CLEARWATER - An element of uncertainty will be removed from the Clearwater's fiscal year 2004/05 budget on Thursday night when the City Council is expected to approve an employee health care contract with Cigna. The approved budget planned for a 15% increase in cost, but the benefits selection process, just concluded on September 30, resulted in a pleasant surprise - only a 5.2% increase.
The City uses an Employee Benefits Committee to consider health care alternatives and evaluate benefits packages proposed by vendors. The committee's 15 members represent the city's several unions, plus management, supervisory and professional employees. According the Joesph Roseto, Clearwater's Director of Human Resources, the use of the employee committee streamlines the benefits selection process, and ultimately results in a more cost-effective package for both the employee and the taxpayer.
The committee first considered a proposal from the City's current provider, United Health Care, to renew with a 9.4% premium increase and increases in co-pays and deductables. The benefits committee decided to release a Request for Proposal rather than accept United's premium increase for a plan with less benefit.
Proposals were received from AETNA, Cigna, Humana, United Health Care and Blue Cross Blue Shield. The City's benefits consultant, The Gehring Group, led the benefits committee through an evaluation of each proposal, including plan cost, ability to perform, size and adequacy of the network of physicians and hospitals, financial strength, and each carriers experience with Florida government entities.
The initial round of proposals offered plans matching the current United contract, but with premium increases ranging from 6.49% to 11.78%, and a range of co-pay and deductibles. The public nature of the benefits selection process provided each insurance carrier with knowledge of their competitors offers, and two rounds of "best and final" offers resulted in proposals offering increases of 3.84% to 5.5%. The total annual premiums bid were $12.644 million by United, $12.444 million by Humana, $12.608 million by Cigna and $12.557 million by AETNA.
The committee were as concerned with plan benefits as they were with premiums. With a premium difference of only $200 thousand per year separating the low and high bidders, plan deductibles and co-pays became the difference maker. The benefits committee selected Cigna based largely on their attractive prescription drug benefit.
The City pays 100% of the cost of basic HMO coverage for a single employee, 75% for an employee plus one dependent, and 68% for an employee plus two or more dependents. Under the terms of the Cigna proposal, the cost of coverage for a single employee will increase from $4330 to $4556, paid entirely by the taxpayer. For an employee plus one, the cost will increase from $7430 to $7816 annually, with the taxpayer paying $290 of the difference and the employee paying $96. The premium for an employee plus 2 or more dependents will increase from $12,262 to $12,900 annually, with the employee paying $204 of the increase and the taxpayer $434. The total cost to the City will be $9.76 million, with employees paying the remaining $2.85 million in premiums.
The $730 thousand difference between the City's 2005 budget and the actual cost of the Cigna benefit plan will be placed in the Health Insurance Reserves, a fund established to reduce the impact of unexpectedly high rate increases. The fund was used to cover $742 thousand of 2003's 18% premium increase, and $90 thousand of 2004's 10% increase according to Margie Simmons, the City's Finance Director. The Reserve fund will have a balance of $3.2 million, well in excess of the 15% of annual premium required by City Council policy.
While the cost of employee health care did not increase as much as expected, it still represents nearly 10% of the City's General Fund budget. At the conclusion of the deciding benefits committee meeting, a disturbance erupted outside the meeting room. A committee member, while looking at a member police officer, asked, "Who has a gun in here?" The officer responded, "Bullets aren't in the budget this year; health care is."
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