SALISBURY – The city plans to come together with the county and Board of Education to amend the Memorandum of Understanding involving their health insurance consortium to reduce the entity’s rates.
According to the Director of Internal Services Pam Oland, the city is in a consortium with the Wicomico County Board of Education and Wicomico County for health insurance. As a consortium, the city is self-insured for health insurance claims.
A requirement involved in the Memorandum of Understanding (MOU) that governs the entire group for health insurance is that each entity pays up to 5 percent of annual premiums additional in any year that the expenditure exceeds the premium.
In negotiating the fiscal year of 2012 health insurance rates, the city’s health insurance company, CareFirst Blue Cross, offered to lower each member’s rate increase by 3 percent if each of the entities were willing to amend the MOU to have the maximum additional liability increased from 5 percent to 7 percent.
“The 3 percent rate reduction lowers the rate increase from 11 percent to 8 percent for the city,” Oland explained.
During fiscal year 2012’s budget process, Mayor James Ireton included the 8-percent rate increase in the budget assuming the offer would be accepted. The county has included the 3-percent rate reduction of rates in its fiscal year 2012 budget as well, and the Wicomico County Board of Education has approved the increase to 7 percent.
“I don’t think they [Board of Education] have actually amended but they have gotten the okay from their governing body that the amendment can be made,” Oland said
City Administrator John Pick added that the County Council was discussing the change that day, laset Tuesday, during the budget discussion.
The MOU also requires that each entity maintain a rate stabilization reserve equal to at least 10 percent of the prior year’s premiums. Salisbury has approximately 19 percent of annual premiums in its rate stabilization reserve.
“Increasing the maximum potential liability percent could be covered with our current reserve,” Oland said.
She added that since 2005 the city has only had to pay an additional amount in premiums one year. In all the other years, the premiums paid have exceeded the costs incurred and the difference between the amounts have been returned to the city and deposited in the rate stabilization reserve.
Oland asked the council to allow the MOU to be updated to change the maximum additional liability percentage from 5 percent to 7 percent. She said that it would benefit the city in the FY2012 budget as well as the city’s employees.
Councilwoman Laura Mitchell pointed out that in the two-year term the city already has 19 percent covered. The proposal does not include the removal just explains that the 14 percent is already covered.
“Showing the numbers we are showing the council that we do have sufficient funds to cover two years,” Oland said.
Council President Terry Cohen asked what kind of timeline the council was facing in making a decision.
“The biggest deadline is the Board of Ed has to do their open enrollment for their employees in the month of May because of the fact that they have a lot of nine month employees,” Oland explained. “Unlike us we do our open enrollment in July, so they can’t really wait that long.”
“You have our verbal agreement,” Cohen said.