Fayette County

Lexington council moves to address 'hemorrhaging' health-insurance plan

Lexington's Urban County Council moved Thursday to address a $7.2 million shortfall caused by unanticipated costs in city employees' health insurance — a situation Mayor-elect Jim Gray described as an emergency.

"Basically, the plan is hemorrhaging," Gray said.

The council voted 13-0 to immediately hire a benefits consultant to examine the health care plan and make recommendations. Council members George Meyers and Doug Martin were absent.

Mayor Jim Newberry's administration briefed Gray two days after the November election about the shortfall, which is projected for the 2011 budget. On Thursday, Gray described the problem as "very severe."

He contacted state personnel officials for advice to help control health care expenses.

On Tuesday, a contingent that included Gray, who currently is vice mayor; Linda Gorton, the vice mayor-elect, and other city officials met with the state Personnel Cabinet secretary and general counsel and the state commissioner for employee insurance.

The state officials offered "an examination at a very treetops level of our condition," Gray said. "They recommended that Lexington immediately engage consultants to help us."

He said the officials "cast our condition as an emergency" based on the percentage of shortfall the city has estimated.

"The state has worked very hard on addressing the rising costs of health insurance for the state's plan," Gray said. "They have been very aggressive in addressing these issues. They consider our situation to be an emergency situation."

The state has no authority to intervene in Lexington's shortfall, but the officials advised hiring consultants to work with Lexington "to get the best plan we can for our employees and for the taxpayers," Gray said.

Budget documents show the Urban County Government has subsidized its health care plan for years. In 2010, the shortfall was $9.8 million. In 2009, the city filled in a shortfall of $8.6 million.

In years past, the city had enough money to cover such shortfalls. That won't be the case in 2011, so Gray's administration could be looking at budget cuts.

After council members learned of the problem in early November, they decided against raising employees' premiums for 2011 just before open enrollment began. But they did talk about ways to control costs, such as ending the city's no-deductible policy used by 90 percent of the city's 3,000 or so employees.

The state hires consultants to provide advice on all areas of health insurance, and the state officials said Lexington needs them as well, Gray said. "Health care is extremely complex today," he said. "If you don't have somebody at the table guiding you through this, you're going to lose."

The city probably will hire other consultants to provide advice on benefits, deductibles, pharmaceuticals and wellness options, Gray said.

In introducing the motion Thursday night, Gray said acting with speed was critical. "Basically, the plan is hemorrhaging. The longer we don't take care of it, the worse it gets," he said.

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