Des Moines to self-insure for city health coverage

Des Moines is returning to a self-insurance system for employee health plans, a move city officials hope will eventually save taxpayers $1 million or more each year.

The City Council approved the switch during its meeting Monday night.

City administrators said it would help control rising health insurance costs, which currently run about $26 million annually.

The Des Moines Register reported Tuesday that if projected savings arrive, the move to self-insurance could become a key part of broader efforts to curb operating costs. Des Moines faces major revenue declines due to lower property valuations. The Legislature also is considering a proposal to slash commercial property tax rates by 40 percent.

Salary and benefits for the city's full-time workers account for about 60 percent of $160 million in general fund spending.

"I hope we stay self-insured," City Councilwoman Christine Hensley said. "I think the time is right for us to go forward with that. I think there have been some changes made."

Des Moines was self-insured before 2003, when the city started to buy private insurance through Wellmark Blue Cross and Blue Shield of Iowa.

The Register said changes in stop-gap, or excessive loss, insurance are among the biggest differences between now and 2003. Then, the city paid the first $300,000 of an individual claim before secondary insurance covered the cost. City officials said that would translate into $500,000 or more for taxpayers.

Multiple large claims helped drive the city's decision to end the self-insurance program. Under the new plan, the city's stop gap insurance will kick in on claims that exceed $125,000, lowering the risk to taxpayers.

Deputy City Manager Allen McKinley said savings in the first year of the new system are expected to be minimal because the time will be spent building reserves required to deal with fluctuations in claims. Significant savings could come in fiscal 2013 once the reserves -- equivalent to about 25 percent of annual claims -- are established.

"Conservatively speaking, we anticipate it being more than $1 million," he said.

City officials estimate health insurance cost would increase between $2 million and $3 million a year had they continued to have private insurance.

The new plan will take effect on July 1 and run through June 30, 2012. Officials said employees would see no change in benefits, health plans or provider networks.

Wellmark will continue to administer the city's employee health insurance claims.