EXPLOIT MAY HAVE RESULTED IN UNFAIR ADVANTAGE FOR INSURER
(September 30, 2014 – Hagåtña) As the enrollment period for government of Guam employees and retirees comes to a close today, acting legal affairs chair Vice Speaker Benjamin J.F. Cruz has called on the Attorney General (AG) to determine the statutory requirements in calculating the employee and government share toward insurance premiums. Cruz raises concerns that the law in question that was used to establish the government share for insurance premiums has consequently created an imbalanced state of medical rates for retirees.
Following concerns his office has recently heard over the Department of Administration’s (DOA) method of determining employee and employer contributions toward insurance premiums, Cruz said in a letter to AG Leonardo M. Rapadas that he found in his review of the medical insurance rates that the most expensive retiree plans had the lowest retiree contribution rates.
“Not only does this create an incentive for retirees to enroll in the most expensive retiree plans, but it also results in a disproportionately higher government subsidy for such expensive plans,” said Cruz. “Conversely, the least expensive retiree plans are under-subsidized and given a higher retiree contribution rate, thus making them less attractive to the subscriber.”
In applying Guam law (4GCA §4301), DOA chose a set of government contribution rates—set to be uniform within each class for all competing plans and not less than 50% of the lowest employee premium—for active employees and then applied the resulting employee rate—total active premium minus the government contribution—to the respective carriers’ retiree plans.
Since the law stipulates that the retiree contribution not exceed that of the active employee within the same class, the government subsidizes the difference between the two to create parity in contribution.
Cruz said that while DOA’s methods “may conform to the law,” he wants Rapadas to evaluate the manner in which retiree contribution rates were determined. “Specifically, does the language ‘contributes no more than an active employee who is otherwise in the same class’ also mean that the active employee contribution rate must only come from a plan offered by the same insurance carrier?”
Additionally Cruz has asked the AG to determine whether the law would have excluded other methods of determining retiree contribution rates. “Perhaps other methods at the discretion of DOA could have been applied that would have otherwise prevented this inequitable level of subsidy and pricing advantage given to certain carriers over others.”
“The law should be used to protect taxpayers and promote competition,” stated Cruz. “When a loophole is costing taxpayers millions and providing an advantage for one company, government officials should close that hole, not allow a select company to drive a Mack truck through it.”
For more information, call the Office of the Vice Speaker at 477-2520/1 or 687-7567.