AS LOCAL MUNICIPALITIES introduce their budgets for 2012, they all seem to be facing the same headache: the ever-increasing cost of health insurance premiums for government employees.
LIke individuals and businesses, local towns must find a way of meeting those obligations, and that ultimately becomes the responsibility of property taxpayers.
When the Red Bank Borough Council introduced its budget (a work still in progress, officials stressed) last month, it contained a whopping 21 percent increase for insurance premiums.
Borough Councilman and Finance Committee Chairman Michael DuPont explained that the borough obtains its coverage from the Municipal Reinsurance Health Insurance Fund, referred to as HIF. The HIF is a coalition of municipalities that have banded together to jointly purchase insurance coverage as a means of saving money.
Why have premiums increased so dramatically?
“They gave me no explanation,” Dupont said. “They gave me nothing.”
“They’re saying it’s due to an increase in claims,” said Colleen Lapp, Red Bank’s chief financial officer. “We’re asking for the actual hard data to back that up,” she added. But so far, “They don’t have all of it yet.”
As he talks to colleagues serving in other municipalities, DuPont found, “They’re all juggling this.”
“Yes, everybody is facing an increase,” Lapp observed.
“We’re all in the same boat,” said Eatontown Mayor Gerald Tarantolo. Along with his responsibilities in Eatontown, Tarantolo is the chairman of the Two River Council of Mayors, a group of about 13 communities in the Two River area. From his conversations with the council’s mayors, Tarantolo said, the increases appear to be happening across the board.
Eatontown’s insurance premiums are rising about eight percent, “It’s a significant jump,” Tarantolo said.
That amounts to roughly a $243,000 increase in medical insurance premiums. And that equals an increase of 1.5 cents on the municipal tax rate.
“It’s a serious problem,” which has Eatontown officials, “looking, shopping, trying to reduce those costs.”
Lou Neely is East Brunswick’s CFO and chairman of the NJ League of Municipalities’ pensions and health benefit committees.  He said that, yes, costs are rising throughout the state. “Of course, it’s seen across the board,” Neely said. “Not only here but across the United States.”
Towns, in general, have four ways to purchase their coverage: through the HIF, via participation in the state plan, through the purchase of a private sector policy, or by self-insuring.
The state plan, Neely said, is seeing about a 20 percent rise in premiums.
“We’re going out and giving all our information to the private sector to determine if the HIF is giving us the best service possible,” DuPont said of Red Bank.
“All I can say is this is a reccurring theme that we’ve had over the last couple of years,” observed William Dressel Jr. executive director of the League of Municipalities, an advocacy, education and lobbying organization for towns. “It’s definitely a major cost driver.”
The state Legislature, supported by Gov. Chris Christie, had placed caps on municipal and public school budget increases, capping the increases at either two or 2.5 percent, depending on the type of spending. The intent of the law was to rein in escalating property taxes. However, health insurance premiums, as well as pension costs, are excluded from the cap. And of course, it is the taxpayers who foot the bill.
“Those reforms,” endorsed by Trenton, “really did not address these costs,” Dressel charged.
“And it’s not the folks under the gold dome on State Street taking political heat,” he said. “It’s the folks on Main Street, the mayors and governing bodies, who are taking the political heat.”
“It’s a very hard sell,” to explain this to the public, Dressel said.
Dressel also criticized the Christie Administration for pushing the reforms before getting the so called “toolkit” (a series of bills that would give towns the tools to cut costs), creating additional mandates, and burdens for towns.
“If they made that an exception to the cap,” Neely added, “wouldn’t you think they knew this thing was increasing dramatically?”
Neely also pointed to the health care costs for younger government retirees, who remain covered by work plans and are too young for federal Medicare—what Neely called “legacy costs.”
The number of early retirees has risen, with employees trying to stay ahead of legislation that might curtail their ability to get pensions. Those people “are the most expensive people,” to insure as some of them have children young enough to continue on the plans, he said.
Neely blamed the rising costs squarely on the federal Affordable Health Care Act, or what is often called “Obamacare.” “It’s anything but affordable,” which he alleges forced plans to increase premiums four to eight percent, “As a result of federal action.”
“It’s driven the rate up,” he charged.
DuPont disagrees.
“I’m not buying that. I don’t see it,” being the causation of cost increases, DuPont countered. The reasons, he’s hearing, is increased claims, “your plans are too generous. You have to increase your deductible, that type of stuff,” he said.
Whatever the reasons, “It’s not going to be resolved locally. It’s not going to be resolved on the state level,” Tarantolo said. “It has to be resolved on the national level.”
The Affordable Healthcare Act may not be the fix-all, Tarantolo said, “But let’s get something in place and fix the things that are broken,” he suggested.
Legislation passed in the last couple of years will require government employees to make a larger contribution to their healthcare plans to offset costs.
Red Bank has gone even further, asking for concessions from local unions to pay for increases, DuPont said. And unions might have to realize that more may be required from their membership in the future .