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Officials Zero in on Medical Reserve Fund Policy

The Board of Finance and Board of Education are working on a policy for the school district's medical reserve fund.

How does the Board of Education ensure medical funds set aside for the school district's self-insured plan never fall short of meeting claims, while at the same time not putting too much money into its reserve account?

Board of Finance members are working with the school board to come up with a Medical Reserve Fund Policy to be used as a guide in setting funding with minimum and maximum levels maintained throughout the year.

On Tuesday night, finance board members met with the Board of Education's finance committee before discussing the issue at the Board of Education's regular meeting.

Board of Finance Chairman Mark Reed said both boards have drafted their own policies and suggested everyone see what they all agree on and go from there.

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Under the Board of Finance's proposal, Reed said the town would create a reserve fund from the general fund and use it as a "backstop", making up the difference if the Board of Education's medical reserve falls below its minimum for three consecutive months.

Board of Education member Dr. Alan Vaglivelo asked Reed if there needs to be a legal opinion that the town could handle the account in this way. Reed said once everyone agrees on a policy, then the town could seek a legal opinion.

Ted Quinlan, a Board of Finance member, expressed his belief that any policy should have something legal in it that binds the town with the responsibility of backstopping the medical reserve.

The school district's proposed range for a reserve was 20-23% of gross medical claims, but Reed suggested a wider window of 18-25%. Instead of a $1.66 million minimum to a $1.91 million maximum in the account, it would be from $1.49 million to $2.07 million. Reed said this gives a larger window for fluctuations.

He suggested having a three month rolling average to determine whether the fund it too high or too low, because an individual month would not provide enough data to determine whether the number of claims are a trend or a spike.

Reed suggested that the target for the reserve fund be in between the minimum and maximum levels and came up with 22.5% of gross medical claims.

"The reserve is there to protect against fluctuations," Reed told Patch Wednesday. "Every month contributions come in and medical claims are paid. In a perfect world it stays at 22.5 percent with no fluctuations, but it fluctuates."

Once a fiscal year is over, Reed said both boards could have a joint session to set the target for the next year.

"The worst case scenario is you'll hit the lower number, but we'll backstop you now," Board of Finance Vice Chairman Michael Manjos told school board members.

If there is a surplus at the end of the year, Board of Education Chairman Darrell Trump said the superintendent had an idea to use the money to set up a capital projects account. But Reed said medical funds should be used for medical expenses only.

Manjos said he didn't want townspeople to complain that money meant to be used for medical funds was used for something else.

Board of Education member Mark Antinozzi wants to ensure that the money in the town's account is also "put in a lock box" only to be used to backstop the school district's medical reserve.

"If an unexpected expense comes up, I don't want to see the town reaching its hand into the reserve account because it's there," he said.

Manjos said, "I think we all agree, it is for medical only."

Drafting a Plan

Reed said financial information gathered over the course of the year could be used to set the baseline for the next year's contributions.

For example, if the targeted funding level was $2 million and the reserve had $2.6 million at the end of the year, Reed said the $600,000 surplus could be used for the following year to reduce the Board of Education's contribution.

Supt. of Schools James Agostine said at year end the district might not have all of the final financial numbers, and would have to wait until it knows what the numbers will be.

If there is an overage, Reed said the school board could put the excess funds into the town account, use it to reduce its contributions for the following year or do a combination of the two.

Quinlan noted how the town can approve of one budget number for the Board of Education to use how it sees fit, and wondered if the Board of Finance weighing in on the medical reserve would infringe upon that.

Manjos said some other towns handle the medical reserve for school districts. If the Board of Education wants the town to handle its reserve, he said they would be happy to do it.

Reed offered to craft a policy and send it to members of both boards. If all agree on it, there could be a joint meeting and vote, he said. He added, any concerns or proposed amendments could be sent to him and Trump.

jim laguardia September 06, 2012 at 03:02 PM
thats right.. how dare those teachers get sick and want treatment on our dime!!!
Herman M September 06, 2012 at 03:07 PM
I'm sure the town could use that money to help pay for the $800,000+ in legal expenses and 21 lawsuits they accumulated under Vavrek. Interesting how people like Walt Longmire are selective in their criticisms.
Alex September 06, 2012 at 06:39 PM
If the BOE has a surplus in their medical fund, it should be appropriated for next year's budget for the exact same purpose: the medical reserve fund. That money should not be used for anything else. If you have a surplus, great, it will reduce your obligations next year in which you can allocate the money you would have spent on it for other line items.
Sheila D September 07, 2012 at 01:51 PM
I really wish people would watch the meetings on TV before making comments. It was brought up that legally, the medical reserve fund could NEVER be used for anything other than medical expenses. This fund is comprised of co-mingled contributions by both the BoE, and the teachers/employees. Personally, I budgeted for $1500 in out of pocket medical expenses for my husband and I this year. As circumstances played out, we had used that up by March unfortunately. I can't imagine how people think the BoE has some type of magic formula up their sleeves that would alleviate unexpected medical expenses from being incurred by their insured employees. This town is just not conducive to being self-funded because there's too much room for give back and accusations of mis-management which is just nonsense. While I'm not a fan of paying more than we need to, at least with fully insured it was a set number each year and less room for debate.
Alex September 07, 2012 at 04:32 PM
"If there is a surplus at the end of the year, Board of Education Chairman Darrell Trump said the superintendent had an idea to use the money to set up a capital projects account. But Reed said medical funds should be used for medical expenses only." Legal or not, the superintendent appears to have suggested that as an option and that warrants a response. No one can predict all potential medical expenses, that's why the fund is 22+% above gross medical receipts, which acts as a buffer to years of additional claims. I think setting a policy for this now will help avoid the issues we experienced last budget cycle.

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