COSA Health Insurance - Draft Budget Priorities

City of San Angelo leaders sought feedback from City Council on the 2012 budget in June.  As a result, I asked city staff:

What are the city's budget assumptions for health insurance for 2012?

The reply by HR Manager Lisa Marley on June 13 indicated:

Budgets for 2012 are still being prepared. Nothing will be firm on health insurance until the RFP is completed. 

The City later posted a draft budget on their website.  FUND 310 includes COSA's self-insured health benefit.  The budget includes revenue and expenses.  The revenue picture shows:

Self Insurance - Revenue

FY 10 - $5,955,062
FY 11 -  $7,226,044 (budget)
FY 12 - $7,917,129  (budget)

The draft budget shows insurance premiums rising nearly $700,000 or 10% overall in 2012.  City Council directed no increase in health insurance costs in their June 28 meeting.  Thus, the city's portion is targeted at $7.2 million.

Other aspects of the draft budget are of interest.  One is the treatment of retirees and employees with dependents.  Draft budget numbers indicate these groups will take a beating for the second year in a row.  (Click n the image below to make it larger)

Savings from 45 city workers dropping health insurance for 2011 can be seen in the Premiums/Employees number.   Marley spoke to this in her June e-mail:

The annual savings in premiums for those 45 people is $189,603.96, which simply remains in the self-insurance fund and is used to either pay for claims or for new employees who enroll during the year.

Draconian premium increases of 34 to 58% for retirees and dependents sent 147 people off the city rolls.  It's not clear how many of the 147 losing city coverage remain uninsured.  If they can't afford subsidized city coverage, they likely can't pay for individual health plans in the open market.

What happened to Early Retiree Reimbursement Funds, expected to make benefits better or lower premiums?  The feds approved the City's ERRP application one year ago.  City staff struggled to complete claims forms, eventually farming out the project to BC/BS.  Yet, nary a claim has been filed, meaning the City received none of the expected $300,000 reimbursement.

I find it hard to believe retirees and dependents can pony up the $940,000 projected in the draft budget.   As the city expects no health insurance increases and sought no ERRP aid, retirees and dependents would shoulder higher insurance costs or get dramatically lower benefits.

Insurance premiums generally exceed self-insured expenses by 6-7%.  Projected expenses in the draft budget are:

Self Insurance - Operating Expenses

FY 10 - $5,644,153
FY 11 -  $6,755,672 (budget)
FY 12 - $7,399,096  (budget)

There are four major components of health insurance operating expenses.

Two of the four, Special Services and Administrative Services, are projected to rise a combined 97% in two years.  Expected Claims Liability is projected to rise by 9% next year. 

This budget is only a draft, but it does indicate management's expectations and reflects their priorities.  If anyone feels otherwise, they'd best attend one of the next two City Council meetings, which will also serve as public budget hearings.

The picture shows more uninsureds in the retiree-dependent arena or significantly poorer coverage.  It remains to be seen where employees fall on that continuum.

Update 8-29-11:  While Harold was Assistant City Manager, the 2004 budget stated: "To administer the employee and retiree health benefit program in a professional manner and to contract for these services at a reasonable economic level for both the City and its employees and retirees."  The pendulum swung fully toward the City.