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Town of Bayfield hit by falling revenues, rocketing insurance
11/25/2009 By: Carole McWilliams
Bayfield sales tax revenue was down 17 percent in October while the recently received price quote for employee health insurance is up 25 percent for 2010.
Town trustees focused on the health insurance cost during budget discussions on Nov. 17. They debated raising deductibles and shifting more of the premium cost to employees.
They opted to minimize both hits to employees, since there will be no pay increases in 2010. But if there is a similar price increase for 2011, the hit to employees could be much worse, especially if the latest sales tax decrease is a continuing trend.
The 17 percent October sales tax drop was far more than decreases for the previous nine months, compared to the same months in 2008. A 6 percent decline had been expected, Town Manager Justin Clifton said in his budget memo.
The town currently pays 90 percent of the employee health insurance premium for individual and up to full family coverage, with a $1,500 deductible.
Clifton recommended going to a $2,000 deductible. He asked whether the employee should pay a larger percentage of the premium. He also presented options for the employee to pay a higher share for other family members.
Staying with the current deductible and cost split would cost employees a cumulative $3,321.77 more per month and the town $29,886.30 more per month.
The maximum cost shift to 75:25 would effectively reverse who pays those increases for a $1,500 deductible. Trustees never seriously considered that – for 2010 at least.
Instead, they and Clifton focused on raising the deductible to $2,000.
Staying with the 90:10 split, employees would pay a cumulative $2,109.43 more per month, and the town would pay $18,975 more per month.
The increase per employee would be $4.78 if just the employee is covered, and $14.28 more for full family coverage.
Clifton said he checked prices from various insurance companies and the town’s current provider, Rocky Mountain HMO, is the most competitive.
“At the end of the day, the two policies we are quoting represent the floor,” he said. “I didn’t include a $3,000 deductible. If you have big claims on our current $1,500 deductible, you are on the hook for 25 percent of your hospital bill. You are still pretty vulnerable to bankruptcy if you have a big claim.”
Clifton said when he started working for the town in 2006, the deductible was $600. Then it went to $1,200, then $1,500.
He wanted trustees to decide what the town will pay, then give employees options, including paying more to stay with the $1,500 deductible.
Trustee Gabe Candelaria objected, “The budget isn’t balanced, and we’re talking about another increase in expenses. … It was 18 percent last year and 25 percent this year.”
Clifton proposed to pay the increase out of reserves.
“We have to avoid putting people against each other’s interests,” Clifton said. “Every decision we made was in the employees’ interest. The person that has never used insurance will want the least impact to their paycheck. Those who have used it will want better coverage.”
Mayor Rick Smith wanted the town to pay all the increase if the deductible goes to $2,000. “If we can’t give a pay raise, and we can’t, I hesitate to monkey with the insurance or it’s a pay decrease.”
Public Works Director Ron Saba commented, “I think it’s very admirable what you are doing. I had to borrow $5,000 today or have 50 percent of my wages garnished” to cover his share of a $16,000 surgery. “I wasn’t in the hospital one day,” he said.
Saba continued, “I make more than all my guys. I told them the blunt truth. The town, it just can’t keep going on. Something is going to have to change.”
If premiums go up another 20 percent for 2011, Saba said, “We are done.”
Trustee Dan Ford suggested the town could switch to giving the employee $600 a month to cover insurance, and they can use it for the deductible or family coverage that they choose. An employee would pay an additional $226 for family coverage, he said.
Clifton said the drawback there is that 75 percent of employees have to be covered to qualify for group coverage. If the healthy employees opt out for cheaper individual coverage, so the town no longer qualifies for group coverage, some employees won’t be able to get insurance.
Ford, calling himself the Grinch, said, “I’m not in favor of the town picking up a lot of the increase. Sales tax down 17 percent in October scares me to death. Very little of the increase should be picked up by the town.” The employees have it pretty good compared to millions of Americans who have no insurance, he said.
Clifton responded, “If sales tax continues to decline, we could be doing furloughs. I want to minimize the impact to employees today and tomorrow.”
Candelaria commented, “The employees and the town are in this together. It should be 50:50. They should absorb half the increase.”
That’s like a 10-percent pay cut for someone making $13 or $14 an hour who has family coverage, Clifton said. “Some people are on a razor’s edge. Our salaries, the way we have remained competitive is with the benefits.”
Smith said, “Tell them we’ll absorb this one, but not next year.”
Trustees voted 3-2 to pay 90 percent of the premium increase for the $2,000 deductible, with Smith and Ford voting no. Ford wanted the lowest impact on the town budget, while Smith wanted the town to cover all the increase for 2010.
Smith advised, “We need to begin education with staff that next year we can expect another large increase, and the town can’t pick it up. So it’s not a total shock a year from now.”