City’s employee health insurance plan to change

Published 10:13 am Wednesday, January 10, 2018

The City of Franklin plans to switch its employee health insurance plan to COVA, a new state insurance local option program being offered to local governments and agencies in Virginia. City Council voted 6-0 with one abstention on Monday to authorize City Manager R. Randy Martin to execute documents necessary to commit the city for fiscal year 2018-2019.

Martin had recommended that council approve the switch after learning that the city’s current health insurance plan, a statewide pool called The Local Choice or TLC, which the city had used for decades, was projecting a 30.8 percent increase in premiums were the city to renew its current policy for FY 2018-2019. This rate hike would follow a 10.3 percent increase last year, of which the city picked up 5.3 percent and passed the remaining 5 percent onto employees.

“I cannot in good conscience recommend [staying with TLC],” Martin said. “The city cannot afford it.”

To move forward with COVA, the city must submit all paperwork to the state by Monday, Jan. 15. The state requires a minimum of 5,000 employees and 10,000 individuals covered statewide to create the plan. If interest in COVA does not materialize by the aforementioned deadline, the state will likely deem the new program nonviable and the city will be forced to renegotiate with TLC.

Switching to COVA will still result in an increase to the city’s premiums for FY 2018-2019, though this is estimated to be around 17 percent. What portion of that increase would be passed onto city employees is currently unknown.

“That decision comes in the spring during budget discussions,” Martin said. “First, we have to wait and see what transpires with The COVA Local plan in terms of whether adequate participation materializes statewide.”

When asked why the city’s projected premiums had risen so much over the previous fiscal year, he denied that it had anything to do with the Trump Administration’s decision in October to discontinue reimbursing insurers for their subsidized Affordable Care Act plans, or Anthem’s decision in August to pull out of Virginia’s Affordable Care Act marketplace, a decision the company reversed in September of that year. He explained that Anthem is the current provider for all state health insurance plans in Virginia, and that the city’s insurance was never subsidized, since it is group insurance.

One contributing factor to the premium increase, Martin said, was what insurers refer to as “experience modification.” This occurs when total claims filed by covered employees, dependents and retirees over a one-year period significantly exceed premiums paid by the city. One of the benefits of COVA, Martin said, was that it was a three-year commitment with caps on how much premiums could go up over those three years.

If the state chooses not to proceed with the creation of COVA, then the city will have until late April to early May to renew with TLC.

In other business, the council voted unanimously to accept a bid of $3,926.80 for the lease of 30.5 acres of city-owned farmland located along Crescent Drive. The bid, though the only one received, is $900 more than what was paid by the city’s previous tenant, whose lease expired on Dec. 31. The new lease offers a four-year contract from Jan. 1, 2018 through Dec. 31, 2021.

The council concluded by going into closed session.