Norwich — Norwich Free Academy will pay out nearly $300,000 to hundreds of current and former faculty and staff to cover a portion of overcharged health insurance premiums and deductibles dating back at least several years.

The overcharges were discovered in October as part of negotiations for a new three-year contract with the nearly 200 teachers in the Education Association of NFA. A union insurance consultant questioned deductibles and premiums for both the high-deductible health savings plan and the preferred provider organization that were higher than what should have been charged by a self-insured entity such as NFA, school officials said.

The overcharges applied to all faculty and staff covered by the health insurance plans, NFA spokesman Michael O’Farrell said, and date back to at least to 2011, when the HSA plan was enacted.

But a settlement reached between the NFA administration and the teachers’ union, EANFA, calls for NFA to reimburse the union a total of $238,777 for overcharges only for the past three years. An adjustment was made starting Jan. 3 in the insurance deductibles and premiums going forward, correcting the overcharges. NFA will apply the same agreement to nonunion members covered by the insurance.

O’Farrell said final figures were not available Tuesday for the reimbursements but the total should not exceed $300,000. The payment will be made from this year's 2019-20 NFA operating budget, O'Farrell said.

O’Farrell said the memorandum of agreement — signed by NFA board of trustees Chairman DeVol Joyner on Jan. 2 and by union co-President Bryan Burdick on Jan. 10 — is a negotiated settlement on the overcharges. O’Farrell said otherwise, NFA would have been obligated to cover only 30 days of the overcharges, while the agreement covers three years, although not the entire period.

Burdick declined to comment on the situation, saying the two-page memorandum “speaks for itself.”

The agreement calls for NFA to pay the reimbursement “based on figures submitted to the Academy from the Association.” NFA will provide the union with insurance cost and enrollment information, and the union will calculate how the money is to be distributed to current and past members. The settlement lists new insurance allocation rates and the amounts to be deducted from union members’ pay for the remainder of the current fiscal year.

The union agreed not to file or support any grievances, appeals with regulatory agencies or lawsuits regarding the insurance overcharges.

On Friday, NFA sent a memo to all staff and administrators explaining the overcharges and the sudden decrease in insurance charges in payroll checks going forward for employees enrolled in either the high-deductible health savings plan or the preferred provider organization.

“When the issue was raised in October,” the memo states, “the parties met and agreed to revise both the formula and rates for the insurance premiums. Those same changes have been applied to all staff and administrators enrolled in the health insurance plans offered by the Academy.”

The academy will apply the same formulas and timeline for reimbursements spelled out in the union agreement to non-EANFA employees. Employees will be notified when reimbursement calculations are finalized, the memo states.

O’Farrell said the previous rates were set through an insurance consultant hired by NFA prior to the 2011 union contract.

“This year, EANFA had an insurance consultant who said, ‘I have a question,’” O’Farrell said of how the overcharge was discovered.

c.bessette@theday.com