Harrisburg council faces steep health insurance increase

HARRISBURG — City leaders say a steep rise in health insurance costs is leaving Harrisburg with few options this year, as council members work to manage a 16% increase and brace for deeper negotiations with unions and retirees next year.

Representatives from Farmer’s Insurance, which manages the city’s insurance portfolio, told the council this week that they shopped the plan across the market but found almost no carriers willing to quote the level of coverage required under the city’s contracts.

Steve Williams with Farmer’s Insurance told the council the city faces a 16% increase and that his team searched the market for alternatives but found almost no options.

“We did go out and look to see if anything was out there,” Williams said. “We had eight self-insured companies decline. We had three fully insured, including Blue Cross Blue Shield, decline. The only quote we got back was from Cigna, and they’re 14% higher.”

City Administrator and Treasurer Alex Jackson said union contracts dictate what the city must offer, including a $1,500 deductible for both individuals and families. That structure, Williams and Farmer’s Insurance representative Eric Widgets said, is richer than most carriers want to quote in today’s market.

“You have a $1,500 deductible for the single, but that also is a $1,500 deductible for the family,” Widgets said. “That plan there is, like you might even say, Cadillac, but everybody’s shifting away from that plan.”

Widgets said insurers did not decline because of Harrisburg’s claims history alone, but because the plan design itself falls outside what many companies are willing to underwrite.

“When we go to the market and we show them what it is, we’re just kind of limited,” Widgets said. “The self-insured piece is you’re basically funding your whole thing.”

Williams said retiree coverage continues to drive a significant portion of the city’s claims. Eleven retirees remain on the active plan, he told the council, and they make up a disproportionate share of total medical costs.

“Looking at the claims, a big part of your issue is you’ve got 11 retirees still on this plan,” Williams said. “That’s a lot of cost. That’s where a lot of your claims are coming from.”

He said the insurance team is reviewing options to shift retirees into a separate type of plan, a structure used in other communities to reduce the strain on active-member coverage.

Despite the sharp increase, Williams said remaining self-insured continues to offer the city more flexibility and potential savings than switching to a fully insured model.

“You are the insurance company,” he said. “If you go back fully insured, you’re going to get the max and you’re with no possibility of getting anything. You’re just going to pay it all.”

Commissioner Jonathan Brown said the 16% increase represents about $400,000 in potential costs. Brown and Jackson both budgeted for roughly an 8% increase, leaving a shortfall the city will need to address.

Council members voted to approve the insurance package as presented while directing Farmer’s Insurance to continue researching plan adjustments and cost-saving options. Widgets said they will bring back additional models and re-engage carriers once the city determines what changes are possible.

“We are going to do everything we can to help you out,” Widgets said. “We just got to make some changes to it, and once we have those changes and we agree to that, we’ll go back to Blue Cross, UnitedHealthcare and those others to see what we can do.”

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