Steep county health costs loom

Carlton County averted a double-digit percentage increase in its property tax levy for 2024, but it may not be so fortunate this time next year — when budgeting for 2025 could include wrestling with a runaway health insurance premium.

That’s the fear being articulated by county officials, who explained that high numbers of claims forced the county to use 5-percent and 10.5-percent caps on premiums in 2023 and 2024.

With no such negotiated cap on the premium with Blue Cross Blue Shield in 2025, the premium could skyrocket.

“The increases are difficult to absorb as it is, but without the caps the cost of our health insurance would have increased by $8 million over two years instead of $1.2 million,” said Gary Jackson, human resources manager. “We need our claims experience to improve dramatically to avoid enormous rate increases because this is our last year of rate protection.”

An increase in the county levy of no more than 3.99 percent was met with relief by commissioners last month. It was in line with the 3.97-percent average increase across the past six years. The levy was contained by a 32-percent increase in county program aid from the state, and interest rates on investment income moving from 0.1 percent to 5 percent.

“That was a big help,” auditor/treasurer Kevin DeVriendt told commissioners. “(But) the two biggest factors that helped us get to 3.99 won’t exist a year from now.”

DeVriendt said that interest rates are projected to come down by next year’s budgeting, and that county program aid, while remaining the same, doesn’t include any escalators or cost of living increases.

All that will leave the county exposed to what could be a soaring health insurance premium that’s based on prior-year claims. Had the county not negotiated the caps for 2023-24, the county would have faced a 31.3-percent increase next year alone.

“Those negotiated caps prevented our health insurance premiums from doubling in 2023-24,” Jackson said.

The caps were negotiated in 2022. The 2023 premium ended up at $7.3 million, while 2024 is expected to reach $8 million — a $764,393 increase, even with the 10.5-percent cap.

The premium is not totally a cost to the county, as employee and retirement contributions fund approximately 11.5 percent of total premium costs, Jackson said.

Negotiations with Blue Cross Blue Shield in 2022 didn’t include a cap for 2025.

“We can negotiate for future caps, but that won’t happen until 2025,” Jackson said. “There is no guarantee that we would get them [for 2026 and beyond] or at what level.”

When asked if the county could make a request for proposal to solicit a new insurance carrier, Jackson explained the county could do that, but that it didn’t make sense.

“It made much more sense to utilize the 10.5-percent cap … than do an RFP for quotes that would never come close to that,” Jackson said.

To avoid health insurance expenses from escalating further, the pace of claims simply will need to come down. If not, the county could be in line for a major increase in its 2025 levy.

When asked about the nature of claims among county employees, Jackson reminded the newspaper that individual health information is protected by federal law, limiting the details on the nature of the claims.

“We have speculated that some of it has to do with elective procedures being suspended during Covid and then there was a surge when those procedures became available again,” Jackson said.

Providers and pharmaceutical companies also renegotiate their rates with the carrier. So the employees could have the same number and types of claims as years prior, but are paying more for them year over year, Jackson added.

Thus, it’s likely that a number of factors are contributing to the claims being made.

“The majority of this is beyond our control,” Jackson said. “We are trying to negotiate a higher share of costs with our unions.”

Currently, single coverage is at no cost to the employee while employees pay 20 percent of family coverage. Proposed single coverage costs in 2024 amount to roughly $12,700 annually and family coverage $29,500, with those figures to be settled by year’s end.

“We can’t tell people not to use their health insurance, but if the expense is spread around more among our employees there may be more incentive to collectively control the costs,” Jackson said.

Regarding the impact on the levy, the county is projecting health insurance to be 22 percent of total payroll costs in 2024.

“We are looking at different options, but you’re pretty limited when you are a bad risk,” Jackson said, meaning any alternative carriers will be looking at the same claims data being used by Blue Cross Blue Shield.

For argument’s sake, it’s worth understanding the big picture impact. It took $322,000 to make a 1-percent move in the 2024 levy. So, a $1.3 million levy increase, from $32.1 million in 2023 to $33.5 million in 2024, amounted to the roughly 4-percent increase that will be considered by county board vote in December.

If the health insurance premium adds another, say, 30 percent to next year’s $8 million in 2025, that alone could raise the levy nearly $2.4 million, or roughly 7.5 percentage points — a figure that would buckle the budgeting process and create an unpalatable tax increase for property owners.

“We have one year of cap protection left for our claims experience to go down or we will have to present staffing options to the county board that would offset the increased expense,” Jackson said, forecasting the risk of position cuts during the 2024 budget season.

“Insurance companies don’t lose money on you forever,” Jackson added. “So we can expect a substantial increase if Blue Cross Blue Shield continues to pay more in claims than we pay in premium.”