City Council changed its stance on ERRP funds after approving an exclusive provider arrangement with Aetna. Council specified ERRP funds be used in 2012 to "avoid federal strings."
The City expected $483,000 in EPO savings, but got double that amount, over $1 million. Note the minutes from the last City Council meeting:.
Line Item 310 $1M decrease in the City’s Health benefit due to positive impacts of the plan’s changes
These savings preclude the use of ERRP funds, which can only be used to ease the pain of health insurance cost increases, not decreases.
Staff will provide an update of the self-insurance fund performance during calendar year 2012. Projections for 2013 indicate an increase in health insurance premiums would be required. Staff is recommending the use of $142,000 from the $343,288 Early Retiree Reinsurance Program (ERRP) to offset the projected increases for 2013.Problems arise in talking about health insurance due to the difference between the city's fiscal year budget and calendar year health plan. Yet, Council did not approve a budget increase in health insurance in their last meeting. The budget shows a decrease of $50,000 in 2013.
There is one huge oddity in this budget amendment, revenue and expenses went down by the exact same amount. Expense savings came from lower utilization and better pricing under Aetna's EPO. Revenue tends to be more predictable, given employees and retirees pay a fixed amount per paycheck for insurance and the City commits to paying X dollars per employee per pay period. Generally, the only variable for the city is the number of employees and retirees it's funding.
For the 2012 plan year Council lowered employee, retiree and dependent contributions, effectively sharing a portion of $483,000 in predicted EPO savings. Yet, savings are double what was predicted.
Does the city plan on rebating premiums to employees, retirees and dependents? Will it hold the funds for the coming year (fiscal or plan)? Will it set the money aside to meet GASB requirements? Or will it pocket the money in the General Fund and spend it elsewhere?
I look forward to hearing the update on the Self-Insurance Fund performance. It could well provide answers.