Routt County may self-insure employees
Nearly 50 percent increase in premiums could spur change
November 18, 2010
Steamboat Springs — Weary of being punished by their health insurance carrier, the Routt County Board of Commissioners is close to self-insuring the county's employees.
County officials received a shock in late September when their health insurance provider hit them with a 47 percent premium increase amounting to $1.2 million. That was enough to boost the county's annual health insurance bill from $2.6 million this year to $3.2 million for 2011 and disrupt preliminary plans for the 2011 budget. County Finance Director Dan Strnad said Wednesday that he had based his preliminary budget on an expected 10 percent increase in the cost of health insurance.
"The bottom line is United Health Care is penalizing us for one bad claims year," Commission Chairwoman Nancy Stahoviak said. "It is unfortunate we didn't self-insure sooner, but the possibilities for the future are good."
She said the county would have to work hard to build up its reserves in the self-insured fund, but as a generational change takes place, and the average age of county employees drops, the county will be well positioned.
"We do have an aging population (among the pool of county employees), and I'm one of them," Stahoviak said.
If the county has settled on a self-insurance plan when it adopts its budget Dec. 14, it will mean it has decided to assume the risk a private insurer typically would take on. However, the county also would be in a position to bank the difference between its employees' claims and the premium amount in a low claims year.
City Manager Jon Roberts confirmed that the city of Steamboat Springs has been self-insured for health care for years and was able to put away about $200,000 this year because its claims were commensurately lower than its premiums.
County Manager Tom Sullivan said the county's health insurance claims amounted to only 43 percent of its premium in 2008, when it could have put $1 million into a self-insurance fund against claims in future years. United did not boost premiums in 2009, Sullivan said.
However, after 2009, when claims were 76 percent of the premium, 2010 premiums saw a boost. Sullivan said United strapped the county with a 47 percent increase in premiums on the tails of 2010, a big year for claims.
County employees filed health insurance claims totaling $3.5 million against $2.5 million in premiums, Sullivan said.
The county has 16 employees who had claims larger than $50,000 this year, and some of the amounts were much larger — there were people whose claims reached $200,000 and $298,000.
Strnad said he expects that as a self-insurer, the county will be much more hands-on with its claims and benefits, with the ability to see every claim and manage the details of its coverage. Sullivan said he expects that employees will take ownership of their health care coverage and their overall health.
Budgeting for lean times
Although the county hopes to recover portions of its premiums in good years as it goes forward as a self-insured community of employees, it expects to absorb a 30 to 47 percent increase in premiums in 2011.
In order to partially absorb the hit on the health insurance premiums, Strnad said the county would save about $900,000 in 2011 by delaying any asphalt overlay projects on county roads in favor of less expensive chip-and-seal projects.
He will submit a budget of $50.4 million against projected revenues of $46.3 million, necessitating spending $4.1 million in reserves.
Much of the expended reserves will cover the cost of six new road graders and repairing small bridges across the county.
The road graders are showing engine wear, and county reserves have been built up with the intent of funding major equipment purchases, Strnad added.