Town Running $1.6 Million Healthcare Deficit

Seven months into this fiscal year, the town has a $1.6 million shortfall in healthcare costs, and that number could increase to $2.8 million if the trend continues, according to a Board of Education financial statement.

At of the beginning of February, the municipal government had budgeted $1.785 million for medical claims, and paid out $2.7 million in claims, creating a deficit of $922,091, according to the statement. Also at the beginning of February, the Board of Education budgeted $3.465 million for medical claims, and paid out $4.187 million in claims, creating a deficit of $722,906, according to the statement.

Overall, the deficit between what was budgeted and the actual claims is $1.644 million as of February 1. If the trend continues at the same rate, the deficit would be $2.8 million. The fiscal year ends June 30.

“Medical care is expensive,” First Selectman Dan Steward said Thursday night. “You take a shot with a budget, you look at what the trend is going to be, and you hope to be close. And unfortunately it is a big part of our budget.”

Why The Deficit

The town is self-insured for healthcare, meaning it pays out medical claims as they come in. Each year, the town has to budget a certain amount as a prediction of what those claims will be, but the number can vary on what the actual claims are.

For many years, the town was pretty accurate in its budgeting of healthcare, Finance Director Rudie Beers said in previous interviews with Patch. But in recent years, the number and scope of claims have skyrocketed, and that caused unexpected increases in healthcare costs, Beers said.

In 2011, the Board of Education faced a $1.6 million increase in the healthcare budget, which was the largest reason the school board cut more out of the operational side of the budget, Superintendent Jerome Belair said. The town budgeted its highest total yet for medical claims this year, $9 million, and yet it appears the town still underfunded its claims, Steward said.

What It Means

The town could use its fund balance, basically its savings account, to cover the deficit, but that would be “the last choice,” Steward said. Using fund balance to pay off operational expenses just creates larger deficits later on, Beers said in previous interviews.

Along with having to pay off this year’s deficit, next year’s healthcare budget will probably have to be increased as well, Steward said. The town just received bids back from healthcare companies for next year, and those numbers should be reviewed and ready for approval sometime in March, Belair said.

The town will likely make a decision on how to handle the deficit in March, Steward said.

“We know we have to make some changes,” Steward said. “We will do whatever is correct for the employees and correct for the taxpayers.”