After passing a difficult budget, the City Council received news of another looming financial burden the rising cost of health care.
The city, which is self-insured, received some advice from representatives of Niagara Risk Management, its benefits consultant.
There is a chasm between the citys expenses and property tax income, said Zachary J. Zuckerman, Niagara Risk Management vice president. Weve seen that gap continue to widen.
Mr. Zuckerman painted a dire picture for the city where its health care costs, expected to be a little more than $2.5 million this year, will increase to $2.8 million in 2013.
By 2017, your plan costs will exceed $3.3 million, he said.
Mr. Zuckerman said the cost of providing health care for city workers is trending up by around 6.3 percent per year.
Mayor William D. Nelson acknowledged the crisis.
If we dont do something, it is going to continue to grow out of control, he said. The taxpayers cant sustain any more.
Mr. Zuckerman attributed the rising costs to advances in medical technology and techniques and increased utilization of the health plan.
One of the problems is revenue, he said. If we took our six percent increase and put that on top of a two percent property tax levy increase, we have a major growing problem that we have to try to manage.
Adding to the problem is the Affordable Care Act, sometimes called Obamacare, which will impose a 40 percent excise tax on insurance plans that cost more than $10,000 per member per year. Currently, Ogdensburg is projected to exceed that cost between 2018 and 2024.
Obamacare is here to stay, Mr. Zuckerman said. It has added some nice services. For example, your preventative services will now be covered in full but your members arent having physical exams.
The city covers 231 employees, 515 members total, in its plan.
Mr. Zuckerman said Ogdensburg would have few opportunities to lower its health care costs between now and 2018. Insurance coverage is an element of contract negotiations with unions representing city employees.
Compounding the problem, Ogdensburg has under-budgeted for its insurance costs for the past five years, meaning it has had to dip into other funds to cover the cost. This year, the city used a transfer from its water fund and its fund balance to supplement general fund spending and artificially lower the property tax rate.
To help find a solution to the rising costs, Mr. Zuckerman recommended creating a health care task force to review options for covering retired city employees and to push disease management and wellness initiatives for current employees.
Retirees currently receive the same benefits as active city workers, but could be changed to a Medicare Advantage or supplementary plan. There are 70 retirees receiving coverage, costing the city $561,569 in 2012. Mr. Zuckerman said switching to a supplementary or Advantage plan could save up to $250,000 each year.
Wellness and disease management initiatives would save money by preventing catastrophic illnesses, but cost $11,000 a year.
The thought is to manage people before they become seriously ill, Mr. Zuckerman said, thus reducing the number of large claims the city sees each year.
Mr. Zuckerman said claims of more than $25,000 have increased from a total of $328,000 in 2011 to $501,000 so far this year.