Palmer keeps city employee health insurance costs stable despite rising medical costs

At a time when consumers are facing double-digit rises in medical costs and health insurance, the city of Palmer has kept its employee insurance costs essentially level for the coming year.

The city council approved a new contract with Premera Blue Cross at its Nov. 4 meeting. It is a one-year contract, so things may be different in 2027, Palmer finance director Gina Davis told the council.

The stability in health insurance costs is good news, however, given the continued trends in rising medical costs and health insurance across the nation.

Palmer’s city employee health coverage is typical of the employer large public and private group insurance common in the nation and is not to be confused with the individual health plans backed by the federal Affordable Care Act which are seeing large increases across the nation and in Alaska.

Davis credited USI, the city’s insurance broker, with negotiating a good deal for Palmer. “Initially, Premera proposed a 10 percent increase for medical and vision insurance and a 1 percent increase for dental insurance,” she said. “Through negotiations, USI successfully reduced the overall increase to 3 percent across all coverage categories – medical, vision, and dental – compared to the City's 2025 health insurance costs,” Davis told the council.

“For context, current market trends indicate average increases of 13.9 percent for medical coverage, 15 percent for prescription drug coverage and 5 percent for dental coverage. Therefore, the City's negotiated rate represents a significantly favorable outcome for 2026,” she said.

The city is paying $2.96 million in its contribution to employee health insurance this year. In 2026 that will rise to $3.049 million. Within the health plan Premera had proposed a 10% increase in rates for basic medical coverage. USI negotiated the increase down to 3%, according to documents given the council. Dental, vision and short-term disability rates will see essentially no changes.

The amount to be paid by employees will rise marginally from $173,690 this year to $178,630 next year, a 2.8% increase.

“The city currently charges employees a portion of dependent coverage. These rates have been the same since 2019, when they increased by 3.6% from 2018. The city administration proposes that the dependent coverage be increased for 2026 by 2.8%,” Davis said.

For city employees and spouses, the current monthly cost of $196.90 will increase to $202.50 in 2026; for an and a child the current monthly cost of $172.99 will increase to $177.90. For an employee and total family, the current monthly cost of $377.22 will increase to $387.95.

The increases may seem small but Davis cautioned the council:

“While this minimal increase is positive news for the upcoming year, it is important to note that future health insurance cost stability cannot be guaranteed, as industry-wide cost pressures continue to rise,” she said.

At its Nov. meeting the council also gave full approval to the city’s Fiscal 2026 budget, which begins Jan. 1. This is unlike the state, borough and school district fiscal years that begin July 1.

A budget of $24.65 million was approved, which is generally in line with the current year, with revenues for 2026 proposed at $26.05 million. The bulk of revenues will come from the city’s 3% sales tax, which is being maintained, as well as property taxes.

City workers were also given a 2.5% pay raise at the same meeting, which is generally in line with inflation.