Health insurance costs are expected to rise nationwide starting
in January, and anyone who is covered by their employer, or pays
taxes, will feel the pinch.
Health insurance costs are expected to rise nationwide starting in January, and anyone who is covered by their employer, or pays taxes, will feel the pinch.
In Morgan Hill, the expected rise in monthly health insurance premiums will not be as high as projected earlier this year, but both the city and its employees will pay higher costs for insurance next year, city staff said.
The new rates, set by the California Public Employees Retirement System, are projected to rise by less than 4 percent locally starting Jan. 1 – halfway through the current fiscal year – according to assistant to the city manager Brian Stott.
However, that’s less than the 9-percent increase that city staff estimated, which is also the average amount by which Calpers raised its 2011 premiums for members statewide.
While Morgan Hill officials are working on a long-term plan to reduce a variety of employee-related costs, which have continued to rise while revenues fall short in the current economic morass, Stott said the immediate impact of health care costs this year won’t cripple city coffers.
“In general, the city will experience relatively little increase in the per unit labor costs (this year) with the elimination of all raises for all employees, slight reduction in retirement rates and modest – when compared to recent years – increases in medical and dental insurance premiums,” Stott said by e-mail.
About 60 percent of the city’s personnel costs are funded by general fund tax dollars. In 2009, the city paid its 208 staff members about $20.6 million, including regular wages, employer contributions for benefits, allowances and overtime pay.
About 9 percent of the city’s total personnel budget in 2009 – or about $1.8 million – was spent on the employer’s share of health insurance costs.
The city, through a contract with Calpers, pays most or all of the cost of the cheapest health insurance plan it offers for all employees who receive the benefit, depending on the extent of the coverage selected, Stott explained. For employees covered under a family plan, the city pays 90 percent of the cost. The employee pays the remaining 10 percent.
For employees who elect coverage for only themselves and their spouses, the city pays 96.5 percent of the cheapest monthly plan; and for employee-only policies the city pays 100 percent of the premium, Stott said.
The cheapest family plan offered to city employees in 2011 will rise from about $1,234 to $1,281 per month, an increase of 3.7 percent of $46.15 per month in tax dollars, Stott explained.
The city also offers dental insurance through Delta Dental, and pays the same portion of each plan with the employee contributing the rest, Stott said. Dental insurance costs are projected to go up about 4.8 percent next year, with the family plan for 2011 costing a total of about $173 per month.
While that’s not a dramatic increase, the continued ascent of other employee-related costs has been burdensome in recent years. In the last two years, due to declining sales and property tax revenues, the city has cut about 13 positions from its budget.
Another area of personnel-related cost concern is the city’s contributions to employees’ retirement benefits, which are also paid through Calpers. Because investments made to the fund took a hit in recent years due to the recession, the city will have to pay more for employees’ retirement than expected for the next five years, starting in fiscal year 2011-2012.
The contracts for three unions representing city employees do not expire until 2013, and the city will consider ways to bring those costs down until then, Stott said.
Rising health care costs are not an anomaly, and the problem was the target of the $940-billion federal health care reform approved by the U.S. congress earlier this year. A Calpers spokesman said the organization’s costs for members’ health insurance plans has increased each of the last “nine or 10 years.”
The struggling economy and rising costs for consumer goods and services in general led Calpers to increase its costs, which are negotiated with providers.
“Even with inflation, the economy has taken a nose dive, and the cost of everything has gone up,” said Calpers spokesman Bill Madison. The rise in hospital costs is one of the most significant factors in the recent rate increase.
And in the private sector, one of the city’s largest employers – Specialized Bike Components – reported that the costs for its employees’ health insurance plans will go up by 20 to 22 percent beginning in January, according to Specialized benefits administrator Ana Marroquin.
That’s more than is expected nationwide among private employers, according to several surveys and projections on the subject.
Marroquin noted that many of Specialized’s 348 local employees are young, and are just starting to have families – thus raising their household health care needs.
One of the employee-only policies that Specialized offers its employees will require the employee’s share to jump from $64 to $78 per month next year, Marroquin said.
“For the most part, they’re still grateful we’re providing a good package for them,” Marroquin said.
City of Morgan Hill health insurance premiums, Kaiser family medical and Delta family dental:
2009 2010 2011
Employer cost $1,202.10 $1,260.49 $1,309.15
Employee cost 276.93 289.89 343.86
Total 1,479.03 1,550.38 1,653.01
