THE MAYOR'S BUDGET: Health Care a Budget Breaker

When thinking about the town's largest expenses, education usually tops that list. But there's another cost that is continuing to grow and in the future could outspend the Board of Education.

Rather than purchase health insurance for its employees, the town self-insures — a "pay as you go" method common to municipalities because of its cost effectiveness. But those cost continue to grow at a rate that outpaces the town's ability to pay.

Mayor Scott Jackson, in his budget recently presented to the Legislative Council, allocated $34.2 million to the health insurance account, up from the $3.4 million the town spent just 15 years ago.

Three years ago, the town was facing a $10 million deficit in the insurance account and looked to bonding to erase that debt. Since then, Jackson has increased the annual contribution to the account to the point where it is now, posting a small surplus.

"If Hamden’s finances are to continue to improve, proper funding of medical self-insurance is a key pillar of that effort," Jackson wrote in the executive summary of his budget.

For the 2014-15 budget, Jackson is proposing increasing the contribution by $2 million, as he did this year from last year's budget.

"Today, more than 20 percent of every tax dollar goes solely to supporting medical benefits," Jackson told the council last week. "We can work to adjust the plans, but we need more significant cost containment efforts at levels well above the town of Hamden to abate continued dramatic increases in these medical benefit costs."

The good news is when the consulting firm the town uses to figure out costs came up with the figures last December, for the first time in more than 10 years the increase was less than 10 percent, Jackson said.

"Perhaps it is looming provisions of the Affordable Care Act, or maybe the system has just started to reach its outer limits in the arena of cost," he said. "Regardless, any appropriation line that sees a 10-fold increase in 15 yars demands attention.And since we are a self-insured system, the issue for us is not a plundering insurance company, it is the lack of cost containment controls.

"Miscalculating this appropriation, given its proportion, is one of the few single errors that can have long-term and dire fiscal ramifications," Jackson said. "A loss of liquidity, which is the ability to pay current bills in a timely fashion, can be the result of shortchanging this account.

"We cannot afford another rolling seven-figure deficit in this account," he said.