BOE probes options with new insurance agent

NAUGATUCK — In a battery of committee meetings in recent weeks, the Board of Education has explored an array of cost-savings measures to bridge a potential operating deficit topping $4 million for the 2010-2011 fiscal year. The most publicly controversial discussions have included proposals to reconfigure grades within existing facilities and even close a school.

But the board has also been feeling out its options in terms of employee benefits with its new insurance agent of record, Joseph Fields of the Durham-based CBC and Kane Partners, Inc.

CBC Kane, which also represents the borough side, replaced the board’s previous broker, USI Consulting, as a condition of the borough’s approximately $1 million bailout.

At a BOE Finance Subcommittee meeting last Thursday, Fields laid out his preliminary analysis of the board’s health insurance problem—and what can be done about it.

Though the borough, as BOE Chairwoman Kathleen Donovan noted, has pushed for the board to return to a fully-insured health plan, as opposed to the self-insured program instated two years ago, Fields said a switch isn’t yet financially feasible.

He said despite some perceptions about a self-funded insurance program—specifically, that its possible savings come with risks of overages—it really isn’t a gamble to utilize one, provided two conditions are met.

First of all, he said, the board needs to accumulate a reserve to cover any claims over budget in a given year. But he said that’s not an easy task for any board of education to face.

“Self-insured is not a problem of efficiency,” he said. “No board of education worth its salt, given a choice to fund a reserve or lay off a teacher, would choose to fund its reserve. … It requires a degree of discipline most boards of education don’t have.”

Fields has worked with many municipal clients and says it’s a storyline he’s seen played out many times: A school board saves in a good year, but rather than supplement a reserve fund, it instead prevents a layoff or finances a much-needed capital improvement project—then pays dearly down the line when claims run over budget.

In addition to nesting a reserve fund, Fields said, the board needs to make better estimations of insurance costs when preparing yearly budgets. He said the fatal mistake of the board’s previous broker was making projections based on previous years’ claims without accounting for inflation, or as he called it, “the trending factor.”

He qualified the point by noting that he’d been examining data “forensically” and that more detailed analyses are forthcoming.

Provided the board utilizes better estimation techniques and manages to save about $400,000 per year using its current self-funded system—and tucks it away in reserve—Fields said it would be in a better position to make the expensive switch back to fully-insured health benefits or to reevaluate that switch in about three years.

“These are reasonable ways to make sure these items are done so they’re consistent with how they’re done in the rest of the industry,” he said. “Slow and steady is a good thing.”

The board met privately Wednesday prior to a budget workshop to examine insurance options in more detail.