Wednesday, May 21, 2014

John's Place: Oro Valley Self Insured Health Care-Who's Minding The Store?

The Town of Oro Valley has embarked on health self-insurance for its town employees. The original set-up of many of its programs has been handled by the town manager and human resource manager. Recently these two have continued to research and present ongoing health programs such as a self-funded dental program and an in-house wellness clinic. There has been minimal public communication or input on these activities until recommended budget presentations.

One of the most important points in self-insurance is the fiduciary responsibility for the fund itself. Of course, the town is ultimately responsible for the cost of the fund. Self-funded insurance programs usually create a Board of Trustees to give oversight to the fund. This could be a combination of internal staff, employees, citizens, and outside experts and a liaison person from Council.

The Town of Oro Valley should establish a Board of Trustees. Their job would be to "mind the store."

The responsibilities of the Board of Trustees (Health Plan Trustees) would be to make policy decisions for the Health Plan and provide oversight of Plan activities.

The Board provides protection for the taxpayer by:
  • determining the third party administrator (such as United Health Care) and other vendors that will work for or support the Plan on a fee for service basis;
  • approving contracts with any health care vendors as a Health Plan Trustee;
  • assuring that the third party administrator and other persons or vendors hired for administrative purposes carry out their duties in a professional manner (audit ability);
  • approving any changes in benefits or rates proposed by third party administrator. (For example, a 7% premium increase has been included in the budget for both employee and employer contributions for FY14/15?);
  • undertaking periodic reviews of the Plan's financial performance, funding safeguards, and stop-loss insurance protection and ensure adequate funds are available to pay for any Affordable Care Act (Obama Care) provisions or changes; and
  • providing timely reports (monthly or quarterly) to the Council on the numbers of enrollees, claims experience, and the financial condition of the Plan 
The Board provides protection for the employee.

Both the employer and third party the administers the plan, that is reviews, approves and processes claims operate with no oversight, no regulation, and no accountability.  In the self-funded plan, there is no insurer. United Health Care becomes the "Third Party Administrator."  They process the claims, they administer the plan.

If the third party administrator (United Health Care) decides not to pay, the employee will not be able to use state laws or regulations to hold the Town of Oro Valley Employer or the third party administrator to accountable.

The only law that you have to back the employee up will be found on the Department of Labor website, under the "ERISA" section.

The Board provides this accountability for the employee.  For example, the Board would create a claims review committee for purposes of reviewing the payment of claims that have been initially denied by the third party administrator.

The town has embarked on a treacherous road, self insuring what is really a small number of employees.  The risk of doing this will not be seen for several more years as claims begin to mount.  We think that a Board should also be put in place to provide oversight to the program, to measure its results, as well as to assure the employee and the taxpayer fair treatment for all.


Richard Furash, MBA said...

With the recent - outrageous - increase in county property taxes (8%) and the reckless path of spending in Oro Valley, I think this dusty, windy, one horse town will soon be much to expensive for retired folks.

Richard Furash, MBA said...

My employer has been self-insured for decades - we have 11,000 employees. It's no small task to properly manage health insurance internally.

Richard Furash, MBA said...

I wonder who is the fiduciary for this plan?? Hope this person has excellent fiduciary coverage in place with very high limits, is a financial wizard, and possibly be willing to spend a lot of time in court resolving claim disputes in the future. One thing about liability claim issues is they can linger on for a long time............................................

It is very irresponsible to the citizens of Oro Valley, and employees involved in administering this plan to not have a Board of Trustees in place.

I wonder if the Town Council has any current and future liability issues?.

Richard Furash, MBA said...

If the town has a self-funded dental plan, is Hiremath in any way involved? That would be a HUGE conflict of interest!