EagleTribune.com, North Andover, MA

November 12, 2013

Salem seeks to end dispute with LGC

Town expected to save on insurance costs

By Doug Ireland
direland@eagletribune.com

---- — SALEM — Selectmen have reversed course, deciding that saving thousands of dollars on health insurance is worth more than continuing a bitter dispute with the Local Government Center.

The board decided last week to seek a quote from the LGC, even though the municipal insurance carrier and the town have been embroiled in a nasty legal battle

Salem and nine other towns are fighting for refunds in a reimbursement dispute that landed in the state Supreme Court. The town is owed between $300,000 and $400,000, according to Selectmen’s Chairman Everett McBride Jr.

But a 14.9 percent increase in employee health insurance costs charged by the town’s current carrier, Cigna, compelled Salem to consider looking elsewhere for coverage, including the LGC. The cost increase means the town would have to pay an additional $93,963 in insurance next year.

The LGC’s group insurance pools are intended to help reduce costs for municipalities and school districts in providing coverage to employees and retirees.

The town has paid approximately $4.6 million for employee health insurance this year, according to finance director Jane Savastano.

On Oct. 7, selectmen rejected the idea of seeking insurance from the LGC after Town Manager Keith Hickey said the town was ineligible to receive coverage for two years. Selectman Stephen Campbell lambasted the carrier.

“I would never go back to a company that treated the citizens of this town so disrespectfully,” Campbell said.

McBride agreed.

“I can’t disagree with that,” he said. “They burned us. We got out of the LGC and I’m not going back. I’m not paying their fees. I’m done with the LGC.”

But the LGC was one of several carriers Hickey recommended, even though the town would have to request a waiver from the two-year restriction because it withdrew from LGC’s insurance plans.

Last week, an angry Michael Lyons asked fellow selectmen to admit they made a mistake and seek a quote from LGC, saying the town could reap big savings in insurance coverage.

“We ought to be going back to the LGC and ask about it because it will save us $200,000,” Lyons said.

Selectman Patrick Hargreaves agreed the town should at least ask for a quote. But Campbell grew angry.

“They owe us money and I want the money they owe us,” he said. “I’m not doing business with people who are happily sticking it to us every chance they get.”

Selectmen voted, 4-1, to ask the LGC to waive its restriction, with Campell casting the lone vote in opposition.

Hickey said yesterday he had contacted the LGC and was waiting to hear if it would grant a waiver. He said it was too early to determine how much the town could save if it received the waiver.

Communities across the state received reimbursement from the LGC after the New Hampshire Bureau of Securities Regulation ruled last year that it violated state law by improperly collecting money and retaining unnecessary surplus funds.

The organization also improperly transferred assets, subsidizing one insurance pool at the expense of the others, and spent millions of dollars on unauthorized items, the bureau said.

The LGC was ordered to reimburse $53 million to all communities except the 10 that had recently dropped its insurance plans, including Salem.

Hickey, a member of the LGC’s board at the time, had recommended the town find a less expensive insurance carrier. The town switched carriers and Hickey resigned from the board.