Date: Fri 01-Mar-1996

Publication: Bee

Author: KAAREN

Quick Words:

self-insurance-school

Full Text:

Officials Say Self-Insurance Gamble Is Paying Off

B Y K AAREN V ALENTA

There's always an element of risk when a town or a school district is

self-insured, but local officials are convinced the practice has saved

millions of dollars for Newtown.

"Being self-insured has saved $3.5 million for the town since we started in

1982," Board of Education President Herb Rosenthal said. "Claims vary from

year to year but overall being self-insured has been a big savings."

Mr Rosenthal and Municipal Finance Director Benjamin Spragg made separate

presentations to the Legislative Council recently to discuss the status of the

self-insurance health benefit plans and to request funding for next year.

"Claims are down slightly this year," Mr Rosenthal said. "We anticipate we

will need $1,692,000 in the operating budget for next year - the same as this

year - plus we also had $827,000 in this fund as of the end of January. The

big variable is what happens between now and (the end of the fiscal year on)

June 30."

TR Paul, the third party administrator of the school district insurance plan,

estimates claims will amount to $2,233,000 next year, Mr Rosenthal said.

Mr Rosenthal said the school plan has 447 "insured units" which include

single, two-person and family coverage. The school district includes the first

$80,000 in claims for each covered unit; claims over that amount are covered

by outside insurers. The district also has a $3.4 million cap on the total

amount of claims it will pay each year; after that, an outside "stop-loss"

insurance plan goes into effect.

School district employees generally contribute one percent of their salary

toward health coverage; some administrators contribute up to two percent. This

helps to cover about 20 percent of the cost of the plan, Mr Rosenthal said,

while the district pays the other 80 percent.

In 1992 the town began a self-funded health insurance plan for municipal

employees. For the first year, actually nine months of coverage, the town put

$850,000 into the plan.

"It was a horrible year for claims - we spent it all," Mr Spragg said. "The

following year we funded it with $1.1 million and almost spent all of that,

too."

In the third year, however, claims dropped. The following year Council reduced

the funding, but claims went up. Council reduced the funding a little more,

hedging that claims would go down, but 1995-96 appears to be turning out to be

the worst year yet as far as claims go, Mr Spragg said.

"We're having a rough year," he said. "Our aggragrate stop-loss is $1,187,000

and I estimate that we will exceed it."

For next year's budget, Mr Spragg recommended that the town increase its

funding to $900,000. The Board of Selectmen approved $850,000, an amount Mr

Spragg said he had no problem accepting.

"Our aggregate stop-loss for next year is $1.3 million," he said. "If we max

out this year and we do it again next year, we probably won't have any reserve

fund in June 1997. But if we only have $800,000 in claims, we will have

$500,000 left."

The chance that claims may be low and money will be left is what makes

self-insurance popular. "If you pay insurance premiums, the money is gone even

if there are few claims," Mr Spragg said. "I estimate that we've saved

hundreds of thousands of dollars."