Thursday, December 12, 2013

San Angelo's Sad ERRP History

Councilwoman Charlotte Farmer asked Human Resources Director Lisa Marley to explain ERRP funds, its purpose and history:

The ERRP is Early Retiree Reinsurance Program is what it stands for, and what it, the reason it was developed because more and more employers were dropping retirees from their coverage and so they used that as an incentive for companies to offer insurance to their retirees with this promise that there would be refunds made to your plan, or reinsurance where it comes back to the plan.--Lisa Marley
The missing history:  Four months after being approved for ERRP reimbursement the City of San Angelo raised dependent coverage for employees and early retirees from 34 to 58%.  Council chose not to apply a penny of expected ERRP reimbursement to lessen the crushing increase.  As a result nearly 200 people dropped health insurance.

45 employees/retirees and 147 employee/retiree dependents dropped coverage for 2011.
Back to Lisa Marley's testimony on 12-3-2013:

And so the program, I think actually they passed it into law in 2010 and we applied for it, were granted it.  It was a long process where you, there's a threshold that has to be met.  You could only turn in claims greater than $15,000 but less than $90,000 and then they were only going to reimburse a percentage of those claims.  But it was only on retirees who were retired and less than age 62.  

We received $343,288.  It's now $201,000.  We used the $142,000 last year.  We were going to have to raise our premiums last year by $142,000, so you all allowed us to use that for everybody, current employees and early retirees.  We did not raise any premiums last year.

I didn't answer your question about what you can use it for.  The government was really specific on, that it could only be used for three reasons, to offset the plan costs, to offset the employer's contributions to the plan or to offset the participants' costs.
Marley apparently forgot her original promise when the City was approved for ERRP:

“It will either be a better (health insurance) benefit or their premiums can be lowered.”
She also failed to mention the only real stipulation for employers, that federal funds not displace local funding, the maintenance of contribution requirement.

The city saved over $300 per month from 45 employees/retirees dropping coverage, which totals $162,000

She also failed to mention the city must use all ERRP funds by December 30, 2014. 

That program has been finished.  It ran out of money.  They had a set amount of money nationwide for for this program, for all employers it was a free for all.  We were one of the first twelve cities in Texas that actually were awarded the program.  We had outstanding claims that we turned in but they ran out of money before they got to them on the list.
She didn't mention the first eleven beat San Angelo to the ERRP window by a handy margin.  Eight months into the program here's the Texas tale of the tape:

Austin--$1.7 million
North Richland Hills--$45,000
San Angelo--$0
From the beginning City leaders were less than forthcoming on ERRP funds.  Here are their characterizations when retired police chief Russell Smith prematurely said the dreaded four letter word, ERRP:

"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"

One sitting City Council member equated ERRP money to a lottery ticket.  I wrote at the time:

ERRP is more akin to a bank.  Uncle Sam is shouldering 80% of claims from $15,000 to $90,000.  Funds are coming, soon.  The question is how much?  In that regard, the city has years of experience, six months are directly reimbursable.  I've never seen a lottery ticket with those attributes.

How many of the City's 51 retiree dependents will drop coverage, unable to pony up more than $500 a month?  The irony is this.  The more retirees the City drives from the plan, the less opportunity for ERRP reimbursement.

Retired spouses may have $377 to spend on lottery tickets in 2011, one option for funding future health care expenses.  It's a high risk strategy, but what alternative do they have?

Which leads us back to Lisa Marley's statement on 12-3-13 "employers were dropping retirees from their coverage."  Marley should've confessed that this is exactly what the city did after its ERRP application was approved.

Relative to the baseline, the city never offered better benefits or lowered plan premiums.  Council sat on the money for years, finally planning to utilize the bulk as the federal due date approaches.

I would suggest the players in this sad story forged a chain link or two.  Heed the words of the other Marley (Jacob) in the Christmas Carol.

BUSINESS? Mankind was my business! Their common welfare was my business! And it is at this time of the rolling year that I suffer most!

I wear the chain I forged in life! I made it link by link and yard by yard! I gartered it on of my own free will and by my own free will, I wore it!

Ah! You do not know the weight and length of strong chain you bear yourself! It was as full and as long as this seven Christmas eves ago and you have labored on it since. Ah, it is a ponderous chain!

When the city applied for ERRP it covered 280 early retirees. It expects to cover 215 in 2014, a drop of 65 people or 23%.  The story for employees shows a decrease from 933 to a predicted 754, a drop of 179 people or 20%.  The City of San Angelo provides health insurance for 244 fewer people than it did when it applied for ERRP program.  That's the untold tale of the ERRP.

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