City Insurance Plan to be Covered in Part by Rainy Day Fund

“Let’s just pass it so we can find out what’s in it,” joked Mayor Dwain Morrison in Tuesday’s City Council meeting as City HR Director Lisa Marley answered questions on City employee and retiree insurance premiums.

Marley had come to present a staff recommendation on fund allocation planned to keep premiums at their current rates by offsetting increases that will result from mandatory changes under the Affordable Care Act.

“We were going to be faced with having to increase the premiums in our health insurance, in our dental insurance, and the Medicaire supplement insurance for our retirees,” Marley explained post-meeting. “The total cost to the city to offset that increase was going to be $360,288.”

Rather than see premiums shoot up, the City has decided to cover the costs of the increases with revenues available in auxiliary funds. The biggest contributor to the city health insurance plan will be monies gained from a federal grant in the Early Retirement Reinsurance Program (EERP).

“[The EERP] was a program the feds set up because so many employers were dropping their retirees from their health insurance, because when you get older you use more insurance, so employers were dumping retirees off their coverage,” Marley explains.

To combat this, the federal government initiated a program in which they offered to reimburse employers for their expenses up to a certain threshold. Six million dollars were set aside for the program, and funds were dished out on a first come, first serve basis. The City of San Angelo applied for the program and was granted coverage.

“We got back $343,288. Last year, we spent $142,000 to offset the premiums out of that $343, so that left a balance of $201,000. We want to use the $201 to offset the $360,000 that we’re off this year,” Marley says.

The remaining $159,000 is to be paid for from budgeted revenue over expenditures, also known as the City’s Rainy Day Fund. Currently, there is $185,341 in the fund, leaving $26,341 after the sum of the 2014 health insurance increases is deducted.

This, however, pertains only to the health insurance plan and leaves the increases for dental and post-65 plans unattended. In order to cover those costs, the remainder of the fund will be distributed.

Dental coverage is anticipated to increase by 9 percent in 2014, which amounts to $1.37 per single individual each month. “The city obviously pays for single person’s coverage, the total cost to the increase for our plan, to the City’s premium, is $13,300 a year,” Marley says, noting that employees must pay their own dependent coverage.

Retirees may opt for dental coverage but must bear the full cost themselves, and an increase on that end would equate to $1.62 per single retired person per month, with higher rates for dependents.

So as to not stick it to the retirees, it was recommended that these increases be covered as well, bringing down the Rainy Day Fund to $13,041. But there are still the increases in premiums for those aged 65 plus to consider, where a rise of 1.7 percent would result in $3 per moth per single individual or $8,000 for the City.

In order to evenly cover all bases, this hike would also be covered, leaving only the dental plan increases for retirees open and approximately $5,000 in the fund.

“I worked 10 years to get it, and we got rid of it in two months. ” said Mayor Morrison, with a slightly dramatized tone, “But I got $5,000 left.” Morrison said.

“I would like to see us cover this increase for the retirees,” said Farmer. “We don’t do anything else for them.”

Some quick number crunching returned a necessary $3,402 to include covering the cost of the retirees’ dental plan, and Morrison’s said goodbye to his fund.

Public comment showed support from former Police Chief Russell Smith, who was very concerned about the retirees. “I would support very much—and all retirees would—the stay flat. Many of them do not get cost of living raises and they’re living on fixed incomes. Anything you could do to help would help,” Smith said.

Smith also voiced concern about the uncertainty of the Affordable Care Act. “I’m very concerned—I’m not talking about y’all, I’m talking about health insurance, and the way things are going. We know we lost part of our liberty, freedom to make our own decisions [when the ACA was passed],” Smith said.

With no nay-sayers on the bench or in the audience, councilman Rodney Fleming threw in some food for thought.

“I support this,” Fleming said, “but I’m nervous that next year we’re going to get hit hard. The only thing I would say is that you might ought to be keeping some of this fund for next year and offset the biggest hit. We know we’re going to get hit hard next year.”

Marley responded by saying that she shared the concern and would negotiate hard to see that the premiums stay flat.

Council voted to approve Marley’s recommendation with the inclusion of dental for retirees and it passed 6-0.

After the meeting, Marley said: “The big point of today was to recognize that we have been making small, incremental changes to our plan each year ever since health care reform, or the Affordable Care Act was passed. We’re very fortunate that we’re not like a lot of employers that either have to cancel their coverage because they can’t afford to make the changes, or the costs are so exorbitant because of the changes that have to be made. We’ve been making these little changes, little by little by little, so it’s never been this big boom.”

Next year, all of the City’s plans will expire and a new round of negotiation will begin. No one is sure of what to expect with the Affordable Care Act in place. 

Related is our earlier story about the city's self-insurance fund and Obamacare's impact upon it.