Kenai council renews city employee health coverage at 29% higher premium

The Kenai City Council voted 7-0 Wednesday, Oct. 21, to renew city employee health insurance with Premera Blue Cross Blue Shield of Alaska at a premium about 29% higher than the current one. The city will use Employee Health Care Fund reserves to help absorb the increase and keep employees' share of premiums at 13%.

The budget had scheduled that share to rise to 15% on Jan. 1, which would have raised employee premiums 48%. The administration did not recommend the change "at this time," according to a city memo.

The ordinance authorizes City Manager Terry Eubank to renew the coverage, effective Jan. 1, 2027, at an estimated annual premium of about $3.5 million. That is about $792,000 more than the current premium. The ordinance also moves $343,749 from the fund's reserves to cover the higher costs. The memo says 2026 claims so far have run higher than expected, with more high-cost claims.

Alaska News reported Oct. 16 that the city's broker, IMA, had negotiated Premera down from 36%. According to the memo, Aetna declined to submit a proposal, and Moda proposed a plan about 35% higher than current premiums with no chance of a surplus refund. Eubank said higher-deductible Premera plans would still have meant a net increase of about 21%, with more exposure for employees.

"These are big numbers," Eubank said. He said the increase costs the city more than $700,000, with employees' share a little over $100,000. An employee paying about $470 a month for family coverage would pay $601, or $693 had the share gone to 15%, he said.

Eubank said the fund's reserves are about $3 million, more than the city thinks it needs. The city received a refund of about $179,000 this year because 2025 claims came in lower than expected, the memo says. "My hope is that we'll be getting a significant portion of this back if our claims experience comes in closer to 2025 performance," Eubank said.

A broker representative said joining an insurance cooperative could leave Kenai paying for another member's large claim, according to the meeting record.

Council Member Bridget Grieme encouraged the administration to do "a significant cost and benefit analysis" of other options. No one from the public spoke.