St. Joseph County Commissioners mull possible contract for health insurance broker

Dec. 11--SOUTH BEND -- Amid debate over what role St. Joseph County's health insurance broker should play to help prevent future budget mistakes, concerns have been raised that the county doesn't have a contract outlining the firm's responsibilities.

When the county Board of Commissioners hired R&R Benefits in 2013, it did so by approving a "letter of engagement" that -- unlike a contract -- doesn't outline all of the South Bend firm's responsibilities and how much it is paid. But commissioners are now expected to consider approving such a contract, according to Andy Kostielney, commissioner president.

The issue, raised during a County Council meeting last week, comes as officials recently found a budget error that caused a $5.8 million deficit in the county's health insurance fund going into 2018. The mistake has called attention to County Auditor Mike Hamann, as well as the role other officials play in financial decisions.

The error stemmed from the auditor's office failure to account for the cost of retirees when calculating the budget for health benefits, accounting only for current employees. As a result, the fund has been sharply under-budgeted each year since 2014.

During the recent meeting, County Council member Robert Kruszynski Jr. raised concerns about not knowing what R&R's responsibilities are and how much it is paid because there is no contract. He asked Kostielney if commissioners plan to consider approving a contract with R&R, which manages the county's self-funded insurance plan. The plan provides coverage for about 1,070 county employees and 200 retirees.

"My expectation is that we will have a contract where everything is clearly delineated as to what their expectations are and what their compensation is," Kostielney said in response.

Kostielney then noted that the county's previous broker, Benefit Resource Group, also operated without a contract and was paid the same way as R&R.

R&R's compensation varies from year to year because the county doesn't directly pay the firm. Instead, the firm gets a percentage of the annual premium paid by the county to its provider of stop-loss insurance; that coverage only takes effect after the county pays $250,000 on its own for an employee's medical bills. According to R&R, the firm has been paid more than $1 million since it was hired in 2013.

Commissioners say R&R had nothing to do with the budget error, saying the firm has consistently given accurate information to the County Council -- the government's financial branch -- and the auditor's office about the cost of insurance per participant, which was about $12,800 this year.

"This is not the fault of the broker," Kostielney said during the meeting, emphasizing that the cost of the insurance plan remains low when compared to other local governments. "They gave us the information for what we should be budgeting -- between $15 million and $16 million -- and moving forward that's what we are doing,"

Even so, some County Council members think the broker should provide more help with the budgeting process to ensure projections are accurate. They've pointed out that some other brokers play a more active role helping local governments prepare budgets.

County Council President Rafael Morton told Kostielney that he disagrees with his conclusion that the broker has been doing everything it should.

"For you to say that R&R has no culpability in this situation, I strongly disagree," Morton said.

Hamann said he doesn't believe the broker has had enough information in the past to accurately estimate the insurance cost per employee. To do that, he said, the firm needs information from his office.

"No one was talking to each other," he said at the meeting, adding that communication problems with the firm have been recently corrected.

Hamann later said he hopes commissioners approve a contract with R&R that requires the firm to be responsible for reporting not only to commissioners, but his office, the human resources department and council members. He also thinks the county should pay the firm the same amount each year, calling the current payment process "murky."

Bob Frick, chief operating officer for R&R, didn't return call Friday seeking comment. The firm previously said in an email that it "will not comment on client's business."

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