What the medical insurance plan structure changes mean for employees
On April 28, the City Council approved the City’s health insurance plan move to self-insured starting in January 2018. Benefits will not be reduced as a result of this change. With self-insurance, premiums are paid to the City, and Medica then administers the plan which includes reviewing and paying claims. The insurance coverage itself does not change. The method we use to pay for claims changes. Rather than sending our money to an insurance company, the money stays with the City in a reserve account that is controlled by the City until it is used to pay claims.
What this means for employees in 2018:
- City employees will not experience any change in how they use or access their Medica medical benefits.
- City employees will continue to have Medica as their medical insurance provider.
This move to self-insurance will help the City better control future health care costs in an effort to stabilize premium rates. It’s estimated that 17 to 20 cents of every dollar paid to a health insurance company goes to administration, overhead and profit. There are also state taxes and fees fully insured plans must pay that are not required under self-insured plans. A self-insured plan can offer the exact same insurance for lower administrative costs and no profit. How much the City and employees will save will also depend on the actual claims experience.
The Benefits Labor Management Committee, which has been working on this for several years, supports the move. It is also supported by the City’s labor unions. A vast majority of municipal employers similar in size to the City of Minneapolis are already self-insured. The City is self-insured for workers compensation and the employee dental plan.
Questions? View the PowerPoint presented to the Committee of the Whole, or contact the employee benefits team: 612-673-3333.
Published May 3, 2017