Insuring Health While Ensuring Efficiency

Monday, April 23, 2007 | Over the three years of my term in office, we will examine virtually every process and function of city government with the goal of reducing costs and increasing effectiveness. Few city processes have been more in need of review than the way we provide our employees with health care. This week, as part of two separate items, the San Diego City Council will consider my health care reform proposal. My plan provides employees with better coverage at less expensive rates and saves the taxpayers millions of dollars.

Through their respective unions, city employees currently have access to 21 different health care plans offered by 11 different insurers. This makes no sense. Because rates are primarily based on the number of plan enrollees, the current system offers taxpayers virtually no buying power. My proposal takes the purchasing and administration functions away from the unions and consolidates all of our health care plans into three medical, two dental and one vision plan. This enormous sea change will allow the city to get more purchasing power for its dollar thereby slowing the increase in health care costs. It will also allow us to standardize benefits for all city employees, the result being a more equitable system.

The second part of my reform proposal is even more important because it will result in better and less expensive health care coverage for our employees. Unlike most employers who pay for a percentage of their employees’ health insurance, the city offers the majority of its employees $5,575 annually that they can apply toward a 10-option cafeteria-style plan. One of the options is a cash payout. While very democratic, this system is inefficient and bad public policy.

Funds set aside for health care should be used for just that and not as an alternative form of cash compensation. Two thousand employees currently waive health care altogether and pocket the cash. While good for them, the remaining employees, most notably those with families, are often negatively impacted and some pay thousands of dollars above and beyond their flex dollar allocation. In my opinion, our present system is not fair. It has also negatively affected our police officer retention efforts.

My proposal modifies the cafeteria plan so that, in the future, the city pays for a percentage of an employee’s coverage. Employees with dependents will save the greatest amount of money.

An employee with a family that opts for the Kaiser and dental HMO plans would see their coverage percentage increase from an equivalent 47 percent under the current system to a standardized 75 percent under my proposal. This represents savings of $2,600 per year that these employees would otherwise have to pay themselves. An employee will still be able to waive health care. But instead of receiving $5,575, going forward, they will only receive $1,000.

The savings, across all employee groups, will be split between the city and employees. Assuming current enrollment, the city could save as much as $2.1 million in fiscal year 2008. Clearly, our proposal is better for the taxpayers and the majority of employees.

This year, we negotiated in good faith with the San Diego Police Officers Association, the Deputy City Attorneys Association and Firefighters Local 145 regarding my proposal. The Police Officers Association embraced the proposal because they appreciated the many positive impacts it will have on their members. Last week, the City Council imposed the proposal on the Deputy City Attorneys Association.

Because the firefighters union has not agreed to my plan, on Tuesday, I will ask the Council to impose my health care reform. If they do not, the reform will be scuttled, our buying power will be greatly diminished and our rates will go up dramatically. I have been puzzled as to why the union won’t agree. After all, it affords their members better coverage at less expensive rates. I think that part of the reason may be that the union’s leadership doesn’t want to surrender the $80,000 in commissions paid to the union for placing the insurance with city funds. My proposal redirects those commissions back to the city to lower our costs as well as those of employees.

Next fiscal year, all of the city’s employee unions will be at the negotiating table. Assuming current enrollment, it is estimated that the city can save approximately $6.3 million per year under this plan when all employee groups are participating. These are funds that we can use to pay for other basic city services such as parks or libraries. We will also take advantage of next year’s negotiating opportunity to engage in pension reform.

I will continue the full frontal attack that I have launched on waste and inefficiency in our government processes. Last week, I submitted a balanced budget to the City Council for its consideration. The hallmarks of my budget are reform, cost-cutting and streamlining. As a result of these principles, we will be able to maintain municipal service levels while not increasing taxes. We will also begin funding a number of long-term obligations, such as the deferred maintenance on our city streets, that have long been ignored.

In spite of these successes, the city faces some very challenging financial times. With a great deal of discipline over the coming years, I am convinced that our problems can be solved but only if we continue our reform efforts.

San Diego Mayor Jerry Sanders was elected in 2005. His current term in office will end in December 2008. What do you think of his employee health care plan? Send a letter to the editor to challenge or embrace the proposal.