Homer councilmember wants to put the city's health insurance broker back on a flat fee

Homer Councilmember Jason Davis wants the city to put its health insurance broker back on a flat fee. Under the plan city staff recommend for next year, the broker's commission on medical coverage would be about $103,000.

The broker, USI Insurance Services, gets 4% of the city's Moda medical premiums, Davis wrote in a Nov. 4 memo in the council packet for Monday, when the council takes up 2027 employee health contracts. The insurer pays USI and builds the commission into the premiums the city and its employees pay, so the broker's pay rises when premiums do.

The city paid its broker a flat fee until 2021, $25,000 a year as set by the council in 2015. Then it switched to commissions. The city clerk couldn't find a signed copy of the 2021 agreement or any record that the council approved the change, Davis wrote.

The agreement says the commission isn't normally disclosed unless the city asks, so Davis had the city manager ask. Next year's Moda plan would pay USI $102,699, up from about $94,800 on the current plan and about four times the old flat fee. Two Premera options would pay less, $90,729 and $84,640. The lower one, through the Alaska Municipal Health Trust, pays a set amount per person, so it stays the same when premiums rise as long as enrollment does. The figures cover only medical plans.

Of next year's options, Moda pays USI the most, and it's the plan the city's employee committee and administration recommend. Employees want to keep Moda's lower copays, Human Resources Director Andrea Browning wrote. Moda's renewal is 8.3% higher than the current plan. The Premera options cost 1.6% to 4.3% less but carry higher copays, and most have higher deductibles. USI's Brian Hardy told the council in October that Moda first proposed about 12% and that competing quotes helped bring it down.

Davis wrote that the council's immediate decision is next year's coverage. Separately, he wrote, the council should consider having the city manager negotiate a flat fee with USI. If they can't agree, the city could give 90 days' notice and seek proposals from flat-fee brokers. "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 suggested asking the city attorney to draft terms establishing that USI owes the city a fiduciary duty, which he said would mean the broker must put the city's interests first and disclose all its pay and any conflicts of interest. The 2021 agreement, as Davis quoted it, says USI's services aren't meant to "include any fiduciary duties or make USI a fiduciary of any plan maintained by the Client."

Hardy is scheduled to present next year's coverage to the council Monday before the vote. Employee health and life insurance costs the city about $2.69 million a year.