Payson Cuts Costs With Health Shift, Buyouts

Eight town employees take five months of salary, insurance coverage to retire early

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Changes in health insurance and a rash of employee buyouts could help balance Payson’s precarious budget in the upcoming fiscal year.

The Payson Town Council recently directed the town manager to change health plans, after a 22-percent increase and dire warnings about future escalations.

Instead, the town will switch to a self-insurance pool funded by a host of public agencies. The shift could save the town hundreds of thousands of dollars annually — depending on which insurance options town workers pick.

In addition, eight town workers say they want to take advantage of up to five months’ salary the town is offering to convince people to take early retirement. The workers who will take the buyout include the town attorney, a senior police officer, two planners and four other workers in various departments.

Five of the retiring workers qualified for five months of salary. The town will also provide continued insurance coverage for six of the retirees and make a $131,000 deposit into the retirement fund to ensure the workers get full benefits.

Three of the retirees will qualify for health coverage for the rest of their lives based on the benefits at the time they were hired, which have since been reduced.

The incentives will reduce the savings from the eight salaries to about $216,000 for the first year, but the savings will rise to $376,000 in the second year — unless the town refills the vacant positions.

The shift in health insurance could save the town even more money.

First-year health insurance change will save $55,000 to $670,00

Currently, the town spends $1.9 million on employee health insurance, which also provides coverage for many retirees. Employees spend $491,000 and retirees another $126,000. That brings the total to about $2.5 million.

However, the town’s benefit consultant recommended Payson switch to the Arizona Public Employers Health Pool (APEHP), which has been in operation for 25 years and has a $5-million surplus and relatively low rates.

Other towns already in the pool include Sedona, Cottonwood, Jerome, Clarkdale and Camp Verde, as well as Navajo County, the Oak Creek School District, the Jerome Fire District and the Clarkdale Fire District.

APEHP then contracts with various health plans to provide the coverage.

The town absorbed a 22-percent increase in rates for its current health plan and, because the pool has so few members, a single expensive illness could drive up rates for the whole pool.

The shift will produce modest immediate benefits, depending on whether employees chose the high-cost or low-cost options within the pool. First-year savings would range from $55,000 to $670,000.

However, the town will have to pay $1.2 million up front to buy into the pool, which will come out of the existing self-insurance pool account. The town will leave $350,000 in that existing account to pay outstanding health costs.

The town surveyed employees about the change. Only 58 of the 178 workers and retirees responded. About a quarter of those wanted to stay with the current plan, the rest approved the change.

As a result of the change, the monthly cost of covering a single employee will go from $411 for the town and $137.01 for the employee to $265 for the town and $88 for the employee for the lowest cost among the four new options.

Even the most expensive of the four options will cost the town $399 and an employee $133 a month. Retirees will pay slightly more — between $131 and $203.

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