Idea #337 -- Health Care Cost Ratios

Idea #337 – Health Care Cost Ratios

Report Status: Fully Reviewed

Researched by: Norma Massarotti

Original Idea as Submitted

Review the Town's health insurance structure to see if there are different ways to reduce premiums. Opportunities should be considered in light of GIC. Different ideas include moving to higher deductible plans but covering all/portion of those deductibles for employees (e.g., Wellesley and Northampton); changing the cost sharing ratio (school from 80/20 to 70/30, town from 75/25 to 65/35; implement spousal surcharges and charge more for larger families); making the school and town cost sharing match; and sharing the savings of moving to GIC will the employees/unions to make the change more amendable.

Other ideas included in this report

• 55 – Institute HRAs (Health Reimbursement Arrangements) like done in Wellesley and Northampton to seek savings in health insurance and OPEB costs; would have higher co-pay and cap on employee costs per year (when employee reaches cap, town reimburses over cap)

• 58 – Change the employer-employee cost ratio for health insurance (school from 80/20 to 70/30, town from 75/25 to 65/35); implement spousal surcharges and charge more for larger families

• 59 – Change the employer-employee cost ratio for health insurance so that School (80/20) and Town (75/25) plans match

Idea intent

Mitigate impact of healthcare costs on taxpayers by shifting more cost to employees and standardize cost ratio between town and school.

Weighted Final Score: 47 (Financial Impact: 5, Operational Impact: 0, Time Scale: 2, Ease of Implementation: 2)

Background Information

The Financial Task Force II recommendation report dated July 15, 2021, includes steps to be taken by the Town and School to help mitigate healthcare costs:

• Consider bringing the Town and Schools into the Massachusetts Group Insurance Commission (GIC) Health Insurance program

• Alignment of Health Insurance “Split Ratios” across Town (75/25) and School Employees (80/20)

• Aggregation of Health Insurance across Town and Schools

Recommendations

In addition to the steps recommended by the FTF II, the SCIG recommends that the Town of Belmont further evaluate the financial and non-financial of the following:

• Adding a spousal surcharge where an employee must pay an additional cost to cover a working spouse who has the option to elect health coverage from his or her employer and has declined the coverage

• and/or providing a monetary incentive to qualifying employees who unenroll in the Town’s health care plan (see table in Further Reading below)

• Setting expectations that healthcare costs/ratios are revisited during each contract and union negotiations to balance Belmont’s market competitiveness with cost effectiveness.

• Revisiting unilaterally grandfathering previous healthcare cost ratios to only grandfathering a subset of employees based upon having higher years of service in the Town of Belmont so that the Town of Belmont realizes savings earlier.

Other ideas recommended that Belmont institute Health Reimbursement Accounts. Belmont does offer Flexible Spending accounts to its employees which are guided by IRS guidelines. The program is managed by external plan advisors.

Next Steps

• The Select Board and School Committee should review the recommendation and consider the cost/benefit of programs like Spousal Surcharge and Opt-out. A pilot or trial could be an option.

• The Select Board and School Committee should consult with both Town and School Human Resource managers who meet with their counterparts in other towns to learn from their pilots or implementations for input into the design of Belmont’s plan.

• Contact the towns who have opt-out incentive to discuss uptake and learn from their experience.

• Financials, if required, can be run by Town and School accountants to confirm savings estimate.

Further Reading

Opt-Out Example Guidelines for the Town of Sudbury, MA:

**The guidelines for the Program are **:

(a) The Opt-Out incentive is only available to Active employees who have been enrolled in the Town’s health insurance for a minimum of two (2) continuous years and then choose to Opt-Out.

(b) The Town will pay a set waiver incentive amount: $1,500 per year for individual plan; and $3,000 per year for a family plan upon proof of other insurance.

(c) The Town will pay the Opt-Out benefit via payroll on a bi-weekly basis, less any required withholdings.

(d) If there is a qualifying event in which an employee who has opted-out needs to opt back onto Town insurance, the employee will be allowed to do so as long as it is within 30 days of the qualifying event.

(e) The only way to receive the Opt-Out incentive is if the employee is not covered by the Town's health plans in any way OR by health insurance coverage through the Lincoln-Sudbury Regional High School. (This includes through a parent or spouse’s plan.)

(f) Changing from a family to individual plan does not count.

(g) The Opt-Out will have a sunset provision. We’ll continue the program for three years and will then review as to whether or not to continue to offer it. If the Town decides not to continue the Opt-Out Program, employees will be given an opportunity to get back onto the Town’s health plans if they choose. (The three-year period runs from 7/1/19 to 6/30/22).

(h) Any issues or disputes that arise regarding enrollment periods or rules and regulations relating to the implementation of the program shall be reviewed by the Town’s Assistant Town Manager/Human Resources Director. His/her determination shall be final and binding.

(i) Should there be a case where an employee did not meet the criteria and received the opt-out in error, the employee must reimburse the Town the Opt-Out money they received through Town payroll deductions.

(j) Employee must provide “proof of other insurance” on employer letterhead or health cards showing coverage effective date.

Links were active at time of writing though can change/be broken.

City/ Town	Opt-Out Incentives	Link
Sudbury	$1500 individual $3000 family	https://cdn.sudbury.ma.us/wp-content/uploads/sites/305/2014/08/InsuranceOptOutIncentiveInformation.pdf?version=a9f1b3ab17637e89e26cee531a0911ea
Wellesley	$2250 individual $4500 family	https://www.wellesleyma.gov/DocumentCenter/View/292/Opt-Out-Application-PDF?bidId=
Milton	$2500 individual $5000 family	https://www.townofmilton.org/sites/g/files/vyhlif911/f/uploads/opt_out_2019.pdf
Lexington	$2500 individual $5000 family	https://www.lexingtonma.gov/sites/g/files/vyhlif7101/f/uploads/opt_out_program_materials.pdf

**Financials for Town of Belmont to assist in understanding Opt-out: **

City/ Town	Flexible Spending Accounts*	Details
Belmont	Yes	Administrated by Cafeteria Plan Advisors $2750 (Health Care Costs); $5000 (Dependent Care Costs)
Sudbury	Yes
Wellesley	Yes	Available if employee is enrolled in Benchmark Health Insurance Plan
Milton	Yes	Administered by Cafeteria Plan Advisors
Lexington	Yes	Administered by Benefit Strategies
An FSA is a great way to set aside money on a pretax basis to pay for healthcare expenses for you and your dependents (Health Care) or for care of your child or disabled adult dependent while you work (Dependent Care), thereby lowering your state and federal tax liability.