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An Open Letter to Connecticut's Municipalities
from State Comptroller Nancy Wyman

At last the state of Connecticut has a unique opportunity to provide real relief to its cities and towns without having to provide funds to do it. Lawmakers are considering legislation enabling my office to open the state employee health plan to municipal employees. If passed, Bill No. 5645 will set in motion a program that could save millions of dollars for our municipalities.

One of the largest and fastest-growing components of municipal budgets is employee health insurance. For many reasons, including the smaller size of their workforces, towns and cities don't have the market clout to demand lower rates from health insurers. One simple and effective way to reduce these costs is to open the state's employee health plan to municipalities. I believe there is significant potential for savings that could be used by each municipality for other priorities or for property tax relief.

We are all painfully aware of the mounting fiscal pressure that confronts Connecticut's cities and towns. Budget cuts from Washington, the flight of companies to other states, increased costs for services, all contribute to the problem of ballooning property taxes. In Connecticut, property taxes raise almost as much revenue as the state sales and income taxes combined. Forty-four cents out of every local and state tax dollar raised in Connecticut comes from the property tax. Our state consistently ranks near the top of the nation in terms of highest property tax per capita.

As Comptroller, I administer the state employee health plan, which covers 166,000 state employees, retirees, and dependents. This enormous group weighs in heavily when we are negotiating health plan options with insurance companies. The state's managed-care effort has yielded over $30 million in savings in its first year and the cost trend has remained flat. This performance is the envy of many private sector companies. In fact, the joint labor- management committee that helps me administer the state's plan recently negotiated three- year contracts with no premium increases. So we've retained the same benefit structure, for the same price, for three years -- quite an accomplishment in an environment where health care costs are rising at nearly twice the rate of inflation.

The idea is a simple one. Municipalities, by joining our plan, could use the leverage of the state's group to reduce their own per-employee costs for health care insurance. The state will take a hands-off approach; it will be up to the municipalities to analyze the program's impact on spending and bargain with their own employees to participate. Preliminary analysis by my staff indicates the savings in premiums could be sizable for many cities and towns across the state. The rates the state pays are lower than those being paid by 91 percent of Connecticut's municipalities we've studied. A recent survey by my office indicates that the average municipality in Connecticut is paying, on average, 30 percent more per capita than our state employee plan pays. That amounts to $1,240 per worker. Some towns pay as much as 60 to 80 percent more than the state on a per-capita basis. Even cutting this disparity in half would result in substantial savings for our municipalities.

Differences in Annual Health Costs Per Employee

Municipality Annual Health
Cost Per
Employee
Annual Dollar
Difference from
State Plan
Percent
Difference from
State Plan
Avon* $5,300 $1,131 +27%
Cromwell* $5,147 $978 +23%
Enfield (town) $6,563 $2,394 +57%
Farmington* $4,966 $797 +19%
Hartford* $5,938 $1,769 +42%
Rocky Hill (town) $6,151 $1,982 +48%
State's Annual
Cost Per
Employee
$4,169

Source: Survey of Municipalities, data self-reported
*Includes both town and school employees

The chart does not take into account the elements of the actual plans. Every municipality has its own plan design and some municipalities have different plan designs for different bargaining units. But I believe the state offers a good, comprehensive array of options that warrant looking at if there is potential to save money.

Because this is a very complicated and innovative endeavor, my staff has set out to create as simple a strategy as possible, ensuring that down the road there are no unanticipated costs for either the state or the municipalities. We've developed a set of five operational components that we believe are essential if the program is to be successful:.

Opening the state health plan to municipalities has captured the attention and bipartisan support of major legislative leaders. It is not very often that we in state government have the chance to help our cities and towns as directly as this program would. With no cost to the state, and voluntary participation by municipalities, this sharing of Connecticut's resources could have a significant impact on the way we all work together.

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