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Local government scrambles to deal with steep health insurance hikes

Counties, cities, nursing homes and other government entities are scrambling to find alternative plans after getting hit with big hikes in what they will have to pay for employee health insurance next year.

Small cities and others with fewer employees are seeing the biggest percentage increases.

Frazee, for example, with seven full-time employees, is seeing an increase of just over 50 percent.

Sunnyside Care Center, with about 40 full-time employees, is seeing a proposed hike of 49 percent.

Becker County, with about 230 full-time employees, is facing a 19 percent hike in health insurance costs.

Sunnyside Care Center has worked with its insurer, Blue Cross/Shield of Minnesota, to find two replacement plans, said Executive Director Danielle Olson.

"The bid we got when we went to our renewal meeting (in August) was 49 percent," she said. "It's huge ... Obviously neither the facility nor our employees can afford that kind of an increase."

The new plans will most affect about 15 employees that are now on a low-deductible plan, she said. "The coverage will be about the same." Most Sunnyside employees already choose to be on a higher-deductible plan, which is cushioned by employer contributions to pre-tax health savings accounts.

"We don't have the final numbers yet, but our goal is to do do the best we can and provide employees with a very good contribution," she said. Sunnyside currently pays 100 percent of low-deductible health insurance for singles and 85-90 percent of family plans. It pays 75 percent of the high-deductible plans, but also contributes to employee health savings accounts.

Sunnyside is owned by Becker County and managed by Ecumen, but it has to buy its health insurance independently.

Like the county, Sunnyside goes through Lakes Country Service Cooperative in Fergus Falls, which could not be reached for comment. Executive Director Jeremy Kovash did not return several phone messages.

The reason for the health insurance increases is because the co-op changed its formula on how rates are calculated, said Olson. "They said there were several years that specifically smaller employers didn't see increases," she said. So for next year, many entities with smaller numbers of employees saw 49 percent increases, she said.

"We have to choose a plan by mid-October, which is basically now," she said. Then there will be open enrollment in November for the Jan. 1 plan change ... In the end, it's going to be different, but we'll have two really good plans we can offer to employees."

Frazee has not been a member of Lakes Country Service Cooperative for several years and buys its insurance from a Moorhead broker, who told the city that cooperatives were raising prices steeply and advised staying with existing insurance, said City Manager Denise Anderson.

The city pays 100 percent of health insurance for its seven full-time employees, which helps offset a lower payscale, she said. Because of growth in Frazee's property tax base, the city will be able to absorb the higher costs without a noticeable tax hike, she said.

Becker County is shopping around, hoping to find a better deal on health insurance than that being offered by Blue Cross/Blue Shield of Minnesota.

"We put out a request for proposals that closes Thursday," said Becker County Human Services Director Nancy Grabanski. "Now we wait to see what comes in."

The major reason given for the proposed 19 percent price hike was "utilization," she said, meaning that county employees were using more medical services than anticipated by the insurance company.

The insurance premium hike would hit county employees hard, since by contract they would have to pay at least half of the increase, and perhaps much more, depending on what type of policy they carry, she said.