Towns see relief from soaring health costs

Wellness programs, self-insured plans cited

At a time most towns are wrestling with double-digit price increases in everything from fuel to pensions, a handful of communities are getting a relative break on - of all things - healthcare costs.

Until recently, the rapidly rising cost of insuring municipal workers was seen as a major budget buster. But at least least four local communities - Brockton, Milton, Plymouth, and Sharon - are benefiting from relatively modest increases of 5 percent or less. And other towns, while not quite so fortunate, are also seeing their increases drifting downward by a percentage point or two.

All of which is providing town officials with a glimmer of sunshine in what is shaping up to be a generally bleak fiscal year, with layoffs, or unfilled jobs, still likely in many places.

"You keep your fingers crossed that it holds up," said Bill Fowler, finance director in Sharon, where the increase is expected to be 5 percent. He noted that health cost increases were 15 percent in 2007 and 8 percent in 2008, so "it is going in the right direction."

The four communities had several things in common: They were self-insured and, in general, their employees avoided costly catastrophic illnesses over the past year. Some have also heavily pushed "wellness programs," which encourage employees to exercise and eat healthier.

Officials at Blue Cross and Blue Shield of Massachusetts said costs for its municipalities went up an average of 8 percent between 2007 and 2008, compared with 10 percent two years earlier.

That may seem high, but consider that healthcare costs for municipalities statewide increased 85 percent between 2001 and 2006.

Some officials said healthcare costs have not increased as dramatically as in past years because Blue Cross is facing increased competition in the form of the Group Insurance Commission, a quasi-independent agency that handles healthcare for state employees and others. Towns now have the option of joining the commission.

Blue Cross officials scoffed at the idea.

"Sometimes we hear that because of GIC we are sharpening our pencils . . . that we're being more diligent in pricing," said vice president John Coughlin. "The GIC has had no impact."

But Dolores L. Mitchell, the commission's executive director, thought otherwise.

"If municipalities are getting lower rates, I'm pleased to hear that," she said. "I'll take credit for it."

Company and town officials say the moderation in cost the last two years may be because co-pays and premiums were increased or benefits were trimmed. Credit may also go to wellness programs, which encourage employees to adopt healthier lifestyles, they said.

For example, the program in Plymouth, run with the help of Blue Cross (even though the town is self-insured), includes diet help, smoking cessation clinics, yoga classes, discounts to local gyms, and a walking program. The town employees even have a softball team. For instance, the number of people using the gym benefit jumped from 183 to 219 people last year.

The program is a big success, with participation growing each year it has been offered, said Mark Sylvia, town manager.

"It gets people to think of ways they can have a healthy lifestyle," which helps reduce visits to the doctor, which in turn reduces costs, said Sylvia.

Many towns - including Brockton, Milton, Plymouth, and Sharon - self-insure, rather than sign up with a big insurance carrier. When a town is self insured, it pays for medical expenses directly, rather than work through an insurance company, although the company handles claims for an administrative fee.

Often the town buys "stop-loss" insurance for individuals, say, $250,000, so insurance kicks in above that amount if expenses soar for a particular person.

The advantage for a community is that costs are lower if its workers are relatively healthy and because it cuts out the insurance company. But if there are a number of bad accidents or illnesses, premiums may rise.

This year, Brockton expects premiums to climb 4 to 5 percent, which is good, said Jay Condon, chief financial officer. But with revenue increasing at about 2 percent, that still leaves health costs increasing at a much faster rate.

He said he expects the city, which employs more than 600 non-school staff, to cut between 40 and 50 jobs, half through attrition and half through layoffs.

Other cuts are being made, too, as Brockton struggles with its $300 million budget.

"Highway maintenance and building maintenance get pushed on to a future date," he said. "It's pretty unwise for the long haul, but we're all doing it."

Milton's health costs are going up only 4 percent, but the town is still in a financial bind, said Town Administrator Kevin J. Mearn.

"If health insurance had gone up another 12 percent," he said, referring to the increase of a year ago, "the picture would be even gloomier."

Matt Carroll can be reached at mcarroll@globe.com.