Health care costs challenge town budgets
By Janet Hefler
Published: August 13, 2009
With the start a new fiscal year on July 1, Island towns already are planning ahead for the economic challenges of the next one, in light of tight budget constraints and declining revenues.
Among the costs that drive up town budgets, employee salaries and benefits, particularly those related to health care, account for a large percentage. In Tisbury, for example, director of municipal finance Tim McLean notes that $2.69 million for health care and insurance costs accounts for more than 10 percent of the town's total $20.2 million fiscal year 2010 (FY10) budget.
"Unless the government comes up with a new health plan that changes the whole dynamic of everything, that's going to be a huge part of our budget going forward," Mr. McLean said.
Comparing employee health care and insurance costs among the Island towns can be a challenge. Tisbury combines health care and life insurance costs as one budget line item, and lists FICA/Medicare as another. Oak Bluffs combines health and life insurance costs under one line item, but also has a line item for dental insurance costs under the police department's budget as a negotiated union benefit.
Chilmark, Edgartown, and West Tisbury budgets list health insurance, life insurance, and Medicare costs separately, while Aquinnah combines health, dental, and life insurance costs in one budget line item.
Nonetheless, a look at the accompanying chart on healthcare costs for the Island towns from FY05 to FY10 shows significant increases for all of them.
All six Island towns and some of its regional agencies, as well as many Cape towns and similar agencies, belong to the Cape Cod Municipal Health Group (CCMHG), Mr. McLean explained. The municipal joint purchase group, organized in 1987, is basically self-insured, pooling its money into a trust fund from which claims are paid, he said.
Blue Cross Blue Shield and Harvard Pilgrim Health Care administer the plan for a fee. The CCMHG offers choices of six to eight plans.
Depending on how many employees a town has, what plans a town chooses, and whether the town's employees belong to a union, costs for some have increased proportionately more than for others.
Many Island municipal employees and public school teachers have saved towns money over the past few years by switching from more expensive indemnity healthcare plans to less expensive managed care plans, either voluntarily or in response to incentive payments.
Another factor that makes it difficult for cities and towns to control health insurance costs is that unlike the state, they cannot change co-payment amounts or deductibles for their union employees without going through collective bargaining.
"We're hoping that the legislature takes health care out of collective bargaining for cities and towns, which would give us a little more flexibility to make those changes and try to keep the costs down a bit," Mr. McLean said.
In the meantime, membership in the CCMHG has grown substantially, Mr. McLean said, which increased its bargaining power with Blue Cross Blue Shield and Harvard Pilgrim on administrative fees. While that helps keep some of the cost increases down, as premiums rise, the options become fewer, he added.
"At some point, if the taxpayers say, we're not going to pay any more, then you go back to the negotiating table and say we've either got to go to lower cost plans or change the deductibles and co-pays," Mr. McLean said. "Instead of 75/25, it may be 60/40. Those are some of the options at some point we may be faced with."
Recognizing that difficulty, Tisbury's finance and advisory committee (FinCom) has invited the other Island town finance committee chairmen to meet and discuss upcoming school and municipal employee contract negotiations.
