By James Lomuscio
In a move that seemed more investigative than damage control, Westport’s Board of Education tonight held a special meeting with its benefits consultant and the Board of Finance to determine how a $2 million shortfall in its current operating budget happened via unexpected health claims—and how to prevent future budget blunders.
Brian Stern: “We need to know how it happened.” Phyllis Groner for WestportNow.com
Elaine Whitney, school board chairwoman, said her board has considered hiring an independent health insurance auditor.
“I think we need to collect a whole lot of data first to find out what is the issue, and then get the auditor to come in and verify,” said Brian Stern, finance board vice chairman who heads its audit committee.
The school system, which has 900 employees, last year projected a net savings of $500,000 in insurance costs with its new carrier CIGNA. About 560 of the schools’ employees are now in health savings accounts (HSAs) instead of point of service (POS) plans, it was noted at the meeting.
However, six claimants who became ill had claims exceeding $220,000, the largest being $600,000, resulting in a substantial draw against the Board of Education’s reserves, said Robert L. Pernicka, senior vice president of Segal Co., a benefits and actuarial consulting firm.
According to a report presented by Schools Superintendent Elliott Landon last week, the insurance shortfall left the school system with a deficit of $681,309 and the reserve’s inability to cover an additional $1,307,400, leaving “us with a shortfall in our 2013-14 operating budget of $1,988,709.”
Finance board member Jennifer Tooker, who previously served on the school board, pointed that in the past “the Board of Education had good claims experience.”
“The assumption was that it would continue,” she said.
Stern expressed concern that the budget discrepancies were not discovered sooner, especially before the current budget was made final.
“Why was it so late in the year that we spotted the variance?” he asked. “…Why wasn’t it until November 18 that it was discovered?”
According to Landon’s report, Assistant Superintendent of Business Elio Longo, who replaced Nancy Harris, uncovered the inconsistencies in the insurance account last month.
Harris had indicated that the insurance account held assets of $2,497,462, when in fact Longo discovered the true net asset due to claims was only $1,055,648.
Meanwhile, the insurance reserve on June 30, 2013 had a $500,000 deficit despite a 2012 end-of-year report showing a $2.5 million reserve.
“We didn’t have an accurate understanding of what the expenses would be at the time we made the budget,” Stern said.
The school system’s 2013-14 operating budget is $104 million.
“Had we known what the extent of the claims was in June, we would have been to the Board of Finance,” said Landon.
Finance board member Thomas Lasersohn said, “We were operating on bad information,” when approving the school budget.
“Do we raise taxes, or do we tell the Board of Education to take it from other (programs)?” he asked.
Lasersohn said any audit should also look at how the HSAs are being implemented.
“I want to make sure we have implemented the HSA right,” he said.
“We need to know what went wrong,” said Stern. “We need to know how it happened.”
With that, he said the audit committee would meet Jan. 6.
