What Happened?
A city in Washington is shifting its employees to a new health insurance model that will drive savings and avoid tax penalties implemented under the Affordable Care Act.
What Happened?
The Bremerton City Council in Washington is planning to move city employees to a self-insured health coverage model to cut costs and avoid potential tax penalties. The city’s 250 employees will continue to file insurance claims as they did in the past. The city, however, will not pay an insurance company a bulk fee each year. Rather, Bremerton will pay for claims on an as-need basis from a reserve fund and hire an insurance administrator to handle the claims, Insurance News Net reported.
Self-Insured Model
City officials expect about $4 million will be needed to pay for all employee claims under the self-insured model. This is less than the $5.4 million Bremerton would need to pay its insurance provider to continue coverage in 2015, marking a 14 percent increase in premiums from the year before.
The self-insured model works by removing the middle man from the equation. If city employees filed claims for less than was contracted with the insurance company, the provider would pocket the savings. The self-insured model enables the city to collect any savings if claims are less than expected. If claims are higher than expected, the city will pay for a stop-loss coverage plan that will kick in once a certain threshold is met, Insurance News Net reported.
The reserve fund will have to contain at least three months worth of premiums, and any savings generated from the plan will go back into the reserve fund to build the city’s safety net.
Tax Avoidance
In addition, Bremerton hopes to avoid any tax penalties associated with the Affordable Care Act’s provision on premium health plans. The tax provision places obligations on health coverage providers, which city officials predicted would translate into higher costs for insurance coverage, Insurance News Net reported.
Because the savings generated from a self-insured model are reliant on a low amount of employee claims, Bremerton will be increasing its wellness programs for employees. The city plans to launch a wellness committee to implement healthy living habits and offer resources to keep workers healthy and on track for low claims in 2015.
Generating Savings
A new survey from the Center for State and Local Government Excellence recently identified the top cost drivers for local government health care:
- Increased claim costs
- Prescription drugs
- Aging workforce
- Insurance company price increases
- Federal health care policy
Nearly half of the respondents said their local governments changed the way health insurance is provided in an effort to avoid rising costs, while 57 percent reported an increased cost sharing of premiums paid by public employees. Of those with changed insurance models, 19 percent shifted to a high-deductible plan with a health savings account, while 14 percent established a health reimbursement strategy.
The findings of the survey underscored the importance of local governments providing employees with health services at work. Wellness resources such as on-site clinics, workout facilities and nutrition programs not only improve the health of employees but also reduce employee absenteeism and lower healthcare costs overall.
The Value of Wellness
Gov1 has reported on several local government initiatives to improve wellness and reduce overall healthcare costs.