Health insurance rates will rise about 12 percent for the city of Urbana this year, the result of several large claims in the past year.

Among the items on the city council agenda Tuesday, Urbana city council members were asked to approve a purchase of the city’s portion for annual health insurance premiums, a total cost of $870,000.

That price rose slightly more than 12 percent from last year, when the premium cost the city about $776,000, said Lee Williams, Urbana’s finance director. The increase is about 4 percent more than anticipated, Williams said.

In most years, the city plans for at least an 8 percent annual increase and it had set aside about $839,000 in the budget. However, Williams said the larger increase was the result of an unusually high number of significant claims from city employees.

About 25 health insurance claims of $10,000 or more were filed in the past year. Urbana employs 87 full-time workers.

“We got hit pretty hard,” Williams said.

Because the city’s annual rate is based on its history, the number of large claims led to higher costs for both the city and its employees this year. The city pays 90 percent of health insurance costs, including life, vision and dental insurance. Employees cover the remaining 10 percent, so the city and workers will share the rise in cost.

Overall, the city has about a $15 million annual budget, Williams said, and the health insurance premiums are one of the largest costs for the city each year.

“It’s becoming my No. 1 line item other than wages,” Williams said.

The rate could come down over time if there are fewer claims in the next few years, but he said that’s impossible to predict.

“It’s one of those hidden elements we don’t know,” he said.

City council members were also asked to renew contracts to retain Carol Hall as manager for Grimes Field airport for $14,650, and Susan Tehan as Oakdale Cemetery coordinator for $10,968. Both items were included in the 2013 budget.