A previously unforeseen fee mandated by the Affordable Care Act has left Iola City Council members fuming.
The city was informed by the IRS about three weeks ago that Iola must pay $127,386 to “help subsidize premiums” on the individual market for the years 2014-16.
A provision in the Affordable Care Act — known to most as Obamacare — requires all health insurance issuers and third-party administrators on behalf of self-insured group health plans to make contributions to support payments to individual market issuers that cover high-cost individuals, City Administrator Carl Slaugh said at Monday’s City Council meeting.
Iola must pay the fee because it has more than 50 employees. The fee is set by taking the number of individuals receiving health insurance coverage, including employees and their insured dependents. That number ranged from 217 to 231 between January and September. Iola must pay $63 for each recipient for each of the first nine months of 2014, Slaugh said. With an “insurance member count” of 2,022, that figure adds up to $127,386.
“We don’t have a choice,” Slaugh said. “The only question is where we get the money.”
The first portion, or $106,155, is due Jan. 15, Slaugh said. The remainder is due by Nov. 15, 2015.
Slaugh recommended the Council use funds from Iola’s Health Insurance Fund, which has $500,000 in reserve.
Council member Nancy Ford noted the city already is dipping into its health insurance fund to pay for raises over the next three years on a recently revamped employee pay schedule. The city plans to draw about $33,000 from the fund for each of the next three years for that.
“We’re going to take even more money out of it,” Ford said. “Are we going to be bleeding that dry?”
“If we kept a balance in that fund equal to three to six months of operating expenses, it’d be somewhere around $350,000,” Slaugh said. “We do have sufficient (reserves) to take that amount out this year, but in following years we have to increase funding going into this so we still keep a healthy balance.”
That means higher premiums for employees.
“Is there anybody appealing this on a bigger level?” Councilman Steve French asked, such as large companies.
“I wonder how many are going to become very vocal about this,” Ford agreed.
Slaugh said other employers in town with at least 50 employees expressed “shock” at the fee.
“It was just three weeks ago, the government just sent this out to everybody?” Ford asked.
“That’s right,” Slaugh responded.
Ford noted the city in the past had offered bonuses to employees from its health insurance fund in years past — the employees then would put that money into their health savings accounts — if premiums collected were more than expenses.
Slaugh, in turn, noted no such bonuses had been offered by the city “since I’ve been here,” or at least five years.
Council members voted, 6-0, for the city to pay the fee, but to wait until Jan. 15 to see if other parties successfully file an appeal. Council members Jon Wells and Sandy Zornes and Mayor Joel Wicoff were absent.
IN OTHER business, the Council:
— Was notified the city’s utility offices will be closed from 8 a.m. to noon on Dec. 12 for computer software upgrades. Other city offices will remain open.
— Approved the sale of a 1987 Chevy bucket truck used by the Electric Distribution Department to David Cross of Oronogo, Mo., for $7,200. Cross’ bid to purchase the truck was the highest of six.
— Formally adopted an updated comprehensive plan, last altered in 2005. The plan is intended to guide policy and recommendations for future growth and development.
— Adopted the city’s Standard Traffic Ordinance as set each year by the League of Kansas Municipalities.
— Hired Jordan Oswald and Chad Reeves as police officers. Oswald’s hiring will be funded through a four-year grant.
