As the presidential elections focus on nationwide health care reform, some South Hills leaders say a crisis of costs has already hit home and, if left unchecked, could mean cuts in municipal services.
McKeesport Mayor James Brewster said if his city ends up paying a recent whopping rise of 83.6 percent in health care premiums, it could mean layoffs and could put the town "out of business."
Several municipalities in the South Hills with employees represented by Teamsters Local 205 recently received notification that the premiums for their Highmark Blue Cross Blue Shield health care plans have been raised at never-before-seen rates, said Carl Bailey, a business agent with Local 205.
The recent rate increases from Highmark are "staggering," Mr. Bailey said.
"A lot of mayors and council people have been calling me near tears," he said.
Local 205 represents hundreds of municipal employees, including about 45 local police departments, several road crews, public works departments and clerical workers, he said.
Local 205 negotiates with Highmark directly and then bills participating municipalities for the cost of the insurance. While municipalities are bound by contract to provide health insurance with specific terms of coverage, the insurance does not have to be purchased through Local 205 or through Highmark.
Some municipalities in the South Hills procure health insurance through Local 205 for some or all of their employees. Among them are McKeesport, Brentwood, Glassport and Duquesne. Three of the four have experienced rate increases that are alarming local officials.
A recent bill from Local 205 for Highmark insurance contained an 83.6 percent increase for coverage of roughly 73 of the city's 180 employees, the mayor said.
While he was still working to get a grasp on the exact figures, Mr. Brewster said he was shocked at the amount of the increase.
He said he was upset that Highmark, a nonprofit enterprise that reports strong revenues, would raise rates so drastically.
"Why not pass along the reserves to the community, rather than charge these ungodly premiums?" he asked.
A large expenditure like this could bankrupt McKeesport, Mr. Brewster said.
To afford the premiums, he said, McKeesport would have to lay off about 20 employees or have the employees make an unusually large contribution to their health insurance.
"Neither of those options is appealing," he said. "I am working to find another carrier."
The mayor said he was "cautiously optimistic" that he would be able to purchase comparable insurance at a lower cost.
He also said he intended to work with state agencies to look into how Highmark is able to charge such high premiums.
A recent bill for Brentwood's Highmark insurance through Local 205 contained a 70 percent increase for coverage of the borough's 30 full-time employees, council President Jay Lieb said. The rate change amounts to a yearly increase of $262,000, to a total of $637,000. That's a quarter of the borough's yearly budget.
"Our budget is being crippled by soaring health care costs. I believe it is time that our state and federal representatives give us more flexibility in designing health insurance benefits for our employees," Mr. Lieb said.
Borough Manager George Zboyovsky is researching other options. He is "fairly confident" that he will be able to secure comparable lower-cost coverage under another insurance plan with Highmark or another insurer.
The level of benefits provided to members of Local 205 in Brentwood is not competitive with what employees in the private sector generally receive, Mr. Zboyovsky said, making the cost of the insurance high. Borough employees do not contribute to the cost of health insurance and do not have pay a deductible or copayment, he said.
If Brentwood cannot find a less expensive plan, the borough could absorb the added cost this year, Mr. Zboyovsky said, by delaying purchases of capital equipment, such as two new trucks for public works.
But, he said, the borough runs a lean operation, and covering higher health insurance in future years would be difficult.
Raising taxes is not an option, he said, and he doesn't see room to cut employees for savings.
Highmark premiums for 16 full-time borough employees represented by Local 205 were recently raised 65 percent, said council President John DeSue.
"I expected an increase, but not this much," Mr. DeSue said. "I lost a night of sleep after I received the bill."
Rate increases over the past few years were moderate, he said, but this year's increase was shocking.
"I think this country needs to work together to address the problem of providing affordable health care," Mr. DeSue said.
He doesn't think Glassport has enough time to secure alternate insurance before its premiums are due, he said, and it likely will pay the higher premiums this year. To cover the cost, he said, other projects planned for 2008 would have to be eliminated. He said the borough would search for identical coverage at lower rates for future years.
"You just can't raise rates this much in one year. It is going to be difficult to absorb these costs in our budget," Mr. DeSue said.
He said he didn't understand how an apparently prosperous nonprofit like Highmark can assess such high premiums. If a long-term solution is not found, he said, services or employees in Glassport will have to be cut.
Still, a few towns are holding their own. Duquesne, for example, appears to have escaped an outrageous increase. The town received an 8.1 percent increase for Highmark insurance for its 30 employees represented by Local 205.
City Manager Frank Piccolino was unsure why.
Michael Weinstein, a spokesman for Highmark, said that while he could not comment on specific increases, he said that, in general, the health insurance industry has seen premiums increase across the country in 2008 at higher rates than in the past three years.
In 2005, 2006 and 2007, he said, premium increases were moderate. Not so for 2008, when increases have been generally higher. The main reason, he said, is the rising cost of providing health care. Small employers are particularly hard hit.
Small employers are struggling to afford the high cost of health insurance nationwide.
"We are seeing small employers dropping coverage from Highmark and other insurers," he said, "and that's a concern to us. ... We understand that for smaller municipalities this is a real problem. Highmark alone can't address these issues."
Highmark works with employers and physicians, Mr. Weinstein said, to try to reduce health care costs through health and wellness programs and preventative care. Highmark also is working with the state, he said, to examine how health insurance is delivered and to see if more effective delivery systems can be created for employers.
Several other communities in the South Hills -- Bethel Park, Dormont, Mt. Lebanon, North Strabane, Peters Township, Jefferson Hills and Upper St. Clair -- purchase some or all of their employee health insurance through Municipal Employers Insurance Trust, or MEIT, a multiple-employer group insurance trust that specializes in Pennsylvania municipalities.
Tammy Cappo, a client manager with MEIT, said that all of its insurance policies purchased through Highmark are renewed on a calendar-year basis, and notification of rate increases for the following year are not usually received until fall.
She did not know whether increases would be unusually high for 2009.
Mr. Weinstein said that he could not predict whether municipalities that purchase health insurance on a calendar-year basis would receive large premium increases later this year. The amount of a rate increase, he said, depends partially on the utilization history of individuals in a purchasing pool.
Mr. Weinstein said there is a movement in the health insurance industry toward larger purchasing pools such as MEIT. That way, smaller municipalities may be able to negotiate better rates.
Some municipalities, including Upper St. Clair and Bethel Park, said they purchase high-deductible plans from Highmark through MEIT and self-fund the deductible to keep costs lower.
In the meantime, McKeesport, Brentwood and Glassport are scrambling to find solutions to provide health insurance that will not bust their budgets.
"It seems like the media and the national spotlight have been focused on the rising costs of gasoline when health care costs have been continuing to escalate," Mr. Lieb said. "This is a real concern."
Erin Gibson Allen is a freelance writer.