Rising health-care costs have forced the city to make several changes to its 2006 health insurance plan. The changes include a 20 percent increase in premiums and $810,000 in cost-saving measures. An additional $500,000 from the general fund will be transferred to cover the remaining costs.
Margrace Buckler, the city’s human resource director, called the changes “make-up money.”
“This is so we can break even,” Buckler said. “We don’t make a profit.”
The cost-saving measures include eliminating the lowest deductible option, increasing prescription co-pays and charging flat rates for office visits.
The city also added preventive coverage benefits to the insurance plan, Buckler said.
The city, which provides its own insurance for employees, has seen an increase of 55 percent in the cost of its health plan from 1994 to 2004. Contributing factors include the rising cost of health care and prescription drugs, along with increases in large claims and claims for dental work. During the same 10-year period, however, the city increased premiums by only 24 percent.
“We made a conscious decision not to increase premiums to match the cost,” Buckler said. “Good or bad, that’s how we got here.”
Last year, the city transferred $1 million from its general health insurance fund to make up the difference, City Finance Director Lori Fleming said.
City Manager Ray Beck said the administration in the past has been able to use the balance from the health insurance fund to ease the impact of rising costs.
“We used the fund balance to do smaller steps instead of big leaps in cost,” Beck said.
By making changes to the health-care plan now, Buckler said the Human Resources Department can reduce the amount of money it needs from the general fund in the future.
“We don’t want to ask for that much again,” she said. “We want that number to decrease. My hope is next year it will go away.”
Under the new plan, employees will no longer be able to choose a $200 deductible plan. The lowest deductible will be $500.
Because new premiums for the $500 deductible plan are lower than old premiums for the $200 plan, employees with dependents who switch plans will save between $200 and $700 per year, Buckler said.
The only employees who will have to pay more are single employees with no dependents, Buckler said. Even though the city pays 100 percent of their premiums, those employees have to cover the higher deductible.
“Employees with dependents pay the highest out-of-pocket expenses,” she said, explaining that coverage for dependents of city employees is not paid for by the city. “Mathematically, this plan is pretty fair. Everybody is bearing a little.”
Fleming said the 20 percent premium increase will affect no employees’ take-home pay because every city worker will get a cost-of-living salary increase of either 3 percent or 38 cents per hour, whichever is higher.
“The way we came up with the minimum increase of 38 cents is that’s what it would take to recover the increase for a family with insurance,” she said.
The effects of the changes will depend on how the insurance is used, Fleming said. The prescription drug co-pays went from $5 to $10 for prescription drugs and $10 to $20 for brand-name drugs.
“Some people with maintenance drugs will have higher out-of-pocket expenses,” Fleming said. “Those who don’t have maintenance drugs might be better off now.”
Maintenance drugs are medicines taken on a regular basis.
The city hired a consultant to examine its health plan. The changes are based on the consultant’s report. The findings will also be used to determine what changes will be made to the 2007 health-care budget, Beck said.
Changes being considered for 2007 include an increase in out-of-network deductibles and a mail-order pharmacy option.