Despite objections to higher-than-expected insurance premiums, the city of Hailey has decided to remain covered by the Idaho Independent Intergovernmental Authority (III-A) rather than pay a penalty of $400,000.
The III-A self-insurance group was formed by Ketchum City Administrator Gary Marks, following the success he experienced with a similar pool in Montana. The III-A pool was launched on March 1, 2012, with 35 Idaho cities’ employees covered, including the staffs of Ketchum and Hailey.
The III-A membership agreement stipulates that cities that drop out before three years must pay a penalty equal to one year’s premium costs. The cities of Jerome, Rigby and Shoshone have dropped out and could face stiff penalties for doing so.
The goal of III-A was to reduce insurance premium costs with mainstream insurance carriers that were set to rise 36 percent for Hailey in 2013. In 2011, Hailey paid about $360,000 in insurance premiums to Blue Cross to cover 65 employees. The city was set to pay only $240,000 in premiums in 2013 under III-A, but the premiums rose to about $400,000 due to unexpectedly high insurance claims within the group.
The increase in premiums was charged to member cities after III-A was warned by the Idaho Department of Insurance to raise capital in order to remain solvent. Hailey threatened to sue III-A if it was not allowed to drop out without paying the penalty.
Hailey City Attorney Ned Williamson said this week that the city will stay within the pool until the end of the three-year trial period.
“I have been wholly unsuccessful at negotiating any reasonable buyout,” Williamson said.
Marks said he took Hailey’s decision to remain in the pool as a “positive action.”
“The pool is performing much better than it was last December,” he said. “The claims are down, as I predicted they would be. For the first time this month, we have gone into the black on our net assets. We are adding to our reserves on a monthly basis.”
“The pool is performing much better than last December.”
Marks said litigation has been filed by III-A against Rigby over the penalty cost for dropping out of the pool. He said letters of demand for payment have been sent to Jerome and Shoshone.
Marks said it would be difficult to assess how those cities’ decision to drop out would affect the entire pool’s performance and premium costs, since no one knows what the claims from those cities would be over the three years.
“But them dropping out makes the formula for everyone else more complicated,” he said.
Marks said the insurance pool he helped create about 10 years ago in Montana now has $9 million in reserves and has taken steps to diagnose illnesses early, thereby reducing medical costs.
“They are going strong,” he said.
Marks said III-A would follow the Montana model by changing benefit plans so that all diagnostic tests are free and encouraged, thereby catching illnesses early.
“We are going to become very proactive in terms of health care,” he said. “Treating a cancer is much less expensive and more effective in stage I than stage III.”
Marks said he did not know if premiums would be reduced for III-A members next year.
“If there is an increase, I don’t think it will be very much,” he said. “We’ll know later this fall for sure.”
Tony Evans: firstname.lastname@example.org