The city is incurring $4.39 million debt to cover over utilization of its health coverage plan by municipal employees.
Council members approved the borrowing on Tuesday evening so as to avoid collecting the same amount – all at once — through taxation next fiscal year. This will ensure the cost is spread over a three to five year period, said city’s acting finance director James TenHoeve
“We’re in a rock and a hard place,” said Kenneth Morris, city council’s finance committee chairman. He said this will “spread the pain” and prevent a large tax hike to collect $4.39 million from property owners beginning July 1st, 2015.
City officials said the borrowing became necessary after municipal employees often opted to use brand name drugs instead of generic brands which resulted in the city going over its health care budget of 42.41 million for 2015.
This amount though was $2 million less than the amount the city expended on health care the year prior, according to city records. In 2014, the city spent $44.27 million on health care for employees.
Andre Sayegh, 6th Ward councilman, questioned why the city cut the health insurance line item the current fiscal year budget. Business administrator Nellie Pou said the city’s insurance consultant USI completed an analysis that showed a $2.1 million savings.
Those savings never materialized.
Morris said the city needs to get a handle on the health care insurance costs. He suggested joining the state health care plan.
“We really need to take a serious look at participating in the state plan at this point in time,” said Morris.
The city is required to conduct an analysis before awarding health care contracts to ensure its self-insured plans are cheaper than participating in the state plan, said city officials.
Sayegh and Julio Tavarez, 5th Ward councilman, voted against borrowing the $4.39 million of which $440,000 will be used to fund the city’s debt service payments.
The city will have to obtain approval from the state’s local finance board before taking on the debt, said officials.