Wednesday, December 5, 2012

Cities’ self-insurance pool faces insolvency

Hailey refuses to pay $123,000 for reserves

Express Staff Writer

Fritz Haemmerle

A self-insurance pool created last year by Hailey, Ketchum and 37 other Idaho cities is facing insolvency, due to unexpectedly high insurance claims. State regulators have ordered the group to come up with $1.5 million in reserves to cover unfunded liabilities, stemming from four costly claims, and meet a list of other criteria by Dec. 6.

The city of Hailey refused on Monday to pay $123,000, its portion of the cost to cover the unfunded liabilities. The City Council denied the payment, saying proper notice for the fee was not given at least 60 days before it was due. 

The Idaho Independent Intergovernmental Authority (III-A) insurance pool was formed last year at the suggestion of Ketchum City Administrator Gary Marks. It was based on a similar program he helped establish in 2004 while working as a public employee in Whitefish, Mont. 

The program was intended as an alternative to traditional insurance plans, such as those provided by Blue Cross, whose premiums Hailey City Administrator Heather Dawson said were set to rise by 24 percent in 2012. 

Marks said in 2010 that premium costs would be kept in check because a joint-powers board would have few marketing expenses, no profit margin and would be able to allocate money from pharmaceutical company rebates toward lowering premiums.

Long-term plans for the program include gathering actuarial data that would help III-A assess the true cost of providing coverage.

Hailey’s premiums remained flat for the first six months of participation in the insurance pool, but then rose by 19 percent to cover the unexpected claims. 

Hailey City Attorney Ned Williamson said they could rise another 36 percent for a total premium increase of 55 percent before the claims are settled. Williamson said the city has no intention of pulling out of the insurance pool, but is making contingency plans to provide employee coverage under traditional insurance companies.

On Nov. 2, the III-A board of directors, chaired by Marks, was given a list of requirements by the Idaho Department of Insurance, the agency that regulates insurance companies in the state. 

The requirements include that the company provide $1.52 million to cover unfunded liabilities by Dec. 6, a contingency plan for similar occurrences in the future and a bank statement for December.

“There is a panoply of issues,” said Hailey Mayor Fritz Haemmerle, who attended a recent III-A board meeting. “The claims have far exceeded revenues, which brought in the Department of Insurance.”

Haemmerle said there is no risk that city of Hailey employees would go uninsured.

Marks said at a Ketchum City Council meeting Monday that III-A would eventually re-establish its reserve funds after incurring costs for claims that were “statistically unlikely.” 

He said Ketchum had agreed to pay $112,000 for its portion of the unfunded liabilities.

“We are well on our way to resolving the issue,” he said. 

Tony Evans:

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