City employee health insurance to rise; current carrier retained

By Sylvia Phillips

Health insurance for city employees will cost the city about $141,934 more per year as a result of the DeKalb City Council’s vote Monday to stay with its current carrier.

DeKalb will negotiate a renewal of its contract with Lincoln National Life Insurance Co., which will run from May 1, 1989, to April 30, 1990.

The new insurance costs represent a 24.3 percent increase over the current amount the city pays for employee insurance, said DeKalb City Manager Mark Stevens. Lincoln originally asked for a 34.5 percent increase.

DeKalb currently pays about $450,000 per year in health insurance, Stevens said. This represents an increase of about 15 percent per year from the 1981 figure of $150,000.

The renewal carries a one-year sunset provision on the policy’s termination liability agreement. If the city decides to discontinue coverage before the contract expires, penalties will be increased from the current 30 percent to 50 percent. At the end of one year, the rate would go back to the standard 30 percent, said David Carrell, manager for Arthur Anderson & Co. and consultant for DeKalb.

The 20 percent increase in the discontinuation penalty is to offset money Lincoln officials said they lost this year as a result of miscalculating insurance rates, Carrell said. Lincoln officials said they lost about $60,000 from underrating the city’s plan, and the increased penalty would help Lincoln recover costs if the city dropped its coverage, he said.

The average nationwide increase for insurance is 18 percent, while the average statewide increase ranges from 15 percent to 50 percent, Stevens said.

The insurance coverage is for current and retired employees of the city, of the DeKalb Public Library and of Barb City Manor.

The council decided against seeking bids from other health insurance companies.

Carrell said, “I haven’t run into anything like this (the rate increase) in 16 years. There’s going to be an increase, no matter which way we go.”