AURORA | In an effort to lower healthcare costs, the city will transition some of its employee healthcare coverage to a self-funded plan.
Starting in 2027, the city is changing its United Healthcare plans from a fully-insured model to a self-funded model, which city officials expect to reduce costs. Under a self-funded model, the city pays directly for employee claims instead of paying a fixed monthly fee.
“We brought United on as a health insurance provider two years ago now, so we’ve got two years of experience under our belt and we started looking at our claims experience versus what we’re paying,” City Manager Jason Batchelor said. “I think this is a model that, particularly when you’re as large as the city, you can see some potentially significant cost savings.”
The amount the city saves will depend on the claims activity, but city staff said the switch allows the city to meet its 5% medical budget target, while avoiding larger employee cost increases or plan reductions.
The change will not affect the plans being offered to employees or what employees pay, Batchelor said. The city offers three plans through United.
As part of the transition, the city is creating a new self-insurance fund in the budget dedicated to healthcare spending. The fund’s revenue will come from employee and city healthcare premiums, while the expenditures would be healthcare claims.
In 2027, the fund is budgeted at $12.4 million, which will cover projected claims, administration, stop-loss protection and reserves.
The city also offers health insurance through Kaiser Permanente, which will not be impacted by the switch to self-funding through United.