By Matt Ward —
Numerous claims in excess of $150,000 have put the City of Fredericksburg’s self-funded health insurance fund at risk of a deficit, according to a report to the city council made during a special meeting Jan. 7.
“We have experienced a large number of claims in the past six to eight months and this fund has used virtually all of its fund balance to cover these claims,” City Manager Kent Myers said. “As a result, the (current) budget includes a 15 percent increase in city funding for health insurance effective Oct. 1 and a 10 percent increase in dependent insurance effective on April 1.”
Claims from fiscal year 2013-2014 have taken the city’s insurance fund reserves “down to basically zero,” Myers said, with $1.448 million currently budgeted revenues this fiscal year in the fund.
Projected expenses of $2.371 million would put the fund at a balance deficit of $923,232, if expected and/or projected claims are filed.
Though the Texas Municipal League administers the fund, contributions to and payments from the fund come entirely from city coffers.
Ten claims were filed in 2014 well in excess of $150,000, though the city will only be charged $70,000 per claim annually due to additional stop-loss protection.
Originally intended to wait for council discussion until a mid-year budget review in April, the issue was brought to council attention several months early as multiple large claims have already been made in this fiscal year.
“What we’re experiencing here with the City of Fredericksburg is similar to what a lot of other public agencies and private companies are dealing with,” Myers said. “Until this year, we’ve had generally pretty positive experience being self-funded, but looking down the road the next couple of years, we may want to consider joining the TML program.”
Effective March 1, the city will move to a more cost effective provider network, which will reduce some benefits such as office visit requirements and changes to prescription policy. The move is expected to save the city $163,000.
Currently, city employees contribute no funds to individual insurance, a trend Councilman Graham Pearson would like to see continue.
“My big problem with employee premiums is that it’s a flat fee and it affects the lower paid guys way more than the higher paid guys,” Pearson said.
A portion of spousal and dependent coverage is paid by the individual employees.
“What we are charging employees for dependent coverage doesn’t come close to covering our costs,” Myers said.
The council requested additional information before coming to a decision on the issue, including a breakdown by department of current contributions to the fund, demographic information on city employees, wellness plan enhancements as well as employee input about possible increases to deductibles and/or employee contributions to the fund.
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