An increase in health insurance costs is already putting a strain on the Lansing city budget for fiscal year 2014.

An increase in health insurance costs is already putting a strain on the Lansing city budget for fiscal year 2014.

The city is in the midst of preparing its spending guidelines for the coming year ― a document that will be voted on by the Lansing City Council later in the summer ― but a presentation from the city's human resources director during a work session Thursday indicated that the city's healthcare provider, Blue Cross Blue Shield, is already estimating a 26 percent increase in insurance costs.

“I was able to negotiate that down 2 percent,” Sunshine Petrone said, by pointing to the city's historically low usage rates, but she added that the city's utilization rate was higher this year.

Eliminating the option of a $500 deductible lowered the potential increase further to 16 percent, or $72,383.

“That was the most that we could do to really get them to come down on the rates,” Petrone said.

She proposed splitting the cost of that remaining 16 percent increase, with both the city and the employees picking up about $36,000 additional for health insurance. For the majority of the city's enrolled employees, 27 of 57, that will mean an increase of $101 a month for a plan covering both the employee and their dependents.

And the total cost of benefits will increase the city's bottom line in that budget item, from $855,977 to $951,136.

Fortunately, Petrone said the city built in a 2-percent contingency in anticipation of those increases and has funds not needed during the recent employee performance evaluation process to lessen the impact of the added costs this year.

“So the question is how comfortable are you with the eight and eight split?” for the next year Mayor Billy Blackwell asked the council, referring to the respective percentages.

Several members of the council, including Councilman Gregg Buehler, said they wanted to see how the proposal would effect the tax rate for the city's residents.

“The mill rate's going up 10-12 mills from the school,” he said. “I really don't want to add any more if we don't absolutely, necessarily in order to make the city function, have to do it.”

Petrone said half of the increase will be due this year, because of when the new coverage period begins and the fact that employees will need to decide on their insurance plans next week.

“Time is not on our side,” she said.

Petrone and other city officials said whittling away at benefits could eventually lead to an exodus of its employees.

“Benefits are very important to our employees,” she said.

Though they discussed some other options for the future, the council members seemed to agree to move ahead with the split of the health insurance increase.