Kenai changes employee health plan

In its drafted Fiscal Year 2016 budget, Kenai will spend $291,629 more on employee health insurance than it did in the last fiscal year. This increase reflects the city’s ongoing effort to control its health care premium costs, which finance director Terry Eubank said have been driven up both by health care inflation and by large claims made on the city’s plan.

While preparing last year’s budget, Kenai faced a premium increase from its then-insurer, United Health care. It reduced that cost by changing insurers to Premera. This year, Premera gave the city a quote of $584,895 to renew its plan, a 39.7 percent increase over the previous year’s premium. The city will once again change plans to reduce the cost, keeping the increase at 20 percent, although it will remain with Premera.

Eubank said the new plan saves money by placing greater responsibility on covered employees to seek care from preferred providers — medical service providers with whom Premera has negotiated lower rates.

“The new plan makes it more punitive to the employee,” Eubank said. “In other words, it increases their coinsurance — the portion of the bill that they will pay — if they don’t use those preferred providers. So as long as I use a preferred provider, the coverage for me is the exact same.”

If an employee receives care from a preferred provider, the coinsurance payment will be 20 percent of the care cost. An employee’s coinsurance at a participating provider — one with whom Premera has a negotiated fee higher than a preferred provider’s — will be 40 percent, and at a non-participating provider — with whom Premera has no relationship — it will be 60 percent.

According to a list from Premera provided by Eubank, there are approximately 39 preferred providers in Kenai and 192 in Soldotna. Eubank said that the plan’s preferred provider arrangement encourages employees to seek care more carefully.

“We’re not looking to financially bankrupt any of our employees, but what we’re looking for is get our employees involved in health care,” Eubank said. “To learn the provider networks, to learn how to use preferred providers. Because it reduces costs for them, and it reduces costs for our insurance company.”

To assist this education, Premera representatives will visit Kenai in the future to hold instructive sessions with city employees.

Eubank said that it was necessary for employees to take more responsibility for the health care services because the city’s high premium increases have been driven by employees incurring large expenses.

“What we determined in discussions with Premera — and we get very limited information — but the root cause for the 37.9 percent premium increase for the city of Kenai was the existence of large claims,” Eubank said. “High dollar claims. Not over-utilization by our employees. Not people running to the emergency room or getting unnecessary treatments.”

According to Eubank, $10,000 is Premera’s threshold for a high claim. Within one 8 month period, Eubank said, 19 claims over $10,000 were made on the city’s plan. Two of the 19 claims were more than $100,000.

“So a significant portion of our premium that we’re paying to Premera is being paid out on a very limited number of claims,” Eubank said. “If we can curb that behavior by getting people to use preferred providers and other things, then hopefully we can reduce that cost.”

Like Kenai’s old plan, the new plan also funds a care option called “medical tourism” — traveling to receive health care in a place with lower costs than Alaska, usually Seattle.

“(Premera has) negotiated rates with certain providers in the Lower 48 at significant savings to what can be done in Alaska,” Eubank said. “They’re offering to provide transportation to our employee, or anybody covered on our plan, plus one representative (a family member or other helper) to go with them.”

A traveling patient will also receive a per diem allowance from Premera, and the coinsurance and deductible expenses will be waived for a medical tourism trip.

Although changing health care plans will help Kenai control the growth of employee health care costs in this year’s budget, Eubank said the new plan is unlikely to prevent another rise in expenses next year.

“Medical inflation was estimated by Premera in this renewal at 8.2 percent,” Eubank said. “So regardless of what happens, we’ll probably be looking at a minimum of an 8.2 premium increase. That’s what they estimate the cost of health care to go up every single year.”

Eubank said Kenai’s goal is to prevent its health care plan renewal costs from exceeding the medical inflation rate.

Another health care problem that may affect future Kenai budgets is the federal health care excise tax, created by the Affordable Care Act and scheduled to go into effect in 2018. According to an information sheet by insurer Cigna, this tax, popularly known as the “Cadillac” insurance tax, is meant to discourage employers from offering high-cost benefits. For health care coverage higher than $10,200 for individuals and $27,500 for families, the tax will collect 40 percent of the excessive cost from employers.

Eubank said that with these thresholds, Kenai will be subject to the tax. However, Eubank said it is not a concern of his yet.

“I don’t know how the law is going to be implemented, or if it’s going to be implemented,” Eubank said. “It’s still out there in the future.”

Reach Ben Boettger at ben.boettger@peninsulaclarion.com.

More in News

Photo courtesy of Gwen Baluss
An Arctic tern sits at its nesting site at the Mendenhall Glacier Recreation Area on Sunday, May 18, 2025.
Arctic terns return to their protected nests in Juneau

The birds began their journey to Alaska in March to find safe haven at the Mendenhall Glacier.

The Taku River as seen Monday, May 19, 2025, from an Alaska Wildlife Troopers helicopter carrying U.S. Border Patrol agents during a patrol flight. (U.S. Border Patrol Blaine Sector photo)
Border Patrol, state troopers take patrol flight over Taku River looking for drugs, other illegal activity

Troopers: “No enforcement action was taken”; Border Patrol: “We are just getting started.”

Seniors throw their graduation caps in jubilant celebration while attendees fling beach balls in the air from the bleachers during the 2025 Homer High School graduation ceremony on Wednesday, May 21, 2025, in the Alice Witte Gymnasium. (Chloe Pleznac/Homer News)
Graduates of Soldotna High School celebrate after receiving their diplomas on the school’s football field in Soldotna, Alaska, on Wednesday, May 21, 2025. (Jake Dye/Peninsula Clarion)
‘Go do cool stuff’

Soldotna High School graduates told to chase futures that will make them happy.

Kenai Alternative High School graduates stand with their diplomas at the conclusion of their commencement ceremony in the school’s gym in Kenai, Alaska, on Wednesday, May 22, 2025. (Jake Dye/Peninsula Clarion)
Kenai Alternative High School graduates 10

Principal John Galahan presented each of his 10 graduates with their own awards.

The front of the Kenai Police Department as seen on Dec. 10, 2019. (Photo by Brian Mazurek/Peninsula Clarion)
Two women arrested in Kenai, indicted on fraud charges

They allegedly attempted to withdraw cash in Eagle River, Wasilla, Anchorage, Soldotna and Kenai using false identities.

tease
Voznesenka School graduates 4

A commencement ceremony was held at Land’s End on Monday.

Graduates celebrate at the end of the Kenai Central High School commencement ceremony in Kenai, Alaska, on Tuesday, May 20, 2025. (Jake Dye/Peninsula Clarion)
‘Fight as the generation who will stand tall’

Kenai Central High School graduates 113.

Guest speaker Donica Nash gave out candy matching each student, including this package of JOYRIDE to Gideon Pankratz, at the River City Academy graduation ceremony Tuesday, May 20, 2025, at Skyview Middle School just outside of Soldotna, Alaska. (Photo by Jeff Helminiak/Peninsula Clarion)
River City Academy graduates 9

The school serves students in seventh through 12th grade and has an enrollment of about 80

Most Read