Analysis of Jamestown Health Benefits

1. Analysis of Jamestown Health Benefits Presented by Amy Gallagher, MBA The Taxpayers’ Association of Jamestown January 4, 2010

2. Amy Gallagher, MBA • 13 Years healthcare insurance industry experience with three major insurance carriers • 5 additional years as Senior Consultant with Cornerstone Group advising large employers in SE New England on group employee benefits and wellness • Noted expertise in cost-containment , consumerism and wellness • Frequent healthcare contributor on NBC-10’s Sunrise Show with Frank Coletta • Guest columnist to Employee Benefit News and Providence Business News • Executive Board member, The Taxpayers’ Association of Jamestown • Jamestown resident since 1996

3. Our Objectives • Provide insight to town management, town council and taxpayers into actual town and school healthcare benefits and costs by comparing the benefits and costs to those of other employers nationally and in RI • Demonstrate state and national benchmarks

4. Our Goals • Increase transparency with regards to the second biggest town budget issue outside of salaries • Contain escalating healthcare costs so that taxpayers do not shoulder an unfair portion of these costs

5. Why We Should Address Jamestown Healthcare Costs Right Now? • Town/School Collective Bargaining Arrangements expire June 30, 2010 • Revenue shortfalls to cities and towns will continue • State and national economic crisis continues – Jamestown Taxpayers not able to absorb tax increases • Healthcare costs trending @ 10% annually • Healthcare Reform likely to further increase employer costs - refer to:(http://www.kff.org/pullingittogether/091509_altman.cfm)

6. 2009: Town Family Premium is $14,638, Police Family Premium is $15,595 and School Family premium starts at $14,611 and increases based on product. Chart Source: Kaiser Family Foundation, September, 2009

7. Town Demographics - Actual • Jamestown employs 52 active employees comprised of: • Nage68(fiscal, clerical) – 9 employees • Nage69(DPW, Water, Sewer) – 11 employees • Police (Local 305) – 14 employees • Nonunion (Department Heads) – 18 employees • There are 16 individual contracts and 36 family contracts • 2009 Estimated healthcare premium costs $609,286 • Town pays $562,982.50 (92%) • Employees pay $46,303.50 - varies based on Collective Bargaining Agreements (8%)

8. School Demographics - Estimated • Jamestown Schools employs 72 active employees , 14 employees who waive coverage (do not take) and 24 retirees • There are an estimated 35 individual contracts and 61 family contracts • 2008 Estimated healthcare premium costs $1,057,314 • School pays $959,706 • Employees pay $97,608 -varies based on Collective Bargaining Agreements (9.2%) Note: Courtesy of RI Department of Elementary and Secondary Education Final Report Healthcare in RI School Districts, February 4, 2008 (statistics adjusted for increasing employee share from 10% to 15%

9. Survey Focus • The United Benefit Advisors Health Plan Survey is the largest national benefits survey with close to 13,000 employer participants • Focuses on small to mid-sized companies • Independent and factual comparison of private industry healthcare costs, contribution and plan design • Provides data to allow analysis of municipal benefits with regard to national and RI employer marketplace norms

10. Average Annual Premium Cost per Employee

11. Monthly Town Premium vs. State Average

12. Monthly School Premium vs. State Average

13. Average Monthly Employee Contribution – (% of Premium)

14. Town - Monthly Employee Contribution %

15. School - Monthly Employee Contribution %

16. Town - Potential Employer Contribution Strategies

17. School - Potential Employer Contribution Strategies

18. Physician CoPays

19. Urgent / Emergency / Hospital CoPays

20. In-Network Deductibles

21. Type of Rx Plan Design

22. Median CoPays for 3-Tier Plans

23. Median CoPays for 4-Tier Plans

24. Median CoPays for 4-Tier Plans

25. Retiree Coverage Offered

26. Medical Plan Waiver - Does Not Take Coverage

27. Key Benefit Highlight Comparison - Town

28. Key Benefit Highlight Comparison - School

29. Renewal Market Forecast Estimate • 2010 Medical cost increases (trend) estimated to be 10% • Costs could fluctuate based on demographics and claims • Town premium could increase from $609,286 to $670,215 • Under current employer contribution, Jamestown’s share could increase to $619,281 – a $56,299 increase • School premium could increase from $1,057,314 to $1,163,045 • Under current employer contribution, Jamestown School’s share could increase from $959,706 to $1,055,677 – a $95,971 increase • In total there is a potential $152,270 contribution cost increase in 2010 • 2011, 2012 likely to have similar increases

30. Recommendations • Phase In/Adjust employee contributions each year of 3 year agreements • Consider shorter term collective bargaining agreements • Adjust benefits to marketplace average • $15/$25 PCP/Specialist • $25 Urgent Care • $100 Hospital • $500/$1,000 Deductible • $10/$30/$50/$75 Rx • Eliminate reimbursement of vision, rx, emergency room, urgent care and instead offer employees a Flexible Spending Account (FSA) to help pay for these expenses pre-tax

31. Recommendations, Cont’d • Waiver Language and waiver bonus should change to reimburse employee only (not employee plus family) as the family member has other coverage • Consider timing of healthcare reform and “requirement of coverage” – if employers offer coverage, employees have to take it” – this will likely increase costs to Employer • Insurance is specified– all language in collective bargaining agreements needs to be rewritten in accordance with new state law that prohibits naming health and dental insurance carriers • Implement annual RFP process for healthcare (and dental) after GHGRI contract expires in 2011 and go to market to UnitedHealthcare and Tufts to force competitive bidding - Bid results should be shared with the Town Council • Consider hiring independent consultant to perform language and fiscal analysis of Collective Bargaining Agreements to assure that financial concessions gained are not lost in other areas of contracts

32. Recommendations, Cont’d • Eliminate reimbursing $5/$10 rx copays for town and police • Consider phase-out of waiver bonus as healthcare reform will eventually mandate coverage if employer provides it • Eliminate opt-out for spouse who is married to town employee (they get coverage through spouse, why are they getting a bonus when they have coverage through town) • Freeze a flat dollar amount to existing retirees; eliminate retiree coverage for all new hires

33. Recommendations • Town/Police Retiree coverage • Minimally, contributions should be increased • Paying for retiree and spouse/family needs to be addressed • Consider giving retirees a “fixed” allowance to purchase retiree coverage elsewhere • Retiree language needs to be addressed (i.e. "town agrees to provide coverage for retired employees until such time as they become eligible for equal or better coverage….” • School language “ benefit will remain in effect as long as the retired teacher is not receiving the same coverage from some other source”…Needs to be changed

34. Next Steps • Present to Jamestown School Committee • Analyze other avenues of savings in Collective Bargaining Agreements • Invite Independent Consultant to provide rational for fiscal and language analysis of Collective Bargaining Agreements

35. Source Documents • UBA 2009 Health Plan Survey • Healthcare in Financial School Districts, February 2009 • Town of Jamestown GHGRI Contractual Agreement • Current Nage 68, Nage 69, Local 305 and Jamestown Teacher’s Association Collective Bargaining Agreements • Town of Jamestown and Jamestown School BCBS Rate Documents • www.kaiser.org