City employees face health insurance hike

The City of Palmer offers one of the state’s richest health-benefit packages in the state. And it’s busting the city’s budget.

Employee health benefits are so generous - the city’s 68 covered employees pay no premiums - that officials say they can’t afford to keep up the status quo.

With next year’s budget talks underway, Palmer administrators say the city needs to make the transition from the current health insurance plan to one that costs the city less - and employees more. 

But employees say they take jobs here with the understanding that high benefits will balance out Palmer’s notoriously low pay rates. For example, a deputy city clerk at Palmer starts at $20.84 an hour; that position is currently staffed at 28 hours. The same position in Wasilla starts at $25.36. 

The city council held a special meeting Tuesday night to discuss the health insurance issue, along with budget and capital project matters.  

Council members expressed reluctance to make any health-insurance decisions until the budget and health-care cost picture gets more clear in the coming months. The city will approve a budget in December.  

Council member Edna DeVries said she wanted the overall picture before making a decision on employee health benefits. 

But DeVries - and several other council members - pledged not to ask Palmer taxpayers to shoulder the financial burden.

“I’m not going to raise sales taxes, I’m not going to raise the property tax rate, I’m not going to go into reserves no matter what the budget looks like,” DeVries said. 

Health insurance cost the city $1.5 million this year, according to City Manager Doug Griffin. Costs are expected to rise 11 or 12 percent next year, an account executive from insurance carrier Alaska USA Insurance Brokers told the council Tuesday. 

At the meeting, Griffin unveiled his two leading employee health insurance proposals after employees panned a half-dozen options sent them in July. More than a dozen city employees came out to hear the discussion; none spoke. 

Griffin proposed keeping the current plan, which offers a 90-10 co-pay split and low deductibles, but with employees paying 5 percent of the premiums. 

That option, however, probably won’t save the city any money, Griffin realized as the night went on. The 5 percent savings from employee contributions would be more than offset by the anticipated increase in health costs next year.

The other option he floated was one with an 80-20 split for co-pay and higher deductibles. That option could save the city about 11 percent, at least enough to offset the projected cost increases, officials calculated as the meeting continued. 

Council member Richard Best voiced his support for the 90-10 plan as a transition to an 80-20 split in the future, as did council members Linda Combs and Ken Erbey. 

Council member Brad Hanson agreed with DeVries on keeping the burden off individual taxpayer and waiting for more budget information. 

“I know this is very very difficult situation for everybody but a 90-10 plan is something the city is not going to be able to afford long term,” Hanson said.

Mayor DeLena Johnson expressed her support for the 80-20 split and urged the council to think broadly about the insurance questions. 

The council took no action Tuesday night on employee benefits. The next budget discussion is scheduled for Oct. 16.  

-- Zaz Hollander