September 28, 2013
City health rates set
Consortium finalizes expected 8 percent premium rise
The health insurance consortium the city joined last year set its 2014 rates on Thursday, requiring an 8 percent increase in premiums for the city.
“The city budget was based upon an 8 percent increase in premiums and that came to pass,” said city Director of Finance and Administration Mack Cook. “The good thing is we continue to offer a quality product.”
The Greater Tompkins County Municipal Health Insurance Consortium will take in $37.4 million in premiums from its members next year. It projects expenses of $34.5 million in 2014.
Seventeen different municipalities and unions comprise the consortium’s membership, including the cities of Cortland and Ithaca and the towns of Dryden and Groton.
Also included in the budget is $1.6 million in repayment of capital paid in by municipalities when joining the consortium. The city of Cortland will receive $180,000 to match its capital investment.
The repayment was expected to be spread out across a few years but the budget supported an immediate payout in 2014 and the board of directors decided on the lump sum proposal.
Cook said that paying attention to the consortium is important, despite the Tompkins County moniker.
“About 30 percent of the members are Cortland County residents,” said Cook, the city’s delegate to the consortium.
About 12.5 percent of the city’s $24.1 million total 2013 budget is spent on health care costs for current employees and retirees.
Joining the consortium has helped the city avoid an additional excise tax under the federal Affordable Care Act but it will be subject to a provision, known popularly as the Cadillac Tax, that places a 40 percent excise tax on high premium plans.
The broader effects of the health care act will be on stop-loss insurance, or excess insurance, which is designed to provide protection for catastrophic health events that exceed the main plan’s deductible. The consortium purchases stop-loss insurance each year to reimburse the losses of any of its member entities.
The ACA’s new health insurance exchanges will newly insure people who have a pre-existing condition, which means they will draw down resources from the plan before making any contributions.
To mitigate the losses of insuring those individuals in the exchanges, insurance companies will need to raise the premiums for existing plans to spread out the expense, according to Cook.
The consortium’s budget was created based upon an assumption of a 20 percent increase in stop-loss insurance.
Consortium expenditures for stop-loss insurance will be $711,651 in 2014 and exceed $1 million by 2016.
Reimbursements from stop-loss insurance can be a major source of income for the consortium, too, however, as they received $1.2 million in reimbursements for 2013.
There were no reimbursements for the 2011 or 2012 fiscal years.
As a result of projected increases, the consortium’s budget calls for the creation of a catastrophic reserve fund, set at 2 percent of the expected claims cost, to better protect the consortium’s cash flow and mitigate the effects of a significant increase in overall paid claims.
The consortium will set aside $602,250 in 2014 for the fund as part of over $6 million in total liabilities and reserves.
With health care premiums continuing to rise and with municipal revenue, employee wages and Social Security experiencing much slower growth, funding health care will become a more difficult proposition.
“It’s like trying to catch a thoroughbred riding a donkey,” Cook said.
Municipal governments have no control over excise taxes and increasing stop-loss insurance rates, but one area is still under individuals hands: their own health.
The city included gym memberships in its newest membership with wastewater employees as it increases an emphasis on employee well-being.
“Employees have to own their own health,” Cook said.
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