The city of Atlanta expects to cut $3.2 million from its health care costs over the next fiscal year, bucking a broad trend of higher health care costs around the country.
The city’s contributions to health plans for more than 19,000 employees, retirees and dependents were originally expected to rise by $4.3 million, or 5 percent. But costs are now expected to drop for the city and for many employees.
City officials attribute the savings to successful negotiations with insurance companies on new contracts, as well as new initiatives focused on preventative care and physical fitness.
The savings represent the first time in at least six years that the city’s health care costs have decreased from the previous year. They come as many local governments and large organizations are struggling with rising health care costs.
“The things we can control, we’re trying to control,” said Yvonne Cowser Yancy, the city’s human resources commissioner.
The city has not always been able to strike such favorable terms. Premium costs have increased more than 8 percent annually in each of the last five years.
Yancy said the city is trying to be more proactive in controlling costs. It’s encouraging employees to sign up and visit primary care physicians rather than call an ambulance or use the emergency room for treatment.
The city plans to spend about $1.7 million on wellness initiatives over the next three years, including adding four new employee fitness centers, making personal fitness trainers available and offering Tai Chi and Zumba classes. Last year saw a slowdown in Atlanta’s rate of growth in claims for medical treatment, a key factor in setting insurance rates.
The city obtained lower costs or no change in cost for benefits for every insurance platform except Kaiser Permanente HMO, which could see rates rise about 3 percent, according to a city document. One of the biggest savings was a 42 percent cost cut for retired employees over 65 who are eligible for Medicare Advantage. Yancy said switching to United HealthCare, a larger provider with bigger economies of scale, helped the city reap that benefit.
The new contracts were approved this month by the City Council.
Gina Pagnotta-Murphy, president of Atlanta’s Professional Association of City Employees, said she was disappointed that her premiums through Kaiser Permanente might go up. But because Blue Cross Blue Shield might become more affordable, employees have the option to switch.
“Ultimately, it will be the employee’s choice,” said Pagnotta-Murphy, an employee of the Department of Public Works. “That’s still a good thing that happened,” she said of the new lower-cost options.
In April, the AJC reported that about one in five of Atlanta’s roughly 7,500 current employees had gone to emergency rooms in the previous 20 months, according to an initial analysis.
“It’s way too much, considering all our full- time employees have excellent health care,” Atlanta Mayor Kasim Reed said at the time. He promised a cultural shift to educate employees about better ways to get health care.
The emergency room visits cost more than $600 on average. The cost of the visits, for both minor problems and true emergencies, totaled $1.85 million in the first six months of the 2011 plan year. That burden was borne by employees, insurers and — through the city’s budget — taxpayers.
James Hannan, chief executive of Georgia-Pacific and chairman of a business roundtable called the Atlanta Committee for Progress, called the health care reforms an example of “right-sized government.”
Coming on the heels of pension reform that required employees to contribute more money to keep their existing benefits, some employees feared they would have to incur more costs for health care as well, said City Councilman C.T. Martin.
“The expectation was that (health expenses) would be higher when we got through with the process,” said Martin, a regular advocate for better employee pay and benefits. “But the (employees) I talked to were excited that something was negotiated.”