City Weighs Health Insurance Options

Ariel Van Cleave

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     Homer city officials are still considering options for the health insurance that’s offered to city employees. Rising health care costs were causing problems for budgeting and there were changes made to the insurance policies in order to save money. The move made some employees and city officials unhappy.

     In a memo to the city council from November, City Manager Walt Wrede explained the projected costs for providing health care in 2014, if nothing was done, would have been around $2.5 million for the year. Changes to the policies went into effect Jan. 1. 

     At the time, Mayor Beth Wythe said she wanted more information about better options. The benefits package is a big recruitment tool for the City of Homer. So the city council revisited the subject during a recent work session. 

     Human Resources Director Andrea Petersen has been poring over plans to find potential replacements. She’s been investigating fully-insured plans where the city would pay a third party to take care of the insurance policies or self-insured plans where the city acts as its own insurer. 

     That’s the current situation, and in a previous memo to the council Petersen wrote that’s likely not the best option for the city. But there are pros to way things run now; especially when it comes to opting-out of coverage.

     “With our current plan, any employee certainly can opt-out if they want to go to the public exchange or go to somebody else, they certainly can. If they want to opt-out and just not have health insurance, they will have to pay that Affordable Care Act penalty fee,” Petersen said.

     For this year that’s the greater of 1 percent of your taxable income, or $95. That rate increases each year. 

     If the city went with the fully-insured option, there’s no way an employee could opt out. City officials also considered giving employees a lump sum to use on the insurance exchanges. There are problems with that though. Petersen said the city would pay a fine of about $146,000 for the first year. 

     “And when you look at that, you’re like ‘well let’s get rid of health insurance.’ It’s much cheaper to pay $146,000 than to cover health benefits. But, like Mayor (Beth Wythe) has said, you go back to that total compensation package and wanting to retain good, quality employees,” she said. 

     Another issue Petersen pointed out was that if the city offers a $1,500 lump sum to all employees; that wouldn’t necessarily be equal. Some employees would see a bump in their salaries, others might see a decrease. Also, that amount would be considered taxable income. 

     The city plans to reach out to places like Kenai, Soldotna and Kodiak to learn more about they offer and come up with some other options. City Manager Wrede pointed out another major “what if” in this whole conversation.

     “What happens if our costs still continue to go up? Sixteen people have already opted out. That’s a $240,000 savings if you’re strictly looking at the budget. We think that behavior may change a little bit because people will have to act like a consumer now when they’re thinking about health care choices,” he said.

     But he said even if fewer employees are using the insurance, that doesn’t mean health care costs will stay the same or decrease. He mentioned there could be a conversation about sharing any increased costs with the employees. More conversations are expected during the city council’s next work session later this month.

 

Contact: 
ariel@kbbi.org
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