Jonesborough Mayor Kelly Wolfe speaks with Operations Manager Craig Ford before Monday's BMA meeting. (Max Hrenda/Johnson City Press)
Despite facing increases to insurance premiums, the town of Jonesborough elected to play the odds that helping its employees pay for medical care would be cheaper than paying for policies with low deductibles.
On Monday, the Jonesborough Board of Mayor and Aldermen unanimously approved the purchase of lower-cost insurance policies and the establishment of a health reimbursement account to safeguard against potential future increases.
Mayor Kelly Wolfe said the new policies approved by the BMA cost less because of the higher deductibles that accompany them. In 2013, employee deductibles were set at $1,500. According to Wolfe, however, a minority of town employees met that deductible.
“Only 12 percent of our employees actually met their deductible, which means 88 percent didn’t,” Wolfe said. “Therefore, the insurance we have right now is not that good a deal for us because we’re overpaying and under-utilizing the policy.”
To compensate, Wolfe said the town chose to purchase policies with higher deductibles ($3,000) to reduce the cost of those policies. That doesn’t mean, however, that employees will be held accountable for the extra $1,500.
“The employees’ out-of-pocket (cost) is still going to be $1,500,” Wolfe said. “The town then will pay the additional $1,500. We believe, looking at our experience and the claims of our employees, that we would be better off paying that additional $1,500 out-of-pocket for, say, the 12 percent who used their insurance this year.”
By purchasing the higher-deductible policies, Town Administrator Bob Browning and Town Recorder Abbey Miller estimated that the town saved $131,472 in insurance costs. Rather than apply those savings to another area, however, Browning and Miller recommended the creation of a health reimbursement account to deposit those savings to either cover employees’ health costs — if those costs exceeded $1,500 — or to save as a “rainy- day fund,” as Miller called it.
“We would be putting money into an account monthly, and using that to pay any claims,” Miller said. “And hopefully it would build a ‘rainy-day’ fund.”
While the town is willing to cover some of its employees’ costs, this new practice is based on the notion that employees’ needs would cost less than the $131,472 the town saved by switching policies. In his report to the BMA, however, Browning estimated that even if half of the town’s employees exceeded their $1,500 deductible, the town would still see a savings of more than $10,000.
Follow Max Hrenda on Twitter @MaxLHrenda. Like him on Facebook at facebook.