Download Health Insurance Review Committee Final Report (updated 03/10/10)
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03/15/10
Committee recommends Town, School Department look into competitive bidding for employee health insurance
Cape Elizabeth could save a significant amount of money on employee health insurance by bidding for coverage plans, rather than continuing to rely on plans offered by programs affiliated with the Maine Municipal Association for municipal employees, and the Maine Educational Association for School Department staff.
A report submitted by the ad hoc Employee Health Insurance Review Committee to both the Town Council and School Board last week estimates combined, potential gross savings in excess of $375,000 annually to the Town and School Department if they were to bid for comparable health insurance services through private providers.
The Town Council and School Board each received the report at separate meetings last week, and are including it as part of their budget workshop discussions this month.
The ad hoc committee, after nearly eight months of work, reached their conclusions by comparing the costs of health insurance for a private company, similar in size and coverage to Cape Elizabeth's, with that of current coverage offered by Cape Elizabeth.
"While the statewide plans of the MEA and MMA health trusts offer excellent benefits, they are priced high (at the upper range of reasonableness) when compared to similar plans comprised soley of Southern Maine providers and enrollees," says the first conclusion listed in the report. "One of the main reasons for the higher price is that northern Maine providers, due to a lack of competition and other factors, have high 'usual and customary' charges and/or do not generally discount these charges," the report says.
It goes on to say that because the southern Maine insurance market is more diverse and more competitive, it should therefore offer comparable coverage at significant savings.
The private-insurance model used by the committee report projected a gross annualized savings of $359,416 for the School Department, and $18,414 for the Town (municipal) government. Using the cost-sharing average of 88 percent currently used by the School Department, the savings breaks down to $316,286 for the schools and $43,130 for school employees, or $225 per employee. On the municipal side, with a cost-sharing average of 80 percent, the savings would be $14,731 for the Town and $3,683 for employees, approximately $82 per employee.
Further savings might also be realized if the Town and School Department offered a health-maintenance plan (HMO).
Among committee recommendations are that the Town Council and School Board consider collaborating to provide common health benefit plans to all employees, and form a joint committee to further explore bidding possibilities.
The report recommends that a broker make an initial evaluation of whether a bidding process would in-fact mean savings for the Town, School, and employees. It also identifies potential hurdles, including current collective bargaining agreements and obtaining existing claims data, particularly from the Maine Education Association Benefits Trust.
The ad hoc Health Insurance Review Committee began meeting in July 2009 with the charge of recommending opportunities for changes in coverages, providers, and employer/employee cost shares offered by Cape Elizabeth as an employer; and addressing "how any recommendations may influence the ability of the local government/school department to recruit and retain quality employees".
In accepting the 59-page report, members of both the Town Council and the School Board thanked the committee for their work. "It's a huge part of the budget for both the municipal side and the school side," said Anne Swift-Kayatta, chairman of the Town Council.
The council and board will collaboratively review the report as part of budget discussions, then independently consider the recommendations, as stated in the review committee's charge.
Action on the committee's work, as well as the work of other ad hoc committees, is among the Town Council's goals for 2010.
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