PITTSFIELD — After switching health insurance plans, the city is realizing considerable savings over the first two years of the contract, officials said this week, but costs during the third contract year won't be known for several months.
Director of Finance Matthew Kerwood told the City Council's Finance Committee that the savings for the first year of a contract for Blue Cross/Blue Shield plans for employees and retirees was approximately $1.3 million, and the savings is estimated at approximately $1 million in the second fiscal year.
However, insurance officials said they won't be able to provide the third year contract costs until they have more data on benefit claims filed by employees and for retirees with supplemental insurance plans.
Council Vice President John Krol had requested an update on the costs thus far, citing questions raised at the time of the 2015 insurance switch and the significant cost of insurance within the city budget.
Councilors last year criticized a lack of transparency when the administration of former Mayor Daniel L. Bianchi approved a change from Group Insurance Commission health insurance coverage without seeking input from the council.
Bianchi said the change in insurance carriers was an administrative decision that did not require a council vote, and said the city had a chance to realize savings but had to make a decision prior to a notification date in the GIC contract with the city.
Some councilors contrasted the changeover last year to the public process, including televised hearings and other meetings, that led to the first GIC insurance contract six years earlier.
The city currently offers employees and retirees BC/BS plans through the Massachusetts Interlocal Insurance Association, which is associated with the Massachusetts Municipal Association.
MIIA representative Christopher Bailey and Mark Meunier of BC/BS of Massachusetts updated the council committee on Monday.
Asked to estimate the city's premium cost level during the third contract year — the first year not fixed in the overall contract — Bailey said not enough time has elapsed for a determination of the premiums.
However, Bailey said MIIA oversees a trust that includes 120 municipal entities in the state and some 35,000 people insured, providing economies of scale for members.
In addition, he said, medical expenses exceeding $75,000 are spread in a pool across all the member entities, which helps control premium spikes for any one municipality.
He said the specific figures for Pittsfield and other MIIA trust members will be analyzed with the help of an actuary firm, and cost figures will be provided the city by February 2017 for fiscal 2018 budget planning.
Normally, he said, MIIA would want to have 24 months of claims information before determining the premium levels in a subsequent year, but only about 10 months has thus far elapsed since the Pittsfield contract took effect July 1, 2015.
Concerning the savings in the first two years, Finance Committee members asked about the cost of a mitigation fund incentive for the first two contract years — protecting employees or retirees from any increases in out-of-pocket costs above what they had paid for the GIC coverage. That cost should be deducted from the amount saved under the contract, councilors said, to determine the actual savings.
Kerwood said providing protection against out-of-pocket increases for individuals cost the city about $213,000 in the first year.
Asked by Councilor at large Kathleen Amuso about the process leading to the change from GIC to the MIIA and BC/BS coverage, Bailey said there were many meetings in 2014-15 with employee groups prior to the decision, during which they were informed about the pending change.
Bianchi said the city had to provide a formal notice of the change to GIC, prompting his decision. He also noted that the Pittsfield Public Employee Committee, with representatives from employee unions and retirees, had approved the switch.
He said he also had concerns that seeking approval from the council might inject politics into the decision, which he saw a chance for considerable savings.
Krol and other councilors acknowledged that the deal seemed a good one for at least two years, but they contended such a major decision should have involved input from the council, as had been the case in 2009.
Krol said after the meeting that he believes it important for officials "to be vigilant on this," in seeking information about the cost of health care.
The cost of insurance in the U.S. is the highest in the world, he added, and those costs make up a significant chunk of municipal budgets.
Contact Jim Therrien at 413-496-6247.