Councilman asks why employee making insurance decision
Tuesday, July 22, 2014 1:38 PM
Council input is needed on costly decisions about health insurance coverage for city employees, according to Decorah City Council member Tade Kerndt.
While the Council is consulted on issues such as a street-sign change, it isn’t for a health insurance decision that has a significant impact on the city’s budget, he said during a discussion – at times contentious -- on the topic Monday night.
During the Council’s July 7 meeting, City Clerk Wanda Hemesath reported a 9.23-percent increase in health insurance premiums would go into effect Aug. 1. She said 4 percent of the increase is to comply with the national Affordable Care Act. As a result, the city will pay an additional $61,000 for employee health insurance premiums in the upcoming year.
“Wanda makes all the decisions on all of this – why is one employee making (that) decision?” Kerndt asked.
Hemesath responded her entireoffice made the determination.
For the previous year, the cost of employee health insurance premiums totaled $666,000. For the insurance year starting Aug. 1, the cost will be $727,000. The city pays 95 percent of an employee’s single premium and 90 percent of an employee’s family premium.
During the July 7 meeting, Kerndt asked if the city ever solicits bids from other insurance companies. Group Services of Bettendorf is the city’s third-party insurance administrator and recently conducted a market analysis, according to Hemesath.
“They did go out to different providers and get prices for us. What it came down to is we are better staying where we are,” Hemesath said.
Wellmark Blue Cross/Blue Shield provides the city’s insurance. Hemesath said until this year, the city has experienced “nominal increases” in premiums. In addition, she said switching to another insurance carrier would create health provider network problems with some employees’ doctors or hospitals not participating in that insurance plan.
But Brian Huinker of Midwest Benefits in Decorah told the Council Monday he was “surprised” Group Services had not obtained quotes from CoOportunity Health or Coventry Health Care of Iowa. He said the two insurance providers, along with Wellmark, are the “three major players” in the local market.
He said he also was surprised to hear there were potential network issues in switching to another provider. Huinker said he has had numerous businesses move their insurance coverage to CoOportunity and Coventry.
“I wanted to put in a plug to have local agents – me or other licensed agents in the city – have a shot to provide a quote,” Huinker said.
Because the city will be paying a major increase for premiums, he said it would be a “disservice” to taxpayers not to seek additional quotes.
Not formal quote
The city did not seek a “formal quote” before renewing with Wellmark this year, but Group Services was able to provide city officials with an idea of what to expect in premiums from other firms, City Administrator Chad Bird said.
“Our agent of record shopped the market and sent out some feelers to see if we did get a quote, what the market environment would be. (Obtaining) a quote is quite a lengthy process,” he said.
Huinker said the market is changing quickly and that options that weren’t viable in the past, could be today.
Mayor Don Arendt suggested the matter be referred to the Council’s personnel committee, prior to the Council’s budget-setting session early next year, since the decision has already been made for the upcoming year.
But Kerndt wanted to continue to discuss the issue. He said city employees shouldn’t be determining their own policies and deductibles. He said since he took office in January, employee health insurance premiums have never been discussed.
“It doesn’t seem right this is our procedure,” he said.
Council member Paul Wanless said he agreed with the city’s history of having a third-party administrator for health insurance, but questioned why that administrator wouldn’t check with two of the three carriers in the area when obtaining market information on premiums.
“Group Services has a reason why they didn’t give us a quote on one of those insurance companies,” Hemesath said.
She said those comments were made during a “private discussion.” Hemesath said Group Services provided “valid reasons” for not obtaining premium information from one of the firms, but she declined to elaborate.
“As a Council, we hire you to do this and report back what they’ve told you,” Kerndt said.
“They’re pushing us one way and I have no idea why,” he continued.
“We were told there were huge network issues and we have two union agreements we have to adhere to. Any major changes need to coincide,” Bird said.
Before the current contract expires, Council member Gary Rustad said questions need to be answered.
“I agree with all of you. This does need to be addressed … this discussion needs to continue. I’d also like to see our current provider here,” he said.
“It doesn’t seem right an employee decides what (insurance coverage) is,” Kerndt said.
Bird said the decision is based on input from the city’s “agent of record,” similar to what’s done for the city’s property and casualty insurance.
“For what it’s worth, I’ve been here 35 years and that’s the way it’s been done,” Hemesath said.
The mayor agreed there should be some contact with the Council on the insurance issue.
“It’s already been done – we need to look at the next process,” Arendt said.
The mayor thanked Huinker for his presentation.