OC’s New Retiree Health Care Plan Near Passage

OCEAN CITY – A divided City Council moved forward this week with the town’s retiree health care contributions for newly hired municipal employees.

Starting July 1 2011, Ocean City will offer new hires an HMO at a 90/10 cost share and a PPO at an 85/15 cost share. If a new employee plans on accumulating a retirement health fund, the town has added a Health Savings Account (HSA) option, which will be offered beginning Jan. 1, 2012 because it runs in accordance with the federal calendar.

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.

According to Finance Administrator Martha Lucey, closing the town’s current retiree health fund to new hires will increase the annual required contribution (ACR) of the town for the fiscal year of 2011 and 2012. The increase due to the plan closing is around $900,000.

If the plan was open to new hires, the ARC is close to $3.5 million. If the plan closes to new hires in the fiscal year 2011, the ARC is close to $4.4 million, which creates the difference of about $900,000. The budgeted amount for the ARC in fiscal yaer 2011 was $3,104,000 creating an unbudgeted amount of $1,318,000.

Closure of the plan increases the ARC for FY2012 from about $3.7 million to around $4.4 million, which is an additional cost close to $750 thousand.

Councilwoman Mary Knight clarified that by June 30 the Town of Ocean City would have to fund $1.3 million that was not in the budget this year, and beginning the next day, July 1, the town would have to fund an additional $744,000 that has also not been budgeted to meet the annual contribution of the county standards.

Last week, when the majority of the council voted to pass the proposed ordinance through first reading, Mayor Rick Meehan asked for the council to review and discuss the town’s contributions into the retiree’s health care before second reading.

Council President Jim Hall said he would be comfortable with a $1,500 contribution in single coverage.

“If you take care of yourself, then you will have something at the end of the road,” he said.

Councilman Joe Hall added that it would also motivate employees to transfer to the HSA plan.

Councilman Brent Ashley set a motion to move the ordinance concerning retiree health care for newly hired municipal employees to second reading, adding the town’s contribution will be $1,500 for individual coverage, $2,800 for double coverage and $3,000 for family coverage, which the employee can use to pay their deductible. The council voted 4-3 to accept the motion, with Councilmen Doug Cymek and Lloyd Martin and Councilwoman Mary Knight in opposition.

“I still think we are going to end up looking at current employees at some point in time,” Meehan said. “When I look at the extra millions of dollars a year these changes are going to cost us over the next few years we are going to be looking for the revenue somewhere and am not sure exactly where we are going to get it.”