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Insurance Committee wants data on health insurance

October 4, 2013

The Walpole Insurance Advisory Committee convened last week for the first time in almost five years, emerging from their one-and-a-half hour long lively meeting with a request that town officials obtain data on Walpole’s participation in the West Suburban Health Group – information that could help determine if the town would benefit from other health insurance options.

Monday evening’s meeting was the end result of two months of mild wrangling, sparked by one of its longtime and most outspoken members, over why the committee has been inactive and whether the town was potentially losing out on an opportunity to save tax dollars.

During the summer, longtime IAC member Tom Driscoll urged Town Administrator Michael Boynton to reconvene the committee, considering that the committee has not met since 2010 and has not met about health insurance itself since before 2000. Insurance, including everything from employee health and life benefits to property and casualty insurance, will cost taxpayers more than $9 million this year – about 11 percent of the total FY 2014 $74 million municipal budget.

But town officials initially appeared surprisingly resistant to Driscoll’s simple request for a meeting.

Assistant Town Administrator Jim Johnson wrote an email to all IAC members shortly after Driscoll made his request, saying he saw no need for the committee to meet, and implied that he felt that the committee had no jurisdiction over health care.

“At this point I do not see a need to have the IAC meet, however if a majority of the Committee would like to meet to discuss anything related to the Town’s Property and Casualty, Workers Compensation and Police and Fire Insurance coverage I am more than willing to do so,” he wrote in the email, noticeably omitting health insurance.

Several members of the committee, including Driscoll, disagreed with Johnson’s recommendation and favored re-convening, resulting in last Monday’s meeting.

The IAC was created in the 1970s and reactivated by Selectmen in 1993 to review the town’s insurance policies and to advise Selectmen on potential savings. The committee has a respectable history of identifying efficiencies in the insurance budget. Historically, it has also delved into health insurance, and at the time of its reactivation in 1993, Selectmen made clear that health insurance was under its purview.

The IAC is made up of five volunteer members appointed by Selectmen, each with various levels of experience in the insurance, legal, or employee benefits fields.

Driscoll’s main point of contention, brought up in a one-on-one meeting with Town Administrator Michael Boynton in August and again last Monday, is that the town does not have any data to show that the town’s current arrangement with the West Suburban Health Group is the most cost-effective option for the town.

The town has obtained its employee health insurance through West Suburban since 2002. West Suburban is a joint-purchasing group with 16 governmental units, including Walpole, that takes advantage of its pooled purchasing power to get low insurance rates. Before joining West Suburban, the town contracted directly with insurance providers through a self-funded arrangement, where the town paid out money only when claims occurred. West Suburban is a premium-based arrangement, meaning that the employers pay a flat premium in advance based on the number of employees they have.

Boynton, who sits on the West Suburban Steering Committee and Board of Directors, has consistently maintained that West Suburban is more affordable than other options, such as joining the state’s Group Insurance Commission (GIC) or obtaining premium-based or self-funded health insurance directly with carriers. Nevertheless, Boynton has said that he is open to exploring the issue, if presented with feasible alternatives.

Driscoll pointed out at last Monday’s meeting that, in a pool of buyers like West Suburban is, the town does not know if it is subsidizing the other members, or if it in itself is being subsidized by the others. If the town is subsidizing other towns’ employees health care, the town might find cost savings from going it alone and contracting directly with a health insurance provider, such as Harvard Pilgrim or Blue Cross, to provide health care to employees and their dependents through a premium-based arrangement.

Driscoll made a motion at Monday’s meeting to ask Boynton to obtain, from West Suburban, financial accounting data specific to covered Walpole employees and dependents including total non-pooled claims, total premiums paid, total administration costs by insurer, and total monthly premium claim data.

During an extensive discussion on the matter, Boynton told Driscoll that he wasn’t sure the information was readily available from West Suburban. But he pledged to make the effort to obtain it.

Driscoll’s motion, which only asked for information from West Suburban and nothing else, passed by a surprisingly close margin of 3-2, with members Bob McCaffery and David Radoccia voting against it. Driscoll, Stephen Fitzgerald, and Kevin Feeley all voted in favor.

In comments before the meeting, Driscoll said the town has been negligent in not getting the data from West Suburban until now. Also, the IAC was never consulted before the town joined West Suburban in the first place.

“The town has an obligation to get financial data on expenses that may well exceed $10 million in taxpayer and employee money,” he said.

During the meeting, Driscoll also suggested that West Suburban may deserve more scrutiny from Walpole officials, noting that an independent audit earlier this year indicated concerns with West Suburban, in that “the Group’s treasurer either performs or supervises all functions and controls that initiate, record, process all of the Group’s transactions and financial reporting.”

“The lack of segregation of duties is a combination of control deficiencies that we consider to be a significant deficiency,” the audit concluded.

Despite the audit, West Suburban is generally highly regarded by municipal and state officials, and ended last year with a $21 million surplus. But even West Suburban chairman Marc Waldman, also the Wellesley Town Treasurer, admitted publicly that the surplus was too large – a signal that member towns might have been overcharged in their premiums.

The West Suburban Steering Committee and Board voted earlier this year to use some of last year’s surplus to offset rate increases next year. They also voted to cap future surpluses to ensure that towns won’t be overcharged. West Suburban still maintains a modest, healthy surplus.

Under the terms of the contract each governmental unit signs with West Suburban, if Walpole leaves the consortium, they are liable for a share of any deficits that West Suburban incurs, but conversely must forfeit any surplus or share of a surplus. That arrangement is common among other municipal joint health care purchasing groups.

Since the IAC has been inactive for so long, Boynton and Selectmen have been the primary decision-makers in the area of town health insurance. Given the success of last week’s meeting, Driscoll said he hopes that from now on Boynton will consult the IAC, with insurance professionals on it, before he and Selectmen make determinations about the town’s insurance policies. While Boynton, and other officials, may have working knowledge of insurance, the committee’s members have collective wisdom on the issue that likely go beyond that of other town officials.

“My hope is he would take full advantage of others (in forming his opinion) especially those with an insurance background,” Driscoll said.

With so much talent and expertise in the group, Driscoll argued, it is nonsensical to allow the committee to remain inactive for so long.

During the time that the IAC has been inactive, state lawmakers passed municipal health insurance reforms in 2011 that make it easier for municipalities to move their employee health care plans to the GIC. The IAC has never had a comprehensive discussion about how those reforms might benefit Walpole.

The GIC, the largest purchaser of health care in the state, uses its market clout to gain better rates, and it is also free by law to make changes in health care plans, such as increases in co-pays for employees, without union bargaining. Despite those benefits to taxpayers, some disadvantages to municipalities include a three-year minimum commitment for communities to join, and the possibility of mid-year premium rate increases.

Cities and towns that have joined the GIC since the 2011 reforms have reported major savings. Some of those towns, however, were not previously in joint purchasing groups like West Suburban, so not every community would necessarily see the same savings.

Despite the fact that the town already had an IAC, Town Hall put together a separate Selectmen-appointed study committee in 2007 to examine the feasibility of Walpole joining the GIC. The town attempted to move town and school employees to the GIC in 2009, but those efforts were eventually abandoned when the unions displayed some resistance. That was before the passage of the 2011 reforms, however.

Besides the GIC and West Suburban, the town also has the option of contracting directly with a health insurance provider, such as Blue Cross or Harvard Pilgrim, to provide premium-based health insurance to employees. In a premium-based arrangement, the town would pay a flat premium paid in advance based on the number of employees they have. West Suburban is also a premium-funded arrangement, but it is spread over a pool, making it difficult to know, without data, if Walpole is subsidizing the other members.

Driscoll, who works as a businesses health insurance consultant, said data from West Suburban would allow the town to bid its health insurance out to health insurance providers to determine if their premium-based coverage would be less expensive.

Boynton was joined at last week’s meeting by Johnson and School Superintendent Lincoln Lynch. Finance Committee member Joe Denneen also attended but did not speak.

Before discussing insurance, the committee elected Feeley as chairman, Radoccia as vice chair, and McCaffery as clerk. Because the committee has been inactive for so long, they had no formal chair, and none of the members could identify who had been the last chair of the committee.

In separate interviews last month, both McCaffery and Feeley said they shared Driscoll’s opinion that the IAC has an important role in town government and that it should meet more regularly. They did not know why the committee had been inactive.

“Maybe given the background of the committee, we could offer valuable feedback,” said McCaffery, who specializes in property and casualty insurance at Liberty Mutual. He said that the IAC is his “only foray” into town government.

Feeley, who has been on the committee since the 1990s, said he believed that the committee didn’t need to wait for the Town Administrator to give them the go-ahead to meet. He says that either town administration can call a meeting, or a member or multiple members can call a meeting.

But he admitted that at this time “it makes sense to meet.”

Feeley said that he is satisfied with Boynton’s stewardship of the town’s insurance policies.

“Marc Waldman has told me Michael Boynton is one of the most active Board members on West Suburban,” Feeley said. “It is my understanding that with West Suburban, the town has saved,” he said.

Even while the IAC did not meet for an extended period of time, annual town reports from 2009 through 2012 all implied that the group was active. Each of those reports states boilerplate language that “the Insurance Advisory Committee continues to advise the Board of Selectmen on issues related to insurance,” and that “the Insurance Advisory Committee shall continue to seek the most cost effective, legal means to adequately and appropriately protect the Town, its employees and its retirees.”

The IAC is actually unusual, if not totally unique, in municipalities in this state. 180 could not find any other community in the state that has a volunteer committee with a similar purpose of advising municipal leaders on insurance matters.

In fact, the Walpole IAC is often confused with another committee of the same name that, under state law, exists in every community in the state, including Walpole. Under state statute, every town must have an Insurance Advisory Committee that is made up of eight members, seven of whom represent town employee unions. The eighth member represents government retirees.

State law requires the town to consult this committee before it makes significant changes to health or life insurance for employees, though the 2011 reforms gave municipalities more flexibility over this committee in the health care arena.

In Walpole, the “Employee” Insurance Advisory Committee meets yearly, and one of its members told 180 that it largely does little work.

Driscoll said the confusion doesn’t help the IAC. “If you ask when the insurance committee last met, they will ‘accidentally’ confuse it with the employee committee,” he said.

(Boynton declined to comment to 180 on the health insurance issue, or on the IAC. He also said that some of 180’s questions on the issue, including one asking whether he receives compensation from serving on West Suburban’s Steering Committee, were “offensive.”)

One Comment leave one →
  1. Tom Driscoll permalink
    October 4, 2013 8:14 PM

    Sam – This is very well done. Even I didn’t know about the 2007 committee regarding GIC. Your research is very complete. You raised big questions about Boynton and Johnson and the last sentence says it all. Frankly I don’t think the data is forthcoming. To do so would reveal the subsidized and subsidizers which would cause the subsidizers to leave and go elsewhere and, eventually, cause the whole thing to collapse. If information is not forthcoming it calls into question of lack of management over a 10 million dollar budget. Good job Tom Is this blog ore Times op-ed as well?

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