Jul 29, 2014

Officials Zero in on Medical Reserve Fund Policy

The Board of Finance and Board of Education are working on a policy for the school district's medical reserve fund.

Officials Zero in on Medical Reserve Fund Policy

How does the Board of Education ensure medical funds set aside for the school district's self-insured plan never fall short of meeting claims, while at the same time not putting too much money into its reserve account?

Board of Finance members are working with the school board to come up with a Medical Reserve Fund Policy to be used as a guide in setting funding with minimum and maximum levels maintained throughout the year.

On Tuesday night, finance board members met with the Board of Education's finance committee before discussing the issue at the Board of Education's regular meeting.

Board of Finance Chairman Mark Reed said both boards have drafted their own policies and suggested everyone see what they all agree on and go from there.


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Under the Board of Finance's proposal, Reed said the town would create a reserve fund from the general fund and use it as a "backstop", making up the difference if the Board of Education's medical reserve falls below its minimum for three consecutive months.

Board of Education member Dr. Alan Vaglivelo asked Reed if there needs to be a legal opinion that the town could handle the account in this way. Reed said once everyone agrees on a policy, then the town could seek a legal opinion.

Ted Quinlan, a Board of Finance member, expressed his belief that any policy should have something legal in it that binds the town with the responsibility of backstopping the medical reserve.

The school district's proposed range for a reserve was 20-23% of gross medical claims, but Reed suggested a wider window of 18-25%. Instead of a $1.66 million minimum to a $1.91 million maximum in the account, it would be from $1.49 million to $2.07 million. Reed said this gives a larger window for fluctuations.

He suggested having a three month rolling average to determine whether the fund it too high or too low, because an individual month would not provide enough data to determine whether the number of claims are a trend or a spike.

Reed suggested that the target for the reserve fund be in between the minimum and maximum levels and came up with 22.5% of gross medical claims.

"The reserve is there to protect against fluctuations," Reed told Patch Wednesday. "Every month contributions come in and medical claims are paid. In a perfect world it stays at 22.5 percent with no fluctuations, but it fluctuates."

Once a fiscal year is over, Reed said both boards could have a joint session to set the target for the next year.

"The worst case scenario is you'll hit the lower number, but we'll backstop you now," Board of Finance Vice Chairman Michael Manjos told school board members.

If there is a surplus at the end of the year, Board of Education Chairman Darrell Trump said the superintendent had an idea to use the money to set up a capital projects account. But Reed said medical funds should be used for medical expenses only.

Manjos said he didn't want townspeople to complain that money meant to be used for medical funds was used for something else.

Board of Education member Mark Antinozzi wants to ensure that the money in the town's account is also "put in a lock box" only to be used to backstop the school district's medical reserve.

"If an unexpected expense comes up, I don't want to see the town reaching its hand into the reserve account because it's there," he said.

Manjos said, "I think we all agree, it is for medical only."

Drafting a Plan

Reed said financial information gathered over the course of the year could be used to set the baseline for the next year's contributions.

For example, if the targeted funding level was $2 million and the reserve had $2.6 million at the end of the year, Reed said the $600,000 surplus could be used for the following year to reduce the Board of Education's contribution.

Supt. of Schools James Agostine said at year end the district might not have all of the final financial numbers, and would have to wait until it knows what the numbers will be.

If there is an overage, Reed said the school board could put the excess funds into the town account, use it to reduce its contributions for the following year or do a combination of the two.

Quinlan noted how the town can approve of one budget number for the Board of Education to use how it sees fit, and wondered if the Board of Finance weighing in on the medical reserve would infringe upon that.

Manjos said some other towns handle the medical reserve for school districts. If the Board of Education wants the town to handle its reserve, he said they would be happy to do it.

Reed offered to craft a policy and send it to members of both boards. If all agree on it, there could be a joint meeting and vote, he said. He added, any concerns or proposed amendments could be sent to him and Trump.

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