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City insurance briefing: self-funded health plan running deficits; property and cyber coverage stable
Summary
Higgins Insurance told Hopkinsville council the city's long-running self‑insured health plan ran a per-employee deficit in 2024, prompting staff to recommend budgeting additional employer contributions; property/casualty and cyber insurance renewals held but law-enforcement liability remains a pressured market.
Mac Major, partner at Higgins Insurance, told the Committee of the Whole that the City of Hopkinsville operates a self‑insured health plan administered by Anthem and reinsured for catastrophic loss. "This is the most cost effective way to fund the health plan," Major said, but he warned the city ran a significant funding gap in 2024: "we funded $708 $978 per employee per month, which creates a deficit spending of about $246 per employee per month." (Major presented annualized figures for fixed costs and claims.)
Major said the city finished 2024 with about $403,000 in reserves; January 2025 showed a small increase but the trend over three years created multi‑hundred‑thousand‑dollar deficits that had been addressed previously with lump‑sum injections. "We don't have a cost problem. We have a funding challenge," Major said, and recommended the city consider increasing the employer contribution on a per‑employee basis rather than shifting further costs to employees, who already pay about 16% of plan costs.
On public‑sector property and casualty insurance, Lee Conrad of Higgins reviewed coverages the city purchases and risks that affect municipal insurance pricing. He described law‑enforcement liability as one of the hardest lines to insure and warned that owning a jail would make coverage more difficult. "If you had a jail, it'd be a complete nightmare," Conrad said. He commended city cybersecurity improvements and noted the cyber premium has stabilized with renewal through Chubb.
Conrad said the city received only one competitive quote last year (from the Kentucky League of Cities) that would have provided narrower coverage at a higher price, so the city remained with its incumbent carrier (Tokyo Marine) and retained a $9 million per‑incident law‑enforcement liability limit. He also highlighted that the city's workers' compensation experience modification led to discounts and is a major controllable cost driver.
Why it matters: the health plan deficit may require recurring budget decisions; insurance market conditions for law enforcement and property coverage can affect premiums and available limits. Major recommended the city consider regular employer contribution increases to build reserves inside the self‑insured arrangement rather than relying on infrequent lump‑sum funding.
Council discussion: Council members asked about employee counts and participation. Major said 300 full‑time employees were eligible and about 250 were participating in the city plan, with roughly 50 waiving coverage. Major and council members discussed benchmarking with peer employers and the tradeoff between predictability of a fully insured plan versus the higher cost of commercial quotes.
Next steps: City staff said they will analyze budget options and return with specific proposals for employer contributions during the upcoming budget process.
