City's health insurance twice as expensive

The city pays nearly twice as much as the School District to provide health insurance that covers an employee's family. Little wonder that health insurance benefits have been the overriding theme of contract negotiations between the city and the four unions representing municipal workers — The Laconia Police Officers Association (LPOA), Laconia Professional Firefighters (LPF), State Employees Association (SEA) and American Federation of State, County and Municipal Employees (AFSCME).

Both the city and the school district provide indemnity plans through the New Hampshire Municipal Association (NHMA), which are administered by Anthem Blue Cross and Blue Shield.

Under the city's health insurance program, the premium for the family plan is $19,245, for the two-person plan $14,256 and for the single-person plan $7,128. Employees enrolled in the single-person plan make no contribution to the cost of premiums, while those enrolled in the two-person and family-plans contribute 7.5-percent of the difference between the cost of the plan and the cost of the single person plan.

By contrast, under the School District plan the premium for the family plan is $10,953, for the two-person plan $8,114 and for the single-person plan $4,057. Employees pay 3-percent of the cost of the premium.

The city plan has about 150 subscribers, including some 100 retirees. Half of the retirees are people more than 65 years old who receive supplemental benefits that enhance their Medicare. Some 460 subscribers, including about 100 retirees, are enrolled in the school district plan.

Under the city plan there is a $5 co-pay for visits to a primary care physician. The less generous school district plan has a $200 annual deductible for the family plan ($100 for the single-person plan) after which the subscriber pays 20-percent of claims up to a maximum of $1,000 ($500 for the single-person plan). The School District itself pays the remaining 80 percent, the cost of which is included in the numbers cited above.

The two plans have different prescription medication programs. In the school district program prescription medications are included in the $100 deductible, then shared with the employee contributing 20 percent up to the caps. Under the city plan employees pay $3 for generic drugs and $15 for brand name drugs purchased at a pharmacy. However, both plans also offer a "mail-in" option that provides a 90 day supply of any medication for $1.

Paula Baumoel, personnel specialist in the city finance department, said much of the difference in the cost of the two programs arose from the city's unusual claims history during the past two years. She said that for the six years prior to 2002, total annual claims ranged between $900,000 and $1 million, usually running near $900,000. But, in 2002 and again in 2003, claims topped $2 million.

In 2002-2003, both the city and the school district chose to self-insure to a "worst case scenario" limit, with stop-loss insurance coverage meeting claims beyond this threshold. That program went awry when the agent who brokered it misrepresented the threshold at which the stop-loss insurance carrier would begin meeting claims. As of July 1, the city and School District returned to the NHMA for coverage, Baumoel explained, and the premiums reflected the city's recent claims history.

Ed Edmond, business administrator for the School District, said that "we have worked very hard to control our health insurance costs," but conceded "our costs were half what they are now four or five years ago."

The city is mounting a determined effort to manage the cost of health insurance in its negotiations with the four unions. It is seeking to increase the employee contribution from a percentage of the difference between the single-person plan and the two-person and family plans to 5-percent of the total premium. The city is also asking those enrolled in the single-person plan, who have not shared the cost of the premium, to contribute 5-percent. At the same time, it is seeking to replace the prescription medication benefit, which represents more than a third of the cost of the entire program, with a co-pay of $10, $20 and $30 based on the classification of the drug.

Baumoel estimated that together these changes would trim almost $1,200 off the cost of the family plan, reducing it to $18,073. This would still be $7,120 more than the comparable plan offered by the School District.

The LPOA, in talks with the Police Commission, has agreed to a 6-percent contribution to premiums along with the modified prescription medication benefit. However, the City Council rejected the contract because annual average cost-of-living adjustment of 3-percent exceeded its limit of 2.5-percent. Negotiations with the other three unions are at impasse and in mediation.