Towns, schools battle health costs by banding together
After health insurance costs for Bristol town employees climbed nearly 30 percent last year, town administrator Bob Veloski figured there had to be a better way to keep workers covered and stop costs from soaring out of control. “The cost increases have been rising steadily over the past few years, so we asked ourselves, ‘What other options do we have?’” said Veloski. So Bristol teamed up with the neighboring towns of Alexandria, Danbury, Groton and New Hampton and the Newfound Area School District (which includes Bristol Elementary School, Alexandria Village School, Newfound Regional High School, Danbury Elementary School, Bridgewater Hebron Village School, Newfound Memorial Middle School and New Hampton Community School) to form a health consortium in an attempt to gain stronger bargaining power with health insurers. “We have 30 employees, but some of the towns have only one or two,” said Veloski. All told, the Bristol area consortium insures some 300 employees. The consortium grew from discussions between Veloski and Newfound School District business manager Charles Stuart. Prior to moving to New Hampshire, Stuart worked for 25 years in Massachusetts, where such arrangements have been popular for almost two decades. “A number of school districts and towns got together in Massachusetts. The more numbers you have in your group, the more insurers are willing to talk to you and the better you can compete,” he said. He said it was not uncommon for the Massachusetts groups to have 14 towns and school districts with nearly 2,000 members. More competition In New Hampshire, the town of Ashland joined with its school district in July to reduce health insurance costs. Rick Alpers, Ashland’s town administrator, said they “saved 11.5 percent off the bat.” The Ashland group’s 370 members are insured with Anthem Blue Cross and Blue Shield through HealthTrust. According to Veloski and Stuart, the Bristol area towns and schools are currently covered by Anthem through Primex, HealthTrust, local agents or directly with Anthem. New Hampshire Public Risk Management, or Primex, is a public entity risk pool trust of over 500 member municipalities, schools, counties and other governmental entities in the state. HealthTrust, an affiliate organization of the Local Government Center and New Hampshire Municipal Association, also provides health benefits to municipal organizations, schools and county governments across the state. Stuart said another motivation to seek lower costs was the increase the towns faced after the enactment in 2004 of Senate Bill 110, which “impacted us terrifically,” he said. “A town’s aging population resulted in higher rates, community health problems, even how well the plan was administered in terms of controlling abuse. Some were paying 15 or 20 percent increases.” But on the positive side, he said, SB 110 did seem to spur more competition in the market. “The government center and Blue Cross found out about the consortium and that we were being courted by Primex and Harvard Pilgrim and the rates dropped,” Stuart said. “Now that there’s competition in the market again, we expect to see two or three others.” When asked if he thought the consortium might also find savings from the new changes in SB 125, which repealed some of what critics saw as the more onerous aspects of SB 110, he replied, “It could, but my cynical nature says it ain’t over ‘til it’s over.” Stuart said Bristol officials tried other strategies, such as different types of insurance, health savings accounts and even becoming self-insured to keep a lid on costs before forming the consortium But, he said, “there’s not a lot you can do other than mess around with benefits and deductibles. HMOs, which were cheaper at first, have become less and less effective to that end. The linchpin is size.” Other sticking points were not so much strategic issues in forming a bargaining group, but were simply getting the members to embrace change. “My biggest hurdles were lack of information and distrust. It was difficult to get the towns to even consider switching carriers,” said Stuart. Veloski said the call for RFPs went out in early August with a deadline of Aug. 30. He said several groups, including Primex, the Local Government Center, Noyes Insurance of Plymouth and Foy Insurance of Exeter have expressed an interest, but as of the deadline, he has not received a formal RFP from any carrier. For now, the consortium covers just the Bristol area, but Stuart said he hopes the group will expand at some point to cover other towns and school districts. “My intent is to get this group established, then look for others,” he said.