West Seneca Special Town Board Meeting Minutes 07/18/2008
Supervisor Wallace C. Piotrowski called the meeting to order at 5:05 P.M. with 30 seconds of silent prayer followed by the Pledge of Allegiance.
ROLL CALL: Present -
Absent - Sheila M. Meegan
Supervisor Piotrowski read the Fire Prevention Code instructing the public where to exit in case of a fire or an emergency.
Supervisor Piotrowski stated that the special meeting was called by letter dated July 12, 2008 from Deputy Supervisor Vincent J. Graber Jr. to consider modifications to the town’s existing health insurance contract and to consider a new contract for the period beginning August 1, 2008. A notice was posted on the door of Town Hall advising that the meeting was moved to the Kiwanis Building.
Motion by Councilwoman Bove, seconded by Councilman Clarke, to have Deputy Supervisor Vincent J. Graber Jr. chair the meeting.
Councilman Graber stated that yesterday the town received a notice of cancellation of all employees’ health insurance coverage effective July 31, 2008. While Supervisor Piotrowski was out-of-town last week, Councilwoman Bove reached out to the insurance expert that had been working with the town over the last couple of years to lower the town’s insurance costs. She was advised that the town had not paid its premium on the policy since August 2007. Because the town failed to act, rates were increasing and the town was not going to be able to get coverage within its budget if something was not done soon. The town’s policy was going to be cancelled effective July 31, 2008. A comprehensive solution was available that would both on a short term and long term basis save the taxpayers and meet the requirements of the contract. Blue Cross/Blue Shield (BCBS) received a letter from the town authorizing its specific insurance agent to act as a broker for the town, but no Town Board resolution was ever passed appointing any broker to act on behalf of the town.
Motion by Councilwoman Bove, seconded by Councilman Clarke, to direct Deputy Town Attorney Paul Notaro to investigate the circumstances surrounding any communications appointing any particular agent or individual the designated broker of record for the town’s health insurance.
Motion by Councilwoman Bove, seconded by Councilman Clarke, that Comptroller Robert Bielecki pay Blue Cross/Blue Shield its outstanding invoices as directed by Deputy Supervisor Graber.
On the question, Supervisor Piotrowski stated that the town’s health insurance was one of the many problems that was on his desk at the beginning of the year. Last year’s budget as adopted by the previous Town Board, including Councilman Graber and Councilwoman Bove, allotted $3,921,883 for insurance costs even though last July the previous Comptroller had allegedly obligated the town for a cost of $4,146,000. The net loss to the town without any increase this year would have been $257,693 and with a 10 percent increase that amount would have been $431,842. Supervisor Piotrowski stated that the town did not have an
insurance broker; the former Comptroller, Supervisor, and Town Board were negotiating themselves. At the suggestion of the town’s auditor, Wayne Drescher, Supervisor Piotrowski contacted John Burger of CIC for assistance in resolving the insurance matter. They were attempting to have BCBS go back to their original rates which were $314,759. After the Town Board and the unions agreed to that figure in March 2007, BCBS shocked the town with a 31 percent increase. The former Comptroller signed off on those documents on July 17th under the auspices that the insurance would be cancelled on July 31st. They did not have insurance rates from BCBS for August 1, 2008 through July 31, 2009. Mr. Burger was putting together a proposal hoping to have them go back to their original figures, but he was unable to accomplish this. They had been talking for several months about having BCBS withdraw their claim for the additional $257,000 and contact outside insurance counsel to determine if a claim could be brought against BCBS as a result of the duress they put the previous Town Board under to sign off on those documents at an increased rate of 31 percent. Supervisor Piotrowski stated that he was not aware of any letter stating that the insurance would be cancelled. He had met with union members to look at other options, and the PBA was very helpful in having individuals they knew contact the town with rates available from other companies. Supervisor Piotrowski noted that Councilman Graber and Councilwoman Meegan were aware of what was going on with this issue since the beginning of the year.
Councilwoman Bove questioned if Councilman Graber was aware that the town had not paid any money to BCBS.
Councilman Graber responded that he was aware the previous administration did not pay BCBS for the last five months of 2007, but he was not aware that the town owed BCBS $3.9 million. When Supervisor Piotrowski took office, he diligently worked to try to lower the rates; however, most experts in the field know that is not readily available and most people have not been able to do so. He just became aware that there were annual rate increases on August 1st, and the Supervisor typically takes that into account when drawing up the budget for the following year.
Councilwoman Bove questioned if Councilman Clarke was informed of invoices not being paid to BCBS.
Councilman Clarke responded that he was unaware of the money owed to BCBS.
Councilwoman Bove stated that she also was unaware that invoices to BCBS went unpaid.
Supervisor Piotrowski stated that there were no invoices sent to the town from BCBS from January 1 – July, 2008. BCBS was well aware of the negotiations taking place by he and Mr. Burger. Supervisor Piotrowski went downtown to BCBS offices and attempted to work this out and Mr. Burger came to his office to try to work this out. He was not aware of any invoices sent to the town asking for $3.9 million.
Mr. Burger stated that he was working on behalf of the town since 2006, but he was not compensated by the town. He was the consultant for a WNY fund, the Labor Management Health Care Fund (LMHCF). In March 2008 he was contacted by Supervisor Piotrowski and the issues were outlined as follows: Rates were provided to the town in the fall of 2006 for a January 1, 2007 effective date. The town was in the process of negotiating through the collective bargaining. Rates became no longer valid after the effective date of coverage, so after January 1, 2007 the rates referred to were null and void. Through the collective bargaining process, agreements were met with each of the labor unions, and at that time it was asked of BCBS to provide a confirmation of the rates. Those rates were provided with an effective date of August 1, 2007 and the composite rate change was about 14 percent. The percentage that Supervisor Piotrowski referred to was the impact to the employee. Anyone that had the traditional insurance had to pay the difference between what was bargained for and covered by the town and if they wanted to buy up they could. This was a significant rate change at that point in time. Mr. Burger’s commitment to the town that he had in writing was as follows: 1) Research what occurred over this period of time; 2) Validate if everything was above board between the town and BCBS and obtain a renewal quotation for the August 1,
2008 renewal; 3) Evaluate the LMHCF as an option to the town. Mr. Burger was going to do this on behalf of the town and was not going to charge any money for it. If there was success in going to the coalition, he would have been paid in that amount. Mr. Burger met with Supervisor Piotrowski approximately eight times beginning April 1st, and at that time advised that it was in the best interest of the town to make a payment to BCBS to prevent the employees’ insurance coverage from being terminated. Supervisor Piotrowski told him that he had not received a bill from BCBS, but Mr. Burger strongly recommended to him that he pay BCBS. Mr. Burger further contacted BCBS to inquire why a bill had not been issued and they signed off on a rate change that benefits the town by about $5,000 per month. At that point, they were in agreement with the methodology by which BCBS calculated the renewal and he explained to Supervisor Piotrowski that there was no way to go back now that they knew how BCBS was running. They would not retrospectively adjust the rate. They validated the rate renewal, which is approximately 4 percent on August 1st, and this was a good renewal. Mr. Burger stated that the LMHCF made a proposal to the town that would save the town $644,000 for the same benefits between August 1, 2008 and December 31, 2009. They were going to meet with the labor unions in the beginning of May, but the meetings had not yet taken place. At the May board meeting of the LMHCF, the board of trustees of the Fund voted to accept the Town of West Seneca into membership with a prospective date of August 1, 2008, subject to the town’s approval. Supervisor Piotrowski and he met again in the beginning of June to review the numbers to understand the cash flow implications to the town and see if there was another option available. It was determined that another option was presented that would meet the financial pressures of the town dating back to August 1, 2007 and that would meet the budget expectations of 2008 with a 10 percent change in 2009. If in fact the utilization of the plan came in less than that, the town would then have the benefit of those savings.
Councilwoman Bove asked Mr. Burger if in the course of those eight meetings with Supervisor Piotrowski, whether a payment had been made in April, May or June.
Mr. Burger stated a payment had not been made during those months and he was then receiving pressure from BCBS. He asked BCBS to make sure a bill was sent and it was his understanding a bill had been sent in June.
Councilwoman Bove stated a bill was not received by the town, but cited a letter dated July 17th sent to Supervisor Piotrowski from BCBS stating, “Our records indicate that the last payment was received on August 2, 2007. This is especially troubling given that you have executed the rate sheets indicating your acceptance of the rates subsequent to the aforementioned date. Continuous health coverage is important to you and your employees. However, all outstanding invoices must be paid by 7/31/08. If all payments are not received by 7/31/08, we regret to inform you that coverage will be terminated for all active employees and their families. In addition, please note that our underwriting guidelines preclude us from insuring your retiree program without the active population and as such, you will be required to secure coverage elsewhere for your retiree population.” Councilwoman Bove noted that the letter also referenced the applicable law and that BCBS “values the longstanding relationship we have enjoyed with the Town of West Seneca.”
Supervisor Piotrowski responded that he never received the letter referenced by Councilwoman Bove.
Councilman Graber noted that was a possibility and was not placing the onus on the Supervisor. He also commented that bills typically were sent to the Town Comptroller’s office, but without the Comptroller present at this meeting, there was no way to ascertain whether or not a bill was ever received. Councilman Graber expressed his concern that bills had not been paid since August 2007. The Town Comptroller was an independent individual and obligated to inform the Town Board of matters such as this. He asked why the Comptroller had never advised the Town Board that the town was $3.9 million in arrears.
Councilwoman Bove asked why the Comptroller was not present for this meeting.
Supervisor Piotrowski stated that the late notice and a prior commitment prevented Mr. Bielecki from being available for tonight’s meeting.
Councilwoman Bove questioned if Mr. Bielecki was instructed not to pay BCBS.
Supervisor Piotrowski responded that a bill was never received so there was nothing to pay. He and Mr. Burger were attempting to renegotiate the terms to the original $314,000 per month with BCBS, so there was no bill issued to the town. Eventually, the town would wind up with a different deal and that was the deal that Mr. Burger had worked out. With the last $257,000 there was still a question whether that could be recouped through other counsel who could say there was a duress claim made as a result of Mr. Koller being under duress to sign it. Supervisor Piotrowski stated that he was attempting to save the residents $257,000. There was never a letter directed to his attention indicating that the insurance was about to be cancelled. BCBS had continued to pay bills until a 30 day notice letter was issued and they would have another 30 days.
Councilwoman Bove asked why these different issues were not discussed with the other board members from January until July.
Supervisor Piotrowski responded that he had discussed the issues with Councilman Graber and Councilwoman Meegan. Councilwoman Bove and Councilman Clarke do not discuss matters with him even though they are free to do so at any time.
Councilwoman Bove stated that Mr. Bielecki, as Town Comptroller, was obligated to either pay the bill or advise the Supervisor that there were no invoices to pay. Mr. Bielecki was supposed to be qualified to do his job as Comptroller, otherwise he should not be in the position of Comptroller.
Supervisor Piotrowski noted that interest was being earned on the unpaid bills while negotiations were going on and an invoice was never received by him.
Councilman Graber commented that on July 10th, the town was supposed to sign a commitment to the rate sheets for the remainder of 2008 and into 2009. Not signing those rate sheets precipitated the actions on the part of BCBS. He asked why the rate sheets were not signed on July 10th.
Supervisor Piotrowski questioned Mr. Burger if notification was given to him prior to that date to sign the rate sheets by July 10th.
Mr. Burger stated he had and noted his June 26th email sent to Mr. Piotrowski confirming the options available to the town. If the town decided to renew with BCBS and not participate in the LMHCF, the gross cost for insurance for the period 08/01/07 through 12/31/09 would be $10,644,000, which would be a $534,000 deficit against the town’s budget. Option #1 was to convert to LMHCF on or before September 8th on a perspective rating basis. This option was the lowest gross cost and did not meet budget for 2007-08. The gross cost for insurance for this period would be $9,999,163, which would be a $644,000 savings as compared to staying with BCBS. This produced a surplus of $110,837 against the town’s budget for 2007-2008-2009. These rates were reviewed by CSEA Benefits Group in the perspective experience rate basis. They required membership in the LMHCF and a 2-year minimum participation. Benefits would be revoked for the current agreement and a 45-day lead time to implement. Option #2 was to convert to the LMHCF on or before September 1, 2008 on a minimum premium rating basis for medical and prescription drugs. This was the most the town would pay (the town could pay less because the town was not responsible for losses up to its maximum). This option did not have the lowest gross cost but met the budget for 2007-2008-2009. These rates were reviewed by CSEA Benefits Group and required membership in the LMHCF, a 2-year minimum participation, and 45-day lead time.
Councilman Graber stated that if rate sheets were not signed, implying that the town was not committed to BCBS, and with the bills being unpaid for a year, and in the event the insurance was terminated, then the Town would need to go to Independent Health or Univera. The Town had signed contracts obligating itself to the employees and this situation would send a message to Independent Health and Univera. The rate sheet was increasing the health care costs by only 4 percent. Councilman Graber stated that he belongs to a Union, pays 20 percent of health care premiums, and every year his portion of the cost of health care goes up. The Town had an obligation to the employees and an obligation to secure a known value to the taxpayers. The uncertainty of being terminated carried with it ramifications that were anyone’s guess.
Supervisor Piotrowski responded that he had been working with Mr. Burger for a number of months in an attempt to put together the best deal available and obtain tax savings for the taxpayers.
Councilwoman Bove asked Town Attorney Edwin Hunter if he was aware of the current situation.
Mr. Hunter stated that he only learned of the situation today.
Supervisor Piotrowski stated that a visit by Councilwoman Bove to the Comptroller’s office would have provided her with all the information surrounding the situation both this year and last year.
Councilwoman Bove stated that this situation was an example of secrecy in government.
Supervisor Piotrowski disagreed and stated that representatives of the PBA were aware of negotiations with Mr. Burger, as well as other Union representatives. Councilman Graber and Councilwoman Meegan were also aware of the negotiations and the other council members were welcome to discuss the matter with him.
Councilwoman Bove thought that Supervisor Piotrowski had been playing games with the health care of the employees and taxpayers of the Town.
Supervisor Piotrowski responded that Councilwoman Bove’s comments were grandstanding and he had been working on the insurance deal for some time.
Councilman Graber stated that he was unaware of Mr. Burger’s existence until last week. A broker had been mentioned but he was unaware that Mr. Burger had been working on this since March. His concern was with the Comptroller who was supposed to be independent of the board, watching over the Town and making sure commitments were met. Whenever the Erie County Legislature or the Executive Branch of county government goes astray, the County Comptroller is the first one to inform the public. Mr. Bielecki failed to advise the entire Town Board on all these aspects and the fact that $3.9 million was owed. Mr. Bielecki had been talking about the town advancing money to the AmeriCorps for the last six months, and in this situation BCBS advanced $3.9 million but Mr. Bielecki never mentioned that fact to anyone.
Supervisor Piotrowski stated that best efforts were being made to get the premiums as low as possible and Mr. Burger’s deal was very good. The employees had health coverage and every bill submitted by the employees was paid. There must be a 30-day notice given before insurance is cancelled.
Councilwoman Bove stated that this was because BCBS was protecting the employees of the Town of West Seneca while Supervisor Piotrowski was not.
Supervisor Piotrowski suggested that poor business practices on the part of BCBS may be the reason invoices were never submitted to the town.
Mr. Hunter asked Mr. Burger if it was typical for an insurance carrier to allow a municipality to accrue $3.9 million in premiums.
Mr. Burger stated that when he became involved, BCBS had two requests – they wanted to stay on the same page with the town and arrange for payment of the bill. He advised BCBS he would do his best on payment, but wanted to validate everything that had been done.
Mr. Hunter asked if Mr. Burger was aware of invoices being sent to the town.
Mr. Burger stated that he agreed with Supervisor Piotrowski that BCBS had dropped the ball administratively.
Councilman Graber noted that Mr. Hunter was not a member of the Town Board and had no authorization to comment on the question or have any discussion with Mr. Burger.
Motion by Councilwoman Bove, seconded by Councilman Clarke, to authorize Deputy Supervisor Graber to execute rate sheets for the coverage after July 31, 2008.
Motion by Councilwoman Bove, seconded by Councilman Clarke, to authorize Deputy Supervisor Graber to execute a member agreement with the Labor Management Health Care Fund effective October 1, 2008 and the applicable rate sheets for the period through December 31, 2009, subject to the approval of Deputy Town Attorney Paul Notaro.
Motion by Councilman Graber, seconded by Councilwoman Bove, to adjourn the meeting at 5:40 P.M.
PATRICIA C. DEPASQUALE, RMC/CMC