Councilman Wants to Go After Consulting Firm that Cost City Millions
Tuesday, June 12, 2012
The chairman of the City Council Finance Committee is calling on city officials to file a lawsuit against the $3.2 million consulting firm that committed numerous errors on a reimbursement application and has likely caused the city to miss out on over $2 million in federal funds.
In a letter sent to the city solicitor last month, Councilman John Igliozzi suggested the explanations provided by Mercer, a global consulting firm that counts clients in 40 countries, as to why the city now sits more than 1,000th on the waiting list for funds through the Early Retiree Reinsurance Program (ERRP), have been “inconsistent with the facts.”
In addition, Caitlin Nangle, the city’s Manager of Employee Benefits and a former Mercer employee, resigned to take a job elsewhere late last week, GoLocalProv confirmed Monday afternoon.
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Time to Reevaluate Relationship
Mercer has collected $3.2 million from the city for various consulting projects dating back to 2008, according to internal auditor Mathew Clarkin. Even though Igliozzi and others have raised questions about the company’s performance in the past, the Taveras administration was left handcuffed by a contract that would have been too expensive to buy out of.
Instead, the administration hired Nangle and essentially cut back much off the work Mercer had been doing for the city. Still, the firm was paid $30,000 to complete the reimbursement application, which it did after four failed attempts.
The cash-strapped city had been counting on the funds (originally $1.6 million and then $2.1 million) for its current year’s budget. In April, Igliozzi publically criticized the firm’s relationship with the city.
“There seems to be a consistent pattern that whatever work Mercer is supposed to provide the city of Providence to achieve savings in healthcare has not [come to fruition] and therefore maybe it’s time for the city to reevaluate the relationship,” he said.
Other Communities Received Payments
The purpose of the $5 billion federal reimbursement program, according to the Affordable Care Act, was to assist “people in the early retiree age group (i.e., ages 55 to 64) often face difficulties obtaining insurance in the individual market because of age or chronic conditions that make coverage unaffordable or inaccessible.”
“The availability of group health insurance coverage for America’s retirees age 55 to 64 has declined significantly over the past 20 years, as the percentage of large employers providing workers with retirement health coverage has dropped from 66 percent to 28 percent,” an overview of the program states. “The ERRP was designed to provide financial assistance to health plan sponsors that make coverage available to millions of early retirees and their families – including for-profit companies, schools and educational institutions, unions, State and local governments, religious organizations and other nonprofit plan sponsors.”
During a finance committee meeting last month, representatives from Mercer and Blue Cross Blue Shield suggested the program itself was flawed. They blamed differences in the fiscal years, changes in the eligibility requirements and Providence’s size as the reason the city remains on the outside looking in when it comes to the reimbursement.
“We feel we did everything to the best of our ability,” said Scott Pollack from Mercer.
Firm has been Sued in Past
But Igliozzi and other officials weren’t buying the excuses. In his letter, Igliozzi noted that Boston, a city with significantly more retirees, received a reimbursement. In Rhode Island, 17 companies, communities or unions were paid out $11,592,229.44 from the program. In fact, Portsmouth, Smithfield and Bristol, which all run on the same fiscal year as Providence, received reimbursements. East Providence, which also runs on a different fiscal year, was paid over $201,000 from the program.
“My overall concern is pretty simple,” Clarkin said at the time. “There’s $5 billion available through a federal program, first come, first serve. There’s similar communities who received reimbursements who do it on their own [without hiring a consultant.]”
Clarkin disputed the idea that the amount of retirees in Providence played a role in the city not receiving the funds.
“That’s the reason we paid for it,” he noted.
If the city does follow through on Igliozzi’s request, it won’t be the first time Mercer has run into problems with clients across the country.
The firm made headlines several years ago when it paid the state of Alaska $500 million to settle a suit claiming it underestimated the state’s unfunded liability by more than $1 billion.
In 2009, the company paid the Milwaukee County Employees’ Retirement System $45 million to settle a suit claiming it did shoddy consulting work as an actuarial consultant.
Dan McGowan can be reached at [email protected].
