Voters OK transfer of $1.2 million to fix ailing healthcare trust fund

Apr 23, 2013

Town Meeting voters on Monday agreed to transfer more than $1.2 million — all of the town's free cash — to make the town's healthcare trust fund solvent, but not without an emotional discussion.

A recent audit completed by independent auditor Powers & Sullivan revealed that the town has not been putting enough money into the fund, and furthermore, that a 2011 dip into the fund to use "extra" money to balance the town's budget was actually a bad idea.

In addition to borrowing money from the fund, the town and the employees took a "premium holiday," a period of time during which both stopped contributing. That exacerbated the problem.

Under a self-insurance plan, the town and employees pay premiums into a trust fund. All health claims are paid out of the fund, with insurance companies involved only in claims processing. Unlike a traditional insurance plan, the town saves money if claims cost less than expected. The town continues 75% of the fund, while the town employees contribute 25%.

The transfer of free cash — that is, the funds that the town has leftover from the previous year — along with giving the employees alone a "premium holiday," will rectify the problem, Town Administrator Derek Sullivan said.

Voters were upset that they were seemingly led to believe that taking the money in the first place would be OK, and are now being asked to put it back.

"It was not a great choice," said Finance Committee member Marilyn Donahue. " I think the expression used was, 'we're going to hold our nose and go for it.'"

As it turns out, the numbers that the voters and various committees were given at the time were not accurate, officials said Monday, and then expenses ended up being higher anticipated.

"The major fact is that when the numbers were put together, it was anticipated after the holiday that we would have 2.4 million left," explained Frank Heath of the Finance Committee. "It was a misestimation of what our expenses would be, and that's one of the major reasons for us being short and deficient right now."

Selectman Steve Holmes had harsh words for former Town Administrator Mark Andrews, who he said had sold the idea to voters.

"It's not a surprise. It was a scheme then. ... And now we have to pay. This body was advised prior to taking that vote that the Department of Revenue frowned on this," Holmes explained. "We were told not to do it. We should have stopped then. ... But it was a scheme that was developed and agreed upon by the former town administrator."

Sullivan, the town's current town administrator, told voters: "This step is the most important step we can take to makes sure that fund remains solvent."

The measure was approved by a majority vote.