City's healthcare costs soar

Preston Pomykal

Officials with the City of Beaumont are moving quickly to curb a massive, seemingly unforeseen increase in the city’s healthcare spending.

According to Chief Financial Officer Laura Clark, this year’s city healthcare spending jumped some $3 million since last year.

Although the city’s stop loss insurance has covered a large portion of the cost overrun, Clark said officials are moving to curb the increase.

“Although we didn’t experience a full $3 million swing — we have stop loss (insurance) because we’re self insured,” Clark said of the cost overrun. “While for many years, we enjoyed things being pretty steady, there is an incline, an increase in cost, so it’s time to take some steps to mitigate that.”

To help mitigate the increase, the city has enlisted the help of healthcare consultant Preston Pomykal of Holmes Murphy & Associates who gave a presentation to City Council on Tuesday, May 27.

“We have to figure out how to make the masses of this population care,” Pomykal said to council. “That’s the challenge and from 2007, 8, 9, 10, 11, 12, when you’re just moving flat, flat, flat, flat, it’s difficult to go to you and say, ‘Boys, I want you to do this.’ But you jump 3 million bucks, and now it’s time for someone to pay attention because you can’t afford to do that forever.”

According to Pomykal, a majority of the city’s 20 most expensive employees typically don’t cost more than $100,000 per year to insure. That number has changed this year, with the 20 most expensive city employees costing much more than previous years.

“In 2011, our top 20 claimants went from $282,000 down to $66,000 for a total of $2.2 million. That was our 20 most expensive people. 2012, we started at $283,000, a pretty similar year. Went down to $63,000, for $2,099,000 total cost,” Pomykal told city council members. “(In) 2013, I had 20 claimants over $100,000. These two years ...  I went from seven to five to my entire top 20 at least $100,000. And my total was $4.34 million compared to my total over here of $2,099,000. Now you have stop loss in there. These are net claims. So, the net net to you is about $1.5 million because you have reinsurance that you’re purchasing, so you didn’t feel the full brunt of all $3 million swing. But my point is, when you look at your plan, it’s not that day-to-day operation of the plan. It’s not the utilization of the 1,700 people or 1,400 people. It’s the 20 most ill people that have cost this significantly.”

Pomykal said one sure way to bring costs down in the short term is to incentivize employees to voluntarily give blood samples at free, in-house annual wellness exams. Pomykal said currently only 30 percent of the city’s employees take advantage of the free annual exam.

“What you’re after is blood samples,” he said. “If you can get somebody’s triglycerides, cholesterol, blood pressure, fasting glucose level and their waist circumference, you can get a pretty accurate reading in the insurance world of what their future liabilities are.”

Clark said employees at numerous focus groups she’s attended are wary about allowing companies like Holmes Murphy & Associates or any other third party to have such data for fear they may be targeted by the city for having health problems.

But Pomykal was sure to assuage those employees by saying disclosure of such data would prompt a very expensive lawsuit against the city.

“That’s one of the stepping stones we have to get over with employees as we talk about this. Because everybody feels that it’s Big Brother. ‘You’re going to look at it. You’re going to come after me because I’m ill,’” Pomykal said. “Well, first off we all know that wouldn’t happen ... because the repercussions from that are terrible. So from our standpoint, we don’t even release that to management. We keep all of that in house.”

The city’s short-term strategy seems to be early detection of health issues.

“Having someone do something as simple as an exam will start making them understand their own health and things will fall off and be caught,” Pomykal said. “That’s what you’re after. It’s not really preventative in nature; it’s just early detection.”

But in the long term, Clark said the city could raise premiums, change their healthcare plan’s overall design and/or incentivize healthy lifestyles by offering better healthcare for those who “care” and are actively engaged in a healthy lifestyle. Specifically, Pomykal said the city could offer a different, better plan for those who choose to give a blood sample.

“Most of your cities that are doing your (plan) variations are doing cost: $50 a month more if you don’t care and $50 less a month if you do care,” he said.

Clark said diabetes and cardiac issues caused most of the cost overrun, but other factors exist which many times are uncontrollable.

“A premi baby (premature baby) can be very expensive,” Clark said.

Clark added that she and Pomykal held a focus group with the city’s upper management April 9 and plans to hold many more focus groups for other city employees this week.

“By the time we have our budget presentation in August, we’ll have everything more finalized,” she said.


Clay Thorp can be reached at (409) 832-1400, ext. 222, or by e-mail at clay [at] theexaminer [dot] com.