budget worksession Minutes
March 29, 2010

The meeting was called to order at 7:02 p.m. Present were Mayor Calvo, CMs Ahrens, Dennison and Wilkinson. MPT Lofgren had an excused absence. Also present were TA Murphy and Clerk Harper.

1. Mayor

Announcements: Residents should be mindful of students, who are on vacation this week. Officer Daniel Unger resigned effective April 3. He will join the Greenbelt police department. The Chief will appoint another officer to fill the Public Safety Taxing District slot.

2. Budget discussion

Health insurance: TA Murphy presented new information about possible health insurance alternatives. He said that currently, the Town has a Care First open network insurance plan (PPO/EPO) with a health reimbursement arrangement (HRA). Employees can choose their doctors from outside the network, but pay the additional cost when they do so. The Town pays 100% of an individual employee's premiums and 85% of premiums for an employee's spouse or children. The plan imposes the maximum co-pays and high deductibles. But the Town reimburses employees for their deductibles. In FY 2010, the Town switched to the HRA option and realized substantial savings in premiums. For FY 2011, health insurance expenditures will increase by at least 8%, based on April 1 rate information. The health insurance budget is estimated at $130,800 based on 18 employees.

TA Murphy reviewed health insurance alternatives. He said that piggybacking onto the County's health insurance would be very expensive. County premiums are very high, probably due to high claims   experience. He advised against joining. TA Murphy met with representatives of the Local Government Insurance Trust (LGIT), and learned about their health insurance cooperative. The cooperative is in the process of determining if a true out-of-pocket HRA deductible will bring down claims and make Towns’ plan less expensive. The Town might consider this option when the data is available. CareFirst also offers a plan in which the employee must pay the first $1,500.00 of claims out of pocket, but the premiums are much higher than what the Town is paying now. In another version of the CareFirst HRA plan, the Town pays the first half of the deductible and the employee pays the second half of the deductible out of pocket. TA Murphy also obtained information about health insurance benefits of its neighbors College Park, Greenbelt, New Carrollton and Riverdale Park, all of which are less generous than Berwyn Heights'. However, employee salaries in those municipalities are higher than in Berwyn Heights.

Mayor Calvo said that, because Berwyn Heights offers the most generous plan and reimburses employees for the deductibles, the Town has some latitude in scaling back health insurance benefits. This could be done in several different ways:

• Switch to a Care First HMO plan, which would save approximately $5,000;

• Switch to Kaiser Permanente HMO plan, which would save approximately $26,000;

• Require employees to pay a share of the Care First deductibles;

• Require employees to pay a share of the Care First premiums.

Mayor Calvo noted that the Council could also choose to retain the current plan, including rate increases, at a cost of $130,800. This would exceed the $125,000 budgeted for health insurance in FY 2011, depending on the amount of money needed to replenish the HRA account. Switching to Kaiser Permanente would close the shortfall, plus save additional money. But it would also be the most disruptive option to employees because it would require switching to an entirely new set of doctors, hospitals and pharmacies. In addition, employees, who live in southern Maryland, would have to travel quite far to get to one their facilities. Personally, he likes the Kaiser Permanente model because it produces the same health care outcomes at a lot less cost.

In response to questions, TA Murphy said that he has not researched the cost of other Health Insurance companies in depth, apart from Kaiser Permanente and the LGIT cooperative. He has no information yet as to whether neighboring municipalities are making adjustments to their insurance plans because they are not that far along in the budget process. Mayor Calvo added that in most other cities, the city council does not discuss such matters in detail. Usually, the city manager makes these types of decisions. In response to CM Wilkinson, TA Murphy said that he believes that the Kaiser Permanente HMO plan does not exclude for pre-existing conditions or raise rates once admitted. Mayor Calvo said that the Town would join an insurance pool, where rates are based on the experience rating of the entire pool, not individual health conditions of Berwyn Heights employees.

Mayor Calvo said that he does not want to make a decision on an insurance plan until the Council has the final FY 2011 insurance rates, in early May. However, the Council has to decide on a number to plug into the budget for introduction at the April Town meeting. His goal is to cut the proposed FY 2011 health insurance budget by $10,000, either by switching to the Care First HMO and asking employees to pay for part of the premiums, or switching to Kaiser Permanente and offer to pay 100% of premiums for employees and their families. However, if the Town chooses to switch to Kaiser Permanente and pick up 100% of premiums for dependents, only those with dependents would benefit. Therefore the Town may want to offer a different way of giving back a portion of the savings to employees, such as reinstating a Cost of Living Adjustment (COLA) or merit increases.

At 8:20 p.m., the Council took a 10 minute break.

CM Wilkinson said that he calculated that the additional cost of picking up 100% of premiums for employees and their dependents under Kaiser Permanente's HMO plan with HRA would be approximately $8,000, or less than a 1/3 of the $26,000 in savings for the Town realized from switching to Kaiser Permanente.

Mayor Calvo said that he would like to poll employees about their preferences on how to reduce the Town's health insurance costs by approximately $18,000. Employees would be able to rank the following options in a secret ballot:

1. Remaining in current Care First PPO plan with HRA and pay an additional $1,000 a year per employee for premiums or deductibles;

2. Switching to Care First HMO with HRA and pay an additional $700 a year per employee for premiums or deductibles;

3. Switching to Kaiser Permanente HMO plan with HRA and get a share of the $8,000 in savings the Town would return to them in the form of salary enhancement or other benefit.

Mayor Calvo said that, from the Town's perspective, all options are equal in terms of money saved, but employees have a choice on whether to stay with the current insurance plan at a higher cost to them or switch to a new insurance at a net savings. He asked for a motion to authorize himself and TA Murphy to design the poll. CM Ahrens so moved. CM Dennison seconded. Mayor Calvo said that the Council will be shown the poll before it is finalized to give their input. The motion passed 4 to 0. TA Murphy was asked to write a memorandum to clarify health insurance numbers to which the savings would be applied.

TA Murphy informed the Council that the recycling budget has a $10,000 appropriation for health insurance for one employee, which was double counted under employee benefits. These savings could be applied towards the purchase of a new dump truck scheduled to be replaced in FY 2011.

The meeting was adjourned at 9:05 p.m.

Signed: Kerstin Harper, Town Clerk

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