As county officials try to cut expenses for the upcoming 2010 fiscal year under the force of waning revenues – along with an anticipated $7.7 million shortfall in the current year’s $54 million county general-fund budget, which runs through June 30 – Sussex County Council members this week gave unanimous approval to a change in county employees’ health benefits that could save the county an estimated $1.185 million per year.
County Administrator David Baker presented the proposal for those changes in the group hospital plan to the council at their March 17 meeting, noting it was one of many revisions to spending that the county’s budget committee has been working on in anticipation of introducing a draft budget on May 19, with public hearings set for mid-June.
The timeline on the hospital plan changes is shorter than that on the upcoming budget, though, as the county’s current plan is up for renewal on May 1 and Baker said a decision about any changes would need to be made by next week.
Currently, the county offers a self-funded plan at no cost to employees for premiums, with an additional cost to them for any dependants covered and minimal co-pays, as well as a safety net for catastrophic illness costing $250,000 or more. Baker said the recommended changes to the plan would make it “more in-line with State of Delaware plan” offered to state employees.
The changes include increased co-pays, similar to those required under the state’s “top plan.” Baker said the co-pay for office visits would increase from $20 or $25 to $30 or $40, saving the county about $347,000 annually. Prescription-card co-pays would increase from $7 to $10, $15 to $25 and $25 to $30, respectively, for generic, formulary and brand-name drugs, saving the county about $153,000 annually.
A new “spousal coordination of benefits policy,” similar to that in place at the state level was also recommended. Under the policy, spouses covered under the county’s plan must first use their own employer’s group hospital plan, if they offer one. Any remaining costs would then be covered the county plan. That is expected to add up to $56,000 saved in the first year of the policy and $225,000 per year saved as the policy is fully implemented. The same would be required for prescription coverage for spouses who had health insurance with their own employer as well.
The first cost increase county employees would see is in the premiums they themselves pay – up from nothing at all to $40 per month.
“The state charges $48.60 for their top plan,” Baker noted, pointing out that the county employees’ costs will be less than those for employees at the state level. He also said he had heard reports that the state will be increasing that employee cost as well.
Additionally, Baker said the county would be offering another health-insurance option – a “silver plan” similar to the state’s “basic” plan – with no premium costs for employees.
The county would also be encouraging use of the mail-in prescription plan, reducing the limit on prescriptions filled at one time from 90 days’ supply to 30 days, unless the prescriptions are filled using the mail service, which could still supply 90 days’ worth of medication.
“The mail process and costs are less expensive,” he noted, and would likely save the county about $66,000 per year.
Finally, the county would also offer an “opt-out benefit,” in which county employees who obtain health coverage elsewhere would be given an incentive to opt out of the county-provided coverage. Those who do so would get either five additional days of paid vacation per year or an additional $75 of pay per month to opt out.
“We would have to ensure they would have some sort of health coverage from another provider,” Baker emphasized of the opt-out program.
In all, Baker said, the county could expect to save $1.185 million by implementing all of the recommended changes to employee health coverage. He said he would have more details at next Tuesday’s council meeting, at which time quotes from various insurance providers for the altered coverage would be available.
Council members voted unanimously Tuesday to approve the recommended changes. They also recently approved a voluntary furlough policy for county employees that would allow them to take additional unpaid time off without professional penalty, thereby reducing the county’s salary costs.
County looking to cut costs, increase revenue
The reduction in employee health insurance costs is only one of the cuts being recommended by various county officials and department heads as they work to develop the draft budget for the 2010 fiscal year.
Baker noted that the budget committee had been meeting with department heads in recent weeks, in a series of informal meetings to review funding requests for 2010.
“For the most part, they were reasonable, with many below current-year levels,” Baker emphasized.
As with local municipalities, the county government is planning to tighten its belt to account for falling real-estate-related revenue streams.
“There are some concerns regarding revenue in the forecast,” Baker said of the budget process. “Housing-related revenues have declined drastically. If they’re at 80 percent of this year, that would mean $11.5 million in transfer taxes – 36 percent versus the current-year budget and just a third of what we had in the 2006 fiscal year.”
Baker said revenue from the Recorder of Deeds Office is down. Investment income for the county is down as well, he said, due to low interest rates. And the county is anticipating a reduction in funding coming from the state level, as well, as state officials take their own cost-cutting pens to what have been routine items in the state budget. A reduction in the state’s paramedic grant to the county, to $1.3 million, is anticipated.
“Without any changes and without use of appropriated reserves, we’ll be 22 percent – $12 million – below this year’s budget,” Baker said of revenue levels expected in the 2010 fiscal year.
As a result, Baker said, the budget committee is recommending some changes to the county’s revenue streams, including reimbursing the county’s general fund for administrative costs for its sewer and water districts. He said the county would also be looking to reclaim interest revenue from transfer tax funds, interim financing for construction and the county pension fund.
Cuts in department budgets include a program to use staff from other offices to fill open positions in the county government, instead of hiring from outside. Capital, travel and training costs deemed not essential are also to see cuts, as will programs deemed not to be as effective as they have been in the past. Baker said the county would also be evaluating use of county vehicles and cell phones, its fleet policy and cutting overtime.
“This is a tough budget, but we believe this is do-able,” Baker said. “We want a budget without stress on current residents, due to the economy,” he added.
Baker said he would be bringing proposals to county council over the next few weeks that are intended to cut costs and increase revenues for the county government. The first of those was the change to the employee group hospital plan approved by the council on Tuesday.
Councilman George Cole (R-4th) asked Baker to also provide the council with a list of capital projects that had been approved by previous councils, so that those could be considered for possible elimination or delay.
“We’ve been putting money aside and haven’t started on them,” Cole noted. “In this economy, we may look at them differently,” he added, suggesting the council give budget committee members early guidance in the budget process.
Baker said he would provide information on such projects, which include the construction of a new county administrative building, and would take feedback from the council on its priorities among the projects.
Councilwoman Joan Deaver (D-3rd) praised the budget team’s work thus far, saying she’d attended a few of their meetings in recent weeks and had been impressed. “They’re just cutting, cutting, cutting,” she said. “They’re doing a great job.”
Baker is set to present a draft budget to the council on May 19. An initial public hearing is expected on either June 16 or 23, with two other public hearings to take place afterward as the budget proceeds toward adoption.