ERRP Saving for a GASB Day?

San Angelo City leaders said "there is no new money," in regard to health insurance plan increases.  Their charge was:

All 2011 plan cost increases must be passed through to employees and retirees. 

When challenged by Russell Smith, retired Police Chief, about Early Retiree Reinsurance Program (ERRP) funding, the range of responses included

"I don't have those numbers"
"There is not clarity"
"These things are hard to predict"
"When one time funds go away, you have problems"

Yet, the City has projections from Holmes-Murphy on expected ERRP funding for retiree claims after June 1, 2010.  That's new money.  City Manager Harold Dominguez bragged about Holmes-Murphy's expertise when introducing the agenda item.  Yet, Holmes-Murphy didn't speak at the meeting, nor were their ERRP projections shared with the public.  Kiah Collier of the Standard Times followed up with HR's Veronica Sanchez.

"Because there's so much uncertainly with it, we hate to count on that reimbursement prematurely."

I can't think of a program with less uncertainty.  The City will receive 80% reimbursement for early retiree claims between $15,000 and $90,000 until $5 billion runs out.  The City will bank 19 months of ERRP funding, before pondering sharing any savings with employees/early retirees.  That's $515,000 at Holmes-Murphy's expected amount, a major dent in the $960,000 increase being passed on to workers/retirees.

The City's wants to share ERRP savings in 2012, mashing two years of assistance in one.  This aggravates the problem of "one time funds."   ERRP is expected to run out of money in 2012.  Just as the city is ready to share, the program could be gone. 

Consider the City's position when it received ERRP funding:

“It will either be a better benefit or their premiums can be lowered. Those are the two choices we have to use the funds for,” said the city’s Human Resource Director Lisa Marley.

The benefit is the exact same, not better.  Premiums aren't lowered.  They are going up, even skyrocketing.   The countdown is on, given City Council will make a decision on health insurance at its next meeting.  Will the City remain evasive and non-forthcoming on ERRP and its intended use of the funds?

The City's 2009-2010 budget stated:

As a result of GASB 45, the City is required to fund other post-employment benefits anticipated to be provided to current and future retirees. The City’s unfunded liability is substantial. The budgeted amount to fully fund the liability on an annual basis is in excess of $2 million dollars.

ERRP funding could put a dent the City's GASB obligations. Will the feds allow it?

How many workers and early retirees will drop health insurance as a result of the changes?    While working with San Angelo's Health Access Coalition, I watched City employees drop unaffordable coverage for 100 dependents.  I saw CHIP enrollment plummet when the State increased premiums and deductibles/co-pays. 

What happens when a program intended to keep people covered does the opposite?  That may be the real world application of health reform under PPACA.  While Uncle Sam stumbles forward to help, others walk away.

San Angelo's ERRP Remains Cloudy

Standard Times reporter Kiah Collier followed up with Human Resources on ERRP funding.  She wrote:

The city HR department says it simply does not know yet how much it will receive in reimbursements from that program.

Estimated ERRP reimbursements come from Holmes-Murphy, the City's health plan consultants.  They used prior claim experience for their calculations.  This is like projecting future tax revenue based on prior collections.   If the City applied the same logic on taxes or expenditures, the Finance Department couldn't prepare a budget.

Kiah continued:

It (City of San Angelo) does have a projected or estimated amount, but even if it does end up receiving anything, it will likely use those reimbursement to offset any increases in the 2012 health insurance plan - not the 2011 (upcoming year) plan.

I just called Veronica Sanchez with the HR department and she said, "Because there's so much uncertainly with it, we hate to count on that reimbursement prematurely."

The City is eligible for federal reimbursement for retiree claims as of June 1, 2010.  The first reimbursements to sponsors, like the City, were expected to be deposited in October.  That's last month.  Has the City or Blue Cross/Blue Shield gotten an ERRP check yet?

Program funding is expected to last two years.  When the city is ready to share any savings with retirees, ERRP will likely be out of money.

There is no uncertainty in reimbursement under ERRP.  Early retiree claims between $15,000 and $90,000 after June 1, 2010 are reimbursable. Checks for 80% of those costs will be cut.  The question is how much?

The City was accepted in the first round.  Why hold onto 18 months of reimbursement, before sharing a nickel with plan participants?  ERRP's aim is to keep insurance affordable, especially for retirees.  Hewitt Associates projected a 25 to 35% savings within any retiree healthcare program.  That's $2,000 to $3,000 per early retiree.

I spoke to Veronica several times on this issue.  The numbers changed each time.  Local data doesn't align with national projections.  I'm sure much of it is explainable.  However, for citizens to understand, the city should share their ERRP application and Holmes-Murphy report.

City leaders have been evasive and nonforthcoming on this issue.  That should concern citizens, as well as retired and current employees.  The Standard Times is in a position to press leaders to be more open and accountable.

City of San Angelo Mum on ERRP Funding Use

Mayor Alvin New stated employees and early retirees needed to cover the $960,000 increase in the City's projected health insurance costs.  He didn't say how much of the increase related to retirees vs. current employees.  The City has two separate plans, both self-insured.

Retired Police Chief Russell Smith noted the City's participation in the Early Retiree Reinsurance Program, a fact not mentioned by the Mayor and city leaders.  Health & Human Services offered a description of the program.

The Early Retiree Reinsurance Program provides reimbursement to employer and union sponsors of participating employment-based plans for a portion of the cost of health benefits for early retirees and their spouses, surviving spouses, and dependents. The purpose of the reimbursement is to make health benefits more affordable for plan participants and sponsors so that health benefits are accessible to more Americans than they would otherwise be without this program.

The City's application for ERRP funding had to state "how the applicant will use any program reimbursement to meet the requirements of the program, including how the reimbursement received will be used to reduce plan participant and/or the employer’s health benefit or health benefit premium costs."

How does the city plan to use an expected $650,000 in ERRP funding over a two year period?  What if federal money reaches the maximum $810,000?  City leaders owe the public an explanation.  An open and accountable government would share its ERRP application to HHS and the Holmes-Murphy report.

San Angelo's Invisible ERRP

During the budget process, San Angelo City Council postponed addressing health insurance.  The numbers, pictured above, were the last the public knew about the issue, until today's Council meeting.  In the interim, the City successfully applied for the Early Retiree Reinsurance Program, which has the federal government reimbursing retiree claims.  ERRP pays 80% of costs between $15,000 and $90,000.  Savings are expected to be $650,000 over a two year period.  GoSanAngelo reported:

“It will either be a better benefit or their premiums can be lowered. Those are the two choices we have to use the funds for,” said the city’s Human Resource Director Lisa Marley, noting the city has yet to determine whether it will put the funds toward claims or premiums although it may be “easier to put toward claims to allow employees to have better coverage.”

"...the program will help offset costs for the city and its early retirees, Marley said

The city is self-insured.  It covers employees and retirees in two separate plans.  Mayor New said BlueCross/BlueShield's rates would increase $960,000 from the prior year, an increase of 10-15%.  The City is financially strapped, given property and sales tax staying level or declining.  That means passing on increased costs to those covered.

Retirees and employees lined up for public comment.  Familiar themes were the rushed nature of the agenda item, the lack of information shared with those impacted and the failure for leaders to meet with employees to understand their needs.

“The problem is there are $1 million of new expenses and there’s not any new revenue, “ said Mayor Alvin New. “So how do you want to pass on for the employees the ability to have the same health care coverage they have ... and how you want to pay for it? That’s what this is about.”

City leaders avoided their receipt of ERRP funds, expected to be $307,000 the first year and $343,000 the second.  When challenged by Russell Smith, retired Police Chief and Justice of the Peace, Veronica Sanchez only gave the name of the program.  HR Director Lisa Marley was not at the meeting.  Also missing in news coverage, when did the City receive bids on their self insurance plans?

City Council and paid leaders purposefully kept ERRP monies out of the discussion.  Surely, they knew of the city's windfall, courtesy of Uncle Sam.  Why? Health & Human Services expects ERRP reimbursement to keep health insurance affordable for retirees.  How is the City planning to use ERRP funding?  The public deserves an answer.

The City Council is a microcosm for American society.  Obama's Deficit Commission hopes to cut Social Security by reducing benefits and/or increasing the retirement age.  Within three years, City retirees will pay the same amount in premium sharing as employees.  By then, the City will have received up to $810,000 in federal reimbursement for retiree claims.

Given the City kept ERRP off the table, it must have plans for the money, other than Lisa Marley's stated promise.  Retirees will not see their premiums go down.  The lack of honesty is disturbing.  It's anything but terrific news.

One employee suggested the city provide assistance for employees, who can't afford huge dependent premium increases.  He thought the City could help enroll dependents in Medicaid or CHIP.  Given the City jettisoned its Social Services workers, this added to the "down the rabbit hole" nature of the meeting,

The final plummet came at near the end of the meeting, when the Council approved a new holiday for workers, Veterans' Day.  If the City can't afford to pay more for health insurance, why did Council increase the paid time off benefit?  Another vacation day cost $135,000.

Combine the first year of ERRP ($307,000) with the new vacation day ($135,000) and you get $442,000, nearly half of the $960,000 shortfall.  The maximum ERRP reimbursement over two years ($810,000), plus the vacation day, knocks out almost the whole amount.

If City Council won't talk about it, what can retirees do?  The message is clear.  Don't be a senior, much less an early retiree.

Republican Clapper

Congressional Republicans floated a government shutdown, suggesting it would send a serious message about deficit reduction.  Republicans turned off the lights during the Clinton years and paid a clear political price. 

Two years ago, Republicans asked the Capital lights be turned back on.  They wanted to address America's energy crisis via "Drill Here, Drill Now."  Here's the pattern:

Lights off (1995)
Lights on (2008)
Lights off (2010)

Who knew the Clapper would symbolize Republican strategy?  That's one odd Circadian Rhythm.  The days keep getting stranger. 

Ghost Visits Charlie Rangel

The ghost of actions past visited Representative Charlie Rangel (D-NY).  A Congressional subcommittee found Rangel guilty of eleven ethics violations.  WaPo reported:

Rangel improperly used his congressional staff and official letterhead to raise seven-figure checks from corporate charities and chief executives for a college wing named in his honor; violated New York City rules by housing his political committees in his rent-controlled apartments in Harlem; did not pay taxes on a villa he owns in the Dominican Republic; and did not properly disclose hundreds of thousands of dollars in personal financial assets. 

The Subcommittee that convicted Rangel included:

Zoe Lofgren, Chair, California	Michael McCaul, Ranking Republican Member, Texas
G.K. Butterfield, North Carolina	Mike Conaway, Texas
Kathy Castor, Florida	Charles Dent, Pennsylvania
Peter Welch, Vermont	Gregg Harper, Mississippi

Odd, Representative Mike Conaway (R-TX) has an earmark ghost in his closet.  It benefited the Albertine's of Fredericksburg, Virginia, not the Texas town. The timing of donations and legislative progress are most curious.

Conaway served as head of the National Republican Congressional Committee's Audit Committee.  It took the CPA a full year to learn outside auditors worked for Casper & Dickens.  The House Ethics Committee has standards for proper use of campaign funds.  Renovating Chris Ward's house hardly qualified.  Five years of abysmal Republican Congressional oversight deserved an investigation and trial. 

I realize the Ethics panel can only right one wrong at a time.  Will Conaway's new earmark religion keep him off the stand?  Will dozens of Republican leaders avoid responsibility for Chris Ward's five year embezzlement?  Only time will tell.  I'd love to hear Chris Ward testify to the level of oversight under the Red team.

Whether Red or Blue, the leadership bar continues to fall, well past abysmal.  Will ghosts visit Mike Conaway this Ethics season?  If so, what story will he tell?  Will it be the simple or complex one?

Caritas Christi Goes PEU

Hellhound Cerberus Capital Management closed its purchase of Caritas Christi Health System, once the largest nonprofit community hospital system in New England.  Cerberus "purchased" Caritas solely with a promise to provide capital.  Prior nonprofit sellouts funded community foundations, but not the Caritas deal.

Who believes in for-profit hospitals, owned by private equity underwriters (PEU's)?

Massachusetts Supreme Judicial Court, 

Massachusetts Attorney General

Department of Public Health

Roman Catholic Archdiocese of Boston

The Vatican

Recall Caritas couldn't invest in insurer CeltiCare, as it conflicted with their Catholic mission.  Yet, a PEU sellout to Cerberus Capital Management was a perfect fit?  It's fitting that Cerberus was a three headed hound, guarding the gates of hell.

Also optioned in the deal?  Caritas Christi's Catholic identity, which can be bought out for a mere $25 million.  PPACA builds on the Massachusetts experiment.  Caritas couldn't survive, even after three years of "reform."  The management team that couldn't make a profitable go alone, will stay on under Cerberus.

We look forward to working with Caritas’ outstanding management team to build a community-based health care model that will thrive for many years to come.

White House Health Czar Nancy-Ann Deparle set the table for stressed nonprofit hospital/PEU deals.  She has experience in this area.  To see how a PEU milks for-profit hospitals, examine KKR's bleeding of HCA, a mere $4.25 billion in 2010.  PEU greed infects health care.  Shadow bankers will do for healthcare what they did for America's financial system, bring it to its knees.  How sad that religion and government have been co-opted.

Update 1-26-24:  American Prospect summarized the damage Cerberus and Steward Healthcare did to Massachusetts hospitals.  Steward hired a restructuring advisor and may be headed to bankruptcy.