Modesto’s unpaid medical claims could reach millions of dollars

Feb. 20-- Feb. 20--Modesto is acknowledging its employees are facing millions of dollars in unpaid medical claims related to Riverstone Capital, the city insurance carrier that is subject to U.S. Department of Labor legal action.

"We fear it could be several million dollars," city spokesman Thomas Reeves said. "We are still determining the amount, and I'm not going to speculate to what it will rise to."

He said the estimate is based on the information city officials have been able to glean so far from providers, employees who have volunteered the amounts of their unpaid claims, and other sources. He said the city expects more definitive information this week.

But a Riverstone official said last week his company provided Modesto with a report a few weeks ago that then showed the amount was $4.9 million.

This is not the only financial stress for the city and its employees.

Modesto has replaced Riverstone and Peter C. Foy & Associates -- the broker that brought Riverstone to the city -- with Alliant Insurance Services and has joined the CSAC Excess Insurance Authority, which provides health insurance to local governments. The new coverage is effective March 1.

But city officials have said the new insurance will cost about 49 percent more than the $6.8 million the city and its employees expected to pay Riverstone this year. And the cost will be significantly higher for employees with families who keep the same type of coverage, with some facing increases of several hundred dollars each month.

Modesto moved to new insurance because in addition to the unpaid claims, Riverstone requested in January an 87 percent increase in contributions. The city went with Riverstone in 2017 because it was facing steep increases from its then provider, and Riverstone said it would not raise rates in 2017 and 2018 and by no more than 5 percent in 2019.

About 700 of the city's roughly 1,200 employees use Riverstone. Modesto is picking up the employees' additional costs in switching to the new insurance through June 24 and is working with its labor unions on other ways it can help employees. Reeves said Modesto continues to work on how to resolve the unpaid claims and in some cases has met with providers and has paid claims.

Modesto also is looking at its legal options against Peter C. Foy & Associates and Riverstone, though Chief Operating Officer Travis Bugli said last week Riverstone was considering bankruptcy. Officials with Foy & Associates have not responded to several requests for comment since at least last week.

The U.S. Department of Labor on Feb. 1 filed a complaint in U.S. District Court in the Central District of California against Riverstone Capital and two associated companies, Nexgen Insurance Services and NGI Brokerage Services.

The complaint alleges Riverstone and the other defendants operated what is called a multiple employer welfare arrangement for about 112 employers with about 16,303 participants and engaged in such actions as setting low premiums that were not sustainable in an effort to attract customers as well as charging exorbitant fees.

A Labor Department news release states the multiple employer welfare arrangement "was in danger of collapsing, leaving little to no money to pay outstanding claims," and processed and unpaid claims amounted to $24 million as of late December.

But it still remains unclear what the complaint means for Modesto. The complaint alleges violations of the Employee Retirement Income Security Act, which regulates private-sector health plans. The complaint states Riverstone also managed plans for about seven non-ERISA plans.

A Labor Department spokesman has said Modesto is not among the ERISA plans, and the department would not comment on what the complaint means for the non-ERISA plans. City officials also have not said what the complaint means for Modesto. An independent fiduciary has control of the ERISA plans, though Bugli has said the fiduciary has control of all of the assets.

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