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HomeMy WebLinkAbout08-26-2015 Steering Committee Agenda Supplemental.pdf Orange County Sanitation District Wednesday, August 26, 2015 Regular Meeting of the Ji 5:00 P.M. Steering Committee Administration Building Conference Rooms A &B 10844 Ellis Avenue Fountain Valley, CA (714)593-7433 SUPPLEMENTAL AGENDA The Steering Committee Members will consider the following: NON-CONSENT 2. OCSD MEDICAL INSURANCE REOPENER (Robert Ghirelli) RECOMMENDATION: Recommend to the Board of Directors to: Adopt Resolution No. OCSD 15-17, entitled, "A Resolution of the Board of Directors of the Orange County Sanitation District Approving Medical Insurance Changes Identified Through the 2015 Medical Reopener Negotiations." 3. CLASSIFICATION & COMPENSATION STUDIES — COMPARISON AGENCIES (Robert Ghirelli) RECOMMENDATION: Recommend to the Board of Directors to: Approve the final list of comparison agencies to begin the next phase of the Classification & Compensation Studies, which includes a labor market survey. I hereby certify under penalty of perjury under the laws of the State of California that the foregoing Supplemental Agenda was posted outside the main gate of the Districts'Administration Building located at 10844 Ellis Avenue, Fountain Valley, California not less than 72 hours prior to the meeting. Dated this 20TH day of August 2015. %ql�t Kell A. o e Cle c IV Board STEERING COMMITTEE Melting Dat0 TOBE.Or Dir. 08/26/15 08/26/15 AGENDA REPORT Item Item Number 2 10 Orange County Sanitation District FROM: James D. Herberg, General Manager SUBJECT: OCSD MEDICAL INSURANCE REOPENER GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 15-17, entitled, "A Resolution of the Board of Directors of the Orange County Sanitation District Approving Medical Insurance Changes Identified Through the 2015 Medical Reopener Negotiations." SUMMARY The Board authorized labor negotiators to engage in discussions with the bargaining units regarding a medical reopener beginning in February, 2015. As part of the reopener, the Orange County Sanitation District (OCSD) moved its eligible medical plans to the CSAC- EIA pool effective July 2015, as approved by employee groups and authorized by the Board, resulting in anticipated annual cost savings of approximately $980,000. Recent discussions have yielded additional proposed changes that will offer employees additional medical plans at a neutral cost to the District. Board authorization is requested to expand health insurance options to include two (2) additional medical plan choices — a High Deductible Health Plan and a bronze-level Kaiser Health Maintenance Organization (HMO) plan. These plan additions would be implemented for all OCSD employees, except for employees represented by the Orange County Employees Association due to that group's rejection of this option. Also, Board authorization is requested for OCSD funding of a Health Savings Account (HSA) for employees who enroll in the High Deductible Health Plan (HDHP). Funding would be adjusted annually and be calculated taking the difference between the deductible for the standard Preferred Provider Organization (PPO) plan and the deductible for the HDHP plan, with the exact amounts being revisited annually. The HSA will be funded from the plan savings achieved by the lower premiums of the HDHP. PRIOR COMMITTEE/BOARD ACTIONS April 22, 2015—The Board of Directors authorized the General Manager to negotiate with the represented employee groups to discuss changes to District medical plans per the agreed upon medical reopener. May 27, 2015 —The Board of Directors approved Resolution No. OCSD 15-11, entitled, "A Resolution of the Board of Directors of the Orange County Sanitation District Approving Page 1 of 4 Medical Insurance Changes Identified Through the 2015 Medical Reopener Negotiations." June 10, 2015 — The Administration Committee approved the benefits renewal cost of $11,830,053 for healthcare and welfare insurance benefits for FY 2015-16. ADDITIONAL INFORMATION As authorized in Memoranda of Understanding (MOU), OCSD conducted medical reopener discussions with each exclusively recognized employee organization and each of OCSD's unrepresented groups from February 2015 through July 2015. The purpose of the reopener was to explore the possibility of joining an insurance risk sharing pool, consider potential changes to OCSD's insurance carriers, and explore plan design changes to mitigate excise taxation in 2018. Throughout the reopener, all stakeholders worked collaboratively, demonstrated an awareness of the rising costs of healthcare and the potential for excise taxation in 2018, and showed an openness toward making changes to control costs and improve OCSD's healthcare options. On May 27, 2015, OCSD's Board approved Resolution No. OCSD 15-11 and thereby authorized entry into a memorandum of understanding for medical plans with California State Association of Counties—Excess Insurance Authority (CSAC-EIA). This resolution authorized a change that bargaining units had mutually agreed upon and approved via member vote. As a result, OCSD has moved its related medical plans to the CSAC-EIA insurance risk sharing pool effective July 1, 2015, resulting in an anticipated annual cost savings of approximately $980,000. The District will save approximately $794,000 annually, and employees will save approximately $186,000 annually. During the course of the reopener, the group considered three (3) additional areas of potential changes to OCSD's medical insurance offerings to further reduce OCSD's healthcare costs. Key items of discussion included considering possible carrier changes, providing additional plan choices, and considering possible plan design changes to reduce and/or more precisely distribute insurance premiums. Each of the bargaining units conducted voting sessions for their members to evaluate potential changes identified in the reopener, including the joining of CSAC-EIA. Votes by bargaining units' members did not approve possible carrier changes or possible plan design changes. However, the vote was divided across the bargaining units regarding whether to approve the addition of two (2) additional medical plan options, a High Deductible Health Plan and a bronze-level Kaiser HMO plan. The Orange County Employees Association (OCEA) rejected the change, while the International Union of Operating Engineers, Local 501, and the Supervisor and Professional Management Group (SPMG) both voted to accept the change. Additional discussion on this topic with the employee groups has taken place during June and July. These subsequent discussions have yielded consensus that OCSD may offer the additional plans to all employee groups except OCEA, as the addition would not impact rates for current medical plan offerings. Page 2 of 4 Adding a High Deductible Health Plan (HDHP) will provide an additional, unique option for active employees to manage their healthcare. The HDHP will be accompanied by a health savings account (HSA) to help employees fund their healthcare costs during employment and after retirement. OCSD will use a portion of the cost savings in premiums to fund the HSA accounts for enrollees, during active employment only. Specifically, it is proposed that the District will contribute to an HSA for employees who elect the HDHP an amount up to the difference between the deductible for the standard Preferred Provider Organization (PPO) plan and the deductible for the HDHP plan, with the exact amounts being revisited annually. For 2016, the District-paid contributions would equal $1,150 per individual plan and $2,150 per family plan. This falls within current IRS code annual limits of$3,350 per individual plan and $6,650 per family plan. With the proposed HSA funding amount, every employee who moves from the PPO to the HDHP with HSA plan would generate a net cost savings for OCSD, ranging from $276 to $1,652 as illustrated in the graphic below. HSA accounts are portable and owned by the employee, so employees would have the ability to utilize their accounts to pay for medical-related expenses both during employment and after retirement. Potential OCSD Cost Savings-PPO vs.HDHP Enrollments HDHP/HSA OCSD Net PPO Plan 2016 HDHP Plan 2016 HSA Funding Total OCSD Cost OCSD Cost OCSD Cost OCSD Cost Cost Savings Individual Plan(Employee) $ 6,856 $ 7,430 $ 1,150 $ 8,580 $276 Family Plan (Employee+l) $ 36,512 $ 13,853 $ 2,150 $ 16,003 $509 Family Plan (Employee+Family) $ 23,587 $ 19,786 $ 2,150 $21,935.60 11,652 The addition of a bronze-level Kaiser Health Maintenance Organization (HMO) plan will provide an additional lower-cost healthcare option, which may be particularly desirable for OCSD's retiree population. OCSD does not pay for retirees' health insurance, with the exception of employees hired prior to July 1988 who receive a limited duration of paid premiums based on years of service. However, all OCSD retirees have the option to remain on OCSD's health insurance post-retirement and pay the full cost of the premium. The addition of the HDHP/HSA combination and the bronze-level Kaiser HMO plan will be at no cost to OCSD, and simply will provide additional options for employees and retirees to manage their healthcare. CEQA N/A BUDGET /PURCHASING ORDINANCE COMPLIANCE N/A Page 3 of 4 ATTACHMENT The following aftachment(s)is included in hard copy and may also be viewed on-line at the OCSD website (www.ocsd.coml with the complete agenda package: • Resolution No. OCSD 15-17 Page 4 of 4 RESOLUTION NO. OCSD 15-17 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT APPROVING MEDICAL INSURANCE CHANGES IDENTIFIED THROUGH THE 2015 MEDICAL REOPENER NEGOTIATIONS. WHEREAS, on April 22, 2015, the Board of Directors ("Directors") of the Orange County Sanitation District (the "District") authorized the General Manager to negotiate with the represented employee organizations to discuss changes to District medical plans per the agreed upon medical reopener. WHEREAS, pursuant to Government Code Section 3500, et seq., representatives of the represented employee groups have met and conferred, in good faith, with the representatives of the District and have reached an understanding with regard to certain terms and conditions relative to employment; WHEREAS, during commencement of negotiations the parties agreed that any changes would take effect on July 1, 2015, or as soon as possible thereafter; and WHEREAS, the parties have modified the District's medical insurance plan offerings to reflect the parties' understanding regarding certain terms and conditions as set forth in the OCSD Medical Insurance Reopener agenda report, which include: • HDHP / HSA - Adding a High Deductible Health Plan (HDHP) to provide an additional option for active employees to manage their healthcare. The HDHP will be accompanied by a Health Savings Account(HSA)to help employees fund their healthcare costs during employment and after retirement. OCSD will use a portion of the cost savings in premiums to fund the HSA accounts for enrollees, during active employment only. Annually, OCSD will fund the HSA, which will be adjusted each year by calculating the difference between the deductible for the standard PPO plan and the deductible for the HDHP plan. Exact amounts will be revisited annually. • Bronze-Level Kaiser Health Maintenance Organization (HMO)—Adding a bronze- level Kaiser HMO plan to provide an additional lower-cost healthcare option. NOW, THEREFORE, the Board of Directors of the Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1. The aforementioned medical insurance plan changes as outlined herein are hereby approved and may be implemented effective January 1, 2016. Section 2. The General Manager is authorized to sign contracts with the designated carriers for the approved plans. OCSD 15-17-1 PASSED AND ADOPTED at a regular meeting of the Board of Directors held August 26, 2015. John Nielsen, Board Chair ATTEST: Kelly A. Lore Clerk of the Board OCSD 15-17-2 STATE OF CALIFORNIA ) ss COUNTY OF ORANGE ) I, Kelly A. Lore, Clerk of the Board of Directors of the Orange County Sanitation District, do hereby certify that the foregoing Resolution No. OCSD 15-17 was passed and adopted at a regular meeting of said Board on the 261h day of August 2015, by the following vote, to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District this 26'h day of August 2015. Kelly A. Lore Clerk of the Board of Directors Orange County Sanitation District OCSD 15-17-3 STEERING COMMITTEE Melting Dat0 TOBE.Or Dir. 08/26/15 08/26/15 AGENDA REPORT Item Number Item 11mber 3 1 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Robert P. Ghirelli, Assistant General Manager SUBJECT: CLASSIFICATION & COMPENSATION STUDIES — COMPARISON AGENCIES GENERAL MANAGER'S RECOMMENDATION Approve the final list of comparison agencies to begin the next phase of the Classification & Compensation Studies, which includes a labor market survey. SUMMARY The Orange County Sanitation District (OCSD) initiated its periodic Classification and Compensation Studies in March 2015 with Gallagher Benefit Services, Inc., ("Consultant"). As part of the study's compensation phase, OCSD's current list of comparison agencies that comprise its labor market has been reviewed by stakeholder groups, and is being presented to the Board of Directors for final approval. PRIOR COMMITTEE/BOARD ACTIONS July 2015—An informational Agenda Report was presented to the Board of Directors with the initial recommended list of comparison agencies from the Consultant. February 2014 — The Administration Committee authorized the General Manager to advertise a request for proposal and subsequently award a Consultant Services Agreement for an OCSD-wide Classification and Compensation Study, for a total amount not to exceed $100,000. ADDITIONAL INFORMATION Classification and Compensation Studies are conducted periodically by organizations to obtain information on how other agencies structure their positions and compensate employees in similar positions. Such benchmark data is critical feedback regarding how an agency compares to its labor market, providing information for organizational decisions on classification and compensation of its jobs. The selection of an appropriate labor market is important to all stakeholders, including the Board of Directors, management, bargaining units, employees, and the public. It ensures that OCSD compares its classification and compensation systems to similar organizations. Page 1 d4 OCSD's current list of 13 comparison agencies was established during the Classification and Compensation Studies conducted in 2002 by Johnson & Associates, and is comprised of the following: OCSD's Current List of Comparison Agencies City of Anaheim City of Irvine Central Contra Costa Sanitary District Irvine Ranch Water District County Sanitation Districts of Los Angeles County City of Los Angeles Bureau of Sanitation East Bay Municipal Utilities District Los Angeles County[)apartment of Public Works Eastern Municipal Water District Orange County Water District City of Garden Grove City of San Diego City of Huntington Beach Updates to OCSD's comparison agencies list were recommended by the Consultant during the current study, in consideration of the following criteria: • Retention: agencies from/to which OCSD gains/ loses employees • Geography: agencies within the same area/ region/ state • Size/ Service Area: agencies from twice as large to half as big • Operations: agencies with similar operations and water processed • Continuity: agencies previously surveyed ensure continuity The table below reflects the initial list of comparison agencies recommended by the Consultant for OCSD and presented to the Board of Directors on July 22, 2015. It includes 12 of the existing comparison agencies, plus 8 additional agencies marked with an asterisk (*). Initial List of Com arison Agencies City of Anaheim Orange county Water District Central Contra Costa Sanitary District City of San Diego Courty Sanitation Districts of Los Angel a County City and Courty of San Francisco Utilities' East Say Municipal Utilities District City of San Jose Environmental Services* Eastern Municipal Water District Sacramento Regional County Sanitation District* City of Huntington Beach City of Long Beach* City of Irvine City of Santa Ana* Irvine Ranch Water District Orange Count Cit of Los A ales Bureau of Sanitation Riverside County* Los An ales Count Department of Public Works iSan Bernardino Count " *denotes an addition to OCSD's current comparison agency list The initial list was distributed to OCSD's unrepresented groups (Executive Management Team, Manager Group, and Confidential Group) and all represented bargaining units, and presented to the Board of Directors in July 2015 as an informational item. OCSD solicited feedback and worked collaboratively with all stakeholders to review and evaluate the proposed comparison agencies during a meeting on August 3, 2015, and through subsequent discussions. It was also presented to the Executive Management Team (EMT) for discussion. On August 7, 2015, the bargaining units provided additional feedback and proposed changes to the initial list, which were subsequently reviewed and considered by the Consultant and the EMT. The review and evaluation phase of the Page 2 d4 proposed comparison agencies has concluded, resulting in an updated list of comparison agencies. OCSD's history of surveying a specific set of 13 comparison agencies over the years was a factor in the decision to keep 12 of the 13 agencies on the final list, for the purpose of maintaining some level of continuity. Additionally, there was stakeholder consensus on adding two (2) agencies that met the necessary criteria of having similar operations, service area, geographic location and retention; and removing four(4)agencies that were less comparable. In summary, the agencies to be removed from the initial list presented to the Board of Directors on July 22 include: City of Long Beach, Orange County, Riverside County and San Bernardino County. The agencies to be added include: Metropolitan Water District of Southern California and Union Sanitary District (Alameda) Special District. The following table reflects the final list of 18 comparison agencies being presented to the Board of Directors for approval, which represents the appropriate labor market to be surveyed as part of the Classification and Compensation Studies. Final List of Comparlson Agencies Ctty of Anaheim Los Angeles County Department of Public Works Central Contra Costa Sanitary District Orange County Water District County Sanitation Districts of Los Angeles Count Cit Of San Die 0 East Bay Municipal Utilities District Cfty and Courdy of San Francisco Utilities• Eastern Municipal Water District City of San Jose Environmental Services' Cfty of Huntington Beach Sacramento Regional County Sartation District* Cfty of Irvine City of Santa Ana* Irvine Ranch Water District Metropolitan Water District of Southern California* ,Cfty of Los Angeles Bureau of Sanitation Union Sanitary District Alameda Special District* *denotes an addition to OCSD's current comparison agency list Upon the Board of Directors' approval of the final list of comparison agencies, the Consultant will begin the next phase of the Classification and Compensation Studies, which will include: • Developing and deploying a survey to the selected comparison agencies; • Collecting market data for OCSD's benchmark positions; • Reviewing the labor market data to confirm it is reliable and sufficiently comparable; and • Analyzing the data to ensure skewing impacts are mitigated. The market data collection process will generate information on an agency's actual pay and/or pay ranges, pay practices, and benefits. The Consultant will review each organization's data and apply a cost of labor geographic pay differential to pay data based on the Economic Research Institute (ERI) quarterly update figure, which is useful in understanding the economic differences between different locations. This method is a standard compensation practice, and will be used to adjust the survey data to OCSD's labor market. Page 3 of 4 CEQA N/A BUDGET/PURCHASING ORDINANCE COMPLIANCE The funds for this project were included in the OCSD Operating Budget for FY 2014-15 and FY 2015-16. Page 4 d 4