HomeMy Public PortalAbout2003-04-29 Special Meeting190
COUNCIL MINUTES
SPECIAL MEETING — APRIL 29. 2003
A Special Meeting of the Bal Harbour Village Council was held on Tuesday, April 29, 2003,
in the Council Chambers, at Bal Harbour Village Hall. The meeting was called to order at
9:09 a.m. by Mayor Tantleff. Those present were:
Also present:
Mayor Daniel S. Tantleff
Councilman Howard J. Berlin
Councilman Peg E. Gorson
Councilman Joel S. Jacobi
Alfred J. Treppeda, Village Manager
Jeanette Horton, Village Clerk
Steven Zelkowitz, Village Attorney
Absent: Assistant Mayor Seymour Roth
As a quorum was determined to be present, the meeting commenced.
4. PLEDGE OF ALLEGIANCE: The Pledge of Allegiance was led by Acting
Police Chief Hunker.
3. DISCUSSION OF HEALTH INSURANCE — LAURENCE DEETS
BUTLER (BUCKLEY & DEETS): Mr. Treppeda explained that Nationwide Public
Employees Trust has had some serious financial problems recently and the State of
Florida is investigating to see if they need to take over the entity. He advised that the
Village's Insurance Consultant, Larry Deets, has checked into the program and has looked
at what options the Village has, to see what the best plan of action is.
Mr. Deets explained that he started looking at this issue in March, with a target date of July,
to resolve the problems of claims not being paid on behalf of employees, etc. He advised
that at that time, he collected necessary data to look in the marketplace. Mr. Deets
reported that in early April, the Village received the announcement that the State of Florida
had gone into the Trust and had given them the cease and desist. He explained that there
seems to be a quarrel going on between the State and the Trust, as to whether the State
has any authority and whether it's a URISA Trust and is only subject to federal law. Mr.
Deets advised that he has been in the business for 30 years and feels that no good will
come out of this kind of argument, for the employees. He thinks that there is a definite
under -funding problem, when claims are not being paid. Mr. Deets reported that there has
also been a change in the turnover of personnel there that pay the claims. He advised that
he doesn't have any solid issues that it's going out of business or what it's going to do, but
he thinks that it has the flavor of being a growing problem.
Mr. Deets stated that the Village has a 70 person employee group, so it's not subject to the
under 50 life laws in the State of Florida, which is a guarantee issue. He explained that
when there are over 50 lives, then there's underwriting involved on anything that is
considered. Mr. Deets reported that he contacted Blue Cross/Blue Shield, Humana, and
United, to discuss the underwriting of this account. He explained that unfortunately the
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Village has employees (1 diabetic, 1 serious blood pressure issue, a cancer case, and a
dependent that has been in the hospital since March), which scares any carrier, from a
liability standpoint. Mr. Deets explained that all insured contracts in Florida have to have a
"run-off" provision. He advised that if a person is in the hospital at the date of the
termination of a contract and is switched to another contract, then the old contract is
responsible for that person. He stated that under the circumstances, where there is a
possibility of a financial issue, a new carrier could be drawn into having to provide coverage
for that situation. Mr. Deets explained that the Village's previous insurer (Florida Municipal)
has agreed to take coverage over. He stated that the State has recommended that the
Village do something no later than May 15th. Mr. Deets doesn't know if that's a hard and
fast issue, because he thinks that there's a lot of legal fighting that will continue on that
problem. He recommended that the Village cut its losses and get out of this before it gets
any worse and before there is any further failure of employees with medical problems. Mr.
Deets stated that this is probably the Village's only choice, at this point, and is an excellent
option. He suggested that the Village look at targeting to do something in the future again
and ask for quotations from various carriers, but he doesn't see that happening until a year
from October 2003, because the Village has to work through these current issues.
Mr. Deets fears that the Village has an outstanding liability, with people who are under the
current plan, who may not receive payment on their claims. He doesn't know where that
stands, but he is suggesting to ask the League if they would be of assistance, if the Village
needs it in the future. He explained that the League has contracts with hospitals and
doctors and he would like them to come in and adjudicate any old claims that the Village
may have a liability on, so that the Village can take advantage of those contractual
agreements, rather than having to pay whatever is billed to the person. He explained that
whatever is billed is usually not what is settled on, with insurance carriers.
Councilman Berlin questioned Mr. Deets about the Village's liability on unpaid claims. He
thinks it should either be a matter of contract or law. Mr. Deets advised that it should be
contract, but the Village has never received a contract from Nationwide Public Employees
Trust. Councilman Berlin clarified that the Village has never received a policy. Mr. Deets
agreed. Mrs. Horton explained that Nationwide advised that they do not issue policies or
contracts. She reported that they just gave the Village what was covered under the plan.
Councilman Berlin stated that, in the future, the Village can't do business that way. Mrs.
Horton advised that Florida Municipal always gives the Village a contract, with their master
plan. She explained that the only thing that Nationwide gave the Village was a letter stating
that they would cover the Village, at the same rate, for two years. Mrs. Horton stated that
when she asked them for a contract, they advised that they don't do that. Councilman
Berlin stated that the Village should never engage in any contract or agreement with any
third party of substance, without a contract. He explained that even if they're the low bid, if
they won't provide a contract, then there won't be a deal. Mr. Zelkowitz agreed that would
be a basic requirement.
Councilman Berlin questioned what the Village's liability is from this point, on the
incumbent policy. He questioned if the Village has paid the entire premium. Mr. Deets
advised that the premiums have been paid to date, in full. Councilman Berlin questioned
what the start date was. Mr. Deets advised that it was October 1, 2002. He explained that
the premiums are paid monthly. Mr. Deets reported that, under a group insurance contract
in the State of Florida, they can be given notice and be out of it the first of any month.
Councilman Berlin clarified that the Village has no residual liability on the premium. Mr.
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Deets stated that the Village may have a residual liability for the month of May, because it's
such a late date. He stated that's a gamble, but questioned whether the Village wants to
forego getting out... Mr. Deets clarified that the problem is that these things can just get
bigger, claims wise and problems wise. He thinks that from the premium standpoint, the
Village has a possibility of a liability for the month of May. He stated that from an
outstanding claims liability, to support the employees, he considers a fiduciary
responsibility that the Village will have to look into more. Councilman Berlin stated that
since there's no contract, he would like the Village Attorney to examine legally what the
Village's obligation is. He understands that it's a two-edged sword, because if the Village
doesn't pay and the underwriter doesn't pay, then they're going to look to the employee to
pay and that has to be balanced. Councilman Berlin would like to understand what the
Village's legal rights are, before making a decision. He stated that if the Village has no
legal obligation to pay and it pays, then he wants to make sure that the Village has the
ability to undertake a payment, when it has no legal obligation. Councilman Berlin stated
that if the Village has a legal obligation to pay, then it's a different story. He feels that the
Council needs to know the answer to that.
Councilman Berlin explained that he thought that pre-existing conditions were kept out of
going forward. Mr. Deets explained that pre-existing conditions are out of it, but they have
the right, in the case of 50 lives or more, under the statute in Florida, to review. He stated
that the underwriter would come in. Councilman Berlin stated that the likelihood of them
picking up a serious condition is not good. Mr. Deets agreed that they're not going to take
over coverage, which is why the Village is in a problem. Mayor Tantleff advised that is why
only the League would touch the Village. Mr. Deets explained that the League has a good
history with the Village, from previous years, and they're trying to bend over backwards to
do this. He stated that the Village isn't going to get a United or Blue Cross/Blue Shield. Mr.
Deets advised that the Village is required, by law, to have retirees covered and Blue
Cross/Blue Shield won't touch it, because of that.
Mrs. Horton advised that she spoke to the Florida League and they asked questions about
pre-existing, etc. She explained that with the Village's experience with them, they are
taking all of the pre-existing conditions, with no limits and no problems.
Mayor Tantleff questioned how much there is in unpaid claims. Mr. Deets stated that
normally a Trust of this nature would have a maximum liability of a quarter of a million
dollars, on any one person, then they would re -insure on top of that. Councilman Berlin
questioned if the Village has subrogation rights. He questioned if the Village helps the
employees and pays some of the claims so that the employees aren't sued personally, if
the Village would have subrogation rights to sue to recover, either from the carrier, re -
insurer, or receiver. Mr. Deets thinks that's more of a legal response. Mr. Zelkowitz thinks
that would depend upon whether the Village has a legal obligation to pay that claim or not,
whether it's doing it voluntarily, or if it has a legal obligation to pay the claim, may give rise
to subrogation rights. He stated that if it's the direction of the Council for the Village
Attorneys to review the issue of the Village's liability in the event of unpaid claims, then
they can also look at the subrogation rights issue. Mr. Deets explained that in the past he
has seen cities step in on the employees' behalf and loan them the monies to negotiate the
issue, because the employee still retains the right to go against them. Councilman Berlin
questioned what kind of loan that would be. Mr. Deets stated that it was done a long time
ago on a non -interest bearing basis and he doesn't think that can be done any longer.
Councilman Berlin stated that if interest isn't charged, then it's income for the recipient. Mr.
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Deets doesn't believe that the Village has a direct subrogation point now, until this goes
further and it's determine. He explained that if the Village considers itself in a fiduciary
responsibility, and the decision to go with Nationwide created this loss, then it's a big step
for the Village to take. He advised that he wouldn't want the Village admitting to something
like that at this point. Mr. Deets clarified that even though the Village isn't subject to the
Employee Retirement Security Income Act of 1974, as a Village and Town, there are still
fiduciary responsibility rules that are involved, which he understands cover any employee
that is covered under a plan. He stated that the Village made a decision in October to go
under a program and it has now found that it is broken, so there's a question if the decision
in October was a good decision. Mayor Tantleff clarified that the Village may be on the
hook to pay those claims, by fiduciary responsibility.
Councilman Berlin questioned if there are any towns that are the Village's size that are
going self -insured, with re -insurance. Mr. Deets responded that they are generally 150-
200+ employers, because of the spread of risk, especially in Dade County. He explained
that Dade County is the second or third highest cost area, claim wise, in the Country. Mr.
Deets stated that one of the issues is that the carriers (United, etc.) have more clout with
the hospitals in getting per diems and rates down, than the third party administrators, who
come in with people like Beechstreet, etc. He advised that they are nice networks, but they
don't have the membership clout to drive down the rate, at the local facilities.
Councilman Jacobi questioned what the Village's premium is now. Mrs. Horton advised that
it's $40,000 per month ($480,000 per year). Mayor Tantleff questioned if there's an
urgency to do something today. He stated that regardless of if there's a million dollars
worth of claims, the longer the Village sticks with this plan, the Plan is still not paying the
bills. Mr. Deets agreed. Mrs. Horton advised that she has requested a loss run from
Nationwide and hasn't received it yet. She explained that she has bills that haven't been
paid since November/December. Mrs. Horton advised that there are several police officers
who have bills out and they're worried about their credit, because they haven't been paid.
She stated that Village Attorney David Wolpin contacted the State and the State advised
that the Village should get out as soon as possible, prior to May, if it can. Mr. Deets stated
that the additional problem is that if the League starts asking more questions and
reconsiders their position, then it will put the Village into a position where it would then
have to go to a self -insured. He advised that he has researched, as an emergency issue
only, to see about getting self-insurance for the Village. He explained that the problem is
that getting stop loss coverage for any large claim and for the aggregate of numerous
claims is going to be practically impossible to get, because the Village isn't getting any
assistance from Nationwide telling what the losses are and the Village has a bad history
claims wise. Mr. Deets thinks that the Village is in a situation where it needs to take action
and see what it can do to get back on a stable road.
Councilman Jacobi questioned where the money would come from, if the Village has to
pay. Mrs. Horton advised that there is a fund balance of over $2 million and a contingency
fund of $109,000. Mayor Tantleff stated that the Village wouldn't pay without going to court
and fighting it, seeing what the Florida League can do to help, etc. Councilman Berlin
stated that the problem is that it's the Village's employees that are on the line, it's not just
the Village. He stated that there are employees, who have claims under what they thought
was the Village's insurance program. Councilman Berlin thinks that the fact that the
insurance company hasn't paid means that they are now personally liable. He stated that
the employees are going to get sued, if the Village doesn't pay, and their credit is going to
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get impaired, which is a serious problem.
Mr. Deets explained that the current plan is a PPO, it's not a HMO plan. He advised that it
would be different if it were an HMO plan, because then it would become a direct provider
discussion between the provider and the insurer. Mr. Deets reported that a PPO is
basically an indemnity that the Village is reimbursing them for benefits. Mayor Tantleff
questioned if the Village has an idea of the amount of the unpaid claims. Mrs. Horton
advised that she cannot get any information. Councilman Berlin stated that Mr. Deets has
advised that one claim could be at least over $250,000. Mrs. Horton advised that an
employee's wife had surgery and had problems, so she was in intensive care for about five
weeks. Acting Chief Hunker advised that another employee just had open-heart surgery.
Mrs. Horton stated that Mr. Wolpin may have to write letters, to negotiate with the providers
to drop the price of the bill. Mr. Deets suggested that the Village ask the League for their
help, to see what their liability would have been, so that the Village can write letters to the
providers saying that based on that amount, this is the payment. He advised that has
worked very well in the past and they are glad to get it and not have to fight and go forward.
Councilman Jacobi thinks that doctors like to settle. Mr. Deets stated that as long as it's
logically done, it's doable. Councilman Berlin stated that if the Village is going to be
stepping in to pay the claims, then they would want to negotiate for full release. Mr. Deets
stated that the biggest problem is with shareholder owned hospitals, which may be difficult
to deal with. He stated that what has happened has happened, and no matter what the
Village does today, it's not going to change that. Mr. Deets stated that if the Trust comes
through and finds some money, then they're going to have to pay those liabilities and if
they don't, then the Village will have to deal with it. He stated the question is what the
Village should do moving forward, because it knows there's a problem.
Mayor Tantleff stated that it's not just the Village. He thinks that the County or someone is
going to have to step in, because there must be thousands of employees who are going to
be on the line. Mrs. Horton stated that the City of Sweetwater also has Nationwide and they
are getting out, because their claims aren't being paid. Mayor Tantleff thinks that someone
is going to have to step in and help pay these claims.
Mrs. Horton advised that they would like a motion to authorize Florida Municipal to be the
Village's carrier, effective May 1, 2003. She explained that Florida Municipal will FedEx all
of the enrollment cards and it would be effective May 1st. Mr. Treppeda requested that the
Council also authorize the funding necessary, because there's a contractual provision in
the police contract that the Village cannot pass on the increases to the officers. He
recommended that the increases not be passed on to the general employees either. Mr.
Treppeda reviewed that there's a contractual provision in the police collective bargaining
agreement that states that the Village cannot pass on increases in the middle of the
contract. He advised that this police contract expires October 2004, so it's the Village's
responsibility and the Village Attorney agrees, to pay the difference between this and the
other plan. Mr. Treppeda thinks that should also be done for the general employees. He
explained that even though the general employees don't have a union, he thinks that it
would be fair for the Village to do this. Mr. Treppeda advised that the total would be
$46,925.55 for the remaining five months. Mrs. Horton stated that there is contingency is
this year's budget.
A motion was offered by Councilman Gorson and seconded by Councilman Berlin to approve
Florida Municipal as the Villake's Insurance Carrier, effective May 1, 2003, and to also approve
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$46,925.55 to cover the difference for the police and general employees. The motion carried with
the vote as follows: Mayor Tantleff aye; Assistant Mayor Roth absent; Councilman Berlin aye;
Councilman Gorson aye; Councilman Jacobi aye.
Mayor Tantleff would like the Council to get the numbers of what the claims are. He
requested that Mr. Zelkowitz help out with that. Mr. Zelkowitz will also research the liability
issue of the Village and what would happen if it stepped in to do it voluntarily or if it has a
legal obligation to do so, including the subrogation rights against the insurer. Councilman
Berlin stated that the employees are going to start getting collected against, so the Council
can't just sit back and not have Nationwide provide the information. He suggested sending
them a 3-day demand letter and if they don't turn over the information, then he suggested
filing a lawsuit and immediately propound discovery and get all of the information. Mr.
Deets stated that if the Village can get the Trust agreement, it would be able to impose it,
which would tell what the run-off position would be. Councilman Berlin wants to get
everything (copy of the contract, the run-off, etc.). Mr. Treppeda requested a motion for a
lawsuit.
A motion was offered by Councilman Berlin and seconded by Councilman Jacobi to proceed with
a lawsuit, if Nationwide Public Employees Trust doesn't follow the demand letter. The motion
carried with the vote as follows: Mayor Tantleff aye; Assistant Mayor Roth absent; Councilman
Berlin aye; Councilman Gorson aye; Councilman Jacobi aye.
Mayor Tantleff stated that as Mayor he gets a lot of invitations and he has asked Ms.
Horvath to give everyone a copy of every invitation. He advised that Council members
should let him know if they want to go, because he wants everyone to have access to all of
the invitations.
4. ADJOURN: There being no further business to come before the Council, a
motion was offered by Councilman Berlin and seconded by Councilman Jacobi to adjourn. The
motion carried unanimously (4-0), with Assistant Mayor Roth absent, and the meeting adjourned
at 9:40 a.m.
Attest:
t.
Jeanette Horton, MMC
Village Clerk
/elh
/
Mayor Daniel S. Tantleff
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