High deductible health plan for Hoboken?
Frequent City Council commentator (and lightning rod for controversy) Donna Antonucci has done some analysis on how the city may save money on skyrocketing Health Insurance costs. In Donna’s model, the city could theoretically save nearly seven million dollars in costs. I’m sure you can appreciate her efforts enough to present a topic for discussion, but be reminded that it’s just one person’s opinion which may or may not even be possible to implement. Keep in mind the city can’t do anything unilaterally, and that in the State of New Jersey the public employees union negotiation system is rigged in favor of the employees. Arbitrators often block efforts to reform things like employee benefits plans.
First, Donna’s view followed by a counterpoint from a health insurance expert (after the break):
An ambitious plan indeed
“The town can save $6.8MM over 2007/2008 levels by going to a High Deductible Medical Plan (HDMP) and asking for reasonable contributions to premiums that are on a scale based on pay. Per a commercial insurance broker, their are towns that are asking employees to contribute to premiums and he strongly recommended that we do it as a percentage of premiums rather than a flat fee. He indicated that contributing to healthcare changes people’s behavior 1) by seeking reasonable cheaper choices like the generic over the name brand drug 2) becoming more healthconscious.
For example, some organizations differentiate between smokers and non-smokers. Smokers have to contribute more. There will be some who quit smoking as a result which is good for everyone.
A HDMP also allows the enrollee to get a Health Savings Account (HSA). This is an account that works like a Roth IRA. Contributions are tax deductibe, and the account grows tax free and money comes out tax free.”
CONTINUE READING ANALYSIS AFTER THE JUMP…
(High deductible, continued…)
“Attached please find a white paper that I gave to the Uniform Police Rep (Vince Lombardi). I do think that because of the time value of money, this can be very meaningful for our more junior employees. It allows them to have some money in their own name rather than solely relying on the pension. Per Paul Zane Pilzer, author of The New Health Insurance Solution, the average 35 year old today, will need $200K for his retirement for un-reimbursable medical expenses. In my example it shows how someone who joins the Police or Fire department at age 35 can accumulate $150K by retirement. Just think of what that can be if they start at 25.
Also attached is my analysis on how this can benefit the tax payers and how I arrived at the $6.8MM savings.
These changes in our health plan offering plus the MANAGEMENT cuts suggested in my Police and Fire layoff EXAMPLES comes to over $14.7MM in ongoing savings. Judy has eliminated approximately 82 positions through normal attrition, provisional worker cuts and disciplinary actions. I do not know how many of these are from the Police and Fire management ranks, i.e., those that were counted in my layoff EXAMPLES but if you conservatively assume 50 do not overlap at average total cost including pension and healthcare costs of, let’s say, $90K that’s an additional ongoing savings of $4.5MM. All 3 items together is $19.2MM. Remember, we need about $25MM in cuts to get back to 2007 tax rates.
We can also trim the recreation program by using volunteers as referees and coaches and asking participants other than those whose household income is less than $40K (half the median income of $80K for Hoboken) to pay a small fee to offset costs. The recreation budget is $9.2MM. I am sure we can cut that in half by doing what is suggested above and I believe that is conservative. That’s an additional $4.6MM or $23.8MM.”
Hoboken411 ran Donna’s analysis past someone with more experience in the field, who pointed out there was no benefits plan design included in the analysis, and that the suggestions made are covered by labor negotiations and can’t simply be implemented immediately like in the private sector. That is a huge barrier to entry for such a proposal.
Our expert also noted HSA’s use the stock market to grow, and in case you haven’t noticed it hasn’t been growing much lately. They added that this plan is likely too big a jump from the “all that and a bag of chips” plan the city employees have now, and that there are intermediate steps that can be taken that would also save significant money that may actually be able to be done now without the firestorm of inevitable pushback that Antonucci’s suggestions would invite.
What do you think? Figured it’d be a good idea to put this out there to spark discussion, so please comment below.