July 19, 2005
SUBJECT: Renewal of Employee Assistance Program Contract 2005/2006
REPORT IN BRIEF
This report recommends the renewal of the existing contract between the City of Sunnyvale and Managed Health Network, Inc. (MHN) for the Employee Assistance Program (EAP) to be renewed effective August 1, 2005 for one year. It is also recommended that the contract effective dates be changed from July 1 through June 30 to August 1 through July 30.
BACKGROUND
As part of its employee benefit package, the City of Sunnyvale provides full-time and regular part-time employees, including those in the Reduced Time Job Status Program with an employee assistance program. The contract was to expire on June 30, 2005, but due to a slight delay in the rates receipt and the Council’s summer recess, it was not possible to bring this report to City Council for rate change approval before July 1, therefore, a one month extension was provided by MHN and a change in the contract’s term is being recommended.
EXISTING POLICY
The General Plan, Planning and Management Element, Sub-element 7.3 Legislative Management, Goal 7.3D: Maintain a quality workforce, consistent with laws, the Charter, and adopted policies in order to assure that City services are provided in an effective manner. Action Statement 7.3D.1a states: to maintain a competitive pay and benefits package for employees.
The City of Sunnyvale provides benefits including medical, dental, vision and employee assistance programs to all regular full-time and part-time employees through language in the Memoranda of Understanding and Salary Resolution.
DISCUSSION
For year 2004, the City of Sunnyvale reflected a 13.46% annualized intake activity compared to MHN’s norm of 8.89% and a 11.09% annualized open case activity, compared to MHN’s norm of 5.73%. Due to the City of Sunnyvale’s healthy rate of individual case utilization combined with the pooled rate for the policy period, the City of Sunnyvale’s proposed rate is $6.49 per employee, per month with a 12 month rate guarantee. This proposed rate represents an increase of $0.05 or 0.08% from the current rate of $6.44.
A second alternative is an option of a 24 month rate guarantee at the renewal rate of $6.57, which would present a 2% increase from the current rate. The reason for offering this rate is because MHN pooled trend is 3-5% and averaging-4-6% year to date in 2005. However, to set rates an employer’s own claim experience will also be used in calculating renewals.
The EAP program is an important benefit which addresses issues/problems that can affect employee performance, productivity, moral and attitude. The EAP program provides for up to 7 counseling sessions per employee and for each dependent with marital, family, alcohol/drug, financial/credit concerns, tax assistance, legal issues and emotional problems including those found at work. This program, in addition to its regular confidential EAP services for employees and dependents, also offers other ancillary services such as related brown-bag workshops, job performance referrals and critical incident stress debriefings.
The change in the effective dates for the contract will provide better timing in the future for Council meeting dates during the summer months.
FISCAL IMPACT
The current number of employees covered under the EAP program is approximately 912, with some fluctuation and the current monthly rate is $6.44 per employee for an annual cost of $70,479. The proposed rate would increase this amount to $71,027, a difference of approximately $548.00 annually under the 12 month scenario.
Under the 24 month proposal the cost would total $71,902 annually showing an increase of $1, 423 per year.
Funding for this expenditure is provided in the Benefits Fund and the cost of the contract renewal has been provided for in the Fiscal Year 2005-06 Base Budget.
Conclusion
The current proposal follows a 2004/2005 year of no rate increase for this benefit. It is very difficult to predict the utilization rate for 2005/2006 and although there are higher trends in the pooled rate, the City of Sunnyvale has a good experience for at least two prior years. If the trend becomes extreme, the option is to market the program and even consider a different plan design for a lower future rate. This is the reason that a one year renewal is being recommended as opposed to two years.
PUBLIC CONTACT
Public Contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.
ALTERNATIVES
1. Renew the MHN contract one year for the EAP Program with a monthly rate increase of 0.08% through July 30, 2006 and approve the change in the contract’s term.
2. Renew the MHN contract two years for the EAP Program with a monthly rate increase of 2% through July 30, 2007 and approve the change in the contract’s term.
3. Consider other alternatives.
RECOMMENDATION
Staff recommends approval of Alternative #1.
Reviewed by:
Jane Fleenor, Director, Human Resources Department
Prepared by: Myriam Castaneda, Human Resources Supervisor
Approved by:
Amy Chan
City Manager