To avoid a budget shortfall this year and potential crises in future budgets, Independence City Manager Zach Walker recommended a series of changes to the city's health insurance plans, which will surely draw much discussion among city circles in the coming weeks.
Most notably, the proposed 2019-20 fiscal year budget calls for shifting the employer-employee cost split for health-care premiums for retirees age 55 to 65 from 80/20 to 50/50 over the course of three years.
The budget also calls for offering group Medicare coverage to retirees age 65 and older with various options; encouraging current employees to shift to a higher deductible plan that would now include a city-funded health savings account of $1,000 (the same as the deductible increase); shifting the employee StayWell clinic to a third-party provider. Health care premiums, which have not risen in four years, would go up 8 percent.
All told, Walker projects the changes would save the city about $3.46 million in the first half-year and more than $7 million annually.
With the upcoming budget, Walker projects employee health insurance costs will increase to $20.5 million and retiree health insurance costs will increase to $8. This in a general fund with projected expenses of $80.1 million.
Walker warned that without the proposed health insurance changes, the city would be looking at notable personnel, service and facility cuts to balance the general fund.
“The city can no longer operate as we have,” Walker said regarding health insurance costs, noting that only 18 percent of employers offer retiree health care benefits – about half as many as in 2000.
The StayWell clinic has only been used by 30 percent of city employees and retirees, and Walker said it would need about 90 percent usage now to cover operating costs.
Overall, Walker's proposed city budget is $320.1 million, a 2.5 percent increase from this year.
The city will host a budget town hall at 6 p.m. Wednesday in the Truman Memorial Building. The official public hearing on the budget is at Monday's council meeting.
ELECTRIC RATE DECREASE: The council did approve a 4 percent decrease for all electric utility rates starting Aug. 1 and asked staff to report back soon on how the city would save on expenses to allow for further rate decreases.
Council Member Mike Huff had asked last week for a 10 percent rate reduction phased in over three years (4-3-3), but the council split on the vote with Karen DeLuccie out of town on family business. Huff brought back his proposed cut and amended it to just the initial 4 percent, with an eye toward more in the future.
DeLuccie said the council's decision to raise rates in 2012 had been wise given Power & Light's budget and reliability issues.
“But we have not decreased rates since then and we've fixed reliability,” she said, referring to the time before the council voted for a 2 percent cut late last year. “I honestly believe IPL can afford this rate decrease.”
As he did last week, Council Member Tom Van Camp also applauded the council's decision in 2012.
“We're unmaking this choice,” he said, “and it's my belief it's not unfavorable.”
Council Member Scott Roberson cautioned that cost-of-service and rate studies about to be presented, he didn't want to be premature and make a cut that might have to be undone in the near future.
“I might support more reduction later this year, but I think that would be premature now,” he said. “I don't want to have to look at a rate increase.”
“I think caution is being held here,” Council Member John Perkins said, noting the council's request for staff reports soon.