With Blue Cross insurance premiums for the 65 employees of the city of Hailey set to rise 24 percent this year, city officials are exploring an alternative "self-insurance" option that could save the city some money.
The city pays $360,000 per year in health insurance premiums.
Public Works Director Tom Hellen said Hailey's health benefits committee is "madly in favor" of the plan, but City Attorney Ned Williamson has advised caution before proceeding.
"Health insurance for city employees is critically important," Williamson said. "Changing the way we handle it is a big deal. There's a certain amount of blind faith involved with this."
The city of Ketchum opted to join such a pool in April.
"We are eager to have Hailey participate in this," Ketchum City Administrator Gary Marks said in an interview.
Marks presented the self-insurance option to the Hailey City Council last summer. The plan is similar to one that he said lowered insurance costs for public employees in Whitefish, Mont., where he worked as city manager before moving to Ketchum.
For Whitefish and 16 other towns in Montana, a joint-powers board contracts out to independent claims representatives, pharmaceutical sales people, large-case management professionals, wellness specialists and others, rather than pay a premium to an insurance company for these services.
"The advantage of having a large pool is that you can spread your risk out," Marks said. "A small city taking on a heavy-loss year will be penalized the next year with higher renewal rates by an insurance company. In a pool, there is much more absorption of losses."
Marks said the 17 cities in Montana have pooled about $8 million in recent years by self-insuring. He thinks insurance companies are charging cities like Ketchum and Hailey too much for coverage.
"In Ketchum, the claims have consistently been less than the cost of coverage, yet we have seen significant rate increases, well above the normal rate of inflation," he said. "With this plan, we gain transparency and have the ability to make decisions that direct our health care coverage."
The plan would initially take advantage of an increased pool of insured members, called a "leveraged purchasing pool," to acquire "loss-ratio" data from insurance companies. "Loss ratio" is a comparison of premiums to the amount paid by the insurance carrier for claims.
State law requires insurance companies to disclose loss-ratio data only for pools of 100 or more clients. Marks said Ketchum, with 53 employees, has so far joined with Fruitland, Council, American Falls and Lava Hot Springs to bring the proposed pool to 130 individual members.
The first membership meeting of the insurance pool will take place on Feb. 1.
Williamson expressed concern about a clause in the agreement that would require Hailey to pay the cost of one year's coverage (about $360,000), if the city opts to drop out of the pool before the end of the first three years.
Marks offered Hailey officials a memorandum of understanding in the agreement that would allow Hailey to opt out of the pool before it becomes a self-insured entity. City staff was instructed to work with him to draft a penalty-free opt-out clause in the proposed contract with the joint-powers board before bringing the matter before the council for review again on Monday, Dec. 13.
Tony Evans: email@example.com