08/27/2000 Meeting Minutes - Laserfiche WebLink

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Special Council Meeting 8-27-01 Page 5 because that is not paid front, that is paid as going forward. Mr. Barrett said the second part of that is what happens if we get into a situation with the Police that they are not going to budget off of that and we are still locked into that Anthem situation. I see a couple of critical problems that could be a problem in going forward: 1. On a split funding option, and I did talk about split funding. Many carriers (and I did talk to Anthem as late as this afternoon to the top guy, Joe Laguardia)--and I didn't talk about any names because I do have a lot folks on the plans--how do they feel about coexisting in an environment where somebody has a third body to insure the front end of that plan and they don't like it. So, that piece looking at coexisting, let's talk about economics. We have a big swing of things that are going forward right now. The interest rate on short-term money is very, very low. Insurance companies on the medical side and on the property casualty side want to have resources and dollars which in turn they can reinvest to ofFset potential claims. What an insurance company has is if we have an adverse selection piece now that they aren't collecting those low end premiums on those dollars, they are giving up that stream of income which they can invest and turn around, whether it be into 30-day or 60-day paper or whatever it is. What they are saying is they have an adverse selection, they have the catastrophic piece and yes, they are going to a lower premium on a higher dollar amount but the fact of the matter is you are not getting full value for that value going forward. It's knocking the premium down, you have a cash flow on the if-come on the lower side. Insurance companies, even in this type of environment, if interest rates were 16-18% like they were in the 1980's, that is a different environment. Today, they are really being critical about that because they don't want to take that adverse selection and take that big debt without the offset on the lower side. So, it could be a problem--I'm not saying it will be--but it could be. It all goes back to that initial piece, where in fact are you going to go if police don't want to get off that piece. The other thing is, in looking at some of the quotes here, people have known and I have talked to Phil every single year, we have quoted other carriers each and every year and we have brought those to the table. They haven't been voted on for a number of reasons, basically the other contract with the Police and Fire. I think that's the biggest issue. I have had several conversations with Pat and Mr. Diemert with respect to this. We have to get those people off somewhere or another and have an opportunity to present to them the available options. I don't think today in taking something over that's an if-come, all we are talking about is numbers. I've presented numbers to you. Any other agent or a new agent coming into a plan such as this is going to get the same numbers. They are not going to differentiate. They are going to take their demographics, their SIC code, the area and where the utilization will be and they will put that all together in pluses or minuses, debits and credits, and come up with a number. Usually those are not going to be negotiated, especially in the under 50 market. So, you haven't positioned yourself to taking over. I guess I would say, you have dated a couple of times, but are you ready