Thursday, November 18, 2010

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.

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