Kenai renews employee health coverage at 29% higher premium, holds workers' share at 13%

The Kenai City Council voted 7-0 Oct. 21 to renew city employees' health insurance with Premera Blue Cross Blue Shield of Alaska at a premium about 29% higher than this year's. It will use reserves to help absorb the increase and keep workers' share of premiums at 13%.

"These are big numbers," City Manager Terry Eubank said.

The new coverage takes effect Jan. 1 at an estimated $3.5 million a year, about $792,000 more than now. Eubank said the increase costs the city more than $700,000 and employees a little over $100,000.

For a worker paying about $470 a month for family coverage, that means $601, he said.

It could have been more. The budget had scheduled employees' share of premiums to rise from 13% to 15% on Jan. 1, which would have pushed that family premium to $693. The administration recommended against that change "at this time," according to a city memo. The ordinance also moves $343,749 from the city's employee health care fund reserves to cover the higher costs.

The memo says claims this year have run higher than expected, with more high-cost claims. Premera first proposed a 36% increase, and the city's broker, IMA, negotiated it down. Aetna declined to bid, and Moda proposed a plan about 35% higher with no chance of a refund. A higher-deductible Premera plan would still have meant about a 21% increase and more out-of-pocket exposure for employees, Eubank said.

The fund has about $3 million in reserves, more than the city thinks it needs, Eubank said. This year the city got about $179,000 back 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," he said.

Council Member Bridget Grieme asked the administration to do "a significant cost and benefit analysis" of other options. A broker representative said joining an insurance cooperative could leave Kenai paying for another member's large claim. No one from the public spoke.