Wednesday, December 19, 2012

Hailey might opt out of insurance pool

Jerome, Burley, and Chubbuck could also leave self-insurance group

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By TONY EVANS
Express Staff Writer

The city of Hailey will consider next month whether to drop out of a recently formed self-insurance pool for Idaho municipalities, a move that could bring a hefty financial penalty. 

City representatives will attend a meeting of the III-A board on Jan. 7 in Boise to consider dropping out, and to discuss whether dropping out will mean paying up to $444,000 in penalties. A joint powers agreement signed by III-A members calls for penalties equal to one year of premium costs for dropping out early.

In March 2012, Hailey joined 36 other cities, including Ketchum, in the Idaho Independent Intergovernmental Authority (III-A) insurance pool, in order to avoid steep insurance premium hikes for city employees.

Yet rather than going down, insurance premiums went up for III-A members during the first year of operation, due to unexpectedly high insurance claims. 

The Idaho Department of Insurance intervened in November, requiring III-A to meet numerous criteria before Dec. 6, including raising $1.5 million in additional cash reserves to cover expected costs for incurred, but not reimbursed, claims.

Hailey saw its annual premiums rise from $336,000 per year to $444,000 per year in September. In addition, the city was assessed an additional $123,000 by the III-A board to help cover the cost of the unexpected claims. 

Hailey publicly refused to pay its share of the assessment last month, adding to the insurance pool’s woes.

Mayor Fritz Haemmerle described the city’s negotiations with III-A on Monday at a City Council meeting as “ongoing.”

The III-A pool was begun 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.

Marks said in an interview that the Whitefish pool now covers cities across Montana and has been successful at avoiding steep premium hikes that cities have endured under mainstream insurance programs

“They have millions of dollars in the bank,” he said.

Marks said the cities of Jerome, Burley and Chubbuck have also expressed an interest in opting out of the III-A pool, but that doing so before the end of the first three years could cost the cities penalties.

“When cities joined, they approved a JPA which included a three-year membership term, so you can have stability,’ Marks said. “One entity’s decision to leave should not jeopardize the viability of the pool for the remaining members.”

Marks said the steep hikes in costs were due to a “rush of claims” during first 40 days of the pool. He said those costs have since diminished to the point that III-A could soon reduce the rate of premium increases.

“We need to see several more months of trends to know if rate increases could go down,” he said.

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In other Hailey news:

Martha Burke resigned from the Friedman Memorial Airport Authority board. In a letter to the mayor and City Council dated Dec. 17, she stated that she realized that her credibility and effectiveness had been “severely compromised” as the result of comments she made during a Dec. 4 board meeting. At that time, she said Hailey’s representatives on the board had been prohibited from compromising on airport expansion options. (See story in the Dec. 7 issue titled “Hailey: No compromise on airport plan.”)  Susan McBryant was reappointed for another two-year term on the board. 

Jan. 4 was proclaimed Fabulous Female Friday by the mayor and council, following a senior project presentation by Amelia Fugate focused on recognition of women in U.S. history.

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Tony Evans: tevans@mtexpress.com