CAPE PLAN CALLS FOR NEW INSURANCE TO START JAN. 1

Escalating health insurance costs have driven Cape Girardeau to offer a self-insurance health plan for city employees. The plan will take effect Jan. 1 and will cover 384 employees and their families. City Council members approved the staff recommendation for self-insurance at its meeting Monday. A team of city staff members, representing nearly every department, had studied the issue for several years. After realizing the health plan would increase premiums by at least 20 percent, city officials began looking at other options in the self-insurance market. "If you know that rates could double in a year and that there are other options, then it would be smart to look at those other options," said Dan Ward, the city's human resources director. The city has looked at ways to lower its health insurance costs while improving benefits. A self-insurance plan might not offer great savings in its first year, but "in the next couple of years we should be able to see benefits improve and stabilize rates," Ward said. Because there are too many unknowns about the amount of claims that have been filed in the past two or three years and what health needs will arise in the next year, the city knows it won't see any savings right away, he said, but by the same token, there aren't likely to be any rate increases either.

Under the existing plan, which expires Dec. 31, the city would have had a 20 percent rate increase in the coming year, and with no claims information from HealthNet Blue, its insurance provider, rate increases of 100 percent up to 300 percent would have been likely over the next two years, Ward said."We are using the exact same rates as the current plan would have if we renewed," he said.

The city will not administer its claims but has hired Swinford-Hoffman and Associates as a brokerage agent and Century Planners as its administrators. All companies operate to make a profit, and insurance companies aren't any different. Insurance companies divide part of each policy premium amount into a profit fund and another fund set aside for times when claims go higher than anticipated, Ward said. If someone has bought earthquake insurance recently, they'll know those premium costs are higher because of all the flood and natural disasters that have caused insurance companies to raise rates. "That industry has taken a beating" in payouts, Ward said.

With self-insurance, the city is able to design a plan that will be most beneficial for its employees. Any re-insurance costs will make sure all losses are covered, but if there is any profit over the course of a policy year, the city claims that net not an outside company."That's what is gained by being self-insured," Ward said. "We retain that profit."Many cities around the state -- Columbia, Springfield and Joplin -- have all become self-insured in some respect. Some cities only operate a self-insurance plan for workman's compensation while others offer all plans under self-insurance. Cape Girardeau has been self-insured on workmen's comp since 1994.

A self-insurance plan is the right choice for the city, said Mayor Al Spradling III. "It's been done in the public schools and it's been a good thing because of the escalating costs," said City Councilman Richard "Butch" Eggiman.

Employees can control their own health benefits by the amount of claims they make. "We're letting people know that it's to their benefit to keep the claims to a minimum," Ward said.