Legalities of Pharr insurance deal questioned

City officials are working to determine whether a multi-million dollar health insurance contract it approved earlier this summer without soliciting bids or proposals was legal.

The City Commission approved an insurance contract May 24 for city employees with Blue Cross/Blue Shield of Texas, marking the second time the city had renewed its contract with the insurer.

But a week after the commission unanimously approved the deal, City Attorney Michael Pruneda sent a memo to the commission questioning the legality of the deal and recommending that the city seek bids or proposals for the contract.

Under state law, cities must solicit bids or proposals for expenditures exceeding $25,000. While there are certain exemptions to that rule — such as expenditures made during emergencies or purchasing items available from only one source — health insurance does not fall into any of those categories, Pruneda wrote in his memo.

Despite the memo, City Manager Fred Sandoval sent a letter July 9to Blue Cross/Blue Shield of Texas saying the city would renew its insurance plan.

Pruneda and Sandoval both told The Monitor Pruneda’s legal opinion was based on the best information available at the time, but the opinion could change since new information has come to light. Pruneda said he is continuing to review the deal and determine whether a renewal clause in the original contract would have permitted the commission to re-approve the contract without seeking bids or proposals.

“It’s possible it may not be an issue anymore,” Pruneda said. “It could possibly result in it not being anything to worry about.”

Pruneda said he still does not have all the facts about the deal, but he is close to getting the answers he wants.

City Commissioner Raul Gonzalez said his vote to approve the contract was based on the condition that the deal would receive a favorable legal review from Pruneda. Gonzalez said he received Pruneda’s original memo and has seen nothing since then that would contradict it, which raises questions in his mind.

Former finance director Ruben Luna, who was fired from his job earlier this summer, also discussed the insurance contract in a letter he sent to the city appealing to be reinstated. In his letter, he said he tried to get a legal opinion on the matter from the Texas Municipal League, an organization that serves the state’s municipalities. Luna wrote that TML told him over the phone it appeared Pharr needed to advertise for proposals but city officials discouraged him from getting that opinion in writing.

Both Sandoval and Ricardo Navarro, an attorney handling Luna’s case for the city, declined to comment on Luna’s allegations, citing pending litigation.

Luna wrote that the city usually advertises for proposals on insurance deals to make the process more competitive, which had resulted in a savings of $300,000 on a previous insurance contract.“Possible violations of state law and suspicion of possible political corruption … are matters that I take very seriously,” Luna wrote in his letter. (Source: The Monitor)

Slone Melhuish & Co., Selective Insurance Group, Inc. Support Chautauqua Institution With Grant

Slone Melhuish & Company and Selective Insurance Group, Inc. have joined forces to support the Chautauqua Institution through a $1,000 grant.

‘‘We are proud to support the work of Chautauqua Institution,’’ said Rick Joslyn, owner of the Sloan Melhuish & Company Agency in Jamestown. ‘‘We feel that they provide the opportunity to grow in many directions through the programs offered.’’

The grant represents a $500 donation from Slone Melhuish & Company matched by a $500 grant from Selective Insurance Group.

‘‘Selective values the relationships we share with independent agents and their customers,’’ said James Caragher, senior vice president of field operations. ‘‘Being able to help those agents give back to their communities supports our mission of being a good business and community partner.’’ (Source: The Post-Journal)

HSBC buys a $254m stake in Vietnamese insurance group

HSBC has made its second investment in the Asian insurance sector in less than a week with the purchase of a 10 per cent stake in Vietnam's leading insurer for $254m (£125m).

State-owned Bao Viet disclosed that it had chosen the world's fourth largest bank to be its sole "strategic investor" before an expected initial public offering in 2009.

Under the terms of the agreement, HSBC also has the rights to buy a further8 per cent stake after 18 months as well as "certain pre-emptive rights".

The move underlines HSBC's intention to pursue a two-pronged approach to investing in some emerging markets, reflecting its view that both the banking and insurance businesses are evolving rapidly as consumers grow wealthier. HSBC already has an investment in Techcombank, the Vietnamese lender, which it raised to 15 per cent this year.

The investment comes as HSBC's every move is under scrutiny from Eric Knight, the activist investor who has criticised the bank's performance and is urging it to launch a strategic review and shake up corporategovernance.

Mr Knight has indicated that he wants HSBC toconcentrate resources on expanding in Asia. Nevertheless, he criticised the investment, arguing that the minority stake would give the bank limited influence.

"It is another example of the failed strategy that HSBC has pursued over 15 years of building a portfolio of standalone businesses which cannot be integrated into a coherent whole," Mr Knight said.

HSBC executives believe the bank is under-represented in insurance and want to double the proportion of profits the bank derives from insurance operations to 20 per cent.

The bank signed an agreement on Monday to launch a life assurance business in India with two local banks.

Bao Viet, Vietnam's market leader in life and general insurance by premium income, reported revenues of $272m and profits of $27m last year. It has 526 branches, 5,000 staff and 40,000 sales agents and had total assets of $1bn at the end of 2006.

Bao Viet was advised by Credit Suisse. Joe Gallagher, chairman of M&A Asia Pacific at the advisers, said: "The deal marks the largest mergers and acquisitions transaction in the country's history."

Stephen Green, HSBC chairman, said: "This investment is in line with HSBC's stated strategy of targeting investment at high-growth markets."(Source: Reuters)

Mayo Clinic Recommends Universal Health Insurance Plan

The Mayo Clinic jumped into the national debate on improving health care yesterday, calling for every individual to have basic universal insurance as a step toward gradually replacing the current employer-based system.

But Mayo, in a proposal hammered out over 18 months by a panel of more than 400 health policy experts, is not advocating a government-run single-payer system. Instead, it suggested that private insurance companies be required to offer standard plans with many options, like the Federal Employees Health Benefits Plan available to government workers.

Applicants for this insurance could not be turned down, under the Mayo plan.

The policies would be paid for by individuals, in some cases with help from employers. Lower-income people would get government help on a sliding scale.

Mayo, the big Minnesota-based physician and hospital group, is sending its recommendations to the presidential candidates and all members of Congress.

Coincidentally, Senator Hillary Rodham Clinton is expected to offer her own health care proposals in a campaign speech scheduled for Monday.

“Mayo’s timing is pretty good; next year will be too late,” said Andrew Mekelburg, an executive in Washington for the big telecommunications company Verizon Communications, which spends $3.5 billion annually on health care for 900,000 employees, retirees and dependents.

Mr. Mekelburg, who took part in the Mayo project, said the recommendations had “a pretty good chance” of winning serious consideration from policy makers. “Mayo is extremely well respected,” he said.

Dr. Denis Cortese, the clinic’s chief executive, said that under the proposals, employees could keep their individual policies when they changed jobs, an important issue for workers. One in four changes jobs each year, and 47 million Americans of all ages do not have health insurance.

“It would be nice for our employees to have the portability feature, the freedom to move,” Dr. Cortese said. For the Mayo Clinic, which has 47,000 employees, “this would be an option we could live with very nicely,” he said.

Executives of several large employers who took part in the Mayo discussions agreed that rising medical costs and the aging of the baby boomer generation were pushing the current system toward a crisis. But they said they were not ready to abandon their current health plans for employees.

“We do not believe in relinquishing the employer-sponsored health care system,” said Anthony C. Wisniewski, a Mayo panelist who is executive director of health care policy at the United States Chamber of Commerce.

Linda M. Dillman, another participant, who is an executive vice president in charge of health and environmental issues at Wal-Mart, said health care should be a shared responsibility.

“The employer has a role to play,” she said. “The government has a role, especially for those who are financially unable to provide their own health care, and we think individuals also have a responsibility.”

Another Mayo panelist, Stuart M. Butler, said “Mayo understands that the era of traditional employer-sponsored insurance is ending and we need to think about the employer’s role evolving into a different model.” Mr. Butler is a health policy expert at the Heritage Foundation, a politically conservative research center in Washington.

Under the Mayo proposal, Mr. Butler said, “smaller employers would no longer sponsor coverage but would contribute to plans that their employees could select” from an outside insurer.

David Cutler, a Harvard economics professor who has advised Senator Barack Obama on health care issues, was another of the Mayo participants. He defended the idea of government subsidies for lower-income people. “Even someone with a $50,000 income would need help paying for insurance that now costs $11,000 or $12,000 a year,” Mr. Cutler said.

He noted that Mr. Obama and another Democratic presidential candidate, John Edwards, had both put forth health plans that would encourage individuals to join insurance purchasing groups and pool their buying power to get better coverage.

Another participant in the Mayo project, Helen Darling, the president of the National Business Group on Health, whose members are large employers, said her group would meet in Washington next month to discuss health care issues.

“Looking forward 5 to 10 years, most people agree that we don’t have a sustainable system,” she said. “What not everybody agrees on is the solution.”(Source: The New York Times)

Your health insurance: Get ready to pay more

For most cubicle jockeys, October is synonymous with open-enrollment season - when workers commit to next year's employer-sponsored health insurance plans.

First Coast workers can expect health insurance premiums to continue their upward trek in 2008, though at a more sluggish pace. Nine-to-fivers should also brace for higher out-of-pocket expenses, and in some cases fewer plan choices.

Commercial plan premiums are expected to escalate about 9 percent to 13 percent next year, compared with 11 percent to 17 percent premium hikes area employers faced this year, said Chris Boetcker, manager at Alliance & Associates Financial Services, an insurance broker on the city's Westside.

Premium inflation is easing off after four or five years of rapid escalation, during which growth clocked in at 11 percent to 12 percent annually, Boetcker said.

"I just think that it's gotten to a point where things are leveling off some," he said.

Humana projects its group premiums in Northeast Florida to climb about 6.5 percent next year, compared with this year's 7 percent increase. Those premiums in the First Coast average about $3,500 annually, with employers typically covering at least half that.

The reduction in premium acceleration is partly because of "benefit buy-downs" by employers, said Laura Nolan, Humana's North Florida director of commercial sales.

An employer, for instance, might choose to offer a plan that has a lower premium but requires a higher deductible. Companies might also choose to cover a smaller percentage of the premiums.

Not every company expects premium increases to fall perceptibly.

Aetna expects its area employer-sponsored plan premiums to spike 10 percent to 15 percent next year, relatively unchanged from this year's increase, spokesman Walt Cherniak said.

Companies are feeling the pressure

With health insurance premiums up about 22 percent this year, Secure-Res, a Jacksonville-based marketing firm, has had to take the scalpel to its health benefits package.

The company used to cover 100 percent of premiums, but shaved its contribution to 75 percent two years ago. Even with the cutback, Secure-Res' employee health-care bill topped $130,000 this year.

Being able to offer health insurance coverage may be costly for the 45-employee firm, but not doing so could prove even more expensive, President and Chief Executive Joe Hyman said.

"The job market is relatively tight," he said, "so it's important to offer" health-care coverage to attract and keep talent.

So, Secure-Res and other firms find ways to be able to afford rising premiums.

"You budget for it [health care costs] like you do anything else," Hyman said. "You have to pass the cost onto your customer and you have to give up some benefits."

Chuck Bushong, CEO of Bushong Insurance Associated in Ponte Vedra Beach, has managed to not pass on the pain of rising health care costs to his employees.

Bushong's agency includes 15 employees, and he has watched his employee health insurance costs tick about 10 percent higher in the past year. The agency is bracing for a hike next year, but hopes it doesn't crawl past 10 percent.

"You never know until you get your renewal," Bushong said. "That's always the question mark."

Despite the bottom-line pressure, Bushong covers 100 percent of employee premiums - workers pay a $15 co-pay and are not subject to any deductibles. The plan, however, requires Bushong's employees seek care from network providers and get referrals before seeing a specialist.

Offering Options

Small companies are more likely to drop health insurance coverage for their employees. Less capitalized, they have fewer financial reserves to devote to rich health-care benefits.

Realizing that, insurers are offering flexible plans that make health insurance an affordable benefit.

Last week, Humana rolled out health insurance packages that cap the annual premium rate increases. Predictable health-care expenses, Humana said, allow companies to more accurately budget and plan for the long term.

Available for Florida businesses with 51 to 99 employees, each two-year package includes a combination of health insurance plans. For example, a package might include a traditional Preferred Provider Organization (PPO) plan in the first year, and a high-deductible health plan featuring a Health Savings Account in the second year.

Annual premium rate increases are capped at 6 percent in the second year, Humana said. Employers can qualify for a lower 4.5 percent medical premium rate cap in the second year by adding dental coverage and meeting other requirements.

Such initiatives might just keep Bushong and other business owners offering their employees' health insurance coverage. At least for a little longer.

"Someday, if things got out of control," Bushong said, "then we might make them [employees] participate." (Source: The Times-Union)

In homeowners insurance, understand your coverage

(www.kansascity.com) - Do you have a vacation house or garage at the lake? Do you have insurance on it to cover ice or snow damage? Maybe not, if you have seasonal coverage, or your policy is with Farmers Mutual Insurance of Hermitage, Mo., as mine was.

Last November, we received 4 to 6 inches of ice and 12-14 inches of snow at the lake during the night my roof collapsed. This is a one-bedroom apartment and garage. When I called my insurance agent to report the collapse, he told me I was not covered for this damage.

When I purchased the policy, I told him I wanted to cover the building so if anything happened, it would be covered by insurance. I asked why I didn’t have this coverage added into the policy? I was told the protection could not be added because my house was a seasonal property. He also said the storm was not unusual weather for this lake area.

I’m retired, go to the lake every month and I live in my home while I’m at the lake. I pay an electric bill every month. I pay taxes on it. I paid for 12 months of insurance. How do you call my home seasonal?

I filed a complaint with the state insurance department. Again, I was told that my policy did not cover damage from ice and snow. I want to know why the insurance company didn’t tell me that the first day I got the policy?

I received a registered letter in March from Farmers Mutual telling me they have canceled my home insurance policy at the lake and would not renew it. No reason given. What do you think of this? — O.L., Kansas City

Dear O.L.: It’s unfortunate that you didn’t ask these questions before you purchased your policy. We also wouldn’t want to continue with coverage that didn’t provide the needed protection.

It’s important that homeowners understand what type of coverage they have and what is and is not covered.

We had never heard of seasonal coverage, so we asked several insurance agents about this. Many insurance companies don’t sell seasonal coverage; often when consumers have a lake home, it’s covered as a secondary residence under their existing homeowner’s policy.

But that can also depend on what state your secondary and primary residences are located in. Before buying a policy on your secondary residence, make sure you fully understand what is covered and that you fully disclosed to your agent how you use the property. For example, certain policies are voided if you rent your secondary residence. Hickory County Farmers Mutual in Hermitage said you had applied for and obtained a fire and extended coverage policy based upon the information provided to the agent.

Determination that a home is seasonal is based on use of the property. If a structure is occupied for habitation on only a part-time basis, it is seasonal.

G. Darlene McLerran, company manager for Farmers Mutual, also said that many insurance companies will never issue a policy on any home occupied on a “less than a full-time” basis. In fact, most homeowners’ policies suspend some or all coverage for dwellings that are unoccupied for more than either 30 or 90 consecutive days.

The policy that was issued to you is a “named peril” policy and covers only the risks of loss specifically listed in the policy. These listed risks did not include collapse or damage resulting from the weight of ice or snow, we were told.

McLerran said that you apparently were aware that this policy did not cover any loss resulting from collapse or damage caused by the weight of ice or snow. You were also free at all times to seek insurance from another company.

As to the subsequent nonrenewal of your policy, very few, if any, insurance companies will insure or continue to insure a damaged structure.

McLerran said that while the insurance company is sympathetic to your misfortune and dilemma, it owes an obligation to all of its policyholders to pay only for losses covered under the terms of its policies.

On-Time Payment Inexplicably Posts Late, Canceling Insurance

(www.tbo.com) - What could be worse than bracing for an approaching hurricane? Approaching hurricane season without homeowners insurance.

Courtney Hoening fretted through the Memorial Day weekend after receiving a notice that coverage on the Tampa home she shares with her husband had lapsed. This was especially shocking since she paid her premium five days before it was due.

"You almost don't want to leave the house because you're afraid something will happen, and you don't know for sure if you're covered even though you have the receipt, and you're praying that's all you would need. But you don't know that for sure," Hoening said.

Here's the timeline: Hoening has a receipt showing she paid her premium on her Citizens Property Insurance policy on May 17. Her insurance agent said it was sent to Citizens that day. It was due on May 22. The Hoenings received the notice of lapse on May 26.

Policy Eventually Reinstated

On June 5, the Hoenings' policy was reinstated, and they received a notice to that effect.

She was relieved, especially because it was already four days into hurricane season when the last notice showed up. Hoening was also frustrated.

"Essentially to us, it seems like the check sat on someone's desk for two weeks. We pay our bills on time. We shouldn't receive notices like this in the mail. This is ridiculous," Hoening said.

Citizens spokesman Rocky Scott said its tracking system showed the company received the check on May 28 (11 days after Hoening said she paid) and cleared two days later. The two-day turnaround for processing is routine, said Scott, who insisted the delay was not the insurance company's fault.

With regards to the 11-day gap between the time Hoening's insurance agent said she sent the payment until the company said it received the check, "I have no explanation for that," Scott said.

Citizens bills are mailed out 60 days in advance, according to Scott. He recommends consumers pay their bills sooner than later to avoid panic, gaps and mail mysteries, as the Hoenings' situation appears to be.

Options Available

To ease the financial burden of hefty policy premiums, Citizens customers can opt to pay their premiums in annual, biannual or quarterly installments.

Scott said that change took effect on Aug. 1 and is a result of the special legislative session on insurance in January.

Customers with questions about premium payments or other aspects of their policies should talk to their agents.

As of Aug. 14, 131,262 policies have been taken out of Citizens' hands by other insurance companies. If you are a Citizens customer and are offered an alternative, you can check on the company's license and complaint history by calling the Department of Financial Services at 1-800-342-2762.

A license means the company has passed inspection by the department's Office of Insurance Regulation and meets the financial criteria set by the state. It also means the company is a member of the Florida Insurance Guaranty Association, which handles claims for consumers of insurance companies that go out of business.

Hoening is stuck with Citizens; it's the only company that will insure her home. Even though the payment problem has been resolved, she is still worried about her coverage.

"I'm scared to death to file a claim with [Citizens]," she said. "I hope it's processed more efficiently than" her premium.