WARWICK, RI – Warwick City Councilors voted 7 to 2 to enter a one-year City employee health insurance contract with Rhode Island InterLocal Risk Management Trust and delayed a continually-postponed resolution for a pre-budget hearing city audit Monday night.
Council members Steve Merolla and Kathleen Usler voted against the low-bidder Interlocal Trust’s contract for fiscal year 2016-2017, costing $19 million for the year.
The Trust was the lowest bidder. Robert Calise, a consultant and managing director of Cornerstone Gencorp, told the council the deal for a fully-insured plan was the best value on health care for the city’s estimated 1,100 employees, but he advised moving to a self-insured plan next time.
Fully insured plans have fixed premiums, based on negotiations with an insurance company (in this case, Blue Cross). The Interlocal Trust purchases a self-insured plan from Blue Cross, and in turn, provides a fully insured plan to municipalities.
Going forward, Calise recommended a self-insured health plan for a three-year period. He explained that among the benefits is that the employee pays a “wholesale rate” rather than a “retail rate” from service providers.
Calise said when he worked as a consultant about 10 years ago, he was hired by the City to review a Blue Cross self-insured program. “I believe at the time, the city had been spending somewhere around $100 per employee per month to administer the program, and we were able to substantially lower the fee another $20 or $30,” he said.
“I can tell you from my experience that a self-insured model is more favorable if you measure over a three- to five-year period of time,” Calise explained. “You are basically stripping out the insurance company’s profits,” he continued.
For FY2017, Calise recommended starting committee discussions soon with members of the school committee regarding the department’s estimated 1,300 employees.
“Those discussions have already begun at the school superintendent’s office,” said Calise, noting that six months would be needed in order to hire a consultant, prepare an RFP and hold discussions. “An organization with 2,500 employees doesn’t wait until October of November of the fiscal cycle,” he added.
Vella-Wilkinson will continue seeking comprehensive audit
In other business Monday, the Council postponed Councilwoman Camille Vella-Wilkinson’s resolution requiring a “Comprehensive Audit be conducted in preparation for the FY2017 Budget Hearings,” until June 6, after the budget hearings.
“Donna and I have heard that a School Committee audit has been completed, but we have not seen it – we have to wait until we receive it from the school district,” she said, adding that she and City Council president Donna M. Travis are “waiting for the whole package,” so a comprehensive audit can be completed.
The resolution, on the docket through several past City Council meetings, has been postponed throughout this year, Vella-Wilkinson said. However, she said, she intends to keep pushing for a pre-budget hearing audit, although it won’t happen before Saturday’s budget hearings.
The City of Warwick already performs an annual audit at the end of each fiscal year. The last one, begun June 30, 2015, was recently posted to the City Finance Department website.
Kenneth Alfano, City Controller, said audits need to wait till the end of a fiscal year, because expenses and bills can still be reconciled up until that time, and even after. In some cases, Alfano said, under the 60-day rule, payments on bills for the fiscal year can be reconciled up 60 days after the year ends, so it takes many months to finish an audit properly.
“You can’t audit the year until it’s done,” Alfano said.
This is a test