Obamacare Slams the City of San Angelo Budget

The City of San Angelo will need to increase its health care insurance budget to pay for Obamacare mandates for city employees, says Lisa Marley, the city’s Director of Human Resources.

The City of San Angelo self-insures. That is, the city has a large enough pool of people enrolled in health insurance that City Council decided to self-finance its own insurance system rather than purchase third-party insurance from a vendor like Blue Cross Blue Shield of Texas. “When Shannon discontinued its Legacy insurance product, the city set it up,” Marley says.

Benefits of self-insurance don’t materialize until after the 10th year, Marley says. The new health care insurance mandates have hit the city in year seven, about the time when the city is struggling to build the fund balance to fully capitalize on compounding interest, and before the city has built a large cushion to pay for larger-than-expected health care costs of its employees.

Aetna is the current vendor to the city that administers the city health insurance plan. “When the hospital bills Aetna $200,000 for a hospital stay for one of our employees or retirees, we write a check out of our insurance fund for the full amount, Marley says.

“One of the misconceptions about the city health insurance fund [which is separate from the general fund] is that we have all of this money in there,” Marley says. “That’s not true when you consider that we’re on the hook to pay 100 percent of all claims when they come.”

Obamacare mandates that the city lower its total out-of-pocket expenses for each insured to $6,340 from $7000. “So our employees and retirees will hit the max quicker,” Marley says.  Individually, it doesn’t appear to be that large an amount, but when multiplied over 1,800 lives that the city covers, it adds up.

Marley adds that the city council thought ahead when Obamacare became law and already has implemented some of its earlier mandates, such as allowing continued coverage of children to the age of 26 for city employees purchasing the family plan and providing coverage for pre-existing conditions. If those features weren’t already in place, this year’s health insurance costs would be a greater shock to the City Council.

The city offers four types of low-end (Obamacare Bronze) plans: employee-only, employee plus spouse, employee plus children, and employee plus spouse and children (the family plan). For every city employee insured, the city pays $357.53 per month into the self-insurance fund plus the employee’s contribution.

Currently, an employee on the employee-only plan pays $13.20 per month; employee plus spouse pays $383.62; and the family plan requires a co-payment of $518.20/mo.  for health insurance. Employees have the option to choose silver and gold plans too. Those plans require greater out-of-pocket contributions from the covered employee. Here’s the city’s benefits information sheet: http://www.sanangelotexas.us/vertical/sites/%7BBD27ED61-E710-4F56-8954-CC319F012B3D%7D/uploads/City_of_San_Angelo_Benefit_Summary_Sheet_Information_2013.pdf

Marley estimates that Obamacare mandates starting Oct. 1 will underfund the city’s self-insurance program by $186,000. To put that number in perspective, every one-cent in the property tax rate equals $370,682 in revenue to the city, according to city staff at the August 26 budget workshop.

The shortfall in city health insurance fund caused by Obamacare equals approximately one-half cent on your property tax rate.

Council already voted to lower San Angelo’s property tax rate for the next fiscal year on Sept. 3 by one-half cent. But Council considered squeezing out a full one-cent rate cut.

They split the difference.

By foregoing a larger one-cent total tax decrease, Council chose instead to cut property tax rates only one-half cent, and pocket revenue from the other half cent, placing the proceeds into a rainy day fund.

At their next meeting, City Council may be forced to vote to move their newfound rainy day money for FY2014 into the health care self-insurance fund to pay for Obamacare just as the fiscal accounting year barely begins.