Employee health and ancillary insurance benefits for the new fiscal year recently were approved by the Crestwood Board of Aldermen.
Aldermen voted 7-1 to authorize a contract with Anthem for employee health benefits for the period of July 1 through June 30, 2011. Ward 1 Alderman Darryl Wallach was opposed.
The board voted unanimously in early June to authorize a contract with MetLife for employee dental benefits and a contract with Standard Insurance for employee life and long-term disability insurance. The ancillary contracts are effective for the period of July 1, 2010, through June 30, 2012.
Anthem, Crestwood’s current health insurance provider, will increase overall premium costs by roughly 27 percent over fiscal 2010 levels. It initially bid a roughly 39-percent overall cost increase, but lowered that amount after the city received a bid from Aetna for health insurance coverage at a roughly 30-percent overall increase over fiscal 2010 premium levels. The city sought bids through its health insurance broker, Strategic Employee Benefit Services.
After meeting to review health insurance options for the city, a group of employees comprised of representatives from each department decided it was satisfied with the current benefit plan but recommended the city reduce employees’ premiums by offering them the choice of either a low- or high-deductible plan.
The city had offered only a $100 deductible plan, meaning employees pay the first $100 (or $300 for family coverage) of Anthem’s total $1,500 ($4,500 family) deductible and the city self-insures the remaining $1,400 ($4,200 family).
Under the new option, employees would pay the first $1,000 ($3,000 family) of the $1,500 deductible ($4,200 family), and the city would self-insure the remaining $500 ($1,500 family).
Crestwood budgeted for a 15-percent cost increase for the employer part of employee health insurance premiums, which is the figure generally used for medical inflation.
If the entire premium budget of $737,156 is allocated, employees who remain on the $100 deductible plan would see their premiums increase roughly 46 percent to 89 percent over current levels, depending on the coverage tier selected — employee; employee and spouse; employee and children; or family.
Employees who choose the new $1,000 deductible plan, however, would see their premiums increase by only roughly 14 percent while the city’s share of those employees’ premiums would increase by roughly 30 percent to 35 percent. Despite the increase to the city’s share of the premiums under the $1,000 deductible plan, officials hope to offset the additional cost through reduced health insurance reimbursements toward the deductible. The city budgeted $75,000 for such reimbursements in 2010.
“The cost to the city is very similar,” City Administrator Jim Eckrich said June 8. “If the employees take the $1,000 deductible in lieu of the $100 deductible, they’ll reduce their premiums, which increases the city’s premiums. However, on the opposite end, the city will be reducing the amount we pay for our health insurance reimbursement. Our deductible payment will go down. It should be a similar payment either way.”
With a higher deductible plan comes a higher risk to the city, though, Eckrich said, as there is a chance Crestwood could end up paying more for health insurance if a large number of employees choose the $1,000 deductible plan — and then exceed the $1,500 deductible, thus driving up both the city’s premiums and health reimbursements.
Eckrich said there is no way of knowing how many employees would select the high-deductible plan, but said about 15 employees last year exceeded the $1,500 deductible. An estimate provided to the board June 22 shows that the city would pay $851,466 in premiums if every employee chose the $1,000 deductible plan — $114,310 more than the $737,156 budgeted for premiums in 2010. But Eckrich said it is unlikely all employees would choose the same deductible plan.
The city administrator noted the health insurance contract was for the fiscal year while the city’s budget covers the calendar year, meaning insurance costs could be adjusted later in the year when officials prepare the 2011 budget.
“It depends on the number, the percentage of people who take the $1,000 deductible plan over the $100 deductible plan,” Eckrich said. “Once we know how many employees are going to take each plan, we’ll be able to better budget for this, and we can correct next year.
“Every year we come into this meeting, and we have an enormous increase for employee health care,” he added. “We feel like by trying to incentivize employees by paying a higher deductible, they’re going to take better management of their health care finances and in the long term, change some behaviors to reduce our health care costs.”
Wallach proposed that the city offer a health insurance option with an even higher deductible plan — $2,500 individual, $7,500 family — to further drive down their premiums, contending that those savings would be worth the increased risk to the city. He moved to amend the health insurance contract to include that option, but his motion died for lack of a second.
Ward 3 Alderman Jerry Miguel, who on June 8 voted against the second reading of the health insurance contract ordinance with both the $100 and $1,000 deductible plans included, said June 22, “I was actually looking for the city to move in the other direction in the future, and that is to get out of the risk business. I’m just not comfortable taking on a higher risk at this point.”
As for ancillary insurance, Principal’s renewal bid included a 26.2-percent increase for dental coverage and 2.4-percent increase for life insurance — including accidental death and dismemberment. The renewal bid from Lincoln Financial for long term disability insurance included a 6-percent decrease. The city budgeted a 12-percent aggregate increase for each of these benefits.
MetLife, however, provided a bid for dental services with a 6.7-percent increase, offering a benefits package similar to Principal’s. Standard Insurance provided a bid for life insurance — including accidental death and dismemberment — which was 22.2 percent below the current rate. Its proposal included a line of duty benefit and an enhanced accidental death and dismemberment benefit greater than that previously provided by Principal.
Standard also provided a long-term disability insurance bid 9 percent below the current rate from Lincoln Financial.
“While the savings above seem rather substantial as a percentage, in actuality the monetary savings is rather insignificant,” Eckrich wrote in a June 3 memo to aldermen, noting that the city would save an estimated $7,000 by contracting with MetLife and Standard for ancillary insurance.