Published in the May 3, 2018 edition.


NORTH READING — The town has scored a victory, of sorts, in the perennial quest to control health insurance costs for its employees.

Faced once again with a potential double-digit increase in premium costs for FY19 back in January, Town Administrator Michael Gilleberto was happy to report to the Selectmen last week that the increase employees will see will be kept to 6.2%, on average, without reducing benefits. The board approved this change.

Gilleberto later explained to the Transcript how this was achieved after Blue Cross Blue Shield (BCBS) had initially proposed an increase of more than 14% over FY18 rates, which is unsustainable for both the town and employees.

“We were able to do this because of our negotiating strategy with our Participating Funding Arrangement (PFA). Blue Cross quoted us 14.8% (increase) and working with Integrated Benefits Groups we were able to negotiate that down to 10.5%. And in utilizing our PFA structure, we were able to further reduce that to 6.2%, on average,” Gilleberto said.

“It is significant in that in the past two years we have been looking at upwards of 10% premium increases with no options on plan design. Last year, we were able to change carrier, from Harvard to BCBS, and in the first year of the PFA we were able to control the growth,” the T.A. explained. “We’ve done so in cooperation and conjunction with our employees.”

The town is among one of the first municipalities in the state to tackle the health insurance behemoth in this manner, as evidenced by the number of phone calls he receives from other town managers asking how the town did it.

Gilleberto pointed out, “It’s true that we are blazing a path here, but we’re doing so out of frustration. We sat in front of the Insurance Advisory Committee and said to them we can keep doing the same thing we always do – change the premium split – which means the employee pays more. Or we could change the benefit level – meaning plan design – or we can hope that there is another carrier out there that will take our plan. But either way it has an adverse impact on our employees. And that’s on top of multiple years of there being an adverse effect” on employees.

The town also has to work within the confines of negotiating its benefits packages with its employees. “For us to be able to do something like this is cutting edge even though it may not sound that way to a non-government employee. We can’t pay less than 50% (of the employee’s premium) by state statute, so in a way we are already boxed in,” he said.

The PFA model is not just limited to municipalities, he said. Private companies can also structure their health insurance premiums using this method.

“What they basically do is re-insure your deductible. We buy a high deductible plan from a carrier, such as Blue Cross, and we deliver a benefit to the employee at a lower deductible level which results in less out-of-pocket costs than they would otherwise experience under the high deductible plan. And the difference is paid by the PFA,” the T.A. explained.

Gilleberto added, “The PFA is funded by a deduction from payroll and set aside in a pot of money to use to pay for the cost within the middle. The more restrictive plan you buy from (the carrier) the lower the premium. This model has allowed us to take advantage of the lower premium. Yes, we add costs back, but not at the level it would be paid to the insurance company.”