The City of St. Ignace has made a switch from a traditional health insurance plan for city employees to a less expensive, high-deductible plan combined with a "wrap," which means the city will pay the deductibles for employees to save on premiums that aren't being used.

The city offers paid health insurance for its employees and their families.

The former health insurance plan offered by the city was held by Municipal Employees Retirement System (MERS) of Michigan and featured no yearly deductible and a $10 charge for office visits.

The new insurance plan, which city officials signed Thursday, December 17, is through Blue Cross Blue Shield of Michigan and Michigan Employees Benefits Services (MEBS). The "wrapped" plan sets a $2,500 yearly deductible for individuals and a $5,000 yearly deductible for families. These deductibles, when needed, will be paid by the city, effectively creating zero-deductible insurance coverage for the employees.

The insurance company figures that health insurance claims made by city employees amount to about 29% of the premiums the city pays.

Cheeseman Insurance of St. Ignace will serve as insurance agent for this new plan, which agent Greg Cheeseman expects will save the city about $36,000 a year. The potential savings depends completely on how many claims, and for how much money, the city experiences after making the switch.

The previous insurance plan through MERS cost the city $401,228 last year in premiums to cover the city's 39 employees and their families. If the city would have switched to a similar Blue Cross/Blue Shield plan, Mr. Dodson said premiums would have been $428,000 annually. He estimated the city will pay close to $342,114 a year in premiums and deductible coverage using the new "wrapped" plan. This includes $169,755 a year for employees and their families for prescription drug benefits, dental insurance, and vision insurance.

"The difference in premiums is so significant," Mr. Cheeseman said, "the city can actually purchase the higher plan, pay for the claims, and if claims come out like we anticipate, the city could save some money."

This sort of partial self-insurance isn't for everyone, he said. In fact, for small groups, single individuals, and groups with high health risks, the "wrapped" plan could actually end up costing more money than it saves.

"The numbers and dollars have to make sense," he said. "The difference in premiums for a small group, for instance, the spread might not be large enough to cover the potential amount the group would need to pay out."

MEBS is acting as an administrator of the process, Mr. Cheeseman said, since it has much more experience dealing with "wrapped" plans. Using data from previous experience, MEBS has come up with a formula to help determine if such a plan is feasible and to help determine the level of risk.

"It is some sort of gamble," Mr. Cheeseman said. "That is all insurance is, a pooling of risk." predictor of what the city could save, he said, since Mackinac County has more employees, which should result in more savings.

He said he does not know how long this plan will work.

"It has worked so far," he noted.

These savings could be threatened by rate increases for that particular high deductible insurance plan, he said, as well as a large number of claims coming in at once.

Under the city's new plan, the city-paid premium for an employee is $353.49 a month; the premium for an employee and spouse is $823.19 a month, and the premium for an employee with spouse and children is $990.94 a month.

Mackinac County has been insured under a similar plan with MEBS since 2004, County Clerk Mary Kay Tamlyn said.

"The county has been quite happy with MEBS and the wrap program," Mrs. Tamlyn said. "We have never lost money yet; we've always come out ahead."

Mr. Cheeseman said that although there have been losses some months, the county has saved about 25% of what it would be paying for the full insurance plan since it has switched to the "wrapped" plan. These savings aren't necessarily a predictor of what the city could save, he said, since Mackinac County has more employees, which should result in more savings.

He said he does not know how long this plan will work.

"It has worked so far," he noted.

These savings could be threatened by rate increases for that particular high deductible insurance plan, he said, as well as a large number of claims coming in at once.