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Town staff propose phasing out HMO in favor of high‑deductible HSA plans to rein in rising premiums
Summary
Staff presented an option to remove the town HMO and move employees to high‑deductible/HSA plans with a town HSA match; presenters said the change could save the town roughly $347,000 in year one and about $797,000 in year two while offering long‑term savings for employees, subject to union bargaining and retiree limitations.
Town staff on March 12 presented a multi‑part proposal intended to blunt an anticipated 12% insurance premium increase and reduce fiscal pressure on the FY27 budget.
Assistant Town Manager Shannon McMahon explained staff are considering removing the town HMO option and offering only two plans: a high‑deductible health plan paired with an HSA and a point‑of‑service (POS) option. McMahon said if nothing changed the town would face an estimated $97,386.84 increase this year tied to the 12% premium rise and that cost would continue to grow over time.
Using modeled employee scenarios, staff estimated that moving employees off the HMO and matching HSA contributions (a larger match in year one, then reverting to a lower ongoing match) would generate town savings of roughly $347,362 in year one and $797,112 in year two. Examples presented compared total annual costs for low‑use individuals, high‑use individuals, and family plans under the two structures and factored in FSA/HSA behavior and likely out‑of‑pocket spending.
McMahon and staff emphasized they were not proposing an immediate change but presenting options for discussion. They reviewed an opt‑out incentive (raising the lump‑sum payment paid to employees who waive coverage) and said retiree coverage would not be changed under the proposal; staff noted retirees under 65 on the HMO cannot participate in HSAs.
Board members asked for more detailed packet materials and emphasized the need to meet with unions and to provide employee education (small groups and one‑on‑one sessions) so workers can compare long‑ and short‑term costs. Residents asked whether a public employee committee or impact bargaining under state law had been considered; staff said those are options and agreed to bring more fully vetted proposals and union discussions back to the board.
The board did not take a final vote; staff were asked to supply detailed materials, meet with unions and employees, and return with recommendations.
