Health Insurance Premium Increases in Little Rock
Little Rock is looking at a potentially significant rise in its employee health insurance premiums for the coming year, as discussed at a recent city board meeting.
During the agenda-setting meeting, representatives from JTS Financial Services provided insights on insurance matters for 2027. Charles Angell from JTS pointed out that some concerning trends have emerged this year, prompting authorities to seek potential solutions.
The city’s insurance plan has reported a staggering loss ratio of 142% over the past year, meaning for every dollar spent on premiums, Cigna, the city’s carrier, has paid out $1.42. Angell mentioned that preliminary figures indicate the renewal for next year could see a 35% hike, which he described as “incredibly high.”
An increase in employer-sponsored insurance cost typically leads to higher employee premiums, increased employer contributions, adjustments in plan benefits, or some mix of these factors.
Mayor Frank Scott Jr. made it clear during the meeting that the city intends to uphold the current policy where employees do not have to pay premiums under the master plan. However, employees may opt for higher premium plans, which would include family members.
Annually, premiums tend to rise. Small businesses that offer employer-sponsored plans are also expected to face substantial increases next year, based on recent data that suggests a median proposed increase of 14% from around 300 insurance companies.
With approximately 2,300 employees and 3,460 individuals covered by insurance, the city anticipates paying about $18.5 million in premiums this year. Currently, the city operates under a fully insured plan, where they pay fixed premiums, and Cigna assumes the risk of coverage.
There’s talk about possibly shifting to a self-insured model, where the city would pay its own claims plus management costs and stop-loss premiums. Such self-funded plans might offer flexibility with various carriers. This approach could prove beneficial if costs are lower than expected.
Angell noted that the figures for self-funded plans aren’t final yet, as complete data won’t be available until August. Negotiations with carriers will take place over the next three weeks, with the aim of achieving more favorable rates.
John Sterling from JTS expressed a desire for the city to have considered self-funding three years ago, recognizing that this is a common challenge for many employers. He highlighted that pharmacy costs for the city have surged by 45% this year alone, approaching $12 million over the course of the year, which is clearly unsustainable for a fully insured plan.
Typically, moving to a self-funded arrangement can lead to savings of at least 30% in pharmaceutical expenses, making it a prospective avenue for the city to explore.
