Employee Medical Benefit Experts Requesting $400,000 Infusion For 2014-15

If it is recommended by the Board of Finance and approved by the Legislative Council as part of an overall budget request, a $400,000 allocation to Newtown’s self-insured employee medical benefit fund would represent a substantial increase beyond the four percent bump already factored into the spending plan currently being deliberated.

On March 6, the finance board heard from Mark Mattioli, chair of the local Employee Medical Benefits Board, and Joe Spurgeon, MHA, representing Milliman, which is among the world’s largest providers of actuarial and related products and services.

Mr Spurgeon is a senior health benefits consultant at Milliman consulting on Newtown’s self-insured employee benefit plan.

The officials explained that since the town established its own self-funded health plan there has been relatively low inflation in medical costs, but the industry is signaling that low inflation trend is about  to end.

Mr Mattioli said his board believes the town will be facing at least a six percent increase, which is a significant change from previous years. The board and Finance Director Robert Tait expect that by the end of the current fiscal cycle in June the self-insured fund balance will show $2.3 million in reserves.

This is a completely separate issue from the municipal fund balance that has dominated discussions with top elected boards in recent budget cycles.

 Mr Mattioli said his board is recommending that the town add another $400,000 to the fund, which would elevate reserves to $2.7 million. He said while his fellow board members do not expect that reserve will cover all underbudgeted claims in the coming year, it would mitigate a request for a substantial added appropriation during the next fiscal year.

Mr Spurgeon noted that in the current fiscal year, the plan is 4.4 percent lower than expected in overall claims. He said the town’s provider, Anthem, is using an 8.23 percent trend as of November 2013, and he attributed much of the anticipated increase to taxes associated with the federal Affordable Care Act.

The Milliman consultant said in the fiscal year 2015, there will be a $133,614 tax impact, which affects administrative fees.

Self-Funded Savings

On the other hand, Mr Spurgeon said because the town established a self-funded plan, it is saving taxpayers about four percent in related taxes that would have to be paid if Newtown used an outside insurance provider.

He noted that in the first three years of the self-funded plan the town has been building reserves because claims have been lower than projected. But both Mr Mattioli and Mr Spurgeon believe cost increase projections for next year will be substantially higher, justifying the need for an increase to the fund balance.

Mr Tait told The Newtown Bee following the meeting that while the $400,000 requested would represent a significant lump sum addition to the current budget request, the allocation is prudent and appropriate considering the town’s advisory board was hearing about anticipated rate increases of eight to ten percent.

He is convinced that if the budget was enacted with the four percent already included in the current proposal, claims would deplete the fund balance to a point below the recommended minimum.

“This is a request to help maintain a stable fund balance and hedge against anticipated inflation,” Mr Tait said.

The finance director said that in the event the $400,000 ends up being an overestimation, it would simply lower allocations to the fund balance in the 2015 budget cycle. In addition, Mr Tait said the increase will have only a nominal effect on the overall budget request, and he does not expect that extra funding to affect the proposed tax rate for the coming budget year.

Assuring Taxpayers

Finance board Chairman John Kortze said he sees the increase as part of the cost of doing business with self-insured employee benefits.

“This self-insured program which was spearheaded by Republican leadership has saved taxpayers a substantial amount,” Mr Kortze said. “Taxpayers should know it has been and will continue to be adequately funded.”

The finance chairman said the management and administration of the program has been “evolving” under the leadership and oversight of a group of dedicated volunteers on the benefits board.

“Those volunteers are recommending we increase the funding, and we need to respect that advice,” Mr Kortze said, adding that global health care cost increases are driving the request. He said the insurance industry is telegraphing to Newtown’s advisors and its actuarial consultant that costs are expected to increase as much as eight to ten percent.

“We need to take their recommendation based on the information they are receiving and act accordingly,” he said.

Security Plan

Later in the same meeting, finance officials met with Police Chief Michael Kehoe who affirmed that a plan to add a complement of specially trained former police officers as armed school security officers for Newtown’s schools is a good plan.

Mr Kortze said he and his fellow board members were happy to hear Chief Kehoe endorse the proposal.

Town engineer Ron Bolmer appeared to briefly discuss how his department prioritizes the major road construction projects on each annual program of activities, and confirmed to the finance board that a program of bridge replacements is continuing as planned at one project per year.

First Selectman Pat Llodra, who was in attendance, said that the $1 million budgeted in the current year paid for about 3.5 miles of road replacements, and it was not enough to keep up with deterioration occurring townwide.

She said to prevent having to go out to bond for road projects, she would be seeing an added $250,000 per year for the next five years to help the public works department “catch up” on road repairs and improvements.

Parks & Recreation Director Amy Mangold and Parks Commissioner Ed Marks also attended and reported their budget request for $1 million for capital improvements was reduced to $166,000. Mr Marks added that in the future, his department would be collaborating more closely with Public Works on capital equipment purchases to maximize purchase power for the equipment most needed by the town.

Mrs Llodra advised the parks department to plan on investing a set amount each year to underwrite capital purchases, and fix that amount into their budget.

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