Henderson will switch from Blue Cross and Blue Shield to the North Carolina League of Municipalities for its health insurance, the City Council conditionally agreed Wednesday night during a meeting of its finance committee.
It took the council four meetings totaling more than six hours to come to a split decision that will save the city $42,509 in the fiscal year beginning July 1. The decision is contingent on the League sending the city a letter guaranteeing its below-market rates the coming year — a guarantee that the League’s Angela Greene and Hartwell Wright already gave orally. (Yes, that’s the same Hartwell Wright who was Henderson’s human resources director until last year and who engineered the city’s departure from the League’s health insurance pool two years ago.)
How the decision will affect city employees depends on the type of coverage the employees opt for.
All city workers will face an increase from a $500 deductible to a $1,000 deductible. The city is making that change, strongly advocated by Mayor Clem Seifert during the initial insurance discussions May 26, to cut roughly $100,000 from the budget City Manager Eric Williams proposed.
Williams’ plan included a 10 percent increase for group insurance costs to $1,205,250. Blue Cross and Blue Shield, the current insurance carrier for the city, planned to increase the policy’s cost by 21 percent but cut that increase roughly in half after the city decided to bid the contract out, a move council member Elissa Yount had urged.
The League of Municipalities, which has an insurance pool administered by CIGNA for its member cities, put in the low bid to regain Henderson’s business, which it lost two years ago because of rising premium costs. Henderson insurance broker Phil Burnette shopped with traditional insurance companies and came back with a recommendation to remain with Blue Cross and Blue Shield at its reduced price.
The League and Blue Cross returned with a new set of prices after the council asked for bids with a $1,000 deductible, and the result was good news for city taxpayers. It took some work Wednesday to figure out the bottom-line meaning of the proposals, but Williams said it came down to a package price of $1,012,785 for Blue Cross vs. $1,068,882 for the League with its own dental coverage or $1,054,914 for the League with dental coverage provided by another carrier, Shenandoah.
Williams recommended the League/Shenandoah combination, which costs $42,509 less than Blue Cross and $150,336 less than the budgeted amount. (Because the some of the city’s employees are paid through enterprise funds, such as water and sewer workers, the general fund savings account for $123,000 of the total.)
The city pays the full cost of individual employee coverage for health, dental and vision care. That premium is $274.77 per month per employee now. It would be $284.51 under Blue Cross’ $1,000-deductible plan. If the city goes forward with the League, the premium will be $269. Those costs are invisible to city workers.
For employees who get the individual insurance, the only differences starting July 1 should be the $500 increase in out-of-pocket expense for the higher deductible and new insurance cards. The actual coverage, as well as the network of doctors, should be the same.
Employees who opt for some form of dependent coverage — children, spouse or family — will see savings with the League compared with the current Blue Cross policy and the Blue Cross proposal for the new fiscal year. Employees must pay the entire difference between the individual premium and the individual-plus-dependent premium.
If you work for the city and opt for employee-plus-children coverage, over the coming year you’ll pay $828.36 less in premiums under the new League policy than you did this year with Blue Cross and $571.92 less than you would under the proposed Blue Cross plan.
If you get employee-plus-spouse coverage, you’ll pay $253.08 less in the new year than you did this year and $825.84 less than the proposed Blue Cross policy would cost you.
If you get the family coverage, something so expensive that only six employees took that option this year, you’ll pay $1,868.28 less in 2005-06 than in 2004-05, and you’ll pay $1,451.88 less than the proposed Blue Cross policy would cost you.
A total of 39 employees chose one of the dependent options this year, while 207 employees had individual coverage. (Those numbers reflect the comings and goings in the city staff, which now stands at 231 people.) Williams and Yount this week touted the possibility that more employees will opt for some type of dependent coverage because of the lower costs.
To put it simply, city employees who get health insurance for family members will wind up with bigger paychecks in the coming year.
That was one of the decisive factors in Wednesday’s discussions at what was technically a meeting of the Finance and Intergovernmental Relations Committee but involved all eight council members.
“How are we going to explain to the people, the employees of the city or whatever, that we could have saved them money but didn’t?” Mary Emma Evans asked.
At that point, the council was evenly split between factions most strenuously represented by Yount on the side of the League and John Wester on the side of Blue Cross.
Yount’s argument: The League’s policy saves the city money, saves dozens of employees enough money that more might pick up dependent coverage and doesn’t preclude the city from bidding out the contract again next year if the League tries to do what Blue Cross tried this year with a huge premium increase.
Wester’s response: A mere $42,000 savings based on artificially low premiums for one year isn’t nearly enough to make up for what the city will lose in the long run. Blue Cross would save the city in the long run because it has the negotiating strength as the state’s biggest health insurer to get the city much lower prices from care providers. As a result, the city’s claims experience will be much worse under the League, and the city won’t be able to get good prices the next time it bids out the policy.
“I won’t get into the details, but I don’t think their numbers are accurate,” Wester said. “This is a short-term decision that probably has long-term consequences.”
Evans, citing the employee savings, and Ranger Wilkerson, pointing to the city’s savings, joined Yount. Harriette Butler, who argued that Blue Cross provides far superior service, and Mike Rainey, who didn’t think the $42,000 difference in the policies was worth the switch, backed Wester.
Bernard Alston, the FAIR chairman, said he was leaning toward Blue Cross until he saw that the savings with the League would total $42,000 instead of the $18,000 discussed Tuesday night. That savings pushed him to the League’s side, even though he thinks Blue Cross provides better service. “Do I believe it’s $42,000 better? I don’t think so. It may have been $18,000 better.”
Lonnie Davis, who arrived more than halfway through the meeting, said he was leaning toward Blue Cross.
It looked like the council would have to call a special meeting in the next week to hold a formal vote and potentially have Seifert break a 4-4 tie. Then, suddenly, Wester and Rainey backed down.
They agreed to go with the League if this year’s rates are guaranteed in a letter today. Greene and Burnette had said in the past two weeks that the League had to stick with its written proposal, but the council members wanted reassurance.
If that letter comes as expected, the city will likely hold meetings with employees Thursday and Friday next week on the change.
As for the money saved, no one argued with a plan to direct the $150,000 into a contingency fund or payment to fund balance in the 2005-06 budget, rather than use the money to cut 2 cents off Williams’ proposed 5-cent property tax increase. Williams and Alston said some of the money could be used to benefit employees — perhaps through merit pay or an across-the-board raise — starting Jan. 1.