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City insurance changes planned

By Sara McManamy-Johnson sjohnson@lebanondemocrat.com • Dec 17, 2015 at 6:21 PM

Lebanon’s city employees will likely see some significant changes to their health insurance benefits in the near future.

“Our goal this year was to make some changes in the health insurance that cut out some unnecessary expenses in the hopes of not having to reduce benefits,” said Robert Springer, the city’s commissioner of finance and revenue.

He said that since 2006 the city’s health insurance costs have increased by 70 percent, while employees pay almost the same as they did in 2006. With the recent implementation of the Affordable Care Act, Springer said he believes those costs will only continue to rise.

He called the city’s benefits package “unsustainable.”

“[The city] can’t continue that trend,” said Springer.

Rick Thorne of THW Insurance Services told city council recently that if health insurance costs increase over the next eight years in the same proportion as the last, an individual policy would cost more than $1,100 per month and family coverage would be more than $3,000.

“This is not sustainable,” said Thorne.

Currently, health insurance costs comprise nearly 10 percent of the city’s overall budget, according to Springer.

He proposed several changes to help address the city’s rising costs.

“Since February, we’ve been working intensely to develop a plan with minimum impact and maximum savings,” said Springer.

Spousal exclusion

According to Springer, about 35 percent of the city’s employees have spouses who have health insurance available through their employers, but choose not to take it, instead opting to use the city’s health insurance.

This reduces costs for the spouse’s employer, but raises costs for the city.

“In essence, the city is subsidizing these other businesses,” said Springer.

The city pays about $530 for an employee’s spousal coverage, so discontinuing coverage for spouses who have it available elsewhere would immediately save the city about $622,000.

Springer said the change would not apply to employees whose spouses do not have health insurance available elsewhere and it would not apply to coverage for employees’ children.

Under the proposed change, the employee would be provided a verification form for the spouse’s employer to complete, verifying whether the spouse is eligible for benefits through work.

Proof of dependency

In national surveys, the number of people on a health insurance plan for which they are not actually eligible ranges from 2-12 percent, said Springer.

Most commonly, that group includes ex-spouses and former stepchildren who are no longer legally dependent since a divorce.

Springer said that, statistically, the city would likely fall in the middle of that range, but even at the low end – 2 percent – that cost equates to about $100,000 for the city.

Springer hopes to cut that cost by simply requiring employees to provide documentation such as a marriage license, birth certificates or tax returns for spouses or dependents during enrollment.

“The goal is not to knock somebody off the plan that legally should be on the plan,” said Springer.

He said that although this may have seemed punitive in previous years, when preexisting conditions and such could make individual health insurance plans hard to come by, that’s not as true today since the implementation of the health care exchange.

With available subsidies, an individual plan on the exchange can be relatively reasonably priced, he said.

“It’s not as harsh to purge today as it was before,” said Springer.

Tobacco-user prices

The health ramifications of tobacco usage are well known. People who use tobacco products are more prone to negative health consequences, including cancer.

Because the city’s health insurance costs correlates to the prior year’s claims, this costs the city extra money.

To help offset these costs, Springer proposed increasing the employee’s share of premiums for those employees who use tobacco products.

Although he’d originally proposed implementing this change in 2015 to give employees who currently use tobacco products the chance to quit, city council asked that the changed be moved up to this July.

Councilor Rob Cesternino said he felt employees already know the risks of using tobacco and that’s their choice to make as adults.

“I don’t think we’re running a kinder-care in this country,” said Cesternino.

Moving the date forward will still give employees who use tobacco products the chance to quit, but will also allow for cost savings to the city sooner rather than later.

Springer said that the city will see an immediate increase in dollars from employee shares, but the overall savings will be more long-term because of the decrease in doctor visits.

Tiered prices

Currently, city employees pay one of two prices for their portion of insurance premiums: employee only or employee plus family.

Springer is proposing adding additional pricing tiers to more accurately reflect family situations: employee, employee plus spouse, employee plus children and employee plus spouse and children.

“This option will better allocate actual costs with those covered,” said Thorne.

Springer said this change wouldn’t necessarily save money for the city, but it could save money for the employees.

“It’s just more fair,” said Springer.

He noted that adding the increased prices for tobacco users would actually create a total of eight tiers.

Wellness program

Springer proposed creating a wellness program for city employees and their spouses.

“Initiating a wellness program not only will benefit city employees, but will lower premium costs to the city,” said Thorne.

Additionally, several insurance companies offer cash to help implement one, he said.

According to Springer, the city already provides money to the Jimmy Floyd Center out of the general fund, so he suggested providing city employees and their spouses free memberships.

ER benefit change

The deductible for an ER visit would change from $100 to $250.

Renewal date change

The renewal date for fiscal year 2014-2015 will be changed to April 1, 2015.

Springer said changing the health insurance renewal date will allow the city to more accurately budget each year.

“Moving the renewal date to April, by the first of February we’re going to have a hard number in our hand,” said Springer.

Which is especially important given how large a role it plays in the city’s budget, he said. 

Currently, the city’s health insurance renewal date is July 1, which is also the date by which the city must pass a budget according to state law.

What’s next?

According to Springer, these changes would take effect July 1, but he said employees should expect to see more changes in the coming years.

“This is the first of a three-year approach to addressing the rising costs,” said Springer.

He said he understood the city’s general mindset was to offer premium benefits to offset generally lower wages, but he said that strategy would no longer work.

“You increase wages 1-2 percent, but you increase benefits 15 percent…You can’t solve this problem with this solution; it’s going to bankrupt you,” said Springer to city council.

More detailed information will be available after the city receives quotes from health insurance providers for the 2014-2015 fiscal year.

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