6.3 Resolution No. 21-7940 Health Insurance Reserve Fund PolicyCITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
2/22/2021 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: FISCAL APPROVAL:
NO:
S HUMAN RESOURCES BY.
ITEM DEPARTMENT FINAL APP OVAL:
NO:
Page] 3 BY: Natalie Fischer, Director BY:
ITEM: Resolution No. 21-7940
Adopting a Health Insurance Reserve Fund Policy and authorizing the City Manager to maintain the
Fund in accordance with the adopted policy and calculate funding balances to maintain a fiscally
responsible account balance in accordance with the Health and Dental Insurance Trust Fund
Management Policy
BACKGROUND:
The City of Salina has self-funded the health insurance program since 1997. The health insurance
program is available to City employees, eligible dependents, and retirees, along with the employees,
eligible dependents and eligible retirees of subgroups. The subgroups include Salina Airport Authority,
Salina Housing Authority, and the Salina Public Library.
On January 13, 1997, the Governing Body adopted Resolution No. 97-5104, establishing the Health
and Dental Insurance Trust Fund. This fund pays health and dental expenses including claims
administration and claims for services, and plan management including stop loss insurance and other
related fees. Revenues are received from charges to applicable City operating funds, fees from the
subgroups, and fees from participating employees and retirees.
Based upon the recommendations of staff and our insurance consultant and a study session
discussion with the City Commission, the Governing Body advised staff to develop a policy that
establishes minimum and maximum reserve balance goals, along with a policy for the fund that
enables the City Manager to manage it.
The City's consultant, Bob Charlesworth, with Charlesworth Consulting, has had several discussions
with City management regarding the purpose and fund balance philosophies to be maintained by the
City which were shared with the City Commission during the 10/26/20 study session. In response to
the guidance previously provided by the City Commission, the attached policy is offered for the City
Commission's consideration.
To summarize, the policy includes authorizing the City Manager to maintain the reserve fund based on
calculated minimum and maximum reserve goals. The specific formulas for the minimum and
maximum amounts include claims data, along with expected claims and stop -loss coverage levels.
When the Fund balances falls below the minimum or exceeds the maximum of the goals, the
Commission will provide direction on action.
FISCAL NOTE:
There is no direct fiscal impact associated with this item. The proposed policy is intended to provide
ongoing guidance regarding the fiscal management of the Health Insurance Fund.
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
2/22/2021 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: FISCAL APPROVAL:
NO:
HUMAN RESOURCES BY:
ITEM DEPARTMENT FINAL APPROVAL:
NO:
Page 2 BY: Natalie Fischer, Director BY:
RECOMMENDED ACTION:
Staff has identified the following options for the City Commission's consideration:
1) Adopt Resolution No. 21-7940, authorizing the City Manager to maintain the City's Self -Funded
Health Benefit Plan reserve fund in accordance with the adopted policy.
2) Adopt Resolution No. 21-7940, authorizing the City Manager to maintain the City's Self -Funded
Health Benefit Plan reserve fund with amendments recommended by the City Commission.
3) Postpone consideration of Resolution No. 21-7940 to a specified date and time, and provide
staff with direction on additional information or amendments the Commission would like for
further consideration.
4) Do not adopt Resolution No. 21-7940 at this time resulting in continued management of the
Health Insurance Fund without a formalized policy.
RESOLUTION NUMBER 21-7940
A RESOLUTION ESTABLISHING A HEALTH AND DENTAL INSURANCE TRUST
FUND RESERVE BALANCE GOAL; ESTABLISHING THE HEALTH AND DENTAL
INSURANCE TRUST FUND MANAGEMENT POLICY; AND AUTHORIZING THE CITY
MANAGER TO MANAGE THE HEALTH AND DENTAL INSURANCE TRUST FUND IN
ACCORDANCE WITH THE MANAGEMENT POLICY.
WHEREAS:
A. Since 1997 the City of Salina ("City") has self-funded its employee group health and dental
insurance plan (the "City Health Plan") available to the City's employees, retirees, and their eligible
dependents.
B. In addition to the City, the City Health Plan is also available to employees and retirees of
the Salina Airport Authority, the Salina Housing Authority, and the Salina Public Library (collectively,
the "Participating Agencies"); each of which determines its own and its employees' share of the group
health and dental insurance premiums established under the City Health Plan while their retirees
participate at the same rates established by the City for its retirees.
C. On January 13, 1997, the Governing Body adopted Resolution No. 97-5104 establishing the
Health and Dental Insurance Trust Fund (the "Fund") from which are paid expenses for qualified health
and dental services under the City Health Plan agreement, claims administration, and expenses for plan
management (including stop -loss insurance for catastrophic claims) from revenues received from
charges to the Participating Agencies, charges against the City's operating funds, and the participating
City employees' and retirees' share of health and dental insurance premiums.
D. Based upon the recommendations of and a study session discussion with staff and the
City's insurance consultant, the Governing Body desires to (1) establish the means of annually
calculating minimum and maximum reserve balance goals and a management policy for the Fund (the
"Health Fund Management Policy") and (2) to authorize the city manager to manage the Fund in
accordance with the Health Fund Management Policy.
BE IT RESOLVED by the Governing Body of the City of Salina, Kansas:
Section 1. Calculation of Minimum and Maximum Reserve Balance Goals. The city manager is
authorized and directed to annually calculate the minimum and maximum reserve balance goals for the
Fund no later than 45 days following the conclusion of the prior plan year, taking into account
individual and aggregate stop -loss insurance maintained by the City, as follows:
A. A "Minimum Fund Balance Goal" calculated as the total of estimated terminal
liabilities (calculated as 1.5 times the average monthly claims over the 18 months preceding the
conclusion of the prior plan year) plus estimated financial exposure for claims (calculated as the
difference between annual expected claims for the current plan year, as projected by the City's
health insurance provider, and the annual aggregate stop loss attachment amount for the current
plan year).
B. A "Maximum Fund Balance Goal" calculated as the total of the Minimum Fund
Balance Goal plus one month of average annual claims.
Section 2. Health Fund Management Policy. It shall be the policy of the City to manage the
Fund balance such that if at any time the actual fund balance either falls below the Minimum Fund
Balance Goal or exceeds the Maximum Fund Balance Goal, the following shall occur:
A. If the fund balance falls below the Minimum Fund Balance Goal, the city manager is
authorized and directed to impose a three (3) to five (5) year rolling impact surcharge to the
established funding rates from the (i) Participating Agencies, (ii) the City's operating funds in
such proportionate shares as the city manager deems advisable and (ii) City employees' and
retirees' shares of group health insurance premiums based upon the City's preference to recover
the shortfall over an extended period of time with the intent of (i) lessening rate spikes in any
one year and (ii) allowing additional claim years to develop such that the rolling impact
surcharge can be recalculated and potentially adjusted as circumstances warrant. Beyond
temporary surcharges, significant and/or prolonged changes in cost factors (e.g. medical costs,
insurance premium costs, the overall performance of the insured group in terms of health
factors, and claims history) may necessitate evaluation and recommendation by the city manager
to the governing body of structural changes in the City's approach toward self-insurance and
health insurance premiums.
B. If the fund balance exceeds the Maximum Fund Balance Goal:
1. The city manager will so inform the governing body and advise the governing
body of:
a. Any factors potentially affecting future utilization of the Fund,
examples of which include (i) the on-going impacts of the Covid pandemic, (ii)
its impacts on the medical profession and individuals choosing to postpone
elective procedures, (iii) the possibility of pent-up demand impacting claims
once the medical services environment returns to normal, and (iv) the need to
further assess the unique circumstances presented by the Covid pandemic and its
aftermath; and
b. The possibility that alternate recommendations regarding the
maximum fund balance could be brought to the city commission for its
consideration in response to the unique circumstances presented by the Covid
pandemic, its aftermath, or other future phenomena affecting health care.
2. After taking into consideration the factors potentially affecting future
utilization of the Fund, the City may, at the direction of the governing body:
a. Declare a "premium holiday" resulting in a reduction in both employer
and employee contributions by an equal percentage for a specified duration
intended to reduce the fund balance to the Maximum Fund Balance Goal;
b. Buy down" any suggested premium renewal increases for both City
and employee contributions for the entire next policy year;
c. Consider including retirees' contributions when a "premium holiday"
or "buy down" is enacted;
c. Take any alternate approach authorized by the governing body; or
d. Take no action.
Section 3. Delegation of Authority to City Manager. This Health Fund Management Policy shall
be administered by the city manager in accordance with Section 2 above.
Section 4. Effective Date. This resolution shall be in full force and effect from and after its
adoption.
Adopted by the Board of Commissioners and signed by the Mayor this 22"d day of February,
2021.
Melissa Rose Hodges, Mayor
(SEAL)
ATTEST:
Cheryl Mermis, Deputy City Clerk