Local governments face health care crunch this budget season

Aug. 20--Local governments, which historically have offered generous health-care benefits to their workers, are facing tough decisions this budget cycle as health-care costs continue to rise.

"To be honest with you, I think it's pretty disturbing about what we have run into over the past few years. It's just increased by large numbers," said Athens Mayor Ronnie Marks.

Most local governments project further increases in health-care spending for fiscal 2018, which starts Oct. 1, and most still have not determined how they will pay for the projected increases in their budgets.

In Decatur, Mayor Tab Bowling said city officials have been advised by the Local Government Health Insurance Board, a joint-risk pool that includes several other government entities, to plan on a 6.5 percent increase in premiums next fiscal year.

In Limestone County, officials said they have been advised to expect a 7 percent increase in premiums from their Blue Cross Blue Shield Local Government provider.

"We're just like everybody else across the county. It's a struggle," Limestone County Commission Chairman Mark Yarbrough said.

Prior years also have brought spending increases for local governments. Decatur Human Resources Director Richelle Sandlin said insurance rates climbed 4 percent last year and 8 percent the year before that. Limestone County saw identical percentage increases over the same period.

Self-insured governments, which pay their own medical expenses, gambling health-care spending by their employees will be cheaper than paying non-refundable insurance premiums, saw even greater spending hikes.

In Athens, health-care spending climbed 15 percent between fiscal 2015 and 2016, jumping from $4.6 million to $5.3 million. Over the same time period, Morgan County saw an 18 percent increase as health-care claims climbed from $3.02 million to $3.58 million.

The year before, Morgan County's claims climbed 21 percent, and the county is on track to close fiscal 2017, which ends Sept. 30, about $880,000 over budget on health care.

The rising costs raise the possibility that local governments could pass more of the expenses along to employees, and self-insured governments could end that practice to join risk pools in hopes of stabilizing rapidly climbing expenses.

Asked if Athens would continue to operate as a self-insured government, Marks said "all options are on the table." In past years, being self insured has worked to the city's advantage, allowing it to add cash to its reserves in years when health spending was low, but that has not been the case the past few years, Marks said.

"These are tough decisions, particularly when you're talking about the possibility of having to cut benefits and things like that," Marks said.

Athens pays 85 percent of employee premiums and 50 percent of retiree premiums.

Self-insured governments typically still pay premiums to insurance companies.

At the end of each quarter, they get whatever remains back in the form of a rebate. If spending exceeds what was paid in, they must pay the difference.

In Decatur, Bowling said it would be up to the City Council to decide whether it will pass any additional expenses along to its 498 covered employees and 225 retirees.

The city pays about 92 percent of premiums, well above the typical 80 percent that most private companies pay, Sandlin said.

In Limestone County, employees with single coverage don't pay any of the $444 monthly premium covered by the county, and the county covers 70 percent of the $1,082 premium for family coverage.

Yarbrough said county officials were still "crunching the numbers" when asked last week where they would get the money to cover their projected 7 percent increase.

In Morgan County, Commission Chairman Ray Long has ruled out the possibility of a premium increase, at least temporarily. Long said he won't propose increasing what employees pay, but the numbers will be tracked closely.

He was warned that deep cuts, including possible layoffs, likely will be necessary if trends in health-care spending don't reverse.

Morgan County and Decatur both offer web-based tele-medicine services to their employees in bids to reduce health care spending for minor illnesses that can be handled over the phone.

If the governments cut health-care benefits in the effort to cut costs, they could become less competitive with the private sector, which often offers higher salaries for similar positions.

Sandlin said many Decatur workers who came from the private sector accepted pay cuts in return for robust benefits.

"It's not apples to apples when you're talking about salaries. You've got to look at the whole package," she said.

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