After receiving information at three meetings, the Henderson City Council expects to make a decision on which health insurance to buy for employees in the fiscal year that starts July 1.
The choice appears to be a tossup between staying with Blue Cross and Blue Shield, represented by Phil Burnette, or switching to the insurance pool run by the North Carolina League of Municipalities, which provided Henderson’s health insurance until mid-2003.
Stay with us as we try to keep the numbers as simple as we can.
For taxpayers, tonight’s decision is a win-win situation. City Manager Eric Williams’ budget proposal includes $1.205 million for employee group insurance (health, dental, vision and life), a 10 percent increase. Whichever insurance carrier the council selects, the total cost will be lower than budgeted, freeing money to be shifted elsewhere.
What’s not clear at this point is how much lower the insurance price will be. Under the latest proposal from the League of Municipalities, the total for insurance would be $996,000, not including the cost for 29 retirees who are on Medicare and get gap insurance through the city. Under the latest Blue Cross, proposal, the total would be $1.012 million.
As their Medicare gap insurance rates now stand, the city would expect to pay $75,000 more during the year for 29 retiree through the League or $87,000 more through Blue Cross. Because of the federal drug benefit that begins through Medicare in January, called Part D, the cost for these retirees could drop further under the League plan halfway through the year; the Blue Cross price includes a $30,000 price cut Jan. 1.
Add the Medicare gap policies into the other insurance and you get a final price of $1,070,387 for the League or $1,099,605 for Blue Cross. If those numbers hold up tonight, the council’s insurance choice will cut the proposed budget by $106,000 to $135,000, equivalent to roughly 1.5 to 2 cents on the property tax rate.
(Warning: This paragraph is likely to add unnecessary confusion. Feel free to skip it! The tentative part about those numbers is that it wasn’t clear Tuesday night whether the $1.205 million budget line included the Medicare retirees. Also, Peggy McFarland, the acting finance director, ran some retiree numbers at council member John Wester’s request that showed a bottom-line cost slightly in Blue Cross’ favor. Examining those numbers after McFarland left, no one was quite sure where they came from, given that Burnette acknowledged that the League was cheaper for Medicare retirees and that the under-65 retirees were included in the main insurance numbers.)
As for city employees, although they don’t know whether they’ll carry insurance cards from Blue Cross or CIGNA come July 1, they are almost certain to be paying more out of pocket.
Under the latest policies from the League and Blue Cross, the ones that would minimize the increase in the city’s cost, the deductible for employees would increase to $1,000 from $500. The benefits from the insurance would remain essentially the same regardless of which company gets the business, with at least one notable exception: As the League’s Angela Greene explained the bottom line at the first insurance meeting May 26, employees would pay less by $500 over the course of the year based on the way the out-of-pocket expense is calculated. That difference did not come up again at a FAIR Committee meeting Tuesday night.
The city pays the entire cost of individual employee coverage. Under the League’s $1,000-deductible plan, the monthly cost per employee would be $269; under the Blue Cross proposal, it would be $284.51. By comparison, the cost to maintain a $500 deductible would be $296 per month through the League and $307.93 through Blue Cross. Council members discussed giving employees the option to buy up to the $500-deductible plan by paying the difference between the monthly premiums: To keep a $500 deductible if the city chose the League plan, a single employee would have to contribute $27 per month out of his paycheck.
The big difference between the League and Blue Cross for employees comes in the area of dependent coverage. Employees must pay the cost beyond the individual premium to get employee-plus-children, employee-spouse or employee-family coverage.
Because of the high cost of those dependent polices, only 24 employees have coverage for their children, nine employees and seven under-65 retirees have coverage for their spouses, and six employees have full family coverage. One of those six, Police Chief Glen Allen, has said his wife is shopping for a separate individual policy because the family coverage is so high.
Right now, the city pays $274.77 per month per employee for health insurance. Employees must pay an additional $277.03 per month to cover children, $342.09 per month for a spouse and $646.69 per month for family coverage.
Under the $1,000-deductible Blue Cross plan, employees would pay $11.63 per month less for child coverage, $57.47 more per month for spouse coverage and $24.96 less per month for family coverage.
Under the $1,000-deductible League plan, employees would pay $74.80 less per month for child coverage, $26.86 less per month for spouse coverage and $161.46 less per month for family coverage.
The savings are big enough for the policies with children or entire families that Williams and council member Elissa Yount said more employees might choose that option.
Police Capt. Charles Crumpler, however, said that for most employees, the bottom line won’t change: They’ll pay more out of pocket because of the higher deductible.
If the change to the League doesn’t make much difference to employees, Crumpler said, “why is $18,000 worth grappling over?” The difference between the prices for the $1,000-deductible plans without the Medicare retirees is $18,085.27.
Wester, who’s an insurance agent but doesn’t sell health insurance, raised doubts about the reliability of the League’s coverage in the long term because its pool of cities is relatively small; Henderson would be one of the bigger members. Kinston is the biggest city in the insurance pool.
“The larger the pool, always the better the results,” Wester said.
He said the League’s proposal was an example of “buying the business,” or making a low initial offer to sell an insurance policy, in the expectation of raising the price a year later at renewal time.
Greene, however, said the reason that the League can offer much lower prices for dependent coverage while calculating prices from the same claims history is that the League doesn’t have salesmen on commission. In other words, Blue Cross has to charge enough to pay Burnette’s commission.
Because of the League’s lower price and the lower premiums for dependent coverage, Yount said she’s in favor of switching to the League.
Wester seemed to favor staying with Blue Cross because $18,000 isn’t enough savings to justify switching only two years after the city left the League for Blue Cross, a move that saved the city $100,000 in the first year, he noted.
Harriette Butler said she prefers staying with Blue Cross because of the quality of coverage.
Mary Emma Evans said she wants to do what’s best for the employees but did not commit to one policy. None of the other council members expressed a preference.
The FAIR Committee will meet at 6 p.m. at the Municipal Building with the intention of making a decision, as well as addressing other budget matters.