Facing a potential 22% premium increase for the city’s health insurance plan, the Manchester City Council decided to get creative with how it will provide coverage for its employees next year.
Under the current plan, employees had a $1,000/$3,000 deductible, but city staff explained if the council moved the plan down a tier to a $3,000/$9,000 plan, premiums on the city’s end would essentially stay the same and employees wouldn’t notice a difference if the council took additional action.
City Manager Tim Vick said costs would more or less not change from the employee’s perspective if the city would pick up whatever difference existed to meet the deductible.
“The employee would still pay the $1,000/$3,000 deductible and the city would then pick up the $2,000/$6,000 difference,” Vick explained. “We can do that through self-funding and using money that we already have reserved.”
With premium increases being commonplace year to year, Vick said city staff typically plans for a 10% increase. He said given that the city’s cost will stay the same by dropping down a tier in terms of deductible, the city can use that extra money in the budget to help cover employee’s out of pocket expenses.
In conversations with the benefit provider, Vick said typically only 30% of employees will actually hit their deductible amount in a given year, which translates to the city saving about $30,000 per year with this new strategy.
Vick said by going this route, the city is still providing a very beneficial health insurance program for employees while also keeping the city’s cost from a dramatic increase had they switched to a comparable ACA-compliant plan.
“I think this is a very reasonable way to move forward and the employee will not see a change in what they have for out of pocket maximums with the city offsetting those costs with this partial self-fund,” Vick said.
The council also agreed to again provide employees the opportunity to invest in a 457 Plan to assist with their retirement after doing away with the program a few years ago.
The city will be able to do this through a service agreement with the State of Iowa Retirement Investor’s Club Department of Administrative Services, which will initially cost the city $100 for the first year and then $50 per year after that.