Executive Director's
Report- Spring Issue 2004
New Health Insurance
Advisory Committee Forty-five counties and
about 160 municipalities secure health insurance for their officials and employees
through participation in what is referred to as the Local Government Health Insurance
Program (LGHIP). The LGHIP is managed by the State Employees Insurance Board (SEIB),
which was created by statute to manage the health insurance program for state
employees.
The LGHIP was authorized by an
act of the Alabama Legislature passed in 1990. The program has experienced significant
growth and acceptance since its inception. It has proven to be an excellent vehicle
through which small to medium size local governments can secure adequate health
benefits at reasonable costs.
Prior to the
inception of the LGHIP most local governments provided health benefits for their
officials and employees through individual contracts with Blue Cross and Blue
Shield of Alabama and a few others insurance organizations. A few of the contracts
involved some form of individual self-funding. Many local governments began to
experience significant increases in health insurance premiums from year-to-year.
Local governments with as many as 150 employees on their health insurance rolls
began to realize that a few catastrophic claims incurred during a year drove their
premiums higher. Stated differently, they simply did not have enough participants
among which to economically spread the cost of a few costly claims. Compounding
the problem further was the ever-increasing costs of health benefits in general.
The LGHIP was created to enable multiple local government employers to participate
in a health insurance pool involving thousands of covered individuals thereby
realizing economies of scale.
With little
dispute, the LGHIP accomplished exactly what it was designed to do during its
first ten years of existence. The health benefits were adequate by any standard
and the costs (premiums) were stabilized (premium increases from year-to-year
were in the three to five percent range). The program operated so well that at
one point the SEIB actually approved a refund to participating employers and covered
individuals totaling several million dollars. Everyone was pleased with the program's
success.
About half way through the year 2000
things began to change. The national economy went sour and health benefits costs
began to skyrocket. It was at about this time that the program's financial condition
began to deteriorate. The economy and health benefits costs were not the only
factors contributing to the program's financial woes. A serious problem began
to emerge concerning retired employees participating in the program. The staff
for the SEIB reported that on an annual basis the costs of providing health benefits
for retired employees was exceeding the premiums paid by or on behalf of them
by more than $1 million. This meant that premiums being paid by or on behalf of
active employees was being used to subsidize the costs of benefits provided to
retired employees. The SEIB began to realize that the revenue surplus it was carrying
was rapidly disappearing and that the program was headed toward a serious deficit
situation.
As a result of all these factors
the SEIB, in late 2002, approved some significant changes in the program. Premiums
were increased significantly and retiree participation rules were altered significantly.
These changes were met with considerable criticism from the employers, active
employees, and retired employees. The criticism was leveled at the increases in
premiums and the new rules, but perhaps more so at the perceived, if not actual,
lack of proper notice and explanation provided by the SEIB.
As
a result of all the controversy surrounding this matter the ACCA membership voted
to have legislation introduced in the Alabama Legislature which would require
that the number of individuals on the SEIB be increased by two and that the new
positions be filled by representatives of county and municipal governments. The
legislation was introduced during the 2003 regular session of the Legislature
and came very close to passing.
Prior to
the 2004 regular session of the Legislature, Mr. William Ashmore, Executive Director
of the SEIB, contacted the ACCA office and suggested an alternative to the legislation.
He suggested that the SEIB be approached with the idea of establishing an advisory
committee consisting of representatives from participating employers, active employees,
and retired employees. He explained that the advisory committee would meet with
SEIB staff and discuss matters relating to the operation of the program and make
recommendations to the SEIB. The ACCA staff agreed to work with Mr. Ashmore in
this regard. A set of by-laws was drafted and presented to the SEIB on February
11, 2004. The SEIB approved the establishment of the advisory committee on that
date and at the same meeting adopted The Local Government Health Insurance Program
Advisory Committee Bylaws.
The Bylaws provide
that… "The Committee shall provide advice and expertise to the SEIB
regarding the Local Government Health Insurance Program (LGHIP). The committee
shall also have the opportunity to review and provide comment on benefit and premium
structures, eligibility, and enrollment rules and requirements as well as any
other matters that have an impact or potential impact on the LGHIP…"
The
Bylaws also provide that the committee shall consist of nine members, two of which
will represent county governments and that they are to be appointed by the ACCA
Executive Director. Other committee members will represent municipal government,
retired employees, and other entities participating in the program.
Appointed
to represent county governments are Hon. Greg White, Chairman of the Covington
County Commission and Mr. Roy Roberts, Houston County Administrator. We are confident
that these two individuals will do an outstanding job in representing the interest
of county government.
It is certainly in everyone's
best interest to support this effort. It will not guarantee that health insurance
premiums will be reduced or that everyone will be satisfied with all future rules
and regulations governing the program, but it does provide an opportunity for
input into the direction the program will travel in the future.
Notwithstanding
the concerns that have been expressed during recent years about the LGHIP, it
has been and still is our position that it is the best means through which small
to medium size counties can obtain health insurance for their officers and employees.
The problems the program has experienced in recent years are typical of what is
going on all over the country. Public and private health insurance programs in
every state are struggling to determine how to control ever-increasing health
care costs. It is well documented that the health insurance programs for Alabama's
state employees and education employees are facing similar financial difficulties.
Problems associated with funding and administration of health insurance programs
will continue and there is no end in sight.
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