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School District cover-up seen over blame for $7 million deficit in health insurance fund


The School District, which ran up the current $7 million deficit in its health insurance fund by ignoring the advice of its actuary from 2011 to 2015, now seems to have been caught in a cover-up in its effort to blame the massive premium shortfall on “bad advice” from its former broker.

Assistant Superintendent of Human Resources William Fritz, who oversees the district’s self-insured health insurance fund for its teachers and other employees, has repeatedly claimed the district didn’t charge enough in premiums over the past five years because Brown & Brown, its broker, recommended increases insufficient to keep pace with rising costs.

Asked by the School District to produce records supporting this claim, Fritz said he couldn’t find Brown & Brown recommendations on premium rates because the district had moved to new offices and there had been staff turnover.

But in fact, documents that Vero Beach 32963 obtained from the Florida Office of Insurance Regulation show that rate recommendations during this period actually came not from Brown & Brown but from the Wakely Consulting Group, the actuary employed by the School District.  And Wakely recommended significant rate increases each year that were largely ignored by the district.

On Sept. 30, 2013, for example, Wakely recommended a rate increase of 30 percent in 2014-15. The School District disregarded that advice, implementing only a 6 percent increase, according to Fritz.

The result of the School District’s failure to follow the rate advice of its actuary led to the surprise news this past summer of the huge deficit which now has to be paid off over the next four years from property-tax dollars.

In addition, to prevent future deficits, the district has just raised the premiums of its employees by anywhere from 53 percent to 650 percent.

When the size of the health fund deficit came to light last summer, the old School Board at that time blandly accepted Fritz’s accusation that the problem was Brown & Brown’s fault. But the new board seated after the November election wanted to see documents supporting the claim.

“The district should not be on the hook for all of this,” School Board Member Shawn Frost said last month. “There is such a thing as malpractice. And if it was a staff issue, we need to make sure they don’t have their hand on the tiller going forward.”

At the document show-and-tell, where Fritz was supposed to provide evidence to the board, he all but said the dog ate his homework.  Even though he is required by state law to maintain such records in good order, he said he couldn’t find the recommendations on premium rates and was too busy to launch a search.

He suggested listening to audio tapes of the Health Insurance Advisory Task Force meetings to sort out who is at fault.

But the advisory board tapes would have been a faulty source of evidence because the board was managed by Fritz’s Human Resources staff, according to Brown & Brown Executive Vice President Ken Felten.

Felten said he attended meetings with Human Resources staff where he was told what he could and could not divulge to the Health Insurance Advisory Task Force. 

The new board appeared to swallow Fritz’s excuses, although Frost did say, “I wonder if we aren’t running afoul of public records law.”

Wonder no more. State law 119 requires public records be kept in the building in which they are used and made easily accessible. 

A public official who “knowingly” withholds public records commits a misdemeanor and “is subject to suspension and removal,” a fine of up to $1,000 and one year in jail.

If negligence is the cause for not having the records, up to a $500 fine can be imposed.

But the documents Fritz told the board he couldn’t find turned out to be also readily available online at the Florida Office of Insurance Regulation.

End-of-the-year reports on the fund’s activities and recommendations for future rates were filed regularly by Wakely Consulting Group, an actuary recommended by Brown & Brown.  State law requires these reports, and it’s hard to believe Fritz was not aware of the records.

Fritz also erred in repeatedly referring to Brown & Brown as the actuary that supposedly misled the school district. Brown & Brown was the district’s broker and consultant, and was responsible for recommending and paying an actuary to produce the year-end reports and recommendations.  But the district hired Wakely directly; the company was not a subcontractor for Brown & Brown.  

Each year-end report provided rate recommendations for the next two years.

On Nov. 8, 2011, Wakely recommended rates be increased 12 percent in 2012-13 and 12 percent in 2013-14.

On Oct. 15, 2012, the actuaries recommended rate increases of 10 percent in 2013-14 and 30 percent in 2014-15.

On Sept. 30, 2013, Wakely recommended a rate increase of 30 percent in 2014-15, but the district implemented only a 6 percent increase, according to a chart Fritz presented to the school board.

The next year, on Oct. 2, 2014, Wakely recommended a rate increase of 12 percent in 2015-16, but according to Fritz, the district only upped rates by 8 percent.

Clearly, if the district had heeded the advice it received between 2011 and 2015, that would have mitigated or prevented the multimillion-dollar deficit in the insurance fund.
Superintendent Mark Rendell did not respond to a request for comment on Fritz’s failure to maintain state-required records or on his maligning Brown & Brown. “This is really affecting my business, with current and prospective clients,” Felten said. “I’ve been forced to field many questions.”