City of Union -- stock

After saving nearly a $1 million over a three-year period, the city of Union is looking at ways to reduce health insurance costs even more.

The city is exploring the next step toward self-insurance in the next few years.

Union took the first step in 2015 when it joined a multiple-city health insurance pool. Three years later, City Administrator Russell Rost said the pool has led to savings totalling $933,072.26.

Rost said the savings are based on projections where costs increase 9 percent annually. He said 9 percent was a very conservative estimate based on the city’s prior experience.

Prior to joining the pool, Rost said costs increased by 51 percent in a three period, on average of about 17 percent a year.

Rost informed aldermen at the Aug. 6 personnel, finance and public works committee meeting about the savings. He also briefed the board on what the next steps look like.

Rost told The Missourian the city is likely to start the transition toward starting its own pool that includes self-insurance and should lead to more savings.

In an effort to cut the rising insurance costs, the city joined an insurance pool offered through its property, automobile, employment practice, workers’ compensation and liability insurance MIRMA (Missouri Intergovernmental Risk Management Association) provider.

Under the plan, MIRMA pools employees from multiple cities to seek better rates. For employees, the actual insurance is unchanged.

“We used to go to local broker and we’d go on the market and get bids each year,” Rost said. “Those bids became, those increases, became pretty significant.”

The city jumped into an existing pool and immediately saw savings.

“It allows the benefit of savings by doing that, by taking some of the risk in house,” he said.

The logical next step is to start its own pool, Rost said. Under its own pool, he said 20-plus municipalities would all join in together to form a group.

“We are actively seeking other cities to join us,” he said.

When formed, the new pool would have a common start date for its insurance.

“We plan to transition, over the next couple of years, into a true pool, where we won’t need to join with these other groups,” he said. “We’ll have our own group at that point.”

Coverage for employees wouldn’t change at all. Rost said the deductible would be the same and so would the providers.

“We’d pool with other cities to do a program that includes self-insurance and excess loss coverage,” he said.

The potential cost savings would come from the eliminations of profits. With the city running the pool, Rost said there wouldn’t be an outside party interested in generating profits.

“There are some profits that are built in contractually by joining these other companies,” he said. “The reason they’re letting us join is they realize a profit with us joining the group. If we create our own group, we would eliminate the need to pay those profits.”

Rost said April 2019 is a potential start date, but it’s still up in the air. He said there’s a lot of things to still get into place.

Rost said the city wanted to start its own pool three years ago, but needed the savings to fund the switch. With the savings in place, now it will begin making the transition.

“Now we have, going forward, the funding to create the pool that we need,” he said.