New London, NH
The Board of Selectmen held a special work session on Friday morning, October 29, in the hopes of reaching a final decision on health benefits for full-time Town employees. At about $2.8 million in 2010, personnel costs, including salaries and benefits, make up about 50% of the Town’s operating budget. Healthcare premiums, which totaled just under $600,000 in 2010, accounted for about 20% of personnel costs, and State-mandated payments to the NH Retirement System accounted for about 7% of personnel costs.
Over the course of the last month, the Selectmen reviewed myriad data, including but not limited to: 1) current pricing of health care premiums from the Local Government Center and Primex (two of NH’s three health insurance pools for public entities) and from a local broker offering Anthem packages; 2) summaries of pay and benefits offered by the other towns in the Kearsarge Regional School District, the School District itself, the Town of Sunapee, and the New London/Springfield Water Precinct; 3) the ratio of employer/employee cost-sharing of health premiums in approximately 50 towns in the 3000-6000 population category; and 4) various scenarios showing how reallocation of New London’s cost-sharing formula would affect both the Town and its employees.
In 2010, Town employees had two healthcare options: they may choose between an Anthem Blue Choice Two-Tier Point-of-Service Plan and a Matthew Thornton HMO (or, a third option: if they can obtain health insurance through their spouses, they may take a “buyout” from the Town worth 50% of the cost of the health plan after deducting the employee’s share and creating a financial benefit for both the Town and the employee). Both plans have $20 co-pays and identical prescription plans, but the Blue Choice POS plan is more expensive and the employee pays a greater share of the premium. However, despite its higher cost, all but two Town employees have opted for this plan because of the assumption that it offers better coverage.
The Board of Selectmen grappled with the fact that the Town offers the Blue Choice plan, which will likely be considered a taxable “Cadillac plan” when that provision of the Patient Protection and Affordable Care Act goes into effect in 2014. Although other towns still carry this plan (and some carry the more expensive Three-Tier plan), the Selectmen felt that they needed to move towards a plan that better manages healthcare costs and
incentivizes Town employees to take greater ownership of their medical care.
The Board was particularly concerned about finding the right balance of fairness to
taxpayers and employees. That is, while they felt it was important to save taxpayer dollars, they were mindful that a drastic change would create a hardship for many Town employees. Needless to say, this was not an easy decision for the Board of Selectmen.
After much deliberation, including discussion of the components of the various health plan options, the Board of Selectmen adopted the following changes: First, the Selectmen chose a Matthew Thornton HMO Plan with a $20 co-pay and a $250 maximum individual deductible for a single person ($750 maximum for a family). The monthly premiums are 12% lower than the current Blue Choice plan, which provides significant monthly savings for both the Town and its employees even without changing the cost-sharing formula (employees would pay 2% of the single premium and 5% of the premium for the two-person or family plan). However, since the deductible, if needed, would represent a higher out-of-pocket cost for employees, the Board of Selectmen recommended funding the deductible in the first year by creating a special reserve fund for that purpose. Unused funds would be returned to the taxpayers at the end of the year.
Second, recognizing that employees may still prefer the coverage of the Blue Choice Two-Tier Plan, the Board of Selectmen voted to continue to offer that option but at a much higher employee share so that it would cost the Town no more for an employee on the Two-Tier Plan than on the Matthew Thornton HMO. In effect, this increases the employee share from 2.5% to 13.4% for a single plan, and from roughly 5% to 16.1% for a two-person or family plan.
The net effect of these changes is a savings of about $60,000 to the Town in 2011.
To be sure, this is not the first major change to the Town health plans. In 2009, a change in the prescription plan saved the Town about $40,000 by increasing considerably the employees’ share of prescription costs. In 2010, changes to health benefits included an increase of the employee co-pay from $10 to $20 (the Town of Warner has a $20 co-pay).
This decision is just one of many facing the Board of Selectmen and Budget Committee during the budget process. The Board of Selectmen will hold its final work session on the budget at its meeting on Monday morning, November 15, and will present its budget to the Budget Committee that same evening. The Budget Committee will deliberate on November 15, November 29, December 13, January 10, and January 31, before holding its public hearing on February 7.
While decisions related to compensation and benefits are made by the Board of Selectmen, it is the Budget Committee’s recommended budget that goes to Town Meeting. If they do not agree with the Selectmen’s recommendation with respect to salaries and health benefits, the Budget Committee may change the amount budgeted for those purposes. It is this system of checks and balances that should assure you all that the Town budget is closely reviewed before it is presented to voters in March.
The Board of Selectmen has added a work session on the 2011-2012 budget on Friday, November 12, 2010 at 8:30 AM in the Sydney L. Crook Conference Room. This meeting will be followed by a Selectmen's meeting on Monday, November 15 at 8:00 AM, and a Budget Committee meeting later that day at 7:00 PM.
As always, please let me know if you have any questions.
Jessie Levine, Town
375 Main Street
New London, NH 03257
Phone: 603-526-4821 extension 13