A proactive approach to managing health care costs: the City of Montgomery's health care benefits committee.

• Author: Davis, Wayne

As hot button topics go, health insurance is at or near the top of organizational agendas across the country. Health insurance issues impact us nationally, statewide, regionally, locally, on the job, and in our homes. The impacts of health care decisions are felt by employers and employees alike, making every renewal of insurance coverage a frightening time for both managers and employees.

The City of Montgomery, Ohio, like other public and private sector employers, is exposed to this problem, as health care benefits account for approximately 3 percent of its total budget. As a small community with 10,000 residents, 100 employees, and limited financial resources, the cost of health care is a critical issue for Montgomery. The city has tackled this problem by utilizing the best resource it has--its employees. This article describes Montgomery's Health Care Benefits Committee, a proactive approach to the perpetual issue of health care cost inflation.

Profile of Montgomery

Population -- 10,163

Located 12 miles Northeast of Cincinnati

Area--5.3 square miles

Incorporated in 1910; Became in 1971

Home Rule with Council-Manager

FISCAL THREAT

The Cincinnati, Ohio, region, like others across the country, has experienced significant increases in health care costs for the past several years. In fact, over the last four years, the average annual increase for public sector entities in the region has been 15.7 percent. Such large-scale increases can wreak havoc on an organization's budget, leading to diminished cash flow, forecasted deficits, and the deferral or elimination of important projects and initiatives. If left unaddressed, the compounding effect of such large increases will eat away at the financial health of any organization, regardless of its fiscal strength.

Complicating matters was the "We/They" mentality that prevailed at the city. This mindset was the remnant of a top-down, traditional management approach to problem solving in the city's organizational structure. The city's executives viewed themselves as the "We" that was responsible for putting together a plan for the provision of health care coverage for the city's employees within budget, but without "Their" input. Front-line employees felt that "We" used the city's health care coverage as they saw fit, regardless of the financial impact, because it was what "They" have provided to us for this purpose. The mindset of employees was that health insurance was a benefit to be paid 100 percent by the city. This approach perpetuated an informational vacuum in the organization, leading to a lack of understanding of the long-range budgetary implications of health care decisions by individual employees. When employees make health care choices without considering the cost of their choices, cost effectiveness is removed from the equation.

It is not difficult to see how these separate mindsets led to skyrocketing health care costs. The same small group of executives that had sole ownership and responsibility for managing those costs was also attempting to find health care plans to meet the needs of the city's employees and their families. As ownership and responsibility for the city's health care program were shifted to the Health Care Benefits Committee, peer-to-peer education and dialogue became the norm, diminishing the...