Going self-insured means Augusta would have greater control over employee health insurance premiums, but it also means slightly more risk if claims exceed what the city budgets for them, a consultant encouraging the shift told commissioners Monday.
Over the past three years, Augusta and its employees have paid Blue Cross Blue Shield about $20.4 million in premiums, while claims have averaged around $18 million, said Lisa Kelley, a consultant with Wells Fargo Insurance Services.
The city could earn interest off the difference and further limit the claims if it went self-insured, she said at a commission work session.
“On those months when you take in more in premiums … where claims aren’t as much, that’s to your good,” she said. “Your employees really won’t see a difference.”
Most governments hire a third-party administrator to manage the pool, at a much lower expense than paying for full coverage, and the city would immediately save a 2 percent tax on insurance premiums, she said.
Control over claims would come from wellness and prevention programs targeted to Augusta’s needs, she said.
“You have the wellness resources that Blue Cross puts out there, but there’s nobody really overseeing the program or calculating the return on investments,” Kelley said.
Once governments change, however, it’s tough to return to full coverage of all employee pre-existing conditions at an affordable price, she said.
“At that point, you’re going to be at every carrier’s mercy,” Kelley said.
If claims exceed the pool, stop-loss coverage covers the difference, but cities that repeatedly run over their budgets might find stop-loss coverage rates pricey, she said.
Commissioners asked about the stop-loss coverage and the impact of the change on employees with primary-care physicians in Blue Cross’ network.
Kelley said that even if it self-insures, Augusta must remain with the Blue Cross provider network to keep those physicians in-network.
She said she’ll be back Oct. 8 with a recommendation for self-insurance and full coverage from companies responding to the city’s request for proposals.