65 are under the City’s group Cigna plan.
The renewal of this plan was higher than planned in the FY2025 Budget for this retiree coverage. It is anticipated to be short $42,902 in the 1600 account for this insurance item based on expected enrollment and the Medicare Part B rates predicted in Budget. A Budget Transfer or Amendment will be evaluated in the middle of the Fiscal Year when there are is more information available.
PREVIOUS ACTION:
Council approved, at the regular Council meeting held on July 25, 2023, the multi-year renewal with United Healthcare for Medicare Advantage Health Insurance Plans for eligible retirees 65 and over from January 1, 2024 to December 31, 2024.
RECOMMENDED MOTION:
Recommendation
Approve a multi-year renewal of United Healthcare Medicare Advantage Plan for eligible retirees 65 and over from January 1, 2025 to December 31, 2025 and payments to eligible retirees for Medicare Part B reimbursement. FY2025 Expenditures are Pending the Adoption of the FY2025 Budget.