Finance – Increase the Health Insurance Contribution for Employees Earning Over $90,000

Savings: $1 million

Currently, City employees who have health insurance through the City must contribute a percentage of their salary to help pay for the cost of this insurance.  The contribution rates are a percentage of the first $90,000 of each employee’s salary.  The percentage contribution is not applied to any earnings over $90,000.  Employees who opt to have the health plan cover their dependents pay a greater percentage than those who have insurance only for themselves.

Under this option, the City would apply the health insurance contribution percentage to all salary earnings.  Based on 2008 data, 67.5 percent of the City’s employees are enrolled in the City’s health plan.[1]  As of June 1, 2011, 5,365 employees had salaries over $90,000 with an average salary of $104,031.  First, assume that 67.5 percent of these employees are enrolled in the City’s health plan and that these 67.5 percent have average salaries of $104,031.  Second, assume that the average health insurance contribution for these employees is 1.92 percent, which is the average of the three different contribution levels.[2]  With these assumptions, applying the average health insurance contribution to all salary earnings would save $1 million annually.

Because the health insurance contributions are part of the City’s Collective Bargaining Agreements (CBAs), implementing this option for all City employees would require changes to the current CBAs.

Proponents might argue that by removing the cap on employee contributions, employees most able to afford increased health care costs would shoulder a larger burden of the City’s health insurance costs.

 

Opponents might argue that this would result in some employees paying a higher amount for their healthcare than the healthcare policy is worth, which is unfair.  Additionally, the increased costs could cause these employees to drop the City’s health plan altogether, which would increase the burden on lower-income employees.

 

Budget Details[3]

Dept: Finance General, 099 Bureau: NA
Fund: Corporate, 0100 Approp Code: 0029, For Health Maintenance Organization Premiums (HMO) Provided to Eligible Employees and Their Families

0042, For the Costs of Claims and Administration for Hospital and Medical Care Provided to Eligible  Employees, Provided However, That All Payments to the Independent Utilization Reviewer Shall Be Subject to the Approval of the Chairman of the Committee on the Budget and Government Operations

0052, Costs of Claims and Administration for Hospital and Medical Care to Eligible Annuitants and Their Eligible Dependents

The appropriation is located on page 254 of the 2011 Annual Appropriation Ordinance.

http://www.cityofchicago.org/content/dam/city/depts/obm/supp_info/2011BudgetOrdinance.pdf

 


[1] In 2008, 25,602 employees participated in the City’s health plan.  As of December 2008, there were 37,940 active employees.   This translates to 67.5% of the City’s workforce being in the health plan.

Sources: City Payroll System and City of Chicago. 2008 Blue Cross Enrollment Report. April 2009. pg. 5.

[3] This budget option could be considered a savings that reduces the City’s spending on healthcare rather than a revenue generator.  The effect, however, is the same.