The Metro Council on Wednesday refused to raise health insurance premiums for city employees, a decision that will force the city to pull money from its reserves and could possibly drain the city-parish’s entire health insurance reserve fund within two to three years.
The city-parish has already lost some $2 million since April because it’s been paying more for health claims than it has been receiving from employee health contributions.
To offset the problem, the city offered to pay $3.5 million extra for health insurance from its tax pools and asked for city employees to pay 8 percent higher premiums to generate an additional $1.3 million.
Department of Public Works union organizer Alvin Rattle and a couple of employees spoke against the higher premiums, complaining it would eat up their 2 percent pay raise from earlier this year.
The Metro Council could not generate enough votes to increase the premiums, forcing City Administrative Officer William Daniel to say the city will pull the $1.3 million from the health insurance reserves.
The reserves are at $10 million.
“It’s fiscally irresponsible,” Daniel said. “They have a fiduciary responsibility to run this city in a fiscally responsible manner.”
The impact will be felt deeply in the city-parish’s budget, Daniel said. Tax money that could have gone toward city services, youth programs and other services will now have to go toward paying health insurance for city employees, he said.
And Daniel is certain the problem will only get worse. The extra financial obligation from the city-parish would grow each year, as health insurance claims mount.
“The sky will not fall in 2016, the sky will fall in 2017,” Daniel said, adding that several council members will be up for re-election next year. “All you’re doing is kicking the can down the road.”
Daniel said when health costs continue to soar and the Finance Department returns to the Metro Council next year, they could be asking for a 20 percent increase on health insurance premiums.
“It’s fiscally irresponsible for us as council members to put that on the employees that work for us,” council member Joel Boé said about a future 20 premium increase. Boé voted Wednesday in favor of increasing the premiums, and was adamantly opposed to pulling money from reserves.
Daniel said the city will have to consider changes to make the health plans more affordable, which would mean lower-quality health care. Other possibilities are also unappealing, from cutting benefits to city workers to raising deductibles on health care plans.
Council members Tara Wicker, Donna Collins-Lewis, Denise Marcelle and Chauna Banks-Daniel all asked to pull the money from reserves rather than raising the premiums. Council members Boé, Trae Welch, Ryan Heck and Buddy Amoroso unsuccessfully voted to raise the premiums. Chandler Loupe, John Delgado and Ronnie Edwards were absent.
Marcelle, Wicker and Collins-Lewis all questioned if new business in Baton Rouge would increase tax revenue enough to plug the reserves next year. Wicker said the prediction that the city could drain its health insurance reserves in the next few years was not optimistic enough about possible business and tax growth.
“I think we’re gonna do great as a city,” Wicker said. “I think we’re gonna have a ton of money.”
Marcelle said increasing the premiums would not give city workers “a true raise.” She was the first council member to suggest pulling the money from reserves.
“You all take $1.3 million out of the reserves and we try to recoup it in taxes somewhere,” Marcelle said.
City workers have not seen their health insurance premiums increase since 2012.
Boé made a joke at the end of the meeting about the additional strain on the budget when the council approved an agenda item for the Festival of Lights in December.
“Maybe in an effort to build our reserves back up, we can cancel Christmas?” he asked, with a laugh.