City health plan called unsustainable

Nov. 18--An insurance consultant this week called Palestine's city employee health insurance plan "unsustainable," and "incredibly rich" when compared to those of other municipalities and companies.

Under the city's self-funded plan for a single person, employees currently pay $69.15, twice a month, while the city chips in $718. The city funds 88 percent of the insurance premium costs for employees. By contrast, companies typically pay about 70 percent of the premiums.

"You have the richest contributions anywhere," Lance Clemens with Arthur J, Gallagher Co., told Council members on Monday. "It will become non-sustainable. Your plan is incredibly rich."

Clemens told Council members medical insurance continues to rise much faster than inflation. Medical insurance costs rose sharply in the last year, he said. The city spends $3 million a year for employee health insurance and dental benefits.

City insurance for employees is partly self-funded; the city pays up to $75,000 toward medical procedures for a city employee, and the insurance company picks up the rest.

Because insurance rates are calculated on a calendar year, the city must estimate costs for this fiscal year, which started Oct. 1.

Two large claims by employees late in the year -- $1.1 million and $500,000 -- made insurance providers more cautious about covering the city.

Gallagher outlined two options: a 172 percent increase in insurance rates, or changing costs to the city based on the health risks of individual employees. The city, for example, would pay much more for the employee with medical bills amounting to $1.1 million.

Under one proposed plan, the employee share for 2018 would increase from $83 a paycheck to $228 for single individuals. For families, the rate would increase from $210 to $573.

Clemens told Council members insurance companies don't like co-pay plans, arguing employees with co-pays don't compare rates because they pay a set fee.

"If you do co-pay, you don't care (what the cost is)," Clemens said. "Co-pays are one of the problems with health care."

An alternative Core plan offers employees deductibles of either $1,500 for single individuals, or $3,000 for families. The city would pay $500 to $1,000 toward the deductibles. Because the plan has no co-pays, it allows employees to enter into the city's health reimbursement plan to help offset potential medical costs.

Clemens estimated 20 to 25 percent of employees would move into insurance plans with higher deductibles and cheaper premiums, at $50.85 twice a month.

The city budgeted $111,000 for dental insurance, but the actual cost decreased 5 percent, or $16,000, a year, with employee rates decreasing to $48.05 a month.

"This plan has saved the city money," Clemens said.

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