OC Reacts To Rising Health Insurance Costs

OCEAN CITY – Town employees will be seeing some changes in their medical insurance coverage, after a unanimous decision by the City Council this week to approve changes that aim to save the town money.

Two years ago, the City Council approved the switch from the town’s long-time health insurance carrier, United Healthcare, to Carefirst Blue Cross/Blue Shield.  As a result of that change, the town’s combined renewal rate increase, as of July 2007, was 7.6 percent, a low figure compared to the 10 percent national average.

“One year later, 18 unanticipated medical cases of $30,000 plus including three deaths and heavy dental usage has resulted in a 2008-2009 combined renewal rate of 14.89 percent compared to a current national average of 11.5 percent,” said Human Resources Director Roger Wesman in a letter to the City Council.

In an effort to decrease the high combined renewal rate, City Manager Dennis Dare presented two recommendations to the council this week.

The first recommendation calls for an increase in the office co-pay that town employees pay when visiting a doctor’s office. Currently, the co-pay stands at $15, but after researching other companies and governments, Dare recommended the co-pay be increased to $20, which could cause a 1.48-percent reduction in the medical costs or $72,000 in savings.

The second recommendation aims to provide an incentive for employees to use generic prescription drugs rather than the brand name, which is often significantly more expensive.

To encourage the use of generic drugs, Dare recommended a reduction in the generic drug co-pay, from $10 to $0 and a raise in the brand co-pay from $20 to $25 and from $35 to $35. The result would be an 8-percent reduction.

In total, the changes result in a combined savings of $170,900, explained Dare, who noted the combined renewal rate would also be affected, dropping from 14.8 percent to 12.2.

“After a due-diligent sampling of other area governments, Board of Education and business, we believe that adopting the two options just described reflects current trends and is appropriate. Although it is never a popular action, sharing insurance cost increases and implementing appropriate changes is in keeping with the spirit of our partnership between city and employees,” said Wesman.

“I think unfortunately, because of rising healthcare costs this is something that we have to do,” said Councilman Jim Hall.

The council voted unanimously, with Councilwoman Nancy Howard absent, to approve the changes.