The city of Austin is in deep trouble due to the rising costs of insurance, and it is those who have retired from the city who will feel the brunt of the measures being taken to correct the situation.

Saturday, November 11, 2000

The city of Austin is in deep trouble due to the rising costs of insurance, and it is those who have retired from the city who will feel the brunt of the measures being taken to correct the situation. It is very possible that retirees will see their monthly cost of insurance go from its current level of $185.75 per single person or $370 per couple jump 40 percent, to $215 and $510 respectively, in the new year.

A vote of the council on Dec. 4 will confirm the rise in premiums.

Even with the jump in fees, city Director of Administrative Services Tom Dankert said the city was still projecting a $122,000 shortfall for 2001. That money will have to come from sources like the general fund – and ultimately the taxpayer – because the city’s self-insurance fund doesn’t have it.

Since the city decided to become its own insurance agency, the balance of the fund has fluctuated. The first five years, Dankert explained, were bountiful, with the city carrying a fund balance of $700,000 by the fifth year. After 1995, funds started the fall back down, and are projected to finish this year with only a $151,641 surplus.

"It wasn’t changed before," Dankert explained, "because in comparison to other cities, Austin had a huge fund balance."

The retirees will bear the brunt of the new charges for two reasons. First and most importantly to the city council members is that it is the retirees who are making far more claims on the insurance than they’re paying in. Secondly, because there is no other alternative. The current employees are in the middle of a contract, the soonest employee contributions could be increased would be 2002, to be negotiated in 2001.

"This was the first year we got a breakdown of costs between the current employees and the retirees," Dankert said. "The retirees’ health insurance is costing the city a lot. To get your costs up, you would have to almost double your charges. Otherwise, the city of Austin will continue supplementing those costs."

When Third Ward Council member Dick Lang asked how the insurance program was presented to retirees when they left the city, Dankert said it was explained that the city could set the fees. He added that Austin’s fees are far below those of other cities in the same situation.

"It’s a terrible dilemma to be in," At-large Council member Dick Chaffee said. "We need to make sure people are aware in the future that when they retire the fees may change."

Letters to the 85 retirees with city health insurance will outline the proposed change and costs of private insurance available in the area.

Second Ward Council member Roger Boughton, who recently completed his own insurance search after he was informed that the cost of his family insurance would be close to $1,200 a month, said private policies were out there and affordable.

"It’s the deductable that makes the difference," he said, explaining that the most affordable private policies carry a $1,000 deductible.

The entire city going back to a private insurance company isn’t an option, Dankert said, explaining that when he explored contracts with companies like Blue Cross/Blue Shield, the costs were almost double for all city employees and their families.

The council will cast its official vote on a resolution increasing the retiree’s premiums at its Dec. 4 meeting with the rise to go into effect in January.

"This is a problem that this council has inherited," Lang said.