Cheyenne City Council approves health insurance for employees

May 24--CHEYENNE -- The Cheyenne City Council on Monday approved new health insurance for city employees that seeks to strike a balance between costs and effectiveness.

The City Council was required to drop its existing plan with Cigna because the insurer sought to increase the city's insurance premiums by more than 60 percent, from $7.8 million a year to more than $12 million.

The Cigna plan had been a continuation of the generous insurance plan employees enjoyed through WinHealth, which included no deductible and a $15 co-pay for most doctor visits, with the city paying 87.5 percent of employee premiums.

The city penned an 18-month agreement with Cigna after WinHealth entered receivership in October 2015; but due to high claim rates for more severe insurance claims, Cigna wound up on the losing end of the agreement, hence its much more expensive renewal terms.

The City Council had been poised to vote on a new plan through United Healthcare on May 15. That plan includes a $1,000 annual deductible and a maximum annual out-of-pocket expense of $5,000. Monthly premiums would come to $683.88 for an individual employee and up to $1,942.23 for an employee and their family, with the costs split 80/20 between the city and the employee.

But the City Council opted to delay the vote by a week to ask for more options. Specifically, city employees wanted to have a choice between the above-base plan and a second plan that costs more but offers better coverage, which was something about 11 percent of city employees signed up for under the WinHealth/Cigna arrangement.

Dianna Madvig of consulting firm Cobecon provided just that option Monday night, as well as several other color-coded plans for council members to choose from.

The "green plan," as she called it, did indeed provide two plan options for employees, and would cost the city about $8.44 million, versus the $8.76 million budgeted for health insurance for Fiscal Year 2018.

"It works similar to the plans they have now except for the benefits," Madvig said. "This puts you a little under budget with the plan, with one small caveat."

The caveat, she said, was that the cost savings would only be true if the rate of employees choosing the second plan stayed the same at 11 percent.

"If we ended up with 25 percent of employees shifting to the (second plan) or we ended up with 5 percent of employees shifting to it, that would greatly affect what your bottom-dollar line is," Madvig said.

Madvig also presented two other plans, "purple" and "brown," which she said were the same as the base plan the council had considered May 15, but with some extra cushion for employees in the form of a health reimbursement account, or HRA. The purple plan dedicated $262,000 in city funds to the HRA, while the brown plan dedicated half that amount.

The idea behind the HRAs, Madvig said, was to soften the blow of employees shifting from a zero-deductible plan to a $1,000 deductible plan by allowing the city to spend out of the HRA to reduce those costs in some cases.

"If the city wanted to take some of the higher deductible burden away from the employees the first year, we could put that HRA in on the back end of the $1,000, and that would allow the employees to go in and utilize it," she said. "When you have a copay-rich plan, a majority of your employees won't meet their deductible. This allows you to not get into a position where employees are paying out of pocket for 100 percent of their expenses."

Stephanie Lowe, representing the Cheyenne Public Employees Association, said her preference would be for the city to maintain its current insurance coverage, which she recognized was fiscally unsustainable. Given the remaining options, Lowe said she would prefer the purple plan, with its more robust HRA.

"I have myself to consider, and representing all the public employees, it's a very tough decision going forward," Lowe said. "(I would prefer) to have that HRA to help with some of the costs we aren't used to shouldering. But taking on this extra responsibility to cover our own health-care benefits is something the employees do need to step up and realize. The health-care world is changing, and we need to be part of that conversation moving forward."

But if the council couldn't justify the extra cost of the HRA options, Lowe said she could settle for the base plan it had previously considered, given the concern over whether the city could maintain the 89-to-11 percent ratio for the dual-option plan.

The HRA plans did have appeal among council members, but costs remained a concern, particularly given the city's high claims rate. Councilman Mark Rinne suggested the city might go with the base plan for this coming fiscal year, then, if the budget picture improves and the number of claims drops, it may revisit the HRA plans on more favorable terms for FY 2019.

"This is somewhat of a bitter pill, but I don't know that we had a lot of alternatives," Rinne said. "I think that's something we could entertain, and it's something I'd like to entertain if we have a better year and the money's available."

Mayor Marian Orr agreed that if there is any upside to the council's health insurance decisions, it's that they can be revisited the following year.

"We're in this for a year, and if we can do better with our experience rating or have high claims that drop off, we may be able to add an additional HRA plan that will be affordable within our budget," Orr said.

Ultimately, council members voted 7-2 to approve the base plan they'd previously considered May 15. Council members Richard Johnson and Rocky Case were the dissenting votes, while Councilman Jeff White did not attend Monday's meeting.

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