Sunday, November 21, 2010

December Wind Unkind to City Retirees

Nearly one year ago, San Angelo's City Council discussed wellness initiatives and employee/retiree health insurance.  These topics were reflected in the December 1, 2009 minutes.

Wellness initiatives relate to the CareHere LLC proposal to operate the employee health clinic.  City staff cited the health risk assessment as a key reason for recommending CareHere.  One year ago, HR Manager Lisa Marley reviewed "how the clinic could be used to promote wellness initiatives."

Mr. Dominguez disclosed as staff develops the wellness initiative, it is highly likely that the City may move towards rates based on wellness initiatives. Therefore, rates would be based on the health and condition of the employee. Mr. Dominguez provided an example how a reinsurance provider may set a higher stop loss amount on an individual, increasing the City’s liability for that particular employee from $150K to $250K based on claims experience.

The second relates to health insurance and any baseline number.  Mayor Alvin New and City staff said on November 16, 2010 they can't spend a penny more than $6.4 million.  Last December:

Mr. Dane informed the City’s budget for the self insurance health fund is $7.2M and the retiree portion of that amount is $1.5M.  

Mayor New noted the city's good experience under the health plans at the recent Council meeting.

2011 budget (city portion)--  $6.4 million  
Additional employee/early retiree portion-- $1 million
2011 budget total-- $7.4 million
What accounts for the $800,000 difference?  That wasn't addressed at the recent meeting.  Last year, the City tried to pass $800,000 in costs to retirees and permanently cap the City's contribution at a fixed amount.

Mr. Dominguez noted the proposed plan would take three years to recoup related expenditures under the proposed benefit. By adoption of this plan, he informed changes will cover the self-insurance fund $680K shortfall and add an additional $289K to stabilize the fund balance. He advised by freezing the Per Employee (or retiree) Per Month rate (PEPM) at $332.22, any future increases would be covered by the retiree.

What Council declined in 2009, Mayor New and City Manager Harold Dominguez operationalized in 2010.  Albeit, Dominguez found money to help with health insurance increases (August 3, 2010 minutes):

City Manager Harold Dominguez explained the $318K health insurance proposed amount would allow the City to buy down the employee’s contribution amount, thereby keeping increases as low as possible.
A "no new money" wind blew into Council Chambers on health insurance.  It echoed hollow, given the City's acceptance into the Early Retiree Reinsurance Program (ERRP).  City Consultants, using the same claims experience cited by City Manager Dominguez, project $650,000 in reimbursement for early retiree claims from June 1, 2010 to May 31, 2012.

ERRP funds associated with 2010-2011 total $515,000.  That money can be applied toward the $1 million shortfall.  Keeping insurance coverage affordable for early retirees is the aim of the federal program.  ERRP arrived at the wrong time for City leaders, intent on implementing long range plans.  That's why leaders stammered and stuttered when challenged by Retired Police Chief Russell Smith.

City leaders plan to bank ERRP funds for 19 months before using any savings to offset their portion of increases.  That may be the only clear thing in this turbid issue.

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