Sunday, September 04, 2011

ERRP Update: One Citizen's Perspective

In early July 2010 the City applied for the Early Retiree Reinsurance Program (ERRP) program, which pays a large portion of early retiree health care claims.  San Angelo was approved on August 31, 2010.  Paid city consultants projected two-year ERRP reimbursement of $650,000.  A Standard Times article in mid-September 2010 quoted Human Resources Manager Lisa Marley on ERRP:

“It will either be a better (health insurance) benefit or their premiums can be lowered.”

In November 2010 Council heard about the program in a public meeting for the first time.   Retired Police Chief Russell Smith raised ERRP during public comment on proposed health insurance increases.  Despite its clear relevance to the issue at hand, no City leader, paid or elected, mentioned the program prior to Russell Smith’s utterance.  Various city leaders responded with:

"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"

The November minutes stated:

General discussion was held on the Early Retirement Reissuance Program (ERRP) federal grant program which allows cities to receive reimbursements on certain claims, as well as creating alternatives to make benefits affordable for both employees and retirees. Staff is currently working on the new program, therefore, information is not yet available to report. Mr. Dominguez added this is a one-time federal program which basically diverts the discussion to a later date.

ERRP arose in the December 7, 2010 meeting.  City leaders called ERRP money “iffy” and “like a lottery.”  I commented that ERRP money was like taxes, you know it’s coming, but not how much. I suggested they use some portion of expected ERRP reimbursement to offset the hardship of premium increases.  Under the lottery analogy, a submitted claim is a winning ticket.  No claim, no reimbursement.  I couldn’t conceive the City would never file a claim.

City Council chose not to apply any expected ERRP funding to relieve draconian premium increases for employee/retiree dependents.  Here’s how the December 2010 minutes masked 35-60% premium increases for dependent coverage in 2011:

... and the differential distributed to the medium and high plans, and dependent coverage across the board.
In the midst of the health insurance chaos, Human Resources mailed out the required ERRP notice to plan participants in early December.

As a result of this Council’s December actions, 45 employees/retirees and 147 dependents dropped coverage for 2011. Nearly 200 people lost city sponsored health insurance.

One might expect this to ramp up the urgency for ERRP reimbursement.

Eleven Texas cities were able to file claims and receive reimbursement.  Amarillo, Longview, Midland, Greenville, Garland, Irving and Mesquite got ERRP money, while San Angelo did not.

HR stated why:

Blue Cross/Blue Shield finally authorized access in March to allow HR the information necessary to process any ERRP claims.  The City has attempted to process the ERRP reimbursements but we simply do not have the staff to do it.  At this point it still remains unclear whether or not there are any claims that would qualify for reimbursement.  I met with the City Manager and he has agreed to pay Blue Cross/Blue Shield to process City ERRP claims.  Their cost for this service is $16,000 and we were initially trying to avoid that cost by doing it in house.

The City contracted claims submission to Blue Cross/Blue Shield by July 1.  Even with an executed contract, no claims had been filed as of late August.

Councilman Kendall Hirschfeld said in the June 28 City Council meeting that expectations were given in January or February that there be no increases in health insurance.  I checked the minutes of City Council meetings in January and February and found only one reference to health insurance:  It was under public comment:

Retiree Curtis Barsley commented on the recent increase to retiree health insurance.

I venture Mr. Barsley’s comment was not positive.  Given there is no evidence of Hirschfeld’s charge in public documents, in what meeting did members of council create this expectation for management?

Going back to the June council meeting, where health insurance was expressly discussed, staff initially proposed a $250,000 budget increase.  Council reduced that to zero.  This sets the stage for a repeat of last year’s fiasco.

There are two strategies going forward, pass increased premiums to employees and retirees or dramatically cut benefit levels.  Only one of four options in the City’s RFP is keeping current benefits.  The other three are a reduction. 

Advising City Manager Harold Dominguez is an Insurance Review Committee.  When questioned by council if any retirees sat on the committee, staff said no, but “we can do that.”  Has a retiree representative been added to the Insurance Review Committee since June 28?

One citizen spoke on behalf of retirees in the budget hearing, held August 30.  Her comments fell to floor like a tripped retiree.  Not one city official responded to her concerns.

CFO Michael Dane closed the August budget hearing with a story.  He said a year ago a council person asked him to make sure city employees received raises this year.  He suggested this private, one-person directive drove this year’s budget priorities.

A year after receiving ERRP approval, the City Council will receive a report in its September 6 meeting.  The ERRP report comes at the end of a second budget-approval cycle, where program funds could make a difference.  ERRP’s a goose egg for the second time.

Recall the secret charge given by Council to reduce health insurance expenditures year-over-year when premiums for other employers have risen 25%?  Any reduction in health insurance expenses by an employer violates ERRP's maintenance of contribution requirement.  Hirschfeld's directive could be an ERRP excluder.

Recall the siren song of “better benefits” and “lower premiums”?  The “premiums lowered” promise didn’t happen, given many experienced draconian increases in 2011.  The “better benefits” lure is impossible given the City’s bid specifications for health insurance for 2012.


The City’s inability to file an ERRP claim, with an executed BC/BS contract and while other Texas cities successfully filed claims, raises questions as to intent.  From a retiree standpoint, leaving ERRP money on the table is made worse by the City’s budgeting no new money for health insurance for the coming year.     For retirees, it’s another failed promise from City leaders, only this one is on their shoulders, not a prior council.

I'll be surprised if this conclusion is part of the City's ERRP update.  Feel free to compare and contrast Harold and Lisa's to mine.

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