Going Way Way Up
In 2004, the county spent nearly $7.7 million on group coverage just from its general fund for about half of its 1,877 unionized employees paid from that account.
But by 2011, that cost is expected to soar to $18 million — an increase of 134 percent in just seven years or an average hike of 19 percent per year for the general fund line item for each of those seven years. The county also pays for employee coverage with monies located in special revenue and enterprise funds, like aeronautics.
In an effort to numb some of the projected financial pain, the county has put together a committee with one representative from each of the 12 bargaining units, and those dozen employees are sitting at the table with county officials trying to figure out what can be done to rein in the climbing costs.
"I've probably got three to four hours of an outline in a PowerPoint presentation to get through some of the issues and get some vocabulary going amongst the group and bring up some of the issues we're aware of and see what feedback they give," said Don Clack, county human resources director, who is heading the meetings that began earlier this month.
"I don't have a set number of sessions in mind. This is one of those situations where the longer it goes and the more questions I get, the better it is," he added.
Unless something changes, the county will have spent $101 million from the general fund on health insurance from 2004 through 2011. Of course, that figure could go higher if the fiscal forecast is low or if medical costs aren't contained.
"The first thing you have to do is to begin to manage and control those costs and not see some of the increases that we have had. Besides having employees pay more, which we've done, the other side of that is plan design. Managing our plan design gets complicated though because we have multiple bargaining units," said Clack.
"This is not intended to be a negotiation," he said of the meetings. "This is intended to be an education before we go into negotiations, so there is some understanding of what the plan's sponsor, the county, faces just like every other employer."
In the county's recent round of negotiations with the bargaining units, 11 of the 12 locals agreed that workers should pay 10 percent of their premium and prescription costs as part of their new labor agreements. Talks to add the same contract provision to the 12th unit — the Police Officers Association of Michigan — were being held last month.
The new contracts mean county employees are now paying from $110 to $118 a month for family coverage under either the respective HMO or PPO plan. Forty-five percent of workers are enrolled in those plans. But when the next round of labor talks come up, the county will likely ask employees to shoulder a larger percentage of the premium cost.
"I think health care is the No. 1 cost issue for the county and I think we need to get our arms around it. In the private sector, we're looking at anywhere from 18 to 23 percent as the employee co-pay, and I think 10 percent is a start. But we're going to have to continue to look at those types of contributions and even the programs that we are willing to administer," said Kent County Commission Chairman Roger Morgan.
The county switched from insuring with a single provider a few years ago to a self-funded plan that is administered by a third party in an effort to get a better handle on that cost. But so far
In December, the county had to raise its 2007 group insurance budget in its general fund from $10.6 million to $11.9 million because the 2006 cost rose by 27 percent instead of the 12 percent that was expected. The increase was driven by more than $11 million in claims last year — $3 million more than were filed in 2005. Sixty-four of those 2006 claims were for more than $25,000.
"We went to self-funding hoping that it would save us money, and with the increases I think that has been kind of a wash. So I think we will always have an eye on going away from the third-party administration that we're doing now and looking at some kind of provider. I think all the alternatives are on the page," said Morgan.
In addition to the health insurance hikes, the county will also spend more on its pension plan.
The county treats retirees differently than employees, however. Unlike General Motors Corp.,
But like its group insurance program, the county is also considering making changes to its pension plan.
Fiscal Services Director Robert White said the county's monetary liability for the retirees' health coverage stood at $48 million, or 3.1 percent of payroll. He reminded commissioners that the state constitution requires counties to pay pension benefits, but not health benefits.
If current projections prove to be accurate,
A county subcommittee that examined employee benefits recently gave commissioners its final report, which summed up the county's current situation and offered long-term options.
"This starts the process," said Delabbio of the subcommittee's work. "It doesn't end the process."
Source: Kent County 2007 annual budget, general fund expenditure forecast