A special town meeting is scheduled for Monday, May 21, to discuss and act on appropriating $400,000 from the town of Easton’s fund balance to cover the school department’s shortfall in the area of health insurance claims.
At stake is whether the town is willing to present $400,000 to the Easton Board of Education to meet its medical claims obligation to teachers and staff, said school board Chairman Jeffrey Parker.
The town meeting will take place at 7 p.m. at Samuel Staples Elementary School, and there will be a voice vote, and if necessary, a vote by the raising of hands.
“If it doesn’t pass, we don’t have the money to finish the school year,” Parker told school board members at a recent meeting. “That would be a very bad place to be.”
“We can’t deficit-spend,” he said, and the shortfall would set off contractual issues — namely, the inability to pay teachers and staff.
The Easton school board voted unanimously on April 17 to accept a motion requesting $400,000 from the town’s finance board to meet the cost of medical claims the district has received and is expected to receive during the rest of the school year.
Medical claims in March totaled $287,000, said school Superintendent Dr. Thomas McMorran, and it’s anticipated that claims will run high for the rest of the year.
“The account is running in the negative,” McMorran said.
“This year, medical claims are significantly up over last year,” Parker said, resulting in the shortfall. “We’ve spent or encumbered 99.02% of our entire (medical claims) budget. We need to be able to meet the claims responsibly by the end of the school year.
“In more normal years, we might have been able to wait until later in the spring to go to the Board of Finance,” he said, because the three school districts could borrow from one another.
But this year, school finance officials say that “all three [districts] are being heavily impacted by medical claims,” he said.
Reserve fund could remedy shortfalls
Last year, the school district saw a $525,000 overage, Parker said, due to savings incurred when a number of high-salaried school staff members left the district and were replaced by staff at lower salaries.
At that time, the schools recouped $100,000 toward paying medical claims and gave $425,000 to the town.
It was the recommendation of Brown & Brown, the school department’s insurance agent, to put two months’ worth of claims into a reserve fund, Parker said.
But the Easton Board of Finance asked the school board to return all the unspent funds to the town.
“We chose to take $100,000 toward the shortfall and the balance to the town at the request of the finance board, he said.
A medical claims shortfall seems to be an ongoing issue with $1.2 million, $100,000 and $400,000 shortfalls in recent years.
“What it suggests is there should be a health reserve balance to mitigate these situations,” Parker said. “I would hope the next time we have a surplus, the town would see a value in keeping a balance in the reserve fund, so money could be pulled.”
Future solutions
In light of repeated shortfalls, Easton school officials instituted a switch from traditional health insurance to high-deductible health savings accounts, which goes into effect on July 1.
The move is expected to save money over time, Parker said.
“We’re looking forward to results we were told we could expect,” he said.
Options also include changing to a plan that’s not self-funded.
In that case, the insurance company takes the risk, but the customer pays a higher premium.
Another idea would be joining the state of Connecticut’s insurance plan.
“If you join, you’re committed for three years, unless you pay a penalty,” Parker said.
Agents from Brown & Brown prepared an analysis showing that there would be no significant monetary difference using the state’s plan.
“There wasn’t a compelling reason to go with it,” Parker said.
“The Board of Education will continue to monitor insurance costs and consider action if and when moving from self-insurance financing to another model becomes cost effective,” McMorran said.