Township Debates Health Insurance Costs

In an unusual move, Haddon Township's commission on June 17 held an open session examination of health insurance vendors, devoting a large chunk of the monthly meeting time to hearing from representatives of the appointed brokerage firm, Conner Strong & Buckalew.

"It's one of our biggest expenses as a municipality and I thought there was a lot of confusion over the different plans last year," explained mayor Randall Teague on the decision to discuss the health plan renewal in public. The discussion lasted close to an hour, with commissioner Ryan Linhart attempting to understand CSB's final recommendation to join the Southern Jersey Health Insurance Fund, otherwise known as the 'HIF,' by closely questioning CSB's Tammy Brown on the particulars.

The commission ultimately decided not to choose a vendor on June 17, instead scheduling a special meeting to take that action on Monday, June 30, at 7 p.m.

Haddon Township has self-insured its health, dental, and prescription plans for many years, since before the pandemic, and uses a thirdparty administrator, Insurance Design Administrator (IDA), to manage and pay claims.

Self-insured means the town provides funds to pay claims as they are submitted by its workforce, some 60 to 70 covered employees. The mayor had been quick to note at the meeting's outset that none of the three commissioners "takes the health insurance." In CSB's presentation, Brown, an underwriter, duly ran through what appeared to be only three companies in consideration - IDA, the Southern Jersey Health Insurance Fund (HIF), and the state's health benefits plan. The state plan was immediately discarded, she said, because "we're seeing increases of up to 50 percent in premiums." Of the remaining two bids, the incumbent IDA's renewal is $2.5 million, and the HIF came in at $2.35 million. The total insurance budget for 2024, according to town's Comprehensive Financial Annual Report, was $1,831,000, of which only $1,733,220 was actually disbursed. Regardless of the company Haddon Township ultimately chooses, CSB is paid a six percent commission as insurance broker of record. For every dollar paid in premiums, Brown noted, 20 cents goes to pay the thirdparty administrator.

The HIF is a joint fund, with 52 New Jersey municipalities and municipal utility authorities enrolled, and was created by Conner Strong & Buckalew in 1992, according to CSB representative Jack Tarditi, who attended the meeting. The HIF is operated by the Southern New Jersey Regional Employee Benefits Fund (SNJREBF) and managed by Conner Strong and a company called PERMA. Representatives from IDA were not present, Linhart noted more than once, and it was not clear whether they were invited to the June 17 meeting.

According to annual financial reports going back to 2019, while Haddon Township was contracted with IDA, on average the town consistently paid out less than the amount budgeted for health insurance. In the three-year period 2019-2021, the town's claims were under budget by a combined $1,090,000. The next year, 2022, with people returning to medical offices for procedures post-COVID, Haddon Township incurred a $589,000 shortfall but returned to a positive cash flow in 2023 and 2024.

Of that shortfall, Teague said, "That scared me, because it's a lot for a municipality to come up with, to cover that line cost, and it was the end of the year, so everything was spent, and we had to shift funds and borrow from different accounts - roads, etc." Based on the quotes, Brown said CSB was recommending Haddon Township move to the HIF in 2025 "because the savings would be $101,000." Linhart then asked Brown directly what happens to monies the town pays in but doesn't need to spend to cover claims. Brown sidestepped answering more than once, even when the commissioner made it easier to understand by rounding the hypothetical spend to $2 million in each of the past five years with $1.9 million paid out. Linhart said he was "perseverating" on his line of questioning, "because we're beholden to our taxpayers." Ultimately, Brown did not address where a hypothetical surplus $100,000 would end up.

Tarditi said, "The advantage of the HIF collectively is that let's say, one town has a little bit worse claims (in one year) than another, we sort of level them out, so that there's a sharing of the benefits and a sharing of the losses. The HIF was created for groups your size, and many of your neighboring towns are members.

Over the years, it's been immensely successful." According to the Southern Jersey Fund website, the HIF counts Barrington, Collingswood, Haddon Heights, Haddonfield, and Oaklyn among its members.

Commissioner James Mulroy, not giving any indication of which vendor he favors, said, "I'd have to be assured (a new plan) is equal or better to what our employees are receiving now, on par with what they have now," because he oversees the town's public safety union contracts.

Onboarding employees into a new health insurance plan can be a lengthy and difficult process, Brown said, which is why insurers require 60 days' notice of the termination of a plan and enrolling into a new plan.

Teague told Linhart he had no objections to meeting separately with IDA, before the special meeting on June 30. If the commission chooses the HIF over staying with IDA on June 30, the actual plan provider will still be Ameri-Health - important because doctors and networks would stay the same, said Brown.

The drug benefits program would change from Optum to ExpressScripts, and Brown said the CSB team would be evaluating Haddon Township employees' pharmacy usage and history to ensure the transfer to a new company is seamless.

After the meeting, Linhart, perhaps frustrated in his attempts to get answers, said, "I don't see the financial benefit of joining SJF." Mention was made of Haddon Township getting an annual dividend return from the HIF after all the claims were paid, but during the meeting, Brown did not provide any specifics regarding how, when, or in what amount such monies would be paid out.

In an email, Linhart wrote: "Every year, Conner Strong has recommended that Haddon Township switch from the township's self-funded insurance model to the Health Insurance Fund (HIF). And every year the HIF sales pitch is the same. But over the years, our current model has consistently saved money (against what was budgeted) by allowing us to manage insurance and money internally. Conner Strong's proposal would shift control of our funds to the HIF without guaranteeing any return on savings.

"Under our current selffunded model, if the township budgets $2.5 million for claims, funds are set aside and paid out as needed. Any unspent money stays with the township and can offset future budgets or cover unexpected expenses, like the spike in post-COVID claims in 2022. If we go with the HIF, the township will pay a flat $2.5 million this year, regardless of actual costs, with no refunds. Any surplus stays with the HIF and is used to subsidize other towns that go over the budget.

"As Mr. Tarditi noted in our meeting, the success of the HIF is that strong performers like Haddon Township help cover costs for those towns that overspend. In effect, we would forfeit our savings to benefit other municipalities or MUAs, such as Haddonfield or Medford. Joining the HIF would raise costs overtime for the township and employees with no financial upside.

And there's no trial period, we would have to buy our way out of the contract to leave."