OCEAN CITY – The City Council settled this week on health benefits for new town employees on first reading, including a retirement health plan.
Starting July 1, Ocean City will offer new hires an HMO at a 90/10 cost share and a PPO at an 85/15 cost share but either one includes a retirement health fund. If a new employee plans on accumulating a retirement health fund, the town has added a Health Savings Account (HSA) option.
According to the ordinance, Ocean City will contribute an amount, as determined by annual budget appropriations, up to the maximum allowable contribution to the employee’s HSA, which the employee can utilize to satisfy deductible charges and other allowable medical expenses. Upon retirement from the town, after 25 years of service, the retiree may participate in the higher deductible health plan by paying 100 percent of the premium cost.
Mayor Rick Meehan said this ordinance concerned him more than the retiree pension plan ordinance that the council approved prior to the retiree health care discussion. He said that in order to close out the current employees plan to new hires and begin the new plan the starting cost will be $700,000 this year and estimates show $700,000 to $900,000 over the next five years each year.
“That is a significant cost,” Meehan said. “It is a significant cost for today’s taxpayers to make this change.”
The mayor added that he had recommended in previous discussions other alternatives that wouldn’t cost the town such a significant cost in changing its new employee’s health benefits, for example a soft cap.
“I thought that was the way to go with all city employees and that would actually save the town of Ocean City $900,000 a year,” Meehan said. “With the cost of health insurance and to maintain a benefit, I think our employees understand.”
He asserted that between the cost in changing new employee’s pension plan and their health benefit it is going to cost the town close to $1 million each year.
“We have been very good in these last few years, this council and our staff has been able to make the cuts we need … and be able to hold our tax rate at the constant yield line last year and still provide the level of services we provide,” Meehan said. “Now, somewhere we are going to have to come up with an additional $1 million or close to it.”
Meehan also asked staff to formulate and add the town’s minimal contribution into the ordinance before second reading. He said that ordinance includes a maximum and what’s allowable but there is no minimum contribution stated in the language.
“It is important for our employees to see [minimum contribution] as part of the ordinance so they know what this council feels is the appropriate level of contribution,” he said. “I realize all ordinances are subject to change with whatever council is sitting here, but I think it would help establish credibility and it would help establish what the true goals were of this council.”
Councilman Joe Hall said that the HSA option provides a new hire the opportunity to manage his or her health care to allow for a reasonable amount of money after retiring.
“As for the cost, it is a reality,” he said. “Both the cost of the previous ordinance and the cost of this ordinance aren’t created by our change. The bill is already there … we are not creating an additional $1 million bill, we’re creating the fact that we need to start paying our bill ahead of time instead of over a longer period of time.”
Councilman Brent Ashley said that in his short five months on the council he is starting to realize it is, “what you want that makes the difference”.
“We sat up here a couple weeks ago and voted for a Boardwalk that was $2 million more than what we could have had and nobody says a word,” he said. “You get a little bit of an extra cost on this and I agree with Joe that it is not a real cost it … I don’t get it.”
Ashley made the motion to accept the retiree health care plan for new town employees and it was seconded by Councilwoman Margaret Pillas. The motion was approved in a vote of 4-3, with Councilman Doug Cymek, Lloyd Martin, and Councilwoman Mary Knight in opposition.