Fort Smith Board reviews rising employee insurance fees at special study session

The Fort Smith Board of Directors mulled dwindling options for the 2017 healthcare plan for city employees at a special study session on Monday (Oct. 10), with Jerry Guy of Gallagher Benefit Services, the city’s health benefits consultants, saying there was only one fully-insured proposal for the 2017 health plan.

National insurers United Healthcare passed on a request for proposal altogether and Aetna and Cigna are operating through third-party administrators. Blue Cross Blue Shield of Arkansas was the only underwriter to take a crack at it, but in each of the three offerings, rates were set to go up significantly.

Comparing monthly premiums to the three plans the city offers, Plan 1 (lowest premium) would increase by approximately 37.4% for an employee only plan ($393.68 to $540.14); 25.7% for employee and children ($668.82 to $840.83); 43% for employee and spouse ($826.19 to $1,181.71); and 41.7% for employee and family ($1,101.56 to $1,560.93).

Plan 2 (middle premium) would increase 31.5% for employee only ($423.20 to $556.75); 20.5% for employee and children ($718.98 to $866.68); 37.2% for employee and spouse ($888.16 to $1,218.05); and 35.8% for employee and family ($1,184.18 to $1,608.93).

For Plan 3 (highest premium), the totals would reflect the lowest overall percentage increases, ranging from just 19% on the low end to 35.4% on the high. The breakdowns would consist of a 29.8% increase for employee only ($452.73 to $587.96); 19% for employee and children ($769.15 to $915.27); 35.4% for employee and spouse ($950.12 to $1,286.33); and 34.1% for employee and family ($1,266.80 to $1,699.12).

Of the quoted prices, the plan would operate through a 70%-30% split between the city and its employees, so a city employee with the highest premium would pay $176.39 per month for sole coverage, $274.58 for employee and children, $385.90 for employee and spouse, and $509.74 for the employee and their entire family.

Other options the city is looking at are through RFPs from Meritain/Aetna and Allegiance/Cigna as well as a proposal from the Arkansas Municipal League (AML). The city entered into an agreement in February for the AML to cover its over $300 million in assets, replacing Travelers Insurance despite the objections of consultants Brown Hiller Clark (BHC).

With one victory under its belt, AML submitted a proposal for the health plan that is cheaper than what the city pays by 6.5% to 12% depending on the plan, but Guy cautioned it is not without its concerns.

Some aspects of the AML plan that are “inconsistent with the city’s approach to employee benefit management,” Guy said, include “geo-access problems for some employees” regarding PPO availability that “would result in significant disruption of historical provider choices by participants” and “cause an increase in the cost of healthcare through a reduction in PPO provider discounts, particularly outside Arkansas.”

Also, the AML achieves cost control by “transferring liability to participants through significant benefit limitations. It does not presently have the ability to allow the city to deviate from the AML plan structure,” Guy said, adding that the “pooling mechanism of the Trust has more benefit to smaller municipalities, and is less attractive to larger cities.”

Case in point, out of the 352 cities AML oversees, only one of those cities has 400 or more employees. The city of Fort Smith has about 900.

The Board did not decide anything on Tuesday, but is expected to act on the issue in the next month with a target effective date of Jan. 1, 2017.