Insurance Driving Up City Budget—And Taxes

If you thought this year's in property tax rates was for good, think again.

According to Minneapolis budget director Heather Johnston, the city is facing a four percent increase in its health care costs from 2011 to 2012 despite restructuring its benefit plan. That would be a proverbial drop in the budgetary bucket, until you look to 2013, when Johnston predicts costs will jump another nine percent, followed by year-after-year increases of 16 percent starting in 2014.

That works out to around $16 million that the city has to find somewhere in its budget in 2014, either through cuts or property tax increases. Right now, the city assumes it will have to ask for a three percent increase in taxes next year, and more in subsequent years.

But it's not like city employees are using their health insurance benefits to buy rounds for everyone at the bar—healthcare premiums for everyone are soaring, according to reports from the New York Times and Minnesota Public Radio's Midmorning program. 

Minneapolis also has a particular problem. The city's Benefits Director Joyce Travers laid the problem squarely at the feet of city employees: they're getting a lot older, and older people need more medical care.

"We have relatively low turnover," Travers explained. "The average age (of a city employee) is in the late 40’s."

Add the generally rising costs of health care services, insurance premiums hikes, and big increases in prescription drug use to that mix—"We're all told there’s a pill that can fix everything," Travers said, sounding a little exasperates. "Just watch your TV."—and you have a cocktail that will continue eating at the city's budget, regardless of what cuts or funding boosts Minnesota's legislature passes next session.