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eligible for Medicare. This significant shift in philosophy for the City began when the <br /> change was implemented with Management/Confidential group of employees starting in <br /> January 2009. Since the reduction in benefit applies to new hires, the impact will not be <br /> realized immediately; however, it will significantly reduce the City's actuarial liability over <br /> time. <br /> Medical Insurance Reform for Active Employees: The newly negotiated tentative <br /> agreement amends the medical insurance benefit for active employees. As <br /> implemented with all other employee groups, co- payments for doctor's visit and <br /> prescription drugs for all plans were increased to better align them with industry <br /> standards. This action will serve to reduce the cost of annual premiums going forward. <br /> The tentative agreement further provides that future increases in the contributions made <br /> by the City toward the cost of medical premiums will be based on the dollar increase in <br /> the lowest cost HMO plan, rather than the premium for the Kaiser Health plan. This <br /> change will allow for increased competition among health providers who bid for the <br /> City's business and benefit us by lowering the premiums. <br /> Lastly, the City will pick up an increase of no more than 15% of the medical premium. <br /> This new limit will cap the City's future exposure and employees will pick up any <br /> increase above 15 %. <br /> Medical Insurance Reform for Retired Employees: The new contract amends the <br /> medical insurance benefit for employees who retire on or after July 1, 2011. This <br /> provision establishes that for employees who retire on or after this date, their health <br /> benefit plan design will be the same as the active employees with respect to the higher <br /> co- payments and newly implemented caps on increases. <br /> These reforms in medical plan design and premium caps (for active and retired <br /> employees) now apply to all City groups, represented and non - represented, and signify <br /> the change in the cost sharing arrangement between employees and the City. The <br /> changes will reduce the City's long term liability for providing retiree medical insurance. <br /> CONCLUSION <br /> This set of negotiations with PCEA/AFSCME represents a shift in philosophy from <br /> previous contract discussions as the City sought to share in the cost of benefits with <br /> employee groups. These concessions from the bargaining units are in line with the <br /> City's strategy to maintain a balanced budget without relying on drawing from reserve <br /> funds. The parties have met formally and in good faith to develop this tentative <br /> agreement. In this first public discussion, the topic is introduced to allow for comments <br /> from the public. The next step in the process is for the City Council to consider the <br /> terms of the agreement and authorize the City Manager to finalize and execute the final <br /> agreement. <br /> Page 3 of 4 <br />