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<br />e <br /> <br />e <br /> <br />~ ~ <br /> <br />CITY OF LA PORTE <br />CITY COUNCIL MEMORANDUM <br /> <br />TO: <br /> <br />Mayor Norman Malone and <br />Members of City Council <br /> <br />FROM: <br /> <br />Bob Herrera, City Manager <br /> <br />DATE: <br /> <br />July 13, 1987 <br /> <br />RE: <br /> <br />State of the Self Funded Medical Fund <br /> <br />The City of La Porte has owned its employees' group medical <br />insurance plan for over 4 years now. Through these years, the City <br />has saved literally thousands of dollars in premium charges by <br />paying itself these premiums and administering a prudent medical <br />insurance plan document. <br /> <br />The Plan haa seen modifications the past several years due in large <br />part to medical inflation and a generally tough reinsurance <br />market. Reinsurance merely is the point where an insurance carrier <br />takes over after the plan has p3id out a certain amount. In our <br />case, our stop-loss ceiling is $40,000 per case and any claims <br />above that amount are automatically paid by the reinsurance <br />carrier-Hartford Insurance Co. In retrospect, key modifications <br />made to the plan in the past three years have been intended to <br />avoid employee contributions by raising employee and family <br />deductibles and by modifying high dollar benefits in the plan <br />document. <br /> <br />We are now at a point in the life of the plan where our consultants <br />believe employee contributions can no longer be avoided. Alta <br />Health Strategies is recommending that the City seriously consider <br />a minimal employee contribution towards dependent coverage only. <br />This will mean that employees wishing to cover their dependents <br />under the existing plan will be deducted $15.56 monthly. This <br />amount is considered fairly minimal by industry standards but we <br />would like the council to consider a plan whereby this amount could <br />be somewhat defrayed and by which the City's payroll taxes could be <br />reduced. <br /> <br />Many cost conscious organizations have undertaken Section 125 of <br />the Internal Revenue Code which allows for partially employee <br />funded benefits to be discounted on a pre-tax basis from employees' <br />paychecks. In other words, through a "cafeteria style" payroll <br />arrangement, employees might save up to 20% of the <br />