Steamboat Pilot & Today

Steamboat Springs — Becoming healthy, wealthy and wise looks to be a difficult proposition as far as next year's budget is concerned. In what some city officials deem the tightest budget in years, some of the most dramatic expenditure increases are coming from an unlikely source: health insurance.

With city health insurance costs rising approximately 20 percent a year over the past two years, the city is looking for some help in determining how to cut costs.

This year, proposed personnel costs are up 10.4 percent over last year and account for almost 50 percent of the general fund. And though the almost $9.3 million in proposed personnel costs for 2001 is due in part to a few possible new hires, much of the increase comes from health insurance costs. The city put out a request for proposals Monday to find a consultant who can give advice on better methods of financing medical and dental insurance. Health insurance will cost the city a total of $1,073,000, or about 3 percent of the total budget. That amounts to $6,293 per employee, as compared to $5,626 this year.

The city partially self-insures, meaning that, up to a point, it will pay the claim on an employee and his or her family. The health insurance budget consists of the money the city puts aside for its claims, though the city secures catastrophic insurance to cover claims over a certain amount. That amount is determined by how many family members are included on employees' plans, said Bob Litzau, the assistant finance director.

If the city does not need to use the money set aside for insurance, it goes into reserves.

Health insurance expenditures escalated over the past two years, with the brunt of the costs to be paid next year, in part due to three catastrophic insurance claims in 1999, Litzau said. Those claims both sapped the city's reserves and increased the cost of reinsuring with the catastrophic program.

"You get a year when you have three large claims, it puts a blip in the curve," Litzau said. "(Self-insuring) tends to be a more cost-effective way of doing it."

The consultant would provide an on-going analysis of the city's current medical and dental insurance program. Proposals will be accepted until Oct. 20.

For instance, although city council members make only about $5,000 a year, the city is planning to spend an average of $4,513 on each member to insure them and their families.

This year, in comparison, the city paid only $1,812 on average for each city council members' health insurance plan.

The council's personnel costs, then, may be as high as $70,857 come next year, 36.5 percent above personnel costs in last year's budget.

Every department in the city is likely to pay a good deal more for health insurance next year than they did this year. Many of them will be strapped with a health insurance bill that could be 50 percent higher than last year.

The cost of insuring an entire department depends on how many people are in that department and how many family members the employees are supporting.Personnel costs are traditionally the most expensive item coming out of the city's general fund, making up about 40 percent of the city's total expenditures in the past two years, according to city budget documents.