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A hefty hike in health benefit costs

“It’s a potential tsunami wave,” Town Meeting member warns of future impact on Saugus’ municipal budget

 By Mark E. Vogler

 

About one out of five dollars in the town’s operating budget will be spent on employee health benefits by the year 2023, according to a Finance Committee report issued this week.

Health benefits that cost the town $10.5-million — or 12 percent of the budget in 2014 — are projected to soar to $21.4 million by 2023, about 19 percent of the budget, the report noted.

Meanwhile, the Town of Saugus continues to pay 85 to 90 percent of health benefits cost for its active and retired town employees — the most of 18 municipal government agencies that were reviewed in the report titled “Health Benefit Analysis,” that was presented to Town Meeting members Monday during the third and final session of this year’s Annual Town Meeting.

Hingham, by comparison, contributes to 50 percent of the costs for its active employees and retirees.

“It’s a potential tsunami wave that could be heading our way,” Precinct 4 Town Meeting Member Albert J. DiNardo told his colleagues Monday night.

“And personally, I would like to be a little head of the curve and have warning so we can begin to deal with this now,” he said.

DiNardo was the author of the non-binding resolution approved by last year’s Annual Town Meeting, which requested the Finance Committee to request an analysis of health benefits for town employees.

“It tells us where we are and where we’re going,” he said.

DiNardo said his intent of initiating the study of health benefit costs was to focus attention on an issue that needs to be addressed by town officials, union leaders and state officials (See this week’s “The Advocate Asks for an interview with the veteran Town Meeting member). Town Meeting members endorsed DiNardo’s resolution overwhelmingly last year, by a 36 to 1 vote, with two abstentions.

 

Tracking trends in health insurance

“As of June 2017, the Town has 872 participants in the health benefit program, broken out to 446 active employees and 426 retired employees,” Finance Committee Chair Kenneth L. DePatto wrote in the executive summary of the Health Benefit Analysis.

“The town contribution rate for the benefit is between 85-90 % depending on the program the participant selects.

“From 2014 through 2017 costs for the program have escalated on average over $900,000 annually and the 2018 Benefit cost is estimated to be over $13-million. The increase from 2017 to 2018 is $1.2 million or 10 %.”

The average benefit cost per employee is more than $15,000 annually, according to DePatto.

Incorporated into the report are forecast projections of the current costs, information from the Massachusetts Department of Revenue contribution rates from cities and towns participating in the GIC program and national averages of municipality contribution rates from the Bureau of Labor Compensation Survey, the executive summary noted.

DePatto said he was pleased with the 48-page report.

“The subcommittee did a very good job in compiling information and financial data that shows the potential growth in how health care costs could impact our operational budget if everything remains constant,” DePatto said.

 

Changes “unlikely,” according to one critic

Former School Committee Member Peter Manoogian has for several years called on town officials to focus on paring down health insurance costs. He has been critical of the town’s switch to one of the state’s richest health benefit insurance policies for municipal employees.

“I have read the report and it is not surprising to me that of the 18 communities surveyed, including more affluent communities, the Saugus contribution at 90% is the highest,” Manoogian told The Saugus Advocate yesterday.

“Along with the offering of the best Blue Cross plan. It is pointed out that by the year 2023, 1 in 5 or 20% of the budget will be devoted to employee and retiree health care,” he said.

Manoogian recalled that about eight years ago Town Meeting sought permission to join the state employee health care program known as the G.I.C. Saugus was the second community in the state to do so, he said.

“Generous contracts were negotiated with town employees, and in particular the teachers union, to obtain support for the move,” Manoogian said.

“It was not long after that (Town Manager) Scott Crabtree scrapped the G.I.C. after hearing complaints from the unions about high co-pays and deductibles,” Manoogian said.

Manoogian said he is not optimistic about the town initiating any significant changes to lower health care costs.

“Ultimately town unions and retirees must agree to changes, and like before those changes will come with a cost,” Manoogian said.

“It is the responsibility of the Town Manager to initiate such an effort. It’s my understanding this is unlikely to happen,” he said.

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