Health consortium could save most money for small towns, could extend beyond Albany County

Doug LaGrange

The Enterprise — Michael Koff

New Scotland Supervisor Doug LaGrange and account clerk Sarah Kavanaugh inspect their budget, which includes a substantial expense of insurance premiums.

ALBANY COUNTY — Albany County’s proposed health consortium was announced this month following the introduction of a bill in the Albany County Legislature to set up the consortium.

Should the bill be enacted into law, the consortium would likely take effect in 2019, with the hope that it would initially save smaller towns and villages money in the first year and ultimately shave expenses for all municipalities.

Albany County Comptroller Michael Conners said that it will take months for the consortium to come to fruition, as the bill to set up the consortium was introduced in the county legislature by Legislator Ralph Signoracci at the May 14 meeting. The resolution was sent to the personnel committee and to the audit and finance committee.

“I don’t think it would be prudent to put it into budgets in 2019,” Conners said, of municipalities in the county.

The comptroller cited a health consortium created in Tompkins County, in central New York, as a model to follow; one of its creators reviewed the Albany County resolution prior to its introduction at the legislature.

The resolution seeks to establish the “Hudson River Benefits Consortium,” with a temporary steering committee made up of Conners and Albany County executive Daniel McCoy to oversee the creation of the consortium. Once established, the consortium would have representatives from each of the participating municipalities as well as the county executive and comptroller’s offices and the county legislature’s chairman, majority leader, and minority leader.

The steering committee would have four months to gather personnel to administer health insurance, and would have to submit its recommendations to the legislature no later than 45 days after receiving proposals.

Conners said that the consortium would need at least 2,000 people enrolled in the plan for it to go through.

The resolution also directs that the plan be forwarded to surrounding county governments and other localities “with a view towards creating and participating in the Consortium.” These counties include Columbia, Dutchess, Essex, Greene, Hamilton, Orange, Putnam, Rensselaer, Rockland, Saratoga, Warren, Washington, and Westchester.

Shared-services history

Excluding the village of Ravena, whose government did not partake in Albany County’s shared-services planning, 19 municipalities including Albany County itself have agreed to partake in the plan, as well as all but four public school districts in the county. The consortium was introduced as part of an eight-part shared services plan to cut costs that was being pushed by the state.

When the shared-services plan was initially in the works, some town leaders were wary of losing autonomy, but admitted that sharing costs for health insurance would be helpful. Last summer, for example, Westerlo Supervisor Richard Rapp said that Westerlo spent about $200,000 a year out of a $2.8 million budget on insurance for current full-time and retired full-time employees.

New Scotland Supervisor Doug LaGrange had been worried at the time about losing local control, but suggested the county look into sharing insurance.

“We’re hoping it would be a positive impact … ,” LaGrange said to The Enterprise on Tuesday. “The question is, just what we’ll see with the real-time figures.”

Municipalities may opt out of any of the eight different shared-services initiatives.

“We are not committing to it unless it’s going to benefit us,” said LaGrange of New Scotland. He said that the county will present what insurance plan it will offer and its findings on how it would affect towns financially in the future, and that the New Scotland Town Board would be able to make a decision then.

LaGrange said that he is not sure how many workers would be counted under the town’s insurance as there are various factors — some full-time employees choose not be insured through work, some enroll their family members, some are retired, and there are even insured part-time employees.

The plan

The expected savings would come from buying insurance at an experienced-based rate rather than a community-based rate, something that smaller governments cannot do alone under Article 47 of the state’s insurance law.

The county’s initial shared-services plan noted state legislation was not clear on whether insurance consortia could cover municipalities with under 50 employees at an experience-based rate rather than community-based. Michael McLaughlin, director of policy and research for the county, said in an email Wednesday that the state’s Department of Financial Services has since clarified that municipalities with under 50 employees could be covered at an experienced-based rate.

This would offer the greatest benefit to smaller municipalities that could then take advantage of what is currently offered to larger municipalities.

“While the savings for those smaller municipalities will likely be more significant, this does not mean the larger municipalities won’t save either,” McLaughlin told The Enterprise.

All existing benefit plans for municipal employees would be maintained as they are now, McLaughlin said.

“What we’ve talked about is everybody keep the plan that they have … ,” Conners said. “You’d start out with as as many carriers you’d need to have.”

Tompkins County

The comptroller touted Tompkins County’s health consortium as a model for Albany County to follow.

“We think it’s well worth the effort to look at it,” said Conners.

The western-central county, with Ithaca as its county seat, has about a third of Albany County’s population. Don Barber was the supervisor of the town of Caroline — population, 3,000 — when the plan was developed. He headed the consortium, and recently reviewed Albany County’s proposed consortium.

Barber now works as the executive director of the Greater Tompkins County Municipal Health Insurance Consortium. The position was created while he was serving as the founding chairman of the Tompkins County Council of Governments. During that time, Barber said, he had the same duties he does now.

The town of Caroline has a full-time municipal staff of eight; seven of those are highway workers, the town’s most expensive department, said Barber. He served as town supervisor for 22 years before he left his post at the end of 2015. During his last decade as supervisor, he helped launch the new consortium, and said savings for the small town were substantial.

“Our premium reduction was 28 percent,” he said, of the new rates for Caroline after the consortium was rolled out.

In 2007, Tompkins County applied for the state’s Share Municipal Services Incentives grant, now known as the Local Government Efficiency (LGe) Grant Program, in order to fund the development of a health consortium, said Barber. Two years later, an agreement was drawn up for 13 of the 17 municipalities in Tompkins County to to join the consortium. The consortium was formed and rolled out, starting in January 2011.

Since that time, the towns of Lansing and Newfield have also joined the consortium, and the remaining two municipalities in the county — the villages of Lansing and Freeville — will join in 2019, said Barber.

Since its founding, the consortium has been opened up to surrounding counties, with six municipalities from Cayuga County, which is north of Tompkins, and nine from Cortland County, which is west of Tompkins, joining. In total, 31 municipalities currently participate in the consortium.

During the consortium’s first year, Barber said, only the municipalities that had under 50 employees saw any savings. This is because previously these towns and villages had to purchase insurance at a more expensive rate. In total, after that first year, these municipalities saved $928,000.

However, $3.3 million had to be set aside that first year in a reserve fund. Based on a stipulation in Article 47, the reserve had to be 12 percent of the expected claims for the year, said Barber. The law states that the reserve must equal 25 percent of expected claims unless it can be proved that a smaller amount is adequate.

For the three municipalities with more than 50 employees — Tompkins County, the city of Ithaca, and the town of Ithaca — costs increased, as these governments already qualified for the cheaper rate. The city of Cortland is so far the only other municipality with more than 50 employees that has since joined.

But Barber said that, since that first year, all municipalities have benefited. In 2015, Cornell University found that the municipalities had saved $1.7 million for that year alone, he said. Barber estimates that the savings for 2017 were over $2 million.

When creating the plans, Barber said, the board worked to ensure that no employee benefits decreased.

Barber said he was able to review Albany County’s resolution before it was finalized, and said he suggested that it require representatives for each governing body, which it eventually did.

“It’s important that everyone have ownership,” he said.

On the Tompkins County consortium, each of the 31 municipalities has a representative, and there are five additional labor representatives.

The large number of representatives has caused some strain. Barber also said that the consortium is cautious of expanding further due to changes in hospital rates in a rural area rather than an urban area. But he said that Albany County’s potential ambition to work with surrounding municipalities could be beneficial, since it would allow for an increase in reserves.

“Expanding to a larger number is definitely to try for,” he said.

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