San Angelo city leaders wrote the following in July 2010 when they applied for federal funding for early retiree health coverage::
Reimbursement through ERRP will allow the City "to continue to provide the same quality of care without passing on additional costs to its participants."December saw City Council approve draconian health insurance increases for employee and retiree dependents, passing on huge costs to plan participants..
April finds other Texas cities getting federal reimbursement for early retiree health claims, while San Angelo is stuck in a drought. Lisa Marley, Director of Human Resources & Risk Management, explained why in an e-mail:
Blue Cross/Blue Shield finally authorized access in March to allow HR the information necessary to process any ERRP claims. The City has attempted to process the ERRP reimbursements but we simply do not have the staff to do it. At this point it still remains unclear whether or not there are any claims that would qualify for reimbursement. I met with the City Manager and he has agreed to pay Blue Cross/Blue Shield to process City ERRP claims. Their cost for this service is $16,000 and we were initially trying to avoid that cost by doing it in house.The City of San Angelo qualified for federal funding for early retiree health insurance via the Early Retiree Reinsurance Program (ERRP). Despite being approved on August 31, 2010 San Angelo City Council is yet to hear a presentation on this development. Retired Police Chief Russel Smith and I raised questions in November and December Council meeting.
The contract with Blue Cross/Blue Shield is currently in the Legal Department being reviewed. As soon as the contract is signed, Blue Cross/Blue Shield will be responsible for the ERRP process for the City.
Mr. Dominguez added this (ERRP) is a one-time federal program which basically diverts the discussion to a later date. 11-16-10
One month later, City leaders characterized ERRP money as "iffy" and implemented draconian health insurance increases for early retiree and employee dependents. Premiums rose 34 to 58%, causing nearly 200 people to lose city sponsored health insurance. Roughly 50 were employees/retirees and 150 dependents.
Oddly, ERRP money isn't iffy for other Texas cities.
North Richland Hills--$45,000
Why have they been able to get paid, while San Angelo fumbles? Benefits consultants projected the City would receive between $200,000 and $800,000 in ERRP reimbursement over a two year period. The City's ERRP application stated:
Year 1Low Estimate--$91,217Expected Estimate--$307,484High Estimate--$383,915
Potential reimbursement for six months under the projected scenarios would mean $45,000 to $190,000 via ERRP.
Surely, other Texas cities use BC/BS as their third party administrator. Why have they succeeded in filing claims, while San Angelo has not?
City Manager Harold Dominguez recently told the Standard Times:
He is hoping the city can both cut taxes and raise city employee salaries during the next budget cycle — and that it is looking at a variety of cost-saving provisions to help make those goals more achievable.The city saved over $300 per month from 45 employees/retirees dropping coverage, which totals $162,000. How much did the dropping of 147 dependents save? At $100 a month, savings would be $176,400. Add six months of projected ERRP claims and cost savings total $500,000.
COSA clearly indicated its plans to the Feds in 2010:
The city intends to maintain the current level of contribution to the (health) insurance fund.What other health insurance moves does Harold have in store? Who knew a tax cut and salary increase would come on the back of early retirees, widowed spouses and children? It's the new American way of managing risk.
Update 4-30-11: Cost sharing grows as employers turn their health insurance benefit into a "defined contribution" vs. "defined benefit" plan. Most employers morphed their retirement (pension) plans into a defined contribution structure. This shifts the risk to the employee to plan and fund their retirement. Similar plans for health care have employees buying individual insurance plans, some with monstrous deductibles and copays. While PPACA dilly dallies, employers and tapped out governments shift responsibility to the individual, already financially distressed. Mayor New talked about moving in the direction of a defined contribution health insurance benefit for employees and early retirees. It remains to be seen what types of plans the city explores and when. How much notice will the public and those impacted get? It was very short in 2010.