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Health Care Costs

In 2019, Town Council approved joining the North Carolina Health Insurance Pool (NChip) and was an

inaugural member of that group along with six other North Carolina local government units. The health

insurance risk pool allows for the sharing (pooling) of medical claim costs over a certain amount to smooth

and minimize the fluctuations in plan renewal based on a small number of covered lives and large claims

that sometimes occur and stabilizes health care costs over time. Joining NChip has also provided the Town

more flexibility in structuring of our health care plan design. It has also provided the ability to rebalance

the employee cost of dependent care premiums between the two plans, offering employees a clear choice

and value based on their individual needs.

The health care insurance pool is working as intended. At the time of the drafting of this budget message,

the Town has five employees with claims in the shared pool layer that provides some relief of the overall

cost of these claims. The Town has retained the two tiers of coverage and made modest plan design changes

to reflect reasonable and peer/industry comparisons and matched appropriate levels of shared

employee/employer cost to those programs that provide choice and responsibility for employees. Employee

premiums for the base health insurance plan have been lowered, resulting in significant savings for

employees covering families. Employee premiums for the buy-up plan, a very “rich” benefit plan, have been

increased to equitably share the cost of the added value in this plan between the employer and employee.

Between the plan design changes and restructure of employee premiums, the overall increased cost for

medical insurance is 3% (approximately $47,000 based on current employee elections) for FY 2020 and

has been incorporated into total compensation costs. Wellness program and premium discounts also

continue in FY 2020. Vision insurance, no longer offered through Blue Cross Blue Shield (BCBS) medical

plans, will be managed in-house by Human Resources staff and offered at similar levels as previously

provided by BCBS.

The Town’s basic dental care plan, offered through the North Carolina League of Municipalities, reflects a

$1 increase in Employee/Spouse coverage only. There are no other dental premium increases.

Employee Compensation/Merit Pay

The existing merit pay award system that has been in place for the past three years has provided for a 2%,

3% and 4% merit pay adjustment for employees achieving a “Meets Expectations”, “Exceeds Expectations”

and “Far Exceeds Expectations” rating respectively, and has resulted in an average merit pay adjustment of

less than 3% on average for employees. While this level of merit pay award has allowed for slower growth

in personnel costs, the minimal differential in merit pay resulting from this percentage structure reduces

the ability for employees to advance through their pay range. As a result, salaries fall behind both in routine

market pay adjustments as compared to peer communities and in the industry. This results in reduced

ability to retain qualified and trained personnel who can demand higher salaries elsewhere and pay

compression for tenured employees who enter the Town of Morrisville workforce at market salaries

provided in the pay plan salary ranges. These factors further provide both a disincentive to strive for higher

level of performance for salary growth in the short-term and long-term and to allow higher performing

employee salaries to achieve more earned salary growth potential. With limited promotional opportunities

due to the small, flat hierarchal structure of our organization, all these factors influence our ability to recruit

and retain highly qualified employees. Our employees are often actively recruited by nearby communities

for increased opportunity and compensation. We must make a commitment to responsibly compensate our

employees and retain the skills and knowledge base investment in Morrisville.