One of the focal points of the structural reform that the city of Davis is looking to do is to update its policies on the cafeteria cash out.
The city has an incentive to encourage employees who can take health care through a spouse to do so. However, the amount of the cash out clearly needs to be reduced so that the city can save money while at the same provide the employee an incentive to take the cash out rather than the health insurance coverage.
In addition to the cost of the benefit, one of the biggest concerns is the unevenness of it. Some employees get the full cash out for $1500 to $1700 while others get no benefit at all. It depends largely on the status of the spouse and whether they work and have their own health plan.
In the last round of MOUs, all of the employee bargaining units agreed to a small reduction in the benefit except for DCEA, which as we know went to impasse and had the imposition of their contract reversed by a PERB ruling. The Department Heads already are capped to $500.
The fire management MOU, passed in absentia, signaled the council and city’s goals for a new policy. Wrote the city into their MOU: “The current contract provides a cash payout to any employee not taking the full health insurance allowance. The new contract would cap the cash-out provision for current employees at $500 per month.”
We know from our interview with DCEA’s Dave Owen and Chris Kassis, that the city is looking to cap the amount that the cash out would provide to $500 per month.
How much money would that reduction save the city? A substantial amount.
The numbers are for January when DCEA’s maximum cash out was $1,483.08. With the PERB decision, the amount is now $1,774.12. City Manager Pinkerton believes that will add between $100,000 and $125,000 to the current costs and the eventual savings.
By bargaining unit the projected savings:
Management $159,300
DCEA $479,500
PASEA $492,500
Fire $152,800
DPOA $377,300
Police Mgmt $48,500
The total savings is thus projected at more than $1.7 million.
When the Vanguard spoke to DCEA’s laid off employee, Chris Kassis, he said one of the biggest problems that he has with the city’s proposal is their efforts to reduce the cash out from $1500 per month down to $500 – for some employees more than a $1000 cut (as the cashout for DCEA employees now is $1700 rather than $1500).
He believes that if the city goes to $500 per month, people will go to double coverage on health insurance and the city will not get the savings that they are projecting.
He argued that a 10 percent cut on health insurance would save the city nearly $200,000 for every hundred employees. At 15%, it would be closer to $300,000.
“You’re going to get more savings that way,” he said. “Then everybody’s the same.”
The Vanguard’s analysis shows that the while the benefit itself is distributed unevenly, the burden of the reduction would be borne heavily on a select number of employees.
The Vanguard’s analysis shows that those earning the maximum cash out, account for just 13% of all city employees yet, account for 32% of the city’s savings. Those are the employees of DCEA who have now been bumped into the highest bracket.
Overall, nearly 39% of the employees will have to give up between $1000 and $1200 a month. Those 147 employees will bear 82% of the burden for cost savings.
Going one step lower, 53% of the employees will have their benefits reduced by $500 or more accounting for 96% of the city’s savings.
In other words, the city can save a substantial amount of money by capping the cafeteria cash out, but the impact of that saves is borne disproportionately by a small group of employees.
On the other hand 39% of employees will not be impacted by this policy change at all, and 48% of the employees will have to give up $250 per month or less.
Worse yet, the overwhelming burden will be faced by the two bargaining units with the lowest overall compensation.
57 DCEA employees and 36 Pasea Employees represent 93 of the 147 employees who will face $1000 monthly cuts or more.
Steve Pinkerton told the Vanguard that these cuts are subject to collective bargaining and that the city will be looking at all options when it comes to the need to reduce compensation.
Ultimately the city should get to that $500 level, one of the questions will be whether it should occur all at once.
—David M. Greenwald reporting
How many tree trimmer positions can you fund with one of those extra positions on the 4 member fire trucks racing to non injury accidents? Just curious.
Methinks Mr Harrington is greatly off-topic, and is just cutting and pasting from a great # of his posts. David? Moderator?
[quote]”He believes that if the city goes to $500 per month, people will go to double coverage on health insurance and the city will not get the savings that they are projecting.”[/quote]Please explain what this means. What good is “going to double coverage” and what is the impact? Why does he expect employees will do this?
I got a much smaller amount for many years but never thought of it as anything more than a bonus. Its a big hit for some but did they expect it to last forever? They had to know it was vulnerable especially after the 3-2 vote to keep it last time. Nobody likes to have less going forward but compared to cuts to a regular pay scale or lay offs this is much less defensible.
JustSaying: Just a guess. Double coverage gets rid of things like co-pays and deductibles, and maxes in the system. So my wife’s coverage, would often only cover a certain amount on dental and eye, and having double coverage, would save money there.
[quote]Please explain what this means. What good is “going to double coverage” and what is the impact?[/quote]
[quote]Double coverage gets rid of things like co-pays and deductibles, and maxes in the system.[/quote]Double coverage is a pain, and does not eliminate co-pay, etc. What may happen is more like a coverage shift The city employee may bring their spouse/dependents under the City coverage, and go off their spouse’s coverage. Often, on the private/quasi public side, the employer pays for employee only, and the employee can make up the difference for spouse/dependent coverage. Some city employees use all or a portion of their “cashout” to cover the additional premium under the spouse’s plan. That might shift over. This may be limited, in that many other employers do not provide for “cashout”. They generally view the COVERAGE to be the benefit, rather than the COST of the coverage. The City did likewise until ~ the late 80’s, when single employees got perturbed than the City ‘spent more’ on married folks with dependents.
David and hpierce
I suspect that you are both correct in some circumstances. It may be hpierce that your statement is accurate as far as city employees and their insurance coverage is concerned and thus the more relevant viewpoint for this discussion. However, I am aware of at least one large group in which “double coverage ” does include the advantages David noted, elimination of copays and deductibles. I also appreciate your bit of history about how the “cash out” came to be in the first place as this has previously been a mystery to me.
medwoman… have you ever personally or professionally dealt with the specifics of ‘double coverage’? I have (accidentally). [u]Each[/u] insurance company, in my case, pointed the finger to the other company, insisting the other was “primary”. The paperwork was significant. It got resolved, but in a way that I would have been the same or better off with a single provider (NOT counting the ‘hassle’). It might be that my situation was different, but I would never go “double coverage’ again. There may be a difference when a second plan provides “supplemental” benefits… not sure.
My question is specific to the city of Davis employees under discussion. Chris Kassis and the Vanguard say “that if the city goes to $500 per month, people will go to double coverage on health insurance and the city will not get the savings that they are projecting.”
Is there any reason to believe this is accurate? Would it provide any benefit to employees other than to give them the satisfaction of getting even by making sure their employer doesn’t save anything with the scheme?
hpierce’s observation about the change away from COVERAGE being viewed as the employment benefit is an interesting one. The “inequity” can be corrected by having a ceiling on city insurance contributions based on the cost of “employee only” coverage. Although that puts partner and child coverage as optional and at the employee’s expense, it still would be a great deal because of the CalPers group rates.
[quote]He believes that if the city goes to $500 per month, people will go to double coverage on health insurance and the city will not get the savings that they are projecting.[/quote]
The employees are not looking at the larger picture. If the cost savings are not reached, then the City would have to achieve it another way, i.e. putting a cap on the city contributions to health insurance per employee, having employees share the cost of the premiums.
Stockton is filing for bankruptcy and stopping all retirement health care in an effort to resolve its budget crisis.
[quote]My question is specific to the city of Davis employees under discussion. Chris Kassis and the Vanguard say “that if the city goes to $500 per month, people will go to double coverage on health insurance and the city will not get the savings that they are projecting.”
Is there any reason to believe this is accurate? Would it provide any benefit to employees other than to give them the satisfaction of getting even by making sure their employer doesn’t save anything with the scheme? [/quote]
My belief is that the employee will go with whatever health plan benefits their family financially the most. Right now, they go with the “other than city” coverage because they are able to get the lucrative cafeteria cash out. If the cafeteria cash out is reduced significantly in $$$, and it does not make financial sense for a family member to switch to the city’s health plan, they won’t… unless I’m missing something…
There is a question as to whether $500 will be enough for some to take the cash rather than the benefits.