Franklin County is changing popular, but expensive benefits program. Employees cry foul
Franklin County is moving forward with changes to a popular, but costly benefits program.
Commissioners are hoping the move could save the county millions, but it would cost some employees more than $10,000 in medical contributions each year.
It also could hurt the county’s efforts to attract and keep workers from being hired away.
The Franklin County commissioners voted in late September to move forward with the process to make changes to their VEBA program (voluntary employees’ beneficiary association), cutting maximum monthly county contributions from about $1,600 to $600 for employees who waive health insurance.
The program puts money into an account restricted for medical-only use for most employees.
The recent decision empowers the county’s Human Resources department to begin working with its insurance provider on coming up with a plan to be approved at a later date.
Why now?
For years the novel way the county has run the program has been its most powerful employee recruiting tool against other government agencies that are able to pay more.
Commissioners have tried repeatedly to change the program in light of a looming budget crisis.
Last fall, they ultimately ran out of time to make any changes before the start of the annual benefit enrollment period had to be completed.
If the changes proposed last month are put into place in time for the 2025 benefit enrollment, they would impact only the county’s non-union employees.
They would however serve as a template for how the county would like to see benefits changed for the majority of its employees.
One employee told the county in a letter that the proposed changes are setting the county up for a lawsuit for age, gender and marital status discrimination., and that it would be a pay cut.
“With this proposed action, you are saying to those of us who are past our child bearing years, unmarried or waive insurance, that we do not deserve the same consideration as those who are ‘young’ or a ‘young family.’ ...” the employee wrote.
“Many of us have been here for years, vested in the work we do, and we deserve to be fairly compensated. Reducing our total compensation package tells me that my contributions to Franklin County are not consequential,” they continued. “I implore you to make the right decision for your employees.”
The proposed changes come at a time when Franklin County is facing a staggering budget shortfall due to property and sales tax bases growing at a slower than expected rate in the county.
Earlier this year the county estimated the best case scenario, before any budget cuts, is a shortfall of about $3 million with the worst case coming in around $7.5 million on their $50 million annual budget.
Who will it impact?
Franklin County currently has 310 employees, only 82 are non-bargaining and would be affected by these changes. Not all employees are eligible for healthcare benefits though.
Franklin County’s VEBA plan differs from most others in that it doesn’t offer a small monthly contribution, but instead a larger amount based on the cost of insurance plans.
The maximum contribution, currently just under $1,600, is the same as the county’s contribution of 80% of the cost of the their most expensive healthcare plan. Employees on cheaper plans also receive a smaller contribution for the difference.
This first group of employees who will be impacted are members of the planning and building office such as inspectors, administrative assistants, maintenance and grounds workers, surveyors, prosecutors and public defenders and department heads and supervisors.
Only 23 in that group currently waive insurance and take the maximum VEBA contribution, according to the Franklin County Human Resources department.
For those employees, a reduction to $600 would save the county just over $250,000 annually. That’s only if they don’t move back onto a regular insurance plan.
It’s unclear what the total savings would be when including changes for the larger group of employees who receive a partial amount based on the cost of their insurance plan.
The contributions are a powerful tool for employees concerned about out of pocket healthcare costs. The American Cancer Society estimates that out of pocket costs for cancer treatment are up more than 15% in recent years.
Elected officials were carved out of this round of changes because the commissioners will need to manage theirs separately, and potential changes would have to take place at the beginning of their next term of office. The commissioners previously took themselves out of the VEBA program entirely.
Why is it so expensive?
The selling point of VEBA accounts is that the money used to fund them is on the county side and doesn’t take away from an employee’s salary the way contributing to a Health Savings Account does.
It is important to note that while the VEBA allocations are called a cash benefit, they are not cash added to paychecks. It is is money put into an account that can only be used for medical needs. They are not portable and they cannot be cashed out.
The exception to this was for elected officials who can receive cash in lieu of the VEBA contributions. Changes for their plan have been put on hold because it will require a separate vote from the commissioners and the changes will have to take place at the beginning of their next terms.
There is also at least one bargaining unit within the county that negotiated a split of 75% of the contribution to VEBA and 25% taxable cash.
The initial planned change was to reduce VEBA contributions to a $300 maximum, but commissioners were concerned that could lead to employees just taking insurance as a secondary payer plan. The $300 figure is the typical amount that other counties who use VEBA pay in.
Commissioner Clint Didier suggested increasing the contribution to $600, which his fellow commissioners agreed to. He also suggested the county could eventually reallocate some of the savings toward salary increases, in order to find a balance of needed savings without losing the employee and recruiting incentives of the program.
It’s unclear how this potential salary increase would work, or what time table they’re considering for any potential pay increases.
“As we keep moving in this right direction we can possibly increase this pay where they’ll get that as monies they can use on anything, instead of VEBA where they can only use it on medical devices,” Didier said during the meeting.
How much could they save?
The total savings will ultimately depend on what their employee unions are able to negotiate, how employees react and if they choose to move to more expensive healthcare plans with the loss of contributions.
Commissioner Stephen Bauman said the county needs to take action. The commissioners discussed the changes as a starting point for future adjustments.
“We’re on an unsustainable track today, and I think we don’t want to swing the pendulum too far, but I would be in favor of that $600 instead of $300 at this point,” Bauman said.
It’s unclear if the other tiers of VEBA payments, for those who do take insurance, will also increase from the proposed reductions to a flat $100 to $200.
If every employee taking their full VEBA contribution in lieu of insurance were moved to the new plan, the county would save a little over $700,000 for the 61 employees who waive health insurance.
However the larger savings appears to come from changes to smaller VEBA payments given to employees who do take health insurance. Those lower tier savings would amount to another $1.1 million for the $100 to $200 VEBA payment range, according to data presented by the county recently.
In total, the county could save around $1.9 million per year, based on the numbers presented for the 271 employees currently receiving some form of health insurance benefits.
Interim County Administrator Eric Johnson told the commissioners during a later budget schedule discussion that they need to keep in mind that no matter what decision they make, the county will be starting at a deficit due to the projected shortfalls.
‘Make the right decision’
The problem Franklin County has run into is that other counties and organizations that use a VEBA program typically limit those contributions up front.
Franklin County decided to use the program to offer the higher healthcare benefit spending amount as a way to give alternative compensation to attract and retain employees. Employees on cheaper healthcare plans got the difference in VEBA.
This is also a strong retirement benefit for all employees, as that money can be used for medical needs after retirement.
Now some employees feel like they’re being punished.
They’re upset that the county will continue to spend about $2,000 per month on healthcare benefits for employees with dependents on the most expensive plans, and those who chose the VEBA route will lose nearly $1,000 in contributions monthly.
The change will have an out-sized impact on those who don’t take the county’s full insurance because they don’t have children, have a spouse with better coverage, they’re a retired service member or they are older and on Medicare. Even those using the county’s health insurance will likely see a hit when their leftover monthly contribution is reduced.
If commissioners are able to settle on a new plan, they’ll have to negotiate changes individually with the county’s various unionized bargaining groups, comprising about 75% of the county’s total employees. Their open enrollment period runs through October.
This story was originally published October 9, 2024 at 5:00 AM.
