Board seeks cause of multi-million dollar health plan deficit
The Board of Supervisors tried to figure out how the $4 million deficit went unreported for more than two years.
November 9, 2022 — The Mendocino County Board of Supervisors attempted Tuesday to close in on who and what is responsible for the multi-million shortfall in the health plan, which has caused as-yet unknown damage to the county’s fiscal health.
The county has set aside $4.6 million from the American Rescue Plan Act, or ARPA funds, to patch the hole in the health plan deficit, which accumulated over two and half years but didn’t come to light until April of this year. In addition to the $4 million projected deficit, this week’s CEO report stated that there was an incurred but not reported loss of $2.6 million in Fiscal Year 20/21.
CEO Darcie Antle reported previously that in fiscal year 16/17, then-Auditor Controller Lloyd Weer said the State Controller recommended spending down an overly robust reserve in the health plan. The county and its employees responded with a health holiday, which means neither party made health insurance payments for three months out of the year for fiscal years 17/18 and 18/19. Supervisor Dan Gjerde identified a key flaw in that approach at Tuesday’s Board of Supervisors meeting.
“It was represented to the Board by the elected auditor, Lloyd Weer, that the State of California was telling him that the reserves were too large,” he recalled. “And that they needed to be drawn down. At the time, their proposal was to only extend the holiday to the employees. Well, the county, the plan sponsor, is paying 75% of the plan. So the Board said, well, we’ll have the holiday, but both parties benefit equally. When employees have a pay holiday, so will the county. What the managers should have said was well, we weren’t proposing that. We’ll need to scale that back to maybe one month, because both parties are having a holiday. They never said that. They just went ahead and implemented a three-month pay holiday for both the employees and the employers and they did not speak up, as they should have, and said, well the math doesn’t work with that.”
Deputy CEO Cherie Johnson told the Board that Weer was the only one who knew exactly what the communication from the state had been.
“I have not ever seen any documentations from the State, stating that the health plan reserves or savings needed to be drawn down,” she told the Board. “That was information that I had received from the auditor’s office. We did talk with our broker. He had never seen that either, and he said other counties had not received that information.”
Now, in the wake of the pandemic, the deficit is one of many heavy blows to the local economy. Cannabis taxes are lagging in a lackluster market, and the county has yet to see millions in disaster reimbursements from FEMA.
County workers, feeling the pinch of inflation and frustrated by the lack of a cost of living adjustment, or COLA, packed the chambers to overflowing during public comment, with social workers citing staggering caseloads and union leadership warning of an impending worker exodus. SEIU 1021, the county’s largest union, is asking for a 2% COLA, but county negotiators won’t budge.
Antle reported that the county is offering each employee a one-time payment of $3,000 from the ARPA fund, but is asking for a year-long pause in the COLA until last year’s fiscal books are closed.
In early October, the county switched over from its self-funded health plan to a fully funded plan called PRISM health, an insurance pool for counties and other public entities that allowed employees to stay with their current healthcare providers. Health plan premium increases have been frozen until fiscal year 23/24.
But even with a new health plan, supervisors wanted to talk about how the old plan’s deficit spiraled out of control. Gjerde said the Board got bad information about the health holiday.
“At no time was the Board advised that it would result in depleting all of the reserves and actually creating a deficit,” he emphasized. “That’s been new information since we've had a changeover in auditor and new people managing the healthcare fund and new eyes on the healthcare fund. I believe there should have been better advice given to the Board.”
County Counsel Christian Curtis conceded that the Board had gotten bad information. “In some cases, the information that was put into the sheets as to what balances you were drawing out, and what one-time funds you were using, may have been incorrectly entered into the spreadsheets before they went to the Board, and that you may have had that erroneous information in front of you at the time that those decisions were made,” he said. When Supervisor Glenn McGourty asked him who would have entered the information, Curtis replied that the CEO may “be able to speak to that a little bit better. My understanding is they were generated by the auditor’s office.”
Supervisor John Haschak pointed out that more than one party was supposed to be keeping track of the health plan. “We’ve been paying an actuarial to manage the health plan,” he said. “And we have the auditor looking at the health plan, and we have the Executive Office looking at the health plan too, right? So how do we figure out where this deficit happened, and how do we get to the bottom of it to see, why wasn’t the Board informed about it, and how this all happened?”
Curtis said there is more material to review, but that with key personnel now retired, he expects the information “may be imperfect.” Still, he said the information, while not highlighted, had been available. “If I can be a little blunt,” he warned. “The deficit itself is reflected in the budget documents. I think this may have just been something that was buried; that while the Board may have had the information, it may not have been particularly called out, or addressed very explicitly.”
Supervisor Ted Williams wondered if the Board could expect more revelations along the lines of the health plan deficit. “Do we think there is any other data entry that may have provided inaccurate reporting?” he asked.
Curtis demurred, saying, “I can’t speak to that at this time.”
Williams pressed him: “Can you and the CEO assure us that that’s not the case? Can we trust the data that we have received?”
“We can’t make such assurance,” Curtis told him. “No.”
The Board agreed to ask Weer to provide an explanation, in writing if he prefers.