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Can Walworth County curb health care costs?

Insurance has put crunch on county budget

Mike Heine/The Week

(Published Nov. 21, 2007, 11:15 a.m.)

The math is simple.

Take Walworth County’s budgeted amount for employee health care in 2008 and divide it by the number of employees and retirees receiving the benefit.

That’s $17.6 million/975 employees and retirees.

What do you get?

An $18,048.82 benefit for employees, retirees and their families that rests mostly on the shoulders of county taxpayers.

The problem is more complex.

Health care costs in Walworth County are “soaring,” according to the 2008 Administrator’s Budget.

It prompted Supervisor Robert Arnold to call for sweeping changes to the county’s self-funded health insurance plan. With an 11th hour proposal, he asked the county board to cut more than $567,000 from the budget and find a private insurer.

He felt a large company could negotiate with health care providers for lower procedure costs.

The move failed, but looking to find cheaper health care costs in the future is on the to-do list for county staffers after Monday’s human resources committee meeting.

“Obviously, we have a system that is totally out of whack and needs a house cleaning,” Arnold said at the county board meeting last week.

Change isn’t easy

The county has sought reforming its health care plan in the past, Administrator David Bretl said.

Each time, however, private insurers came back with quotes at or above what the county budgets for insurance or, they offer plans with less coverage to employees, Bretl said.

The county is subject to negotiated contracts of seven employee unions. Massive changes to insurance would no doubt subject the county to grievances and arbitration, Bretl said.

“Why not have private insurance? In concept, it would be great,” Bretl said. “You can buy it off the shelf and it’s there.

“The problem is if employees, represented through their unions, don’t want that, then they can take it to binding arbitration.”

To meet the provisions of union contracts, insurers would have to customize their plans and build in profit on top of it, Bretl said.

In the past, that has always meant a higher cost than the self-insured plan the county currently uses, Bretl said.

Neighboring Racine and Kenosha counties are both self-funded and belong to cooperative networks that have the power to negotiate lower provider costs like large insurance companies do.

Racine County, which networks with municipalities and large companies in the area, has employees pay 10 to 15 percent of their health insurance, said Doug Stansil, county finance director.

Kenosha County keeps its insurance costs lower by having higher co-pays and deductibles.

“Not only is it a way to manage our costs, but a way to remind the employees (of insurance costs),” said Barna Bences, a financial consultant for the county. “If you had fully insured insurance, and (employees) pay little for it, there is no incentive for you to not go to the doctor every time have sniffles. If they have co-pays and deductibles and a pay-as-you-use system, it makes you a better user of insurance and providers.”

Walworth County has a similar setup.

The four-tier plan currently offered by the county has both co-pays and deductibles. Depending on the plan, employees pay zero, 3, 5 or 10 percent toward premium costs. The county uses a preferred provider organization (PPO) to try and negotiate lower costs from providers.

 

Health care ailing

Arnold isn’t alone on the board in feeling that other options need to be explored. His proposal failed 18-7. Some who voted against him said they were doing so because his proposal came in late.

Wages and benefits make up 46 percent of the county’s total expense budget. The $6.5 million increase in wages and benefits for 2008 includes a 27.5 percent increase in health insurance rates.

For every $1 spent on wages, the county will spend 74 cents on fringe benefits (health, dental, life and long-term disability insurance, workers compensation, etc.), Comptroller Jessica Lanser said.

The amount spent on county benefits since 2003 has soared from $19.1 million to $31.3 million in 2008. The latter total includes $3.9 million going into a reserve account for future retiree insurance coverage.

The health care budget rose $2.7 million in next year’s budget and it might need $1 million more if union negotiations result in no changes to the current plan. That would mean an $18.6 million health care budget and about $19,000 benefit per employee, retiree or family on the plan.

The county has seen shortfalls with its self-insured health care plan in 1996, 1998, 1999 and 2001. Between 1996 and 1999, about $750,000 unbudgeted dollars were added to the account. In 2001, there was a $1.2 million deficit, according to Bretl’s budget outlook.

After 2001, the county started building a health care a reserve fund. It reached $3.1 million in 2005.

Increasing claims through 2006 forced a 35 percent increase in insurance rates for 2007, but even that was too small. In February, an additional $900,000 was added to the account and in July, an additional $1 million was added to keep a reserve, according to the administrator’s budget.

Bretl projected finishing this year with a “slim” $370,000 balance.

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