June 26, 2011

USA: Hemet gets bad news on insurance - Too Many Seniors!

HEMET, California / The Valley Chronicle / June 25, 2011

Hemet gets bad news on insurance

By CHARLES HAND/The Valley Chronicle
Hemet has a health problem.

The problem is that most insurance companies are not interested in providing insurance programs because the city is carrying too many seniors on its health plan.

Where most municipal governments’ insurance coverage includes no more than 15 percent or so, Hemet’s insurance rolls are 50 percent seniors, people older than 65, the City Council was told during a workshop session Tuesday.

That is the result of years of providing lifetime insurance benefits to not only employees, but members of the City Council.

That lifetime insurance coverage was eliminated several years ago, but not before people who have not attended a City Council meeting in many years were guaranteed lifetime insurance.

Mike Reilly of HUB International, the city’s health insurance representative, said, when he asked insurers to bid on Hemet’s health insurance, he found “not a lot of interest.”

Insurers prefer no more than 10 percent to 15 percent of the insurance rolls be seniors.

“Hemet is unique,” he said.

Reilly suggested a two-part solution.

One element is to require seniors to go on Medicare.

The other is for the city to buy Medicare supplement insurance for its seniors.

According to a spreadsheet presented by Debbie Pickett of Pickett and Associates, an insurance agency representing Aetna, the cost of insuring seniors directly with the remainder of the insurance pool is about $2,046 per month per person.

By adopting the modified plan, the cost per month for an individual would be $380 and, for the senior employee and spouse who is older than 65, the cost would be $760 per month.

Reilly said it is difficult to undo the Gordian knot of deals made over the years with employees who started during multiple eras as insurance policies changed, adding to or subtracting from, the benefit levels.

“We are sensitive to take-aways,” he added.

Benefits under the two types of plan are nearly identical and seniors who would be covered under the supplement plan would gain on some provisions of the restructured policy.

Because the information was presented in a workshop session and was not on the action agenda, the council could not take a position. City Manager Brian Nakamura said it would come back to the council as the budget issues that still face the city come back to the agenda.

“It is a structural issue we need to address,” Nakamura said.

He said retiree medical benefits account for about $2.2 million in the budget.

Councilman Robert Youssef said, “I almost can’t believe it,” and said it indicates “It is important to know that the decisions we make have effects down the road.”

He said it indicated to him a need to “be even more aggressive” in finding ways to smooth government operations.

Reilly said he was looking for direction from the council and to “start the discussion with retirees.”

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