On July 1, the Arrowhead Procare Pool, the consortium that provides health insurance for many public employees in the area, was dissolved and its board disbanded.
 
Made up of more than 30 entities, and covering 900-plus employes, the discontinuation of Procare has come as a surprise to some.
 
“It came so fast. How could we possibly be prepared?” said Bill King, mayor of Keewatin, whose employees were covered under Procare. King said the city was first notified of the impending dissolution just a couple months ago.
 
Affecting many small towns, the ultimate financial impact is still unclear. With Itasca County covering shortages, several small communities are left owing money to the county.
 
In years past, King had served on the Procare board, and he reflected that there had always been a good surplus of funds, the loss of which he is struggling to understand.
 
While King noted that employees will continue to receive similar coverage through the Northeast Service Cooperative, he anticipates that both the city and employees will see unfortunate financial fallout.
 
NESC will carry Keewatin employees for six months at higher premiums with a similar plan. After that, negotiations will be entered, and King expects that while premiums will be similar to the past, a higher deductible will be a hidden cost.
 
“It’s going to be a different kind of plan with NESC after six months, more of a health savings account, and the city will have to negotiate this with our employees in the next few months,” he said.
 
Meanwhile, King is concerned about the money Keewatin already owes to Itasca County for covering shortages on past claims, and expects that claims filed before the June 30 deadline are yet to strike a tough blow to the city’s budget.
 
Arrowhead Procare began in 1987 when a group of government entities in the area pooled their resources to purchase health insurance for their employees. A consortium of a small group of public employers, this method of insurance works by employee-paid premiums being used to purchase fully insured plans from Blue Cross Blue Shield, with the ability to leverage lower premiums by adding groups. 
 
In 2008, Procare stopped purchasing insurance from a third-party provider and created a self-funded pool for health, dental and life insurance. In a self-funded pool, contributions are pooled and then used to pay claims.
 
Itasca County auditor/treasurer Jeff Walker says the events leading up to the dissolution of Procare remain somewhat of a mystery. He explained that the move to self-insure was motivated by outrageous cost increases. And for a time, Walker said the self-insure method was working well.
 
“We had established a pretty good reserve of $3 to $4 million, and everything was going along fine,” Walker stated. But that dynamic began to shift as costs of claims recently began to outstrip monies going into the reserves.
 
“During the last couple of years, reserves began to decline, in other words, our claims were out-doing our premium dollars. We were spending more than we were taking in,” Walker said.
 
In the last six to seven months, a rapid decline in Procare’s reserves resulted in them being completed exhausted by this spring.
 
Walker said that since the group is not allowed to view each individual claim, they are not able to put their finger on what exactly happened, but the end result is clear: There was no money left to pay claims and keep the collaboration going.
 
Itasca County has also made the decision to turn to NESC for continuation of health insurance, where Walker says that there will be no loss of benefits, and no longer any direct exposure for the county.
 
“Under the Arrowhead Procare system, if a claim was turned in, we would pay it directly from the Procare pool reserves, and we were collecting about $1 million in premiums a month and paying out $1.3 million in claims,” Walker said.
 
With Itasca County making up about 75 percent of the pool, Walker said the county suffered a direct liability with the imbalance.
 
“There was no distinguishing between claims for each entity, and it became up to us to keep the pool viable,” Walker said.
 
Walker said that claims still coming in will continue to be paid until the county secures coverage.