Homer councilmember asks city to put health insurance broker on a flat fee

Homer Councilmember Jason Davis is asking the city to move its health insurance broker, USI, from a commission tied to premiums to a flat fee. His Nov. 4 memo is part of the council packet for the 2027 employee health contracts the Homer City Council takes up Monday, Nov. 9.

The city paid a fixed brokerage fee until 2021, Davis wrote. The council set it at $25,000 a year in 2015. In 2021 the city switched to a commission based on a percentage of the total premium. The insurer pays USI and builds the commission into the premiums the city and its employees pay. The amount "is not normally provided, but can be disclosed in response to a request from the City," he wrote.

Under the 2027 medical options, USI's yearly commission would range from $84,640 to $102,699. The Moda plan pays USI 4% of medical premiums, and its commission is the highest: $102,699. Moda, the current carrier, offered an 8.3% increase with the same benefits. A Premera plan through the Alaska Municipal Health Trust would pay $84,640. That plan pays $70 per enrolled employee per month plus $100 per covered member per year. So if enrollment stays the same, its commission stays the same even when premiums rise.

The current six-month Moda plan pays USI $94,828 on a yearly basis.

The Premera bids cost 1.6% to 4.3% less than the current plan but had higher copays, and most also had higher deductibles. City staff and the Employee Committee recommend keeping Moda. The human resources director wrote that employees are satisfied with Moda's network and service and want to keep its lower copays.

The city clerk could not find a signed copy of the 2021 agreement or any record that the council approved the switch, Davis wrote.

Davis wrote that the immediate decision is choosing 2027 coverage. Separately, he asks the council to consider directing the city manager to negotiate a fixed fee. "A fixed fee would show what the City pays for brokerage services and remove the link between higher premiums and higher broker compensation," he wrote. He also suggests asking the city attorney to draft terms making USI a fiduciary to the city. That would mean the broker must put the city's interests first and disclose all pay and conflicts of interest.

Brian Hardy of USI is scheduled to present 2027 coverage to the council's Committee of the Whole at 5 pm Monday. The contracts are on the 6 pm consent agenda. The city puts employee health and life insurance costs at about $2.69 million a year.