Governor Vetoes Bill 174, Which Would Have Forced Selection of “Exclusive” GovGuam Health Insurance Option


Guam – Governor Calvo has vetoed Bill No. 174, a measure that would have effectively caped GovGuam spending on health insurance coverage for GovGuam employees and retirees in FY 2014 at roughly $55-million dollars.

In his veto message, the Governor disputed the claimed “savings” that would result from choosing the “exclusive” health insurance option calling it ” far from accurate,” and saying that “even under the most optimistic of scenarios, the savings in the bill would not result in” an  $18 million savings.

Bill #174 was passed along party lines during a Saturday Session on August 24th.

By capping the amount spent on insurance, it would have forced GovGuam to chose the “exclusive” health insurance option for GovGuam employees,  because there would not be enough money to pay for the “non-exclusive” health insurance option recently selected by the Governor.

It was introduced by Senator Ben Pangelinan who argued that the “exclusive” health insurance option would save both GovGuam and GovGuam employees about $18-million in premiums.

During the debate the Senator said “We are not dictating choice. What we are doing here is exercising our legislative choice to appropriate money … we choose to fund the most economical plan.”

However the Governor called the measure a “political ploy” and accused the Democratic leadership of  protecting one insurance company when they passed Bill #174.

READ Governor Calvo’s veto letter below:

September 5, 2013

Honorable Judith T. Won Pat, Ed.D.
I Mina’trentai Unu Na Liheslaturan Guåhan
155 Hesler Street
Hagåtña, Guam 96910

Dear Madam Speaker,

Enclosed is Bill No. 174 -32 (LS), An Act Making Appropriations for Medical and Dental Insurance Premiums for Employees of the Executive and Legislative Branches and for Retirees of the Government of Guam for Fiscal Year Ending September 30, 2014, which I have vetoed  and am returning with the objections that I outline below.

The supposed motivation behind Bill No. 174 was to save the government money, even if it resulted in the lack of choice. This was stated very clearly in the introduced version of Bill No. 174, and repeatedly in published columns and news interviews. However, this is far from accurate, and I must correct the misinformation given to the public about a supposed “$18 million in savings,” which some senators have been talking about with reference to Bill No. 174. Even under the most optimistic of scenarios, the savings in the bill would not result in $18 million ready for appropriation from the General Fund.  The initial projection was obviously overstated.  The budget chairman, who initially relied on this projected savings to reduce the amount appropriated to cover the retirees’ insurance pool in his original version of the budget bill, Bill No. 177, later realized that taking the projected savings from the retirees’ insurance pool placed their coverage at risk, so even he had to restore the amounts that were supposedly saved in his second-to-last version of the budget, Bill No. 177.

Relying solely on last year’s configuration of the plans selected by the GovGuam employees, at best there is a possibility of a projected savings of $2 million by accepting an exclusive provider.  However, this savings would come at the loss of choice to our employees, and it is tenuous at best.  Even though one might assume that giving one health insurance company the exclusive contract would produce greater savings, the simple fact is that neither the Legislature nor the administration can predict the price, or even the estimated price, of the health insurance pool.  The employees’ and retirees’ decision on whether to choose the more expensive 1500 deductible plan or the cheaper 2000 deductible plan, more than anything else, will determine the cost of the contract.  And that won’t be known until after open enrollment.

Stating that there will be any savings to the General Fund based on one of several possible scenarios is fiscally irresponsible at best.  In addition, this single scenario ignores the obvious implications that the timing of the Medicare open enrollment will have on such savings:

·      There has not been any information provided to substantiate the supposed savings in premium reduction due to GovGuam retirees opting to leave the GovGuam plan and joint the Medicare Part D and Medicare Part D supplement.  The cost to reimburse retirees for their purchase of these programs has not been presented.  The cost GovGuam has to pay for 100% of the Medicare Supplement Plan F has also not been presented.

·      Federal Open Enrollment to join Medicare is during November for coverage effective January 1, 2014.  Who will cover the drug expenses of the retirees during the 3-month period they opt out of GovGuam’s health plan and prior to them joining Medicare Part D?

·      Who will cover any dependents of GovGuam retirees who would not be covered after the retiree opts out of GovGuam health insurance?

·      What will be the Medicare Part D cost for retirees currently covered under the “Unqualified” prescription Drug Plan of GovGuam which is the 2000 Deductible Plan?  They will have to pay the premium penalty for each year they failed to previously have coverage under a “Qualified” Drug Plan.

In order to realize an estimated savings of $18 million, the bid for an exclusive contract would necessarily have to have come in at more than $2 million below the actual amount projected to be paid out in total claims for FY 2013.

·      Have the senators considered that an exclusive contract comes with a participating agreement that would have stipulated that this one insurance company had the right to recoup its losses in the following plan year, negating any “savings” there may have been? The multiple carrier contracts do not have such a provision.

·      Have the senators considered the procurement nightmare that would happen should the company awarded the exclusive contract purposely bid below claims data for Fiscal Year 2015 so it could outright win the next contract and recoup revenues through the provisions of the participating agreement? This is a scheme that could have taxpayers paying where senators suggested there could be a “savings.”

·      Have the senators examined the risk that choosing an exclusive contract means that GovGuam employees and retirees and their dependents could be at the mercy of a company that, hypothetically speaking, could:

o   Try to pull out of the contract and yank insurance coverage in the middle of the year, potentially leaving our employees and retirees without any coverage to fall back on?

o   Deny coverage to employees and retirees when they need coverage most?

o   Bury what rightfully should be paid to employees and retirees in medical loss ratio rebates under a loophole and later pay these revenues as dividends to stockholders?

o   Fail to meet the needs of thousands of employees, retirees and their dependents simply because major clinics and medical centers do not recognize the insurance coverage?

·      Have the senators considered the risk that forcing a change from the non-exclusive option to the exclusive one could trigger a protest that would cause the current contract to roll over? This would be the ultimate injustice to our employees and retirees, as the new plan year benefits are better for them, especially those needing expensive specialty drugs to treat their chronic diseases.

Rather than economic, the real motivation here appears to be more political.  Are the senators who, for the past three years, have been advocating for employees and retirees to have choice in insurance carriers no matter the cost now changing their minds in support of one insurance company? What has changed so quickly in the minds and convictions of those who even used the issue of a single insurance carrier against me politically?

The responsible action we can take is two-fold. First, we should be consistent in our stated agenda to provide our employees and retirees with choice in health insurance coverage. Second, we should wait to know which plans the employees and retirees choose after open enrollment closes so we can know the true amount of savings to the General Fund. Then, and not before then, should we be able to responsibly estimate what can be appropriated from whatever savings there may be. Otherwise, we simply would be making empty promises to the taxpayers of Guam, and the employees and retirees who serve with us.