Sunday, September 09, 2012

Health Insurance Budget Amendment & ERRP

City Council learned about a $1.1 million budget amendment in their September 4th meeting.  I found this surprising given my direct questioning of city staff on this issue over the last year.  It's unusual to amend a budget so late in the game, effectively the day council approved the next year's budget.

I've asked city staff for more specifics on the budget amendment, but a question arose in my mind.  Did the City's actions jeopardize their federal Early Retiree Reinsurance Program (ERRP) funds?

To ensure that ERRP proceeds are not de facto used as general
revenue, sponsors must maintain their level of financial effort in
supporting the applicable plan or plans. To the extent a sponsor decides
 to use the reimbursement for its own purposes, it can do so only to
offset increases in its health benefit premiums or health benefit
. The sponsor must explain in the program application how it will maintain its level of effort for the plan.

Recall the City's history after qualifying for ERRP money.  It acted like ERRP money wasn't real and passed draconian premium increases to early retirees and employee/retiree dependents.  That cast some 200 people from the City's health insurance rolls.

After $343,000 in ERRP cash arrived, Council members asked that it be applied in 2011-12 so as to "reduce federal strings."  It had the temerity to specify uses different than required by ERRP.

Over this two year period Council passed on 75% of cost increases to those covered, while keeping 70% of the savings.  Head's the city wins, tails employees and retirees lose. You get the picture.

No comments: