City employees to take on more benefits obligations

May 09--Due to increasing insurance premiums, the city is taking steps to reduce costs by moving to a partially self-funded plan. City council approved the resolution which will impact 72 out of the 125 current city employees enrolled in the city's PPO plan.

The city's insurance through Wellmark Blue Cross Blue Shield renewal schedule runs from July 1 to June 30 each year. Historically, its premiums have seen an increase of approximately 3 percent to 6 percent each year. However, due to a high claims experience during the last year, the renewal rate came in at 18 percent increase for the next year.

"In looking for ways to reduce cost and improve claim experience through Wellmark, the city has been working with our broker, Holmes Murphy on the possibility of moving to a partially self-funded plan," city administrator Matt Muckler said. "The benefits to the employees would stay the same but the city would purchase a higher deductible plan and cover the difference in deductible for employees that reach their contracted benefit limits."

With the new plans, a 3.5 percent reduction in premiums would take place for the city and city employees. Through research, it is estimated, based on last year's numbers, only 25 of the 300 plus members covered would meet the initial contracted deductible.

"It will allow greater flexibility with rates/premiums and assist in reducing our claim experience," Muckler said. "Any additional savings due to a reduction in claims would be used to buy down future year premiums."

This move comes as the city begins to address the increasing dollars spent on employee benefits. Employee costs per capita has become a warning trend for the city the past several years with employee benefits expenditures topping out at almost 15 percent higher than the national average.

"When comparing the cost of Newton's employee benefits as a percent of salaries and wages, Newton benefit costs are significantly higher than the national average," senior analyst Natalie Umstead said during her trends report. "As of March 2016, national average for public agencies was 36.6 percent and Newton has been around 50 percent for the past several years."

To address the trend, Umstead suggested utilizing the wellness committee to a greater extent to encourage employee wellness and healthy lifestyles, continuing to encourage the use of health savings account plans which have a lower financial burden on the city, conducting an analysis of employee benefits costs to determine a way to reduce the claims of the top spenders which could lower costs and negotiating benefit contributions separately from salary in negotiations with bargaining groups.

Contact Jamee A. Pierson at 641-792-3121 ext. 6534 or [email protected]

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