Current coverage could cost city

Money may get tight as Carson City deals with a significant increase in its insurance rates.

City Finance Director David Heath said it could cost up to $700,000 to maintain the current level of coverage.

Heath said the city may have to look at cutting benefits, but finding funding for extra projects would be difficult.

"It's going to be difficult to fund any of the things requested (in a recent city goal setting session)," Heath said. "The cost of labor and the cost of group medical are on the way up."

About 75 percent of the city's budget is consumed by salaries and benefits, to the tune of about $30 million. The city paid about $1.77 million for coverage last year, but costs of group medical plans are on the rise and the city has a premier plan, Heath said.

Heath said in 1997 Carson City changed insurance companies from Mutual of Omaha to Reno-based Hometown Health. Rates went down 30 percent and increased only 5 percent in 1998 and 1999. The plan was so well-used the insurance company lost money in the bargain.

"We got an awesome deal two years ago, and the picnic is over next June," Heath said. "Benefits would reduce 40 percent if we took our $1.77 million to the table and said give us a plan. Why would someone do it for $1.8 million if it's going to cost $2.5 million?"

While $700,000 may seem like a drop in the $40 million budget bucket, Heath said it would take a 4.2 percent increase in sales tax revenue or a 10 percent increase in property tax to fund it. Heath projected a 2.5 percent increase in sales tax for the coming year.

The city should know by the beginning of next year how much rates will increase. The contract with Hometown Health runs out this year and the city will also have to find a new provider.