NAUGATUCK — A month ago, the Board of Education was $7 million away from reconciling what will likely be a zero-percent budget increase for the 2010-2011 fiscal year. After rounds of cuts, votes to reconfigure the schools and a likely insurance switch, it is $1.7 million short.
The board voted unanimously Tuesday night to switch school employees’ health benefits manager from Anthem Blue Cross and Blue Shield to Cigna, a change it hopes will save almost $850,000 this year.
Though the board self-insures, meaning it fully funds employee claims, it still pays a nominal administrative fee to a benefits manager to administrate them.
According to figures—adjusted to account for differences in stop-loss coverage and prescription and over-65 plans between the two companies—provided by CBC Kane Partners, the board’s insurance broker, the two companies offered roughly the same fee structure but differed on their expected claims. The adjusted numbers were about $10.4 million from Anthem and $9.6 million from Cigna.
The difference in expected claims accounts for the bulk of the savings the board hopes to realize by implementing the switch, which will need to be approved by the bargaining units.
The board also voted to fund the line item at 10.8 percent above expected claims, leaving a 9.2 percent “doughnut hole” liability between its funding and the 20 percent threshold, at which Cigna’s aggregate stop-loss coverage would kick in.
Though funding that account at the full 120 percent would give the board the most security, a Cigna representative said last week he doesn’t foresee claims differentiating from the prediction by more than 5 percent.
The board expects the 10.8 percent will be enough to cover overages and even begin to fund a reserve, which it will be able to tap in coming years to cover overages or to make the expensive switch back to a fully-insured plan. The difference between funding that account at 120 percent and 110.8 percent of expected claims is about $850,000.
Joseph Fields, a principal of CBC Kane, said Anthem’s plan is a little less risky than Cigna’s, but noted that an 8 percent difference in cost is more than enough to justify a switch. He said most clients, in his experience, find the tipping point to be between a 4 and 6 percent difference. He noted that both companies were “very fine entities” which would provide the same level of service, but stopped short of making a recommendation, saying his job is to provide numerical analysis, not to make value judgments.
When asked, acting board business manager Wayne McAllister said if he had a vote, he’d vote for Cigna.