Borough facing spike in insurance costs

NAUGATUCK — Naugatuck officials have just started assembling the borough’s 2015 budget, and they are already looking at an increase of between $3.2 million and $5.5 million. And that’s just for health insurance.

The borough has received renewal rate estimates of up to 34 percent from its insurance carrier, Aetna, for both municipal and school employees. Currently, the borough pays $10 million for school employees and another $6.3 million for municipal employees. If the rates jump 34 percent, it would mean an increase of about $5.5 million for the next fiscal year, which runs from July 1, 2014, to June 30, 2015.

There is some hope for taxpayers, but not much.

The borough is shopping around for better rates. Unfortunately, the best rate officials have found is 20 percent higher than the current cost, meaning the borough’s expense would jump about $3.2 million, borough and school Controller Bob Butler said.

“This isn’t like the private sector where we can just go and change the health care plans,” he said. “All of the changes to insurance must be negotiated through the unions.”

The Naugatuck Board of Finance will ultimately make a decision on all spending in the borough. The board has received proposed budget plans from most municipal department heads, but will not hear education funding proposals until April 7. All departments could face cuts if the insurance bill jumps as high as the predictions.

Butler said insurance companies have told the borough that rates are going up based upon its history: Naugatuck has had several major insurance claims in the past few years, and the rates will reflect the cost.

Also, he said, taxes on insurance implemented by the federal healthcare legislation are being passed on to customers. Though officials have talked about going to a self-funded insurance plan, Butler said he doesn’t foresee that happening in the near future because Naugatuck doesn’t have enough money in reserve at this point.

Also, the Naugatuck Board of Education has had a bad experience with self-funded insurance. At one point during the 2007-08 school year, the board was facing a significant budget deficit because, officials say, the board did not reserve enough money for its self-funded account. Butler said the school board was forced to borrow $5 million from the borough to make up that anticipated deficit; that money was eventually paid back. After that, the school board went to a fully-funded insurance plan.

The borough has found ways to bring down its insurance costs in recent years, Mayor Robert Mezzo said. Most employees are now on health savings accounts rather than traditional health insurance plans, which has saved the borough millions. And, he said, Naugatuck has switched insurance carriers three times in the past five years.

“Unfortunately, there are only so many insurance carriers out there,” he said. “We have been as proactive as possible in addressing the health care costs, but each and every year we are faced with higher costs and more challenges.”

Despite those challenges, Naugatuck taxpayers hope officials can find a way to bring costs down; most say they do not want to see a tax rate increase.

Currently, the town and school system operate on a combined $110.9 million budget; the school system makes up the most of that, at $59.47 million. The current tax rate is 44.3 mills. It jumped significantly last year from 2012-13 after a state-mandated revaluation saw the average home drop in value by 29 percent. The average homeowner, with a house assessed at $120,000, pays just under $5,400 in property taxes.

Board of Finance Chairwoman Diane Scinto said looking at the insurance numbers is scary. She said her board will have to make up the difference somewhere.

“We can’t absorb a $3 million increase; we would have to cut somewhere,” she said. “And I can’t even begin to tell you where we’d begin to cut.”

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