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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 10/01/2002 - FIRST READING OF ORDINANCE NO. 144, 2002, APPROPRI AGENDA ITEM SUMMARY ITEM NUMBER: 15 FORT COLLINS CITY COUNCIL DATE: October 1, 2002 STAFF: Rick DeLaCastro SUBJECT: First Reading of Ordinance No. 144, 2002, Appropriating Unanticipated Revenue and Prior Year Reserves in the Benefits Fund to be Used to Cover Medical Insurance Claims and Other Expenses. RECOMMENDATION: Staff recommends adoption of the Ordinance on First Reading. 1Y FINANCIAL IMPACT: This Ordinance increases the 2002 Benefits Fund appropriations by $1,600,000 to cover benefit expenses. Funding for these appropriations is comprised of unanticipated revenue in the Benefits Fund and Benefits Fund reserves from previous years. Current budget projections indicate that actual revenues will exceed budgeted revenues by approximately $900,000. The remaining $700,000 is requested from prior years' plan reserves. This Ordinance also requests the use of funds on hand, namely unanticipated future revenues and funds from prior years' reserves for unanticipated medical claims and expenses. No additional funding is requested from outside of the Benefits Fund. EXECUTIVE SUMMARY: Benefits Fund Revenues and Expenses for 2002 were projected in early 2001, and were based on enrollment and cost trend information available at that time. Actual revenues exceed budgeted projections due to increased plan enrollment and unanticipated shifts in plan selection by employees. Expenses exceed budgeted projections due to higher than expected claims activity. During 2002 to date, the ten highest claims average in excess of $63,000; one claim exceeds $115,000, and one claim exceeds $150,000. Catastrophic claims of this nature are difficult to project, and contribute significantly to the $1.1 million in unanticipated claims experience. Besides unanticipated increases in claims expenses, administrative expenses increased at a higher than expected rate. PacifiCare's fees increased approximately 25%, five-times higher than its historical average. Stop Loss Coverage (which pays claims in excess of $120,000) increased by 40%, one-third higher than anticipated. The Stop Loss coverage in particular was affected by the events of September 11, 200t. Together, these unanticipated expenses require that prior year plan reserves be used to fully fund currently projected claims and expenses. ORDINANCE NO. 144, 2002 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROPRIATING UNANTICIPATED REVENUE AND PRIOR YEAR RESERVES IN THE BENEFITS FUND TO BE USED TO COVER MEDICAL CLAIMS AND OTHER EXPENSES WHEREAS, the City of Fort Collins, through the Benefits Fund, provides employees with a full flexible benefit package including choices in insurance plans for health, life, vision, dental, long-term disability,and accidental death and dismemberment insurance;health care and dependent care reimbursement accounts; employee assistance program; and other employee benefits; and WHEREAS, the City is self-insured for employee health care benefits, collecting revenues associated with providing medical, dental, and employee-paid vision benefits to employees and budgets for the payment of all medical insurance claims, including administration costs for claims processing; and WHEREAS, the City's Benefits Fund is sufficiently funded to cover claims and administration costs,and adequate reserves are maintained for use in the event that fund expenditures exceed the revenues received in the fund; and WHEREAS, staff projects that 2002 Benefits Fund expenditures could exceed budgeted appropriations in the Benefits Fund by $1.6 million; and WHEREAS, the aforementioned overages are due to higher than expected medical claims activity, including numerous catastrophic claims thus far in 2002, and significant increases in administrative expenses, that were not anticipated at the time the budget was adopted; and WHEREAS, staff has identified unanticipated revenue, from fees, charges, and interest earnings, in the Benefits Fund that exceeds budget estimates ($900,000), and prior year reserves in the Benefits Fund($700,000),to be used to fund the need for additional appropriations,totaling$1.6 million; and WHEREAS,an appropriation of$700,000 from prior year reserves within the Benefits Fund still leaves reserves funded at a level within the guidelines recommended by the City's benefits consultant; and WHEREAS, Article V, Section 9, of the Charter of the City of Fort Collins (the "Charter") permits the City Council to make supplemental appropriations by ordinance at any time during the fiscal year,provided that the total amount of such supplemental appropriations,in combination with all previous appropriations for that fiscal year, does not exceed the then current estimate of actual and anticipated revenues to be received during the fiscal year; and WHEREAS,Article V,Section 9,of the Charter also permits the City Council to appropriate by ordinance at any time during the fiscal year such funds for expenditure as may be available from reserves accumulated in prior years, notwithstanding that such reserves were not previously appropriated; and WHEREAS, City staff has determined that the appropriation of funds from unanticipated revenue as described herein will not cause the total amount appropriated in the Benefits Fund to exceed the current estimate of actual and anticipated revenues to be received during any fiscal year; and WHEREAS, it is the desire of the Council to appropriate the sum of $900,000 in unanticipated Benefits Fund revenue, and the sum of $700,000 from Benefits Fund prior year reserves to fund 2002 unanticipated Benefits Fund expenditures. NOW, THEREFORE,BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That there is hereby appropriated for expenditure from unanticipated revenue in the Benefits Fund, the sum of NINE HUNDRED THOUSAND DOLLARS($900,000), to fund 2002 unanticipated Benefits Fund expenditures. Section 2. That there is hereby appropriated from prior year reserves in the Benefits Fund, the sum of SEVEN HUNDRED THOUSAND DOLLARS ($700,000) to fund 2002 unanticipated Benefits Fund expenditures. Introduced and considered favorably on first reading and ordered published this 1st day of October, A.D. 2002, and to be presented for final passage on the 15th day of October, A.D. 2002. Mayor ATTEST: City Clerk Passed and adopted on final reading this 15th day of October, A.D. 2002. Mayor ATTEST: City Clerk