Terry Eubank (left) and Paul Ostrander address the Kenai City Council during a budget work session on Saturday, April 24, 2021 in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)

Terry Eubank (left) and Paul Ostrander address the Kenai City Council during a budget work session on Saturday, April 24, 2021 in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)

Kenai anticipates high hike in health care costs

The city paid just over $2.6 million on employee health care in FY21 and expects to pay about $2.8 million in FY22.

The City of Kenai expects to spend between 18% and 20% more on health insurance for city employees this year than it did last year. That’s according to data presented by Kenai Finance Director Terry Eubank during a public budget work session last Saturday.

That percentage increase reflects an assumed 10% jump in premium payments and the elimination of a one-month premium holiday for the city by its insurance provider, which comes out to about 8.3%. The city has been given a one-month holiday for the past two years.

However, Eubank said Saturday that the increase in the city’s premium payments may be even higher. The city’s initial quote for FY22 from its insurance provider, Premera Blue Cross, was 12%. At that rate, plus the loss of the one-month premium holiday, the city would see an increase of 20.3% from the previous year.

Eubank said that the determination of Kenai’s final premium increase is still “a ways away,” and that they contract out someone to consistently research new health care providers and plans that may be less costly to the city.

Regardless of whether the change is 18% to 20%, the amount of money city employees pay monthly for health insurance will go up. How much an employee pays monthly for health insurance depends on how many people their plan covers and whether they are a full-time or part-time employee. Part-time employees whose plan covers their spouse and children, for example, pay more for coverage monthly than full-time employees and their family. The lowest premium is paid by full-time employees whose insurance only covers them.

The change in how much each type of employee scenario will pay monthly in insurance between FY21 and FY22 ranges from $34 per month to $474 per month. That reflects an increase in the percentage employees contribute to their insurance costs, or their cost share, from 11% to 12%. The 1% increase is the second increase in two years and reflects a five-year plan by the city to achieve an employee cost share of 15%.

Per eligible employee, the City of Kenai will pay about $2,000 more for full-time workers and about $1,000 for part-time workers. Eubank said Wednesday that about 100 city employees currently have health insurance through the city.

Eubank told the Kenai City Council and city administration during a budget work session last Saturday that health care costs are a consistent challenge during the budgeting process.

“[Employee health care] is a battle every year for us,” Eubank said.

Kenai City Manager Paul Ostrander said during the same work session that the city’s inability to control rising health care costs is one of the primary reasons the city needs to keep its operating expenses low.

“Health care goes up 10-plus percent every year,” Ostrander said. “Until the way we provide health care as a nation changes, that’s something that we’re going to see for the foreseeable future, and it’s not sustainable. We can’t do that forever but for now that’s what we’re seeing [and] we’ve seen it for the last 10 years.”

If premium costs increase by 10% — the conservative estimate — Kenai will pay, in total, $210,893 more than it did last year. The city paid just over $2.6 million on employee health care in FY21 and expects to pay about $2.8 million in FY22.

The City of Kenai is not the only entity with high health care costs.

Soldotna Finance Director Melanie Imholte said Wednesday that while the city is still finalizing its FY22 budget, they are expecting their renewal rates for employee health care benefits will be “essentially the same” as they were for FY21. Imholte said the city participates in the State of Alaska’s political subdivision health insurance plan with coverage provided by Aetna.

“We are waiting for the final rates but have been notified by Aetna that the medical portion has no increase and the dental portion is a very slight decrease,” Imholte said.

Soldotna has seen a yearly increase in insurance costs of about 7.5% over the past five years, with the range of percent increases dependent on the type of coverage an employee has. Most recently, health insurance rates increased by 7.6% in FY21.

Imholte said the city has been able to save money on insurance by going through the state, because they utilize premium stabilization reserves. Imholte said that the state has saved the city about $860,000 and city employees about $210,000 since FY2015.

In all, Soldotna is expecting to spend about $1.2 million on employee health insurance, which about 65 city employees take advantage of.

Kenai Peninsula Borough Finance Director Brandi Harbaugh said Wednesday that the borough’s financial statements show an increase of about 27% in health care costs from FY13 and FY19. The borough spent just over $5.5 million in FY13 and just over $7 million FY19. That is an increase of about $1.5 million in six years.

Kenai Peninsula Borough School District Finance Director Liz Hayes has said they expect roughly one-third of the district’s general fund — about $44.4 million — will go toward paying for employee benefits in FY22. Another 46.5% —about $62.4 million — will go to salaries.

In a presentation to the KPBSD Board of Education earlier this month, Hayes said the district budgeted for a 5% increase in health insurance costs from what it paid during the last fiscal year.

Per the agreement negotiated with the teachers’ unions, the district’s employee cost share is 15% while the district pays 85%.

The City of Kenai’s full budget draft can be found on the city’s website at www.kenai.city.

Reach reporter Ashlyn O’Hara at ashlyn.ohara@peninsulaclarion.com.

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