Gary Marks, Ketchum city administrator and the chair of a health insurance pool that includes the city, defended the financially struggling pool’s concept Tuesday, saying that for its 37 member cities, it’s still preferable to health insurance options in the private market.
“It’s a gift to the state of Idaho,” Marks said at a Ketchum City Council meeting Tuesday, referring to the Idaho Independent Intergovernmental Authority Trust insurance pool.
The city, under Marks’ leadership, spearheaded the pool’s creation last year.
“I got into this career path, now 21 years, not to make a profit, but to make a difference, to move communities in positive directions,” he said. “The ‘triple I-A’ is an extension of that.”
Marks said premium costs would be kept in check for pool members as compared to private-market insurance costs because the pool would have few marketing expenses, no profit margin and would be able to allocate money from pharmaceutical company rebates toward lowering premiums. Triple I-A was modeled after a similar pool that Marks helped launch in Montana in 2004. He said the Montana pool has saved $9 million in reserves since then. The Idaho pool went live March 1, 2012.
“Within the first 40 days[,] the [Idaho] pool experienced 11 shock claims in excess of $50,000 each,” stated a PowerPoint slide that Marks displayed during the meeting. “Three of these claims pierced the stop-loss insurance limit and coverage was shifted to the stop loss carrier.”
Marks said at the meeting that considering the pool’s size, it should have seen about two or three claims in the first year.
“Eleven shock claims within 40 days is just insane,” he said. “There’s no other way of saying it.”
Marks said the claims included the “expensive deaths” of two people who had been “gravely ill” and passed away during those 40 days. He said doctors used “expensive, experimental, lifesaving techniques.” He said other claims included two premature births and a renal failure, all of which are acute, unpredictable health issues.
The Idaho Department of Insurance intervened on Nov. 2 after the coverage was shifted to the stop-loss carrier and required triple I-A to rebuild its reserves by $1.5 million. That resulted in premium increases for the pool’s members, which caused some members to consider pulling out of the pool to place their bets instead with the private market.
A letter to Marks dated Jan. 16 and signed by the mayors of Hailey, Chubbock, Burley, Jerome and Shoshone states that the cities intend to withdraw from the pool if they can avoid being 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.”
However, Marks said at the meeting that pulling out is a bad idea. He said because of current health care reform in Washington, D.C., the cost of private-sector health insurance premiums are expected to triple in the next five to six years.
“We’re actually sheltered in a situation like [triple I-A] because we’re isolated from the private market,” he said. “This is the time to be in the shelter of a public pool such as ours.”
Also, there is a penalty for pulling out. In an interview after the meeting, Marks said six cities have “indicated an interest in leaving the pool” if they can do so without paying the penalty.
“[The penalty is] not to punish them, necessarily,” he said. “It’s to make sure the pool remains as strong as can be.”
Though premiums have gone up, Marks said the pool will be solvent enough to offer a 23 percent rate cut in July.
Best- and worst-case scenarios
Marks ended his presentation by listing several best- and worst-case scenarios that triple I-A members can expect if they remain in the pool.
The following numbers refer specifically to Ketchum. Each city’s rates would be slightly different depending on the number of claims that the city’s employees have filed.
Best case: Blue Cross premiums for Ketchum would have increased by 14.4 percent in fiscal 2012 had Ketchum not formed and joined the pool. Considering the expected 23 percent July cut, within six years, triple I-A will beat private rates by 28.2 percent.
Worst case: Assuming fiscal 2012 Blue Cross premiums would have gone up by only 4 percent, triple I-A would still beat private rates by 8.8 percent within the same time frame.
Marks said that in the best case, triple I-A members will now likely start saving money in fiscal 2014 and in the worst case in fiscal 2015. Either way, he said, the first year (fiscal 2012) would have cost them more than if they’d continued in the private market.
Brennan Rego: firstname.lastname@example.org