05-16-11 Public Safety and Human Resources CommitteeCITY OF EDMONDS
Public Safety and Human Resources Committee
Specially Called Meeting
MEETING MINUTES
May 16, 2011
Committee Members Present: Council Member D.J. Wilson
Council Member Diane Buckshnis
Others present: Police Chief Al Compaan, HR Director Debi Humann, Assistant Chief of Police Jim
Lawless, Administrative Police Sergeant Mike Blackburn, Police Sergeant Bob
Barker, Police Corporal Rachel Ramseur, City Clerk Sandy Chase, Deputy City Clerk
Linda Hynd, Associate Planner Gina Coccia, Associate Planner Jen Machuga, Parks
Maintenance Lead Parks Maintenance Worker Dave Timbrook, Administrative
Assistant Huda Olsen, Engineering Technician JoAnne Zulauf, Executive Assistant
Cindi Cruz and Building Maintenance Operator Larry LaFave
The meeting started at 5:01 pm.
MINUTES
Council Member DJ Wilson opened the meeting by stating that the purpose of this specially called meeting was to
hear from City employees as to their questions, comments and/or concerns about self-insurance. Council Member
Wilson explained that he felt that the "right" questions and "right" answers regarding self-insurance may not have
been asked through the research the Health Benefits Committee worked through with Wells Fargo. Additionally, it
was his intent to get the "right" questions asked and the "right" answers if possible in exploring self-insurance
although it was uncertain as to what the outcome of the research may be and whether or not self-insurance is the
"right" answer best health insurance option for the City. Council Member Wilson inquired as to whether any of the
meeting attendees had any thoughts on self-insurance that they would like to share.
Lead Parks Maintenance Worker Dave Timbrook stated that, as he remembered, the City went on a self -insured
plan in 1999 and it was promoted as the "pie in the sky" that would save the City quite a bit of money. He believed
that, at that time, the employees didn't have a choice in the matter. According to Mr. Timbrook, being on the self -
insured plan worked well for the initial first month or two until several employees fell seriously ill which "wiped out"
whatever reserves the City had. At that point, the City had to approach the Association of Washington Cities (AWC)
and ask if we could rejoin their consortium.
Mr. Timbrook estimated that 75 — 80% of the City's Teamsters' employee base is tenured with greater than ten
years of service at the City. It was Mr. Timbrook's belief that the City has done "more work with less staff' when
compared with other cities who have significantly more staff and budget. He pointed out that this was particularly
true when looking at maintaining the same amount of parks, for example, as the City of Edmonds does.
Mr.Timbrook stated that, in his opinion, this shows that the City's staff is proud to be "lean and "mean" and to work
here at the City. He further stated that he took a pay cut to work here primarily because the benefits were good.
Mr. Timbrook further explained that the Teamsters have worked in cooperation with the City on a number of issues
including taking 9 furlough days [of unpaid leave in 2009] which resulted in an approximate 3% reduction in wages
for the year. If the benefits package is changed in such a way that results in a great reduction in benefits, this will
be "a problem." Mr. Timbrook stated that the Teamsters employees are willing to move to a different AWC health
insurance plan [AWC Healthfirst] because they understand the financial need to do so but not to a self -insured plan
at this point.
Council Member Wilson responded that no one seems to have anything positive to say about the previous
experience [when the City was self -insured] but that he didn't believe it had been set up correctly at that time and
that, now, Council may be willing to put $1.5M into the self-insurance reserve fund. Council Member Buckshnis
inquired as to whether or not the City had stop loss coverage set up when the City was previously self -insured. Mr.
Timbrook responded that he believed there was some stop loss coverage in place with the previous plan.
Deputy City Clerk Linda Hynd asked what the City would be looking at for stop loss coverage ($100,000 for
example). Council Member Wilson explained that any changes to our health insurance plans would have to be done
at the bargaining table and that one of the primary concerns is to reduce the administrative overhead of
approximately 30% that the City is paying through membership with AWC. Council Member Wilson further stated
that he believes that because of the prime market position AWC is in, they are using this to their advantage to
"hamstring" the other member cities along. In his opinion, a $100,000 stop loss coverage policy amount would be
tough [and possibly not financially viable]; looking into a lower stop loss coverage policy amount of $40,000 (as used
in his model) would be better (depending on if one is available) for the first period. Then, depending on our claims
experience and history after the first year, adjustments to the stop loss coverage policy amount could be made.
Council Member Buckshnis stated that through her research, she believes the City of Redmond and the City of
Renton love their self-insurance plans and that there was a wellness incentive (possible member discount) built in to
some of the plans. Council Member Buckshnis further stated that the largest issue she has with the self-insurance
model proposed by Council Member Wilson is with an outside appeals committee handling review of denied claims.
Engineering Technician JoAnne Zulauf inquired as to whether or not an outside management company such as a
third party administrator would come in and manage the self -insured plan.
Building Maintenance Operator Larry LaFave stated that if the City was to go on a self -insured plan, the City would
need to purchase a separate computer system and make staffing changes [additions] in HR due to the Health
Insurance Portability and Accountability Act (HIPAA) privacy requirements and due to increased workload. Council
Member Wilson acknowledged this. Mr.LaFave inquired as to the savings associated with a self -insured plan if the
City would have to spend the extra money on compliance programs and additional staff.
Council Member Wilson responded that if there is a self -insured plan in place, the types of plan benefits could be
changed to meet the City's needs; something the City does not currently have the ability to do with AWC. Council
Member Wilson stated that he believes we may have an adequate number of employees for a self -insured plan and
that it is his belief that such a plan may save the City up to $250,000 per year even with the extra compliance
programs. Council Member Wilson further stated that the reserve money for the start up of self-insurance is
currently sitting in a public safety account fund that, at some future time, may be designated for other uses by the
council but that he would rather see it used for self-insurance for the City.
Ms. Zulauf inquired as to what areas may not have been looked at by Wells Fargo with the previous RFQ/RFP for
insurance. Council Member Wilson stated that it appeared that only large insurance providers may have been
approached for quotes by Wells Fargo. In addition, he felt that AWC did not allow Regence and Premera the
opportunity to provide quotes to Wells Fargo. Ms. Zulauf inquired as to whether Wells Fargo took into consideration
our city employee member base size. Council Member Wilson responded that AWC blocked the City by not
releasing information (data needed to obtain fair prices when going out to the market for quotes). Additionally, he
stated that he is currently up for re-election in his position as a City Council Member and that this self-insurance
proposal does not benefit him in any type of bid for re-election. He further stated that the next step is to bring a
resolution regarding self-insurance forward to council for consideration at the next council meeting on 5/17/11.
Mr.Timbrook inquired as to whether or not self -insured plans were less regulated than other types of health
insurance plans. Associate Planner Gina Coccia inquired as to whether a self -insured plan was being proposed
throughout the City [for all union groups] or only for the non -represented employees. Council Member Wilson
responded that it was for all employee groups. There was some discussion that followed about the Public Employee
Relations Committee (PERC) and whether or not union employees would have the option of going to PERC for any
issues with health plan changes and the role of PERC and union contracts. Mr. Timbrook asked if he would be able
to continue his coverage through the Group Health Cooperative (GHC) network if the City switches to a self -insured
plan and if this would also result in employees [who sought medical attention through a Group Health provider]
ending up having to pay their own medical bills out of pocket since they may not be covered through the City's self -
insured plan. Council Member Wilson responded that at the "end of the day," this would not be a third party
administrator issue but it would be an issue for council to make sure that the medical service bills [through GHC] are
paid.
Police Chief Al Compaan stated that his concern with the City switching to a self-insurance plan is that it is a huge
change that involves many parties (employees, council, retirees, etc.). Due to the City's current financial situation,
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the unknown financial future and the many unknown aspects such as actual claims cost, etc. including the
projections/estimations made on the self -insured model, this may not be the best time to go forward onto a self -
insured plan. Considering our employee head count compared to those of our comparable cities who have two to
three times the amount of staff, the premiums we pay through AWC seem like they are somewhat of a "bargain" and
it would seem reasonable to expect that they are competitive with other fully insured health plans. Additionally, since
we have a marginal employee base size now and we may end up further reducing staff size if we have to make
service cuts, how would this impact the self -insured model proposed?
Council Member Wilson stated that if a levy is not placed on the City's ballot or if one is and it fails, self-insurance
will likely not be an option; without 200 employees on the plan it will not be viable. Council Member Wilson
confirmed that it is unknown as well as to how many of our covered employees and/or dependents are sick or
healthy and that if all 200 employees are healthy, a self -insured plan would save the City money. Also, timing has
been a concern. Council Member Wilson further explained that he had approached the former Mayor [Gary
Haakenson] in 2008 which was probably a better time to go forward with a self -insured plan. In Council Member
Wilson's opinion, we should push forward and get as much data as possible with the "right" questions asked and the
"right" questions answered.
Mr. LaFave stated that it seemed that one of the reasons for having this discussion is so that the $1.3M is not spent
on something else. Council Member Buckshnis responded that if you look at the insurance we currently have, in her
opinion the City is pricing itself out of the market. As council members, it would be a disservice to City employees to
not look further at health insurance options.
Mr. Timbrook inquired as to whether the COBRA and retiree health insurance plans currently active under AWC
would rollover or become a part of the new insurance plan. Council Member Wilson stated that he can propose and
try to "sell" City employees on self-insurance, but at the "end of the day," if the employees determine they will not
support a self -insured plan and it isn't viable for the City to go to a self -insured plan, he will not try to force the City
onto a self -insured path.
Mr. LaFave pointed out that the Health Benefits Committee did not easily "cast aside" the possibility of self-
insurance, but a major concern with this plan type was the unknown impending healthcare reform legislation and
how it would impact self-insurance. It was determined by the Health Benefits Committee that the fully funded AWC
Healthfirst plan was the most reasonable health care insurance option for the City to switch to. Mr. LaFave further
stated that he believed Volunteer Consultant Jack Loos also agreed that it was a more viable option to move to the
AWC Healthfirst plan and that now was likely not the right time for the City to move to a self -insured plan.
Council Member Wilson stated that he would likely have made the same decision based on the information Wells
Fargo presented to the Health Benefits Committee. Council Member Wilson stated that he completely agreed that
moving the City to a self -insured plan, today or this year, would likely not be an option although next year it may be.
In his view, and what he feels is the viewpoint of Jack Loos, while healthcare reform legislation is going to be an
issue for all employers providing health insurance for the next decade, the impending legislation should not be a
reason to "tie our hands."
Associate Planner Jen Machuga inquired as to whether or not the $1 M that would be set aside to be invested in a
self-insurance fund may be used for another purpose that would help the city and if so, what else could it be used
for. Council Member Buckshnis stated the City Code/Ordinances are being revised to encourage business and
economic development in the City. Furthermore, Council Member Buckshnis believes that Jack Loos agreed with
Council Member Wilson that we will need the $1 M if it is decided that the City will go to a self -insured plan. Council
Member Buckshnis further stated that she believes that this money should be held at this time, not spent on
economic development but possibly used for a health insurance plan.
Council Member Wilson responded that, in his opinion, he doesn't foresee four votes of approval from council for the
self-insurance plan and/or a levy. Mr. Timbrook inquired as to whether or not council may be in favor of "shoring up
the budget" with the $1.3M instead of using it for the self-insurance plan. Council Member Buckshnis responded that
she does not believe that the City is in such "bad shape" that we would have to do that and that she believes the
Interim Finance Director agrees with her on this. Council Member Buckshnis further stated that she also believes
there are ways to add some things onto a levy ballot and that the City's financial condition will not be in too bad of a
shape until 2014. Council Member Wilson stated that while he respects Council Member Buckshnis' "numbers
acumen," he completely disagrees with her position.
Executive Assistant Cindi Cruz asked for clarification from Council Member Wilson as to what he hoped for at
tomorrow's council meeting with regard to the self-insurance model proposal. Council Member Wilson responded
that he would like to get approval to seek more data on self-insurance plans and to obtain approval to retain a
broker to go out to the market for self-insurance quotes. Council Member Wilson further stated that he did not want
to proceed too much further if none of the employees, and/or council, were interested in pursuing self-insurance. Mr.
Timbrook stated that he disagrees with Council Member Wilson's proposal on the idea of further exploring health
insurance at this time since it is unclear as to what specific self-insurance plan has been proposed and that there
hasn't been any assurance that employee medical bills would be paid under a self -insured plan.
Ms. Coccia asked if HR Director Humann would like to share her opinion/insight on the topic of self-insurance. HR
Director Humann responded that the Health Benefits Committee researched fully insured and self -insured
healthcare plans and directed our consultant, Wells Fargo, to obtain quotes from the market. One of the reasons
Wells Fargo was selected as the City's consultant for this process was because they had experience in working with
a city (Puyallup) and moved them from the AWC consortium to a self-insurance plan. HR Director Humann stated
that she believes Wells Fargo did a good job with their research and analysis. Additionally, the information they
came back with on self insurance after going to market indicated that: 1) our employee risk pool size was an issue;
2) healthcare reform legislation would potentially have unknown impacts upon the plan and; 3) our LEOFF 1 retiree
group was a high risk deterrent to many insurers which made it difficult to provide quotes. Wells Fargo pointed out
that if the City was to self -insure, it would need to staff up in HR in order to handle the increase in workload. HR
Director Humann further explained that she believes that self-insurance is probably one of the only ways for the City
to control health insurance costs and health plan benefits, however, with an employee population of 200 and a levy
that may not pass, our employee population size may not be stable, which is of concern. There was a short
discussion that followed about the cost liability of LEOFF 1 retirees.
Council Member Wilson stated that if the City was proactively able to promote the idea of employees "taking care of
themselves" through physical fitness, wellness programs, etc., self-insurance would be a favorable option as it may
reduce the cost of claims. Council Member Wilson further explained the idea of lowering City costs, and possibly
increasing health insurance benefits, by managing health care through individual employee ownership and good
preventative health care practices.
Mr. LaFave stated that, as he understood it, this preventative care was the primary reason the City opted to switch
to the next best available health care insurance plan (AWC Healthfirst) as the current Regence Plan A does not
have any benefit provision for preventative health care coverage. In his opinion, employees will be happy to have
this new plan (HealthFirst) as it is a much needed change. Additionally, the City's Health Benefits Committee looked
very hard and closely at this plan. As for self-insurance, it does need to be further studied, including how other cities'
self-insurance plans through Clearpoint are performing, so that if the City is ready to, it will be able to move forward
to self-insurance at some point.
There was some discussion that followed about the City's financial "deficit" and the potential savings from self-
insurance. Council Member Wilson stated that he won't "vote for a budget that strips services" from the City. Ms.
Zulauf opined that it seemed like the self-insurance proposal would not be ready to be voted on with the next budget
cycle. Council Member Wilson responded that this is correct, but it needs to be worked on and he would like to say
that the City is trying to move forward and look for ideas and ways to control health insurance costs. Council
Member Wilson thanked those in attendance for taking the time to attend the meeting.
The meeting adjourned at 6:12 pm.
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