Modesto picks health insurance fix, will help workers with added costs

Feb. 06--Modesto has taken steps it believes will free itself from a health insurance mess in which its employees' medical claims have gone unpaid and they faced huge increases in their contributions, but the city's fix also will be costly.

The City Council on Tuesday decided unanimously to replace insurance broker Peter C. Foy & Associates with Alliant Insurance Services and join the CSAC Excess Insurance Authority, which provides health insurance to local governments. The city also is ending its relationship with Riverstone Capital Insurance Services.

Councilman Mani Grewal did not take part in the council action because he is a Memorial Hospital Foundation board member, and the facility has unpaid medical claims for care provided to city employees.

Modesto has used Foy & Associates and Riverstone since 2017, through what the city is calling the Fortress plan and with the health care offered by Cigna providers. Modesto officials say the two companies guaranteed contributions would not increase in 2017 and 2018 and by no more than 5 percent in 2019.

They did not increase the first two years, but Riverstone in January sent Modesto what is called a cancel-rewrite letter recommending as of March 1 an 87 percent increase in "employer funding contributions that will ensure payment of claims and fixed cost," according to the letter.

"Our position is Foy and Riverstone have not lived up to their commitment to the city," Human Resources Director Norma Santoyo told council members.

Modesto has roughly 1,200 employees, and about 700 have health insurance through Fortress, while about a couple of hundred have insurance through Kaiser. The remaining employees have opted out of city insurance and have coverage through other providers.

Riverstone Chief Operating Officer Travis Bugli said in a Wednesday phone interview that what Modesto does not understand is that it does not have a traditional health insurance plan in which the insurer is responsible for all of the costs. Instead, he said, Foy and Riverstone helped Modesto set up a self-funded plan in which Modesto bears the bulk of the increased costs.

City spokesman Thomas Reeves said Modesto still is determining the amount of unpaid claims and a plan to deal with them. City officials are expected to report back to the City Council. But Bugli said Riverstone provided Modesto a report a few weeks ago showing unpaid claims were $4.9 million.

The new health insurance coverage that starts March 1 comes with lots of pain for the city and its employees.

Contributions in total will be 49 percent higher than what Modesto and its employees expected to pay before receiving the Riverstone letter with the 87 percent increase. Santoyo told council members that employees with families are facing "400 to 500 to 600 percent increase in rates over what they were paying before."

More than two dozen city workers attended the council meeting, and several told council members about the financial hardships they face. They said they were proud and dedicated employees, made good wages, and despite being careful with their money, it still was a struggle for them and their families.

"I'm sunk at paying $500 or $600 more (a month)," a streets department worker said, who added he has young twins with respiratory problems. "I don't know how to pay this."

The council did decide to pick up the increased costs through June 24, but employees asked for help to get them through all of 2019. City officials said they will work with their labor groups to find ways to help employees beyond June 24. Potential solutions will be brought back to the council.

"My commitment to you is stronger now than ever," City Manager Joe Lopez wrote to employees in a Wednesday email. "We will fight for your family's well-being." Council members also pledged their support to city workers at Tuesday's meeting.

Lopez also wrote: "We will fight the companies that put us in this position with every legal tool we have at our disposal."

The employees' new contributions from their paychecks are steep.

For instance, an employee with a family with coverage through Fortress had been paying $48.02 every two weeks through one plan. That employee will pay $364.68 every two weeks for the same coverage under the new insurance. But employees who were single or insured themselves plus one other person were not having anything deducted from their paychecks.

Modesto and its labor unions switched to Fortress in 2017 because the city was facing steep increases through one of its health insurance providers. A city report from Lopez (who was then a deputy city manager and HR director) said the Fortress plan would offer a 25 percent reduction in contributions.

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