The Legislative Council heard a report from Finance Director Glenys Salas about a strategic plan to pay back $3.5 million in debt in the self-insured medical fund and restore the fund balance back to full at its January 7 meeting.

The plan will take five years, ending in 2032.

Salas said as far back as 2024, a strategic plan was in place for the medical self-insurance that identified problems in the medical self insurance fund, and there were audits in 2024 and 2025. However, the problems peaked in the 2026-27 budget, when medical self insurance and the town's medical stop loss insurance together increased by 30%. Additionally, fiscal year 2024 had an audited fund balance deficit of $1,154,378. This deficit widened in FY2025, with a fund balance deficit of $3,537,071. It has such a significant deficit, Salas said, because revenues have been insufficient to cover expenses.

Salas said medical costs have increased 48% since 2020, versus inflation which has increased 25% since 2020. Additionally, high dollar claims of over $50,000 are up 94% since 2020, versus non-high dollar claims that are only up 24%, closer to inflation levels. The high dollar claims are divided into four red flag categories: Cancer, new births/prenatal, muscular/skeletal, and behavioral health.

Of the town's and school's 700 employees, only 1.6% are causing 40% of the costs.

"A small amount of members are driving most of the costs," said Salas.

Salas also stated she has concerns with how Anthem, the town's stop loss insurance provider, is administering the plan. Salas said she felt Anthem was not negotiating better rates for the town and she said she didn't like how medical claims were reviewed for costs.

The associated unions will not likely be willing to allow assistance for the medical self-insurance fund's deficits to come from employees. However, Salas said the town has switched all but the Public Works employees over to Health Savings accounts, and employees who do switch are facing a six percent increase to their health insurance contribution; those who do not are facing an 11% increase.

Councilman Chris Eide questioned whether the town could get insurance through the state and become part of the state pool. However, Salas said the state currently pays higher rates and is facing the same challenges as Newtown. She said that question often comes up, and that even if the town were interested, the state does not seem interested to add Newtown to its pool.

Salas said the town was not likely to see another 30% increase for insurance, and that the town had recently moved from its current plan to a more "economically favorable" plan for stop loss.

The town is following a number of key strategies to stabilize the debt and restore the fund balance, including a transfer of surpluses to pay down the deficit, and a six-year fund balance repayment plan. The town has already completed strategies to float the medical self-insurance fund by supplementing it with general fund money through 2025, premium adjustments for employees for 2026, and changing the fund balance target to 20%.

The town's plan will pay the deficit and rebuild the fund balance with budgeted surpluses of roughly $650,000 per year, and forecasted favorable expenses of roughly $450,000 per year. The deficit is expected to be paid off by 2029 and the fund balance will be at 20% by 2032 under the plan.

Councilman Ben Ruben asked if the deficit was hurting the town, and was told by Salas it was, and followed up by asking if the town could find ways to pay it down more quickly.

"Kicking the can down the road and hoping for surpluses may not work," said Ruben.

Salas said that at this point of fiscal year 2025-26, which is half over, there is no room in the budget for that, but the town will be working on the 2026-27 budget soon and the Council will have the opportunities to make those sorts of decisions when the budget comes before them in March.

The council is expected to vote on the strategic plan at its next meeting.

Editor Jim Taylor can be reached at jim@thebee.com.