SEABROOK — As twice-weekly budget hearings get under way, town officials were stunned to learn yesterday that Seabrook’s insurance carrier is raising health insurance premiums more than 26 percent for the 148 employees on its policies.
The figure came as a blow to Town Manager Bill Manzi and the Board of Selectmen, who along with many staffers have worked long hours reformatting and pulling together next year’s draft budget document. Manzi, who received notice of the increase right before yesterday’s 10 a.m. selectmen’s meeting, said the unprecedented hike is bad news.
Manzi said he could only guess at the causes for such an enormous increase. One reason is the possible impact of new federal requirements due to the implementation of national health care reform in the Affordable Care Act, he said. The other reason he could think of is the long-standing industry practice of establishing health insurance premiums based on the experience of the group insured, Manzi added.
Health insurance carriers use both the demographics of those insured — which includes age and lifestyle issues such as smoking — as well as the annual number of claims they pay and the amount.
Insurance costs have long been a bone of contention in town. In 2011, Seabrook officials worked for months to find a way to reduce the then-$3.2 million cost of insurance in the town’s $18 million annual operating budget. The town’s contracts with its unions mandate specific health insurance coverage.
A long-sought solution was believed to have been found in January 2012 with Lumenos, an innovative plan estimated to save the town about $750,000 over a three-year period due to an agreement with the unions.
It is offered through Anthem/Blue Cross and Blue Shield of New Hampshire via the HealthTrust, the insurance arm of the N.H. Local Government Center, which also provides the other two plan options from BCBS that a few are still on: the expensive JY plan and lower-cost Blue Choice.
At the time of the switch, officials said Lumenos provided the same or better coverage than JY and Blue Choice plans, but at lower premium costs because it’s a high-deductible plan. An example cited indicated that by switching from the Blue Choice plan, which most employees had at the time, premiums would drop by 34 percent, representing a gross annual savings of $1.1 million.
Lumenos, which most employees opted for, offers family and two-person plans with the first $5,000 deductible and individual plans with $2,500 deductibles. The town covers the deductibles for each person on the plan, setting up individual third-party-administered accounts containing the cost for each employee on the Lumenos plan. When employees use their medical insurance, the deductible costs are paid out from the accounts. The money not used in the accounts would revert to the town.
It took longer than expected to establish the third-party administration system, but some savings should have been realized since most employees are on Lumenos.
The Local Government Center and HealthTrust have endured both political and financial turmoil since an August 2012 ruling requiring it repay its municipal clients $17.1 million from its workers compensation risk pool funds, which were found to be kept and utilized inappropriately. The payments are due Dec. 1, but the LGC has asked and extension, although the New Hampshire Attorney General’s office is urging the court not to postpone repayment.
Last month, HealthTrust executive director Peter Bragdon rejected the notion the company is preparing to file bankruptcy.