The city's health plan covers about 66,000 people. That number includes current employees, retirees and dependents.
The plan costs about $300 million a year.
Houston Mayor Annise Parker says the city may save nearly $24 million by switching from its contract with Blue Cross/Blue Shield to a self-insured plan in which the city actually pays employee claims.
"The first issue is cost avoidance. Had we continued the same plan forward into the future for another year it would have cost us $19 million. Instead, we decided to restructure the plan and create a self-insured plan for the City of Houston. So in addition to the $19 million of cost avoidance, we actually created a plan that saved an additional $4million to the city."
The city's contract with Blue Cross/Blue Shield expires at the end of April and was up for renewal.That's what prompted the administration to consider other options.
Human Resources Director Omar Reid says Houston is the only large city in Texas that, previous to this vote, did not have a self-insured health plan.
"The fully insured plan was you pay a monthly amount to a vendor. Paying that monthly amount to the vendor certainly does not help the city in its ability to save money. Going to a self-insured plan, we only pay for the claims and that helps the city with its ability to save money."
But a number of councilmembers raised objections to ending the contract with Blue Cross/Blue Shield, saying the self-insured plan will mean fewer options and higher costs for employees.
This is Councilmember Wanda Adams.
"Some of their premiums would double. For instance, let's make it personal, mine would. Mine would double from paying what I pay now to going under the new plan would pay almost $400 a month."
After an hour of debate, the council passed the new plan in a 9-5 vote, with Councilmember Anne Clutterbuck
absent. They added a provision that the new contract could be subject to change pending further negotiations with Cigna, the company providing administrative services for the plan.
The new plan will go into effect May 1st.