Employee Health Care Costs Adding to Budget Woes

The controversial health care legislation passed by Congress this year came with the promise of greater access to health insurance at a more sustainable cost to families and individuals.

But insurance companies are raising rates in order to offset cost increases expected to result from the new law, leaving municipal officials scrambling to cover the rising premiums while also holding the line on taxes.

Officials in the city of Rye last week that would raise local taxes by 2.16 percent, due in part to a $577,000 increase in health care contributions. The increase is substantial, but far less than the $948,000 increase projected earlier this year.

The city recently switched health insurance companies, saving $750,000 in the process, but premiums are expected to rise by as much as 12 percent each year for the next three years, according to City Manager Scott Pickup. The rising premiums were offset, he added, by leaving six open jobs unfilled. Rye will have 155 employees in the next fiscal year, down from 170 in 2009.

At the budget presentation, Mayor Doug French acknowledged that the perfect storm of dwindling revenues and rising costs will likely result in a decrease in services.

"This is a very tough time for the city staff and for the community; it will potentially have an impact on service levels," French said. "The public has to realize you can't have a flat tax and the same service levels. Something has to give."

That "something" includes the Rye Free Reading Room, which faces a $100,000 decrease in funding, as well as increased fees for parking and recreation.

Rye Brook is facing an increase in insurance costs as high as 14.5 percent next year, according to Village Administrator Chris Bradbury. The village budgeted $1.4 million this year for the costs, and that figure doesn't include the mandatory contributions that most employees make to their insurance plans.

"We're very mindful of the need to keep taxes down, especially with the difficult economy, and we're in the process of reviewing our entire budget" in order to identify potential savings, Bradbury said.

The village is down to 73 employees after leaving two vacated posts unfilled this year.

The issue has hit fiscally-strained municipalities statewide, necessitating some creative solutions. Seven towns and two villages outside of Rochester, for example, announced this week that they had formed a health insurance trust that would save the municipalities a total of $5.1 million over the next three years.

The State Comptroller's office suggests that towns and village explore payments in lieu of health coverage, in which employees already covered by spouses' insurance plans can opt for a lump-sum payment that is far less than the cost of insurance.

The town of Rye, which has only 18 employees, actually managed to decrease its health insurance costs by more than $60,000 between 2009 and 2010, in part by offering $1,500 buyouts to three employees.

Bishop Nowotnik, the secretary to Town Supervisor Joe Carvin, said the decrease in insurance contributions was mainly due to fortuitous circumstances, such as the retirements of two elected officials who were not old enough to receive health care benefits.

The town budgeted $437,000 for employee health benefits this year, with rates set to increase by as much as 16 percent in 2011, Nowotnik said, adding that town officials have braced for future increases by requiring any employees hired after Jan. 1 of 2010 to contribute 25 percent of their health insurance instead of the current 15 percent.

"The idea is that the town doesn't have a limitless coffer to provide fully-paid benefits, and there was a recognition that in order to be fair to taxpayers, employees should share in the cost" of health insurance, he said.