1. Call Meeting to Order
Mayor Havens called the meeting to order at 7:00 p.m.
2. Roll Call
Members Present: Mayor Edward Havens
Deputy Mayor John Pelkey
Councillor William Aman
Councillor Thomas Delnicki
Councillor Judith Paquin
Councillor Elizabeth Pendleton
Councillor Roseann Williams
Also Present: Town Manager Matthew B. Galligan
Town Attorney Barry Guliano
Absent: Councillor Deborah Fine
Councillor Matthew Streeter
3. Public Participation - None
4. Communications - None
5. Town Manager's Report
Town Manager Matthew Galligan said he had two items to report on-the first being that the Town did advertise and interview for a new "I.T. Director." Included on the interview panel, he added, were representatives from the Town, Board of Education, and outside people familiar with the requirements of the position.
As a result of those interviews, the Town Manager reported that Mr. Jason Lathrop had been hired; and his actual starting date was today. according to Mr. Galligan, Jason Lathrop was hired. Mr. Lathrop's past working experience, he added, included being a "consultant" for the firm of Arthur Anderson; working for IBM; and, more recently, has installed new systems in local and regional school districts.
ITEM:
5. Town Manager's Report (Continued)
The next item Mr. Galligan touched on was a recent successful "stakeout":conducted by South Windsor's Police Department. As a little background, Mr. Galligan reminded Council of a robbery this past November at one of local trucking companies during which over $1 million worth of "Brooks Brothers" items were taken.
Continuing, Mr. Galligan said that the Police Department had received a "tip" that there may be another incident; and, on New Year's Eve and Day, it paid off. The suspects did show up, again, to apparently steal more goods from the trucking firm. The stake-out was conducted, he said, in conjunction with Connecticut's State Police and through the use of their helicopter.
According to the Town Manager, four (4) suspects were arrested-and one is still at large. Sixteen police officers, and South Windsor's Police dog, were involved in the apprehension of the suspects. He commended all the Officers involved for their prompt follow-up on the "tip;" and for the success of this operation.
Mayor Havens concurred with Mr. Galligan's recognition of the fine job done by all the Police Officers involved. He offered the Department his thanks for a job well done; and added that he felt that the Town should be proud of its Police force.
6. Items for Discussion
A. Consideration of a Policy to "Self Insure" by the Town and the Board of Education
Mr. Galligan said that, some time ago, he had done an analysis on the amount of money being paid, in premiums, by the Town to cover health care costs associated with "fully paid premiums," where the "health carrier" assumes all the risks. Based on his analysis, Mr. Galligan felt that the Town was being overcharged in premiums; and although the carrier the Town has is a good one, providing good service, it is probably one of the only ones insuring municipalities throughout the State.
ITEM:
6. A. (Continued)
The Town Manager then provided information to the Council regarding how much these premiums have gone up, each year, over the past several years. Based upon this information, he said, he and the Superintendent of Schools, Dr. Wood, went out and hired a "broker," Webster Insurance, to continue with the analysis work. Based on their findings, according to Mr. Galligan, it was discovered that, over a period of about the last five or six years, the Town paid approximately $5.2 million over and above claims and expected retention.
Mr. Galligan said that he and Dr. Wood feel that, by combining the Town's and Board of Education's insurance needs within a "self-funded program," the Town could actually save money in the future.
The assumption, he added, that under a self-insured program the Town would assume all the risk is not correct. The program proposed by he and Dr. Wood would include various "stop loss" insurances-both for individual claims, and for aggregate. What this means, he added, was that at some point the Town would never pay more than 125% of all claims because of protection against "catastrophic" claims. Claims, he said, were found to represent anywhere from 65% to 78% of the premium-a big difference, he felt.
Mr. Galligan informed Council that, under this plan: (1) a "third party" administrator would be hired on a fee basis; and, (2) there would be no change to the employees' plan-all benefits would remain the same. He stressed that it was his opinion that this is something the Town Council should think of doing "for next year's budget."
Explaining "stop loss" insurance more fully, Mr. Galligan said that, under this plan, the Town would pay the first $25,000 on a claim and, after that, the insurance would "kick in." Most claims, he added, are in the $1,200 to $1,500 range. He then gave examples of how the two types of "stop loss" insurances, individual and aggregate, would work.
ITEM:
6. A. (Continued)
The Town Manager added that this program was not new; that communities have been doing this since 1982/83-Towns such as Cheshire and Manchester. The whole idea, he added, was to create an Ordinance that would allow this Council to "set up the appropriate reserves." The only "fear" he had (and it did not apply to this Council, he added) was that, if the "reserves" were built up enough, future Councils might dip into these reserves to reduce taxes. This, he said, would be very detrimental to the Town.
In summary, Mr. Galligan reiterated that what he and Dr. Wood were proposing to do is to try to come up with a self-insured program for this year's Budget. They proposed, too, to hold the line at today's premium costs; take a small amount from "Fund Balance" to start the reserve ($200,000 to $300,000); and then monitor it.
In a self-insurance plan, according to Mr. Galligan, you have a 12 month timeline for self-funding contracts and incurred claims. However, under the law, he added, you have 15 months during which those claims can be paid. He gave an example.
Mr. Galligan then referred to a planned Joint Meeting between the Board of Education and the Town to discuss, among other subjects, the proposal to "self-insure" the Town's health program. He did remind the Councillors that there would, indeed, be fees associated with this program-namely, hiring Anthem to be a Third Party Administrator; fees for a "stop loss" insurance for the aggregate; etc.
(See attached outline regarding "Self-Funded vs. Fully Insured" programs provided to Council by the Town Manager.)
Mayor Havens asked if the Town would experience savings this year. Mr. Galligan said there would be no savings this year; however, there could be "cost avoidance;" i.e., avoiding an increase in health care costs that have ranged from a low of 4% to as high as 16% to 18% increase in health care costs in recent years. On a $9 million policy, he stressed, "that's a lot of money."
ITEM:
6. A. (Continued)
Mayor Havens also asked if the plan had to be approved by the various Bargaining Units within the Town forces. Mr. Galligan replied that it does not-mainly because it does not change the health care cost at all. He added, however, that he and the Superintendent would be working with the Unions on this.
Councillor Aman suggested to the other Members of the Town Council that "there would be a tremendous desire on future Councils to 'raid' reserves-it being an easy way to balance the Budget in an election year." He suggested that when the Council was actually drafting an Ordinance regarding this Plan, it would be prudent to include within that Ordinance, a stipulation that it will require an affirmative vote of a "super-majority" (at least 2/3rds vote) of the Council Members to be able to use these reserves for anything other than their intended purpose. He added that he felt this would "protect future Councils from themselves."
Councillor Aman continued by reminding Councillors that this same thing has happened to Towns with their "pension fund" reserves: the Towns make good investments with their pensions-their reserves build up--they 'raid' the reserves of their pension funds-and, then, the market 'crashes' leaving the Towns in a very awkward situation. He again suggested that the Council seriously consider the inclusion of the restrictive stipulation he had recommended for the proposed Ordinance.
Deputy Mayor Pelkey if the Town was experiencing "some sort of a major shift in 'age' of Town employees-are we getting younger, older-which of the two?" Mr. Galligan replied that the Town was probably "in the middle of the road-not having kids right now and, yet, not old enough to have some of the medical problems you would have at the age of 65 or 70." He added, however, that the Town does allow retired employees to buy into the Town's medical by paying for it themselves until they are 62 or 65 when they go on "Medicare" and into a supplement.
The one area in any medical program, according to Mr. Galligan, that is high is the "drug prescription program."
ITEM:
6. A. (Continued)
Mr. Galligan said that many people feel that, perhaps, "self-funding" is not the right way to go; however, he added, communities all over the Country are doing it; and, he added, the Town has been "self-funded," at the very least, for the past 9 years he has been Town Manager, on Workers' Compensation, through CIRMA.
Deputy Mayor Pelkey then asked if it was common among municipalities to accommodate both the Board of Education and the Town Government in one program like this. Mr. Galligan replied "Yes. Because that's what makes it work." If only the 160 employees of the Town Government were to go it alone on such a program, it would not work, according to the Town Manager.
Councillor Delnicki asked Mr. Galligan if there were "disadvantages" to self-funding? Mr. Galligan replied that the only disadvantage he could see was if "you don't Budget for it, or if you don't financially do it in a correct way." He alluded to the practice of using the reserve to lower taxes-this, he again emphasized, does not work-particularly if, in the next year, you have (for instance) 15 catastrophic claims.
After further questions and responses from the Town Manager, Atty. Guliano interjected one thing regarding the "stop loss" insurance he wanted Council to be aware of-that being that the if the "carrier" takes awhile in investigating a claim, and don't pay the claim right away, there may be instances where the Town (early on) might have to fund some of that money and then be reimbursed, in the long term. In other words, he said, there could be a little gap between the time when our "stop loss carrier" paid and when the actual claim had to be paid-the Town, he again stressed, might have to front some money.
Councillor Williams asked if the Town Manager would be returning to Council with "some real figures" at some later date. She also asked if all these insurances would be under one umbrella. Mr. Galligan replied that they could be different-some doing the aggregate; some doing individual "stop loss;" etc.
ITEM:
6. A. (Continued)
Councillor Williams expressed her support for utilizing a Third Party Administrator (TPA) in this process. Mr. Galligan then elaborated on the many reasons he felt a TPA was essential. In response to the Councillor's question as to currently having one particular risk management person, Mr. Galligan replied that he did not-and the Town never has had one to date.
Councillor Pendleton asked if Dr Wood has presented this proposal to the Board of Education. Mr. Galligan said he did not know; however, the Special Joint Meeting of the Town and Board on January 24, would certainly provide the time needed by him and the Superintendent to present this proposal, in more detail, to both agencies.
Mayor Havens asked if there is going to be any administrative costs associated with this. Mr. Galligan said that neither the Town's nor the Board of Education's budget would be affected. The Mayor asked if a Member of the Town Council should participate in these decisions, as is done on the Pension Committee. Mr. Galligan said that most of this is controlled by the Director of Finance. And, he reminded the Mayor, the Town has the "Insurance Control Commission" that could be utilized to oversee this process. Representatives from both the Town Council and the Board of Education, he said, are voting members of the ICC (including the Mayor, a Council minority representative, and the Chairman of the Board of Education) making it an ideal conduit for this proposal. Mayor Havens felt this was a good
idea.
More questions from the Council, and discussion on the proposal, followed.
7. Executive Session - None
8. Adjournment - A Motion to Adjourn was made at 7:55 p.m.; was duly seconded; and was approved, unanimously.
Respectfully submitted,
Patricia R Brown
Clerk of the Council
Attmt.
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