Kenai faces 29% jump in employee health premiums as council weighs Premera renewal

The Kenai City Council will consider an ordinance Wednesday, Oct. 21, that would spend an additional $343,749 from the city's Employee Health Care Fund reserves and renew employee coverage with Premera Blue Cross Blue Shield of Alaska. Premera quoted 2027 increases of 29% for medical and vision premiums and 15% for dental.

The city's insurance broker, IMA, negotiated the medical and vision quote down from an initial 36% increase. The 29% figure includes a 1% discount if the city renews by Nov. 2.

The renewal would cost an estimated $3,508,632 a year, $792,362 more than the current premium, according to a memo from Human Resources Director Stephanie Randall in the council packet. The added money covers Jan. 1 through June 30, 2027, the end of the fiscal year.

City workers would pay about 29% more for their premiums. The city's budget had scheduled the employee share of premium costs to rise from 13% to 15% on Jan. 1, a change Randall wrote would have raised employee premiums 48%. City Manager Terry Eubank's administration is not recommending that increase at this time.

Randall wrote that 2026 claims are running higher than expected, with more high-cost claims. Aetna declined to submit a proposal. Moda offered a fully insured plan about 35% above current premiums, with no chance of a surplus refund.

Under the current Premera arrangement, the city gets back half of any unused claim funds when claims come in lower than expected. It received $179,385 this year because 2025 claims were low, and shared part of it with employees through a premium holiday in May.

Fund reserves are sufficient and exist for unusually high renewals, Randall wrote. At a May 2 budget work session, Finance Director Dave Swarner said the fund finished the prior year with just over $3 million and the city aims to bring it closer to $1.5 million.

The administration is asking the council to introduce and pass the ordinance the same night, to meet Premera's Nov. 2 deadline and open employee enrollment. That requires a unanimous vote.