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Local governments face rising in health insurance costs

Sunday, November 11, 2012

Local governments no longer find themselves immune to the rising cost of providing health insurance for employees.

The city of Cape Girardeau will pay about 6 percent more -- or about $140,000 -- next year to cover approximately 370 employees who receive health insurance benefits. The increase at least partly is due to a large rise in the number of claims; especially high-dollar claims. It comes after several years without a significant increase in the cost of premiums. The only recent increase was a 1 percent jump for dependent premiums last year.

County Clerk Kara Clark Summers has been leading meetings to discuss possible changes to employer-sponsored medical benefit plans for the county's 170-plus employees.

On Thursday, Summers likely will propose to the county commission that medical insurance coverage should come under the charge of the county with help from a third-party administrator. This would be instead of retaining the use of a full-service health insurance company.

The city is seeing the first change in the design of its health plan in more five years and its first significant increase in costs in an even longer span of time.

David Johnson is a consultant with CBIZ Benefits and Insurance Services, which was hired by the city to evaluate health insurance companies' proposals and plan designs. He told city council members Monday that higher insurance costs are justified because of a "dramatic" increase in claims the past two years. Paid claims are up 27 percent, and 15 of those claims were for more than $50,000 each.

The city won't scale back its benefit package. It provides employees with an option of participating in a traditional preferred-provider organization health plan or a health savings account plan and offers dependent coverage. City employees don't pay a premium for their coverage, but they do for dependents.

No extra costs will be seen by employees for their own premiums, but premiums for dependents will rise 6 percent.

Employees will pay a bit more for co-pays on specialist visits and prescriptions with the plan changes. No changes will be made to the city's plan for dental insurance.

Assistant city manager Heather Brooks said a 6-percent increase in health insurance costs was budgeted during annual planning.

No single reason has been determined for the increase in claim amounts since the city receives only aggregate information regarding the usage of its plan.

The city does, Brooks said, use an employee benefit team that works with human resources and the service firm to analyze trends and determine if changes are needed. She said claims often are cyclical, "meaning you will see some really good years and then some bad years. We had several years of good claims and now we are starting to see some increases."

The city's experience before this year seems to indicate it might have bucked a trend seen elsewhere. Premium costs for employer-sponsored health insurance have been rising for years, only to level off somewhat this year, according to a study released this fall by Kaiser Family Foundation and the Health Research & Educational Trust.

A Bureau of Labor Statistics report in July stated local government employers paid a greater share -- up to 8 percent more -- of medical premiums than private industry employers for single coverage.

Up to 8 percent more in just one year is the amount Summers predicts the county will need to pay if a proposal to self-insure employees is not approved by the commission.

"This is something we have been looking at for two years," Summers said. "It is taking a bit of a risk, but if we don't do something now, we could have a lot higher cost put out to us."

Summers said county employees would keep their existing benefits, which are similar to those offered by the city, with the employee's premium being fully paid. The difference would be that the county would design the plan and pay the benefits; anything budgeted but not paid out in claims would come back to the county instead of going to the insurance company.

Summers said the design of the plan would be based on the current plan provided by the insurance company, and employees would not see a difference in coverage.



Pertinent address:

401 Independence St., Cape Girardeau, MO

1 Barton Square, Jackson, MO

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Health insurance premiums are out of control have been for a long time crushing small businesses and the Affordable Health Care Act hasn't even kicked in yet wait until that happens.

-- Posted by swampeastmissouri on Sat, Nov 10, 2012, at 7:00 AM

Anyone know if cities or counties are allowed to offer their employees HSA- or MSA-type policies? I would think savvy employees would love to be afforded a measure of control, and the possibility of saving what they don't spend. It makes such good sense, and usually the laws are written such that the political class gets the alternatives that make sense (just look at Congress).

-- Posted by Givemeliberty on Sat, Nov 10, 2012, at 7:57 AM

Just wait till Obama care kicks in.

-- Posted by scared of the future on Sat, Nov 10, 2012, at 9:26 AM

First, let's shop the "experts" to see if our city's offerings to employees is standard?

Second, shop the insurers? When is the last time we went out for bids for the whole package?

Too many unanswered questions and I'm not comfortable with the people doing the shopping here - kind of like putting the fox in charge of the chicken house?

-- Posted by landlord on Sun, Nov 11, 2012, at 9:17 AM

The city is self insured, meaning they pay for all claims, plus a administrative fee to a company to administer the claims. Cost increases are due to health providers prices going up, or a higher number of claims. Using a consultant to provide industry specific advice is a prudent measure. Good job to the city leaders for not being held hostage to big insurance company whims.

-- Posted by 5jays on Sun, Nov 11, 2012, at 3:07 PM

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Map of pertinent addresses