Hailey last week joined five other cities in an effort to sever ties with the Idaho Independent Intergovernmental Authority insurance pool, formed last year at the suggestion of Ketchum City Administrator Gary Marks.
The city paid an unexpected bill of $123,000 this week to help cover a spike in insurance claims in the pool, which covers 37 cities in southern Idaho.
State regulators ordered the group this fall to come up with $1.5 million in reserves to cover unfunded liabilities stemming from four costly claims and to meet a list of other criteria. Since that time, Hailey has been preparing for a backup plan.
The city joined the other cities last year to pool insurance costs and liabilities in an effort to stem the tide of rising premiums under a Blue Cross policy. City Administrator Heather Dawson said in 2011 that the city’s insurance premiums were set to rise by 24 percent in 2012. Marks said in 2010 that premium costs in a pool would be kept in check because a joint-powers board would have few marketing expenses and no profit margin and would be able to allocate money from pharmaceutical company rebates toward lowering premiums.
Hailey’s premiums remained flat for the first six months of participation in the pool, but then rose by 19 percent to cover the unexpected claims. Hailey City Attorney Ned Williamson said last month that they could rise another 36 percent for a total premium increase of 55 percent before the claims are settled.
“It’s regrettable, but this does not appear not be working as promised,” Haemmerle said in an interview. “We definitely will be ready with another insurer.”
However, the joint powers agreement that formed the pool includes a penalty of about $400,000 if a city drops out before three years.
A Jan. 16 letter to Marks, who is chair of the Independent Intergovernmental Authority board, signed by Haemmerle and the mayors of Chubbock, Burley, Jerome and Shoshone states that the cities intend to withdraw from the pool if they are not charged a penalty for doing so. The letter states that if they are not released from the penalty provision, they may seek a declaratory judgment from a court that the provision is “unconstitutional and void.”
Marks said in an interview Tuesday morning that he had not yet read the letter, but that Burley Mayor Terry Greenman had agreed to remain in the insurance pool.
The letter, also signed by the mayor of Rigby, states that Rigby has already decided to drop out.
“It’s in the agreement that they (Rigby) signed that they will have to pay the penalty,” Marks said. “We will take [Hailey’s letter] under advisement with our legal counsel.”
Tony Evans: email@example.com