City employees in North Little Rock will have a new health insurance provider in 2015 in order for the city to continue paying the entire cost of premiums for its full-time workers, city officials said last week as final budget preparations draw closer.
The North Little Rock City Council will still have to approve the insurance recommendation from Mayor Joe Smith and city Finance Director Karen Scott, expected at the next council meeting Oct. 27. Budget meetings with city aldermen are to begin next month, Smith said.
The recommended change from QualChoice to United Healthcare will cost city government $770,730 more than what it paid to cover employees this year, Scott said. But, that's less than the minimum $1.31 million increase the city would have seen if it chose to keep the same policy features under QualChoice that it had in 2014.
The recommended proposal is for a 13 percent increase under United Healthcare, Scott said.
The city worked through Stephens Insurance LLC, its insurance broker, to compare plans, receiving estimates for an increase as high as 37 percent, Scott said. The City Council will be asked at the next council meeting to waive formal bidding for the new insurance contract and to designate Stephens Insurance, with United Healthcare as the major medical provider, to manage employee health benefits, according to legislation being prepared.
North Little Rock pays 100 percent of the health insurance premiums for its 850 full-time employees and 75 percent of that cost for workers' family members, Scott said. The total cost to the city next year will be $6.87 million, she said.
Employees, however, should prepare to start kicking in some of their premium costs in 2016, Smith said in a letter to department heads that compared the current and recommended proposals. The letter stated that "the city cannot continue to fund a double-digit increase in health insurance benefits" and that continuing the city's share of the premiums' costs "may not be possible in future fiscal years."
The major changes in the two policies will be raising employees' deductibles from $500 to $1,000 and out-of-pocket maximums from $4,000 to $6,600. Workers' share of costs after deductibles are reached would stay the same.
Which physicians are included under the new coverage isn't expected to change much, Scott said.
"We hope not," Scott said when asked if many employees would have to change health care providers. "We believe that our health-care network is very robust. All the hospitals in the area are on this network.
"We recognized early on that the city would not be able to do [the higher increase] and that we'd have to reduce some benefits," she said.
Giving employees a 15-month heads-up that they likely will pay a portion of their premiums in 2016, Smith said, was meant to let them prepare for how "their personal budgets might be affected. I thought that was the most fair thing I could do for them as mayor."
Smith formed a committee that included employees from most city departments, he said, to work on the insurance coverage options and held departmental meetings to survey workers on what options they would prefer.
"What we found out was that the least painful thing to most of our people was to raise their deductible," Smith said. "More than half of them don't meet their deductible. We also asked about, and what some companies have done, that if a spouse had insurance at their work to not include them. The answer was please don't do that. So we didn't even entertain that as an option."
The overall effect on the city's general fund -- its basic operating budget that includes salaries and benefits -- will be about $175,000 out of the total $770,730 in additional cost, Scott said. The cost will be spread among all city budgets, including the Street Fund, Parks and Recreation and the city-owned Electric Department, she said, and also the city's fund balance, or cash reserve, which is stronger this year because of some increased revenue and reduced expenditures.
Last year, the City Council discussed refraining from using the cash reserves to help balance the city's general fund budget in coming years, after using $1.15 million to balance the 2014 budget. Tighter budget management, a reduction in what the city pays in landfill fees, and higher revenue that included increased collections in business license fees and property tax payments, Scott and Smith both said, will help the city come under budget for this year.
Smith said the city's cash reserve has grown to about $10 million, up from $6 million to $7 million a year ago.
Metro on 10/19/2014