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Rice Hospital explains factors driving employee health insurance hikes

Erica Dischino / Tribune

WILLMAR — Rice Memorial Hospital administrators are seeking to explain significant health insurance premium increases that many Rice employees will see next year.

The issue boiled to the fore at a meeting Tuesday night of the Willmar City Council. The council had planned to discuss a pending affiliation agreement involving the city-owned hospital, Affiliated Community Medical Centers and CentraCare Health. Instead, much of the discussion centered on the sticker shock that hit many employees when open enrollment began last week.

Members of the hospital board were briefed Wednesday night with costs and numbers.

"We're also sharing the information with the council," Mike Schramm, chief executive, told the board. "Hopefully this will help."

High expenses this year and actuarial calculations for next year led to a 20 percent increase in Rice's health insurance costs for 2018, said Bill Fenske, chief financial officer.

Fenske said the increase was averaged across the board for next year's premiums. The impact isn't the same for everyone, however.

Union employees at the hospital face the largest increases. Someone choosing single coverage with a $750 deductible, for example, saw their monthly premium increase from $85 to $180. Family coverage with the highest deductible, $2,750, will increase from $564 to $825 a month.

For non-union employees, the increases are less steep — and in most cases, premiums are actually going down.

Single coverage at the $2,700 deductible level is going up from $27 a month to $65 a month, but coverage for non-union employees at all other health plan levels and categories is going down an average of $40 to $150 a month.

The increases come at a sensitive time. The Willmar City Council is expected to finalize a series of agreements next week allowing Rice Hospital to join ACMC and CentraCare in a new nonprofit entity known as Carris Health, and the impact on Rice's 1,000 employees has been one of the key issues raised at public forums and council meetings.

Rice executives told the Willmar City Council earlier this week that the increases are not because of the affiliation, a point they reiterated Wednesday to the board.

"It's because of the high costs that we incurred," Fenske said.

Rice is projected to spend $8.8 million this year on health insurance, he said. About 25 percent of the overall cost is borne by employees through the premiums they pay each month; the remaining 75 percent is the employer's share.

Costs next year are expected to rise to $10.2 million, with the same overall 25-75 split between employee and employer share, Fenske said.

Why the difference between premium increases for union and non-contract employees? Fenske and Schramm said two factors are at work.

First, Rice is phasing in a more consistent approach, starting next year, to how premium costs are divided between employer and employee, Fenske said. The new percentages "are much more in line with the marketplace than they were in the past," he said.

These market adjustments brought down most of the premium rates for non-contract employees, he said. But for employees represented by a bargaining unit, contract language set contributions at a fixed amount, he said.

Honoring existing labor contracts has been an important issue for employees during the negotiations to create Carris Health, Schramm said.

"The employer contribution is written across the three years of the contract and that will be honored," he said.

About half of Rice's 1,000 employees are represented by one of the hospital's four unions: the Minnesota Nurses Association, which represents registered nurses; two separate units of the American Federation of State, County and Municipal Employees, one representing licensed practical nurses and the other representing housekeeping, maintenance and food service workers; and the International Association of Fire Fighters, representing paramedics and security staff.

As Rice, ACMC and Willmar Medical Services join under the Carris Health umbrella, the goal is to make benefit packages more consistent across the three platforms, Fenske and Schramm said.

With union contracts set to expire at the end of 2018, it's hard to predict the role that health insurance benefits might play in the negotiations, Schramm said. "Ideally we'd want to have all our employees on the same Carris benefit package, but it becomes a negotiation."

Doug Allen, chairman of the hospital board, said he understood the shock that employees experienced when they learned what they'll have to pay next year for their health insurance. He said he hoped the message was clear that it wasn't a direct result of the Carris Health agreement.

"Hopefully they heard that," he said.

Anne Polta

Anne Polta covers health care, business/economic development and general assignment. Her HealthBeat blog can be found at http://healthbeat.areavoices.com. Follow her on Twitter at @AnnePolta.

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