Thank you for the opportunity to express some thoughts on the implications of the Patient Protection and Care Act (PPACA -Healthcare Reform) and its impact on the Town of Greenwich. Commenting on such a subject during an election campaign is challenging. Some will consider my comments as being partisan and will discount my views. Nevertheless, I have the responsibility to inform the residents of Greenwich of the real and very difficult challenges that will face our community in the near future. In my State of the Town Address that I presented to the Greenwich Chamber of Commerce on September 19th, I reported that an independent insurance consultant had run our numbers and projected that due to the Patient Protection and Care Act, Greenwich would be facing increased costs for our health care insurance of an estimated $29.5 million.
We asked Brown and Brown, an independent insurance broker, to analyze what the effect on Greenwich will be given the present labor agreements we have and the insurance coverage that we offer. Their report indicates that the Town’s annual cost of insurance for our employees and retirees, once the law is fully implemented in 2018, will be approximately $122 Million versus $92 million without the adoption of the Act. During the next five years the cost to the Town will gradually rise as specific sections of the law take affect and new taxes included in the law are implemented.
In 2018 for example, the last of the many new taxes included under the Act will commence. This tax will cover what is commonly referred to as “Cadillac [Healthcare] Plans” and is the section that is most widely discussed and known. The term Cadillac Plans was used during debate on the PPACA and refers solely to the cost of the plan. Unfortunately, many of the healthcare plans in the Northeast are lumped into this group due to the high costs of service in our region. The Town’s healthcare plans fit this description.
Nationwide health care costs are projected to increase by 12% annually without the new act. With the new law the following additional costs are projected by Brown and Brown to occur. The specific cost increases are the following:
2014 – Healthcare costs will increase by an additional 4.4% due to the following factors: The assumption that Brown and Brown used is that these costs will be passed along to Town in our healthcare budget premiums. We believe that is a realistic assumption. The list below, when blended together, increases the Town’s premiums for health insurance by an estimated 4.4%.
- New excise tax on the health insurance carriers of 3.8%
- New tax on durable medical equipment of 2.3%
- Increased cost to provide certain women’s wellness services of .2%
These costs will continue year after year and will thus have a compound affect. The base cost that we are working from is approximately $51 million and covers the gross cost of coverage for active employees and retirees.
2015 to 2018 – Premiums for the Town’s health insurance are also expected to grow by an additional 2.0% yearly (above normal growth) due to the following factors: The number of people who will use the services of the health insurance industry (doctors, hospitals and pharmaceuticals) will create increased demand for medical services. The new law also includes significant limitations on employee cost-share and thus limits the Town’s ability to shift health care costs to the beneficiary. For example, the employee’s cost share is limited to 9.5% of their family income. According to Brown and Brown, the definition of “family income” has not been settled and depending upon the final resolution could seriously limit the Town’s options to control costs.
2018 – A new tax will be levied on all insurance plans where the gross premiums exceed certain dollar amounts. The tax will be 40% of the premium in excess of that set in the law. Brown and Brown estimates that this new tax will increase the Town’s costs by an estimated $19 million.
We view the cost of health insurance and the new federal taxes and regulations that have been imposed on us to be unsustainable. We cannot sit idly by during the next few years. We have and will continue to take affirmative actions to lower our future costs.
Clearly our employees will be asked to increase their share of these costs to the extent possible. We will also review our health plans to see what changes can be made to lower coverage and thus lower our costs. We will also seriously consider the option of eliminating health insurance as a benefit the Town offers to our employees. We will also make operational changes in the way we do business to moot as much of these costs as we can. The most obvious operational change is the use of part time employees. Part time staff do not receive health insurance benefits and this cost avoidance measure will always be a consideration. Another action that we have taken in the past and will now consider anew is a decrease in the total number of positions employed by the Town. Since 2008 the Town’s (not including the School District) number of full time employees has dropped from 822 to 769.
We will also work very closely with our labor unions to address the present and future costs of health care and how we may be able to make it affordable. These costs are affected by three variables: plan design, experience, and location. While we cannot do anything about being in the New York metropolitan area and the high costs associated with this region, we have taken a number of steps to mitigate the cost of our insurance. Through contract negotiations, the majority of our employees are now enrolled in a high deductible health savings account. This type of plan encourages personal responsibility and incentivizes healthy living by waiving the deducible for many types of preventative care. Additionally, we routinely go into the market place to find the best rates available. Most recently this resulted in a contract that guaranteed rates for two years. Furthermore, we are implementing an organization-wide wellness program that focuses on preventing cardio vascular diseases. Evidence shows that if implemented successfully, claims experience can be significantly reduced. Cumulatively, over the last four years our actions have resulted in an average annual increase in the Town’s healthcare costs of just 3.5%. The national average over the same period of time was 12%. However, we must continue to consider other actions to control healthcare costs and especially in light of the future financial implications of the new law.
To sum up the steps we are taking and will consider to address this looming problem:
- Increase the employees share of the cost of healthcare
- Decrease our claims history through wellness programs and making our employees better consumers of this costly benefit
- Redesign the healthcare plan to lower the services offered and thus the costs of the plan
- Hire more part-time and fewer full-time employees to provide governmental services
- Decrease the total number of positions that we employ and accept the consequent decrease in the service levels that we provide
- Eliminate providing healthcare insurance altogether and pay the tax built into the healthcare law
Finally, a few editorial comments on the law and the process followed for its adoption. Obamacare was passed by Congress in 2010 and is over 2,000 pages in length. Few, if any members of Congress had the opportunity to read, let alone understand the implications of all of its many titles and sections. I think most people would agree that the sections of the law that refer to covering our young people to age 26 and the new prohibition against the denial of insurance based upon pre-existing conditions are worthy and positive measures. However, our lawmakers did not need 2,000 pages to cover just these changes. What they did need 2,000 pages was to intersperse new taxes throughout and to impose new obligations and requirements that will make doing business and managing governmental services in the United States even more of a challenge. These taxes, requirements and obligations were not clear at the time of the passage of the law and in some cases are not clear even today. Certainly the U.S. Congress did not debate these new requirements and they did not have the benefit of any kind of an impact analysis on what the new law would mean for their constituents. The vetting of such an important piece of legislation was inadequate and the consequences will now be felt by everyone for many years. I think the economic and human impact of the law will be unfortunate for many people. While the Town of Greenwich is facing an estimated $30 million in new costs, our employees may have to face the loss of this important benefit. I urge our Federal legislators and the President to return to the negotiating table and develop a law and a system that keeps the good while not punishing those entities that have for many years provided this important benefit.