Health-insurance costs could drop by thousands of dollars a year for Miami-Dade County government employees who cover their spouse or children, under a plan being considered next week by the County Commission.
By becoming self-insured -- taking on the risk for health insurance instead of paying a private company to carry it -- county leaders believe they can cut costs by $45 million and pass on the savings.
County employees already receive free HMO coverage for themselves, but family coverage can cost $5,190 to $6,405 per year. County Mayor Carlos Alvarez believes the proposal could cut those payroll deductions by up to $4,100 per year. In particular, healthcare for children will be cheaper.
As healthcare costs rise, a growing number of large companies and government agencies are insuring themselves. However, there is still disagreement on how much risk is involved and how much money is saved.
Howard Gruverman, president of EDIFY, a Fort Lauderdale healthcare consulting firm, said the risks are probably small because healthcare costs tend to be predictable with such a large group -- the county covers nearly 27,000 employees and can base its predictions on the last 15 to 20 years of coverage. The county will also buy a "stop-loss" policy to cover extreme claims.
"We're still going to be lower than we ever would have been with a fully-insured HMO, " said Wendi Norris, director of the county's General Services Administration.
However, Peter Joseph, a vice president at one of the companies that currently provides a county HMO, said the proposal leaves the county vulnerable to large price hikes from local hospitals.
Joseph, who works for Vista Health Plans, said many of the cost-saving measures in the county's plan could be done by the private companies without exposing the county to new risk.
Also, Gruverman was wary of cutting employees' contribution so deeply, because insurance costs are projected to continue rising. To compensate, he said the county will have to gradually increase employees' costs in the future or commit more and more of its own budget.
"Nobody else is lowering costs to employees that drastically in the country, " he said. "That bar is going to move up again."
One particular group that County Manager George Burgess hopes to help: uninsured children. Of employees with kids who responded to a 2006 survey, 19 percent said their children have no coverage.
"It's like rolling the dice, " said Terry Daniels, president of the Transport Workers Union Local 291, which covers more than 3,000 employees. "If I don't insure my child, what happens?"
Kids' healthcare costs are normally much lower than adults', but that has not been reflected in the county's plans. A new level of service will let parents insure their children -- but not a spouse -- for far less money than covering an entire family. The annual costs to cover two or more children in an HMO could drop more than $4,100 to about $1,980, the county projected.
"This could be savings enough to put a child in college, " Daniels said.
The county currently offers similar HMOs from four different companies. Under the proposal, it would switch to two -- one would meet or exceed the current plans, the other would have lower premiums but higher co-pays.
Both would be managed by a single outside contractor, which would oversee claims, wellness programs, billing and other administrative duties. Private companies take less profit when they simply manage plans rather than pay the claims and assume the risk.
Burgess also believes the current HMOs overcharge for employee-only coverage because they know the county pays all those costs.
A pricier point-of-service plan, which the county has self-insured since 1995, will still be available and managed by the new contractor. Its dependent coverage could drop $2,850 to $7,500, according to projections.
When companies bid to manage the new plan, county staff will compare their network's doctors with the list of doctors currently being used by county employees; bidders who cause the least disruption will be more likely to win the contract.
Joseph, the Vista vice president, said no single contractor can offer the wide range of doctors found under all the existing plans.
"There's going to be a huge disruption, " he said. "There'll be thousands and thousands of people who will have to change doctors."