June 3, 2024 – Stafford, CT
When most people think of health insurance plans, they imagine a Fully Insured plan in which employers and employees pay a premium, and insurance companies assume the risk of paying any claims. However, there is another kind of insurance plan, and Stafford Public Schools has one. Right now, the Self-funded plan is on uncertain ground. This problem was on the agenda at June’s Board of Finance (BOF) and Board of Education (BOE) meetings.
Here’s how the Health Care Administrators Association describes Self-funded plans, like the one Stafford Public Schools employs:
“A Self Funded, or Self-Insured plan, is one in which the employer assumes the financial risk for providing health care benefits to its employees. In practical terms, Self-Insured employers pay for claims out-of-pocket as they are presented instead of paying a pre-determined premium to an insurance carrier for a Fully Insured plan. Typically, a self-insured employer will set up a special trust fund to earmark money (corporate and employee contributions) to pay incurred claims.”
It may go without saying, but if it’s not obvious, we will spell it out: The schools must maintain a fund balance high enough to sustain any potential claims made by participants. When it doesn’t, the town is on the hook to pay those bills from the General Fund, which has frequently been the case.
Stafford’s CFO, John Lund, said that, on average, a bi-weekly payroll contributes about $400,000 to the fund. While the claims made on a monthly basis can vary greatly, they are typically between $500,000 and $600,000. Over the past year, Lund estimates the General Fund has loaned the school’s self-insured fund about $1 million as claims outpaced contributions.
Across town at the concurrent BOE meeting, Charmaine Bradshaw-Hill, Director of Finance and Operations for Stafford Public Schools, said that just a few years ago, the fund was more robust. However, at the recommendation of the then-sitting town finance director, the district decided to cut contributions due to budget constraints. Bradshaw-Hill said the fund went from consistently having about $2 million to $1.5 million to even less in just over three years.
Back at the BOF meeting, Lund reported that a team was assembled, including One Digital the school district’s insurance consultant, to create an action plan to address the problem. He also reported that the treasurer's office provided the project team with a multiyear report on the fund's history. The deficit, as reported, for Fund 9, was $621,723 through April 30, 2024. He also noted that draft estimates through the end of May worsened the deficit by almost another $160,000, but the report was not yet completed. It’s also worth noting the summer months are when this fund is hit the hardest. Staff who are off for the summer often seek care during their time off. At the BOE meeting, Superintendent of Schools Steven A. Moccio noted that they are still catching up from last summer’s claims, reminding the board that employee contributions cease during the summer.
Information sharing has been improved in addition to regular meetings between the town, the schools, and the insurance consultant. Bradshaw-Hill said that because the account holding the funds is under town control, and for several years, the town did not have a full-time CFO, the schools had not had direct insight into the balances. Now, the schools will have more direct access to real-time information.
One Digital has drafted recommended formulas for the BOE to consider that will bring down the deficit and build the reserves back up. Progress will be monitored at least quarterly. Still, with the school budget already set for next year and contractual negotiations already in place, the district’s ability to immediately increase contributions to the fund is limited. The BOF may be looking for the schools to find other budget areas to draw from to help make up the shortfall.
Some BOF members were skeptical that the self-funded insurance plan was the best solution moving forward. Chair Steve Geryk noted that the BOE opts for this plan over the state plan that the rest of the town employees are part of because it is 15-20% less expensive. However, it's also less predictable. BOF alternate Shelley West noted that there are also administrative costs, such as the time Lund spends monitoring the issue.
The BOF noted that until Lund’s arrival, this issue had not received much (if any) attention, but he and First Selectman Bill Morrison are watching it closely now that it is on their radar. Expect more updates going forward.
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