Smithfield is getting creative to curb a spike in the cost of providing health insurance to its workers.
On July 1, barring any changes, it would cost 16 percent more for Smithfield to provide the exact same coverage to employees, according to the town’s insurance broker, Mark III Employee Benefits. Smithfield considered switching insurers, Town Manager Paul Sabiston said, but the quoted prices came in 36-40 percent above the current cost.
The Smithfield Town Council met with Sabiston last Tuesday and discussed strategies for dealing with the increase.
The town could reduce the rate increase to 9 percent by lowering the level of coverage it provides, Sabiston said. For instance, the town could opt to raise the co-pay for a doctor’s appointment to $35 from $25 and raise deductibles 50 percent to $1,500 for individuals and $4,500 for families.
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Most agreed the changes made sense, but Councilman Roger Wood had one serious concern. The scaled-back plan would double the out-of-pocket maximums to $7,000 for individuals and $10,000 for families. Wood said that could easily leave lower-income workers with unaffordable medical bills.
“This is going to scare people,” Wood said. “Hell, it scares me, and I don’t have to sign up for it.”
Councilman Perry Harris said that’s just the future of health insurance in America. “Catastrophic insurance is about what it boils down to,” he said.
Smithfield will pay $1.2 million this fiscal year to insure 163 employees, and the price would jump to $1.4 million next fiscal year if the council did nothing. The town bears the full cost of insuring 108 employees who opt to cover only themselves. It collects collects a total of $200,000 in premiums from the 55 workers who also insure a spouse, children or both. Smithfield would need to budget $168,978 more to continue offering the same coverage, or $93,710 more if it cut the level of coverage.
For single employees, Sabiston recommended the town continue to foot the entire bill. For those with dependents, he suggested Smithfield budget the same amount for their premiums next year and charge the employees the difference. In other words, workers would pay the increased cost of insuring their spouses and children.
Under that plan, Smithfield would need to pay only an extra $94,154 to keep its same coverage, or $52,215 if it also cut the benefits. Sabiston recommended the council choose the latter option.
During the council’s discussion, another idea emerged. The town currently pays $50,000 a year for employees’ dental insurance, and none of that cost gets passed along to the workers. If instead the town made dental coverage optional and passed the premiums on to workers, that $50,000 could help pay for health insurance.
Wood seemed to like that idea because, with the extra money, Smithfield could afford to keep its current benefits and avoid doubling the out-of-pocket maximums.
Sabiston said he would first need to find an insurance company willing to provide the town with a voluntary dental plan.
Before making a decision, Harris said Smithfield needs to ask neighboring towns and Johnston County government what type of benefits they plan to offer next year. That way the council can make sure Smithfield remains competitive as an employer, he said.
What’s certain is the council faces some tough choices during the budget process.
“There’s not going to be a silver bullet, guys,” Harris said.
In another bid to ultimately save money, the council added $21,000 to its 2015-16 budget for Mark III to begin developing a wellness program for the town. The program will not begin until the following fiscal year, but Mark III estimates it will save Smithfield about $60,000 yearly in health premiums.
The top health risks for Smithfield’s employees are weight, cholesterol and blood pressure, according to Mark III. Those create risks of heart disease, hypertension, diabetes, strokes, kidney disease and more.
Those problems are all preventable, and the wellness program would give workers a financial incentive to improve their health.
Healthier workers should file fewer claims, and that would save the town money.