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Dr. Steven Scott's medicine show has parked its wagon outside the offices of the Miami-Dade County School Board, and it ain't movin' until somebody buys a health tonic. United Teachers of Dade union boss Pat Tornillo, a steely-eyed fireplug of a senior (he's 76 years old), surveys the uneasy rabble of bureaucrats and politicians milling about the wagon. Beside him überlobbyist and school board kingmaker Eric "Ric" Sisser offers a few bright baubles to the first to step up. The two experienced hawkers smell a sale.
Dr. Steven M. Scott, a kind of junk-bond specialist when it comes to health care plans (he collects ailing ones, resuscitates them, and tries to turn them into moneymakers), is peddling a multimillion-dollar insurance offering from HIP Health Plan of Florida that will likely prove too expensive for many of the school district's employees. But with Tornillo and Sisser pushing for him, he may well get what he wants when the school board votes August 22. For Scott keeping a piece of the huge Miami-Dade school contract is essential to a much larger play for dominance in Florida's rapidly changing health insurance market. For workers it's about whether they can afford to take Junior to the doctor.
Since January the school district has been in the throes of deciding which two or three insurance companies will get a share of the $153 million fringe-benefits plan it will offer to about 39,000 employees next year. The school district gives its full-time employees $330 per month toward health insurance, which the employees can use toward one of the medical plans offered by the district; they also can buy into a number of extra benefits, such as dental or vision care, dependent care, or a 401(k) contribution. Over the past seven months, school district staff, outside consultants, and a handful of labor unions have attempted to make intelligent, reasonable recommendations (such as the two current health plan favorites, Cigna and Humana) to Superintendent Roger Cuevas based on the needs of most employees. In the end, though, none of this matters.
What matters is that Tornillo really wants HIP Health Plan of Florida to get a piece of the action, and he has the leverage to make it happen. The old union boss has led UTD for exactly half his life and through a combination of clever politicking and sheer chutzpah, has proven his ability to coerce management. Negotiations for the medical insurance package are a part of the union's collective-bargaining process with the school board. Part of Tornillo's plan is to use some of the money the district contributes to health insurance premiums to pay part of a four percent salary increase he's promised union members. Employee salaries and benefits use up more than 60 percent of the district's budget, and Tornillo has shown himself willing and able to field hundreds of teacher demonstrators if negotiations don't go his way. Tornillo also has pull with several board members who don't want to risk angering him. "The politics is absurd," remarks the leader of another union involved in the insurance talks. "It's a logjam because of the politics."
Hardly a new circumstance. Five years ago Tornillo used exactly the same tactics to prevent competition for the company he backed, HIP Health Plan of Florida, by making sure another HMO, AvMed Health Plan, was excluded. It was 1996, an election year, and a majority of school board members (most of whom had received union endorsements and help from the Sisser fundraising machine) gave him what he wanted. HIP currently enrolls about 15,000 employees in its HMO, a customer base worth about $43 million in 2001.
If Tornillo is a one-man platoon of shock troops, Ric Sisser is the life-infusing Red Cross of political campaigns. And HIP Health Plan of Florida is willing to pay an astounding commission to Sisser, its supereffective lobbyist who has helped elect many a public servant in Miami-Dade County since the early Eighties. A state examination of the company's books in August 2000 revealed that HIP paid Sisser "more than a million dollars in a year," according to Belinda Miller, lead attorney for the Florida Department of Insurance. The money was Sisser's cut of the insurance premiums he'd helped the company obtain. "It sounded like a lot to us," Miller remarks. "We did not let them pay that last [check to Sisser for $121,000]." The exorbitant compensation disturbed school board member Marta Perez so much when she heard about it that she returned two $500 checks to Sisser that he contributed to her 2002 re-election campaign. "I called and asked him [about his fee], and he said, “It came in with the low bid, so who cares how much they paid me,'" Perez remembers. (Sisser's office advised he was out of town last week and could not be reached for comment.)
HIP Health Plan of Florida will need its heavy lifters more than ever for this new sales pitch because of the company's erratic financial fortunes in the past couple of years. A year ago the Department of Insurance was going through the books at the company's offices in Hollywood and threatening to put it in receivership. It likely would have died a horrible, lingering death had Scott not swooped in two months later with a $40-million buyout offer to its original parent company in New York, where financial difficulties also were extreme. Steven Scott, of Boca Raton and Durham, North Carolina, has been on a bit of a buying spree, in fact, collecting four failing HMOs in Florida in the past year (plus the customer base of a fifth). Scott has infused these companies with huge amounts of cash and will eventually consolidate them into a monster health care empire that will rival national health insurers, such as Aetna and Humana, currently operating in Florida. Whether the ambitious plan to bring about 500,000 customers under one roof will turn out to be madness or genius isn't yet clear. "It's a big gamble, but the strategy is good," Scott told Florida Trend in May. The Miami-Dade school district isn't as willing to gamble.
The school board paid benefits consultant William M. Mercer, Inc., $275,000 to shepherd the district through a challenging restructure of its health plans, owing to changes in the industry that have occurred since the district's last major bid five years ago. With rising health care and prescription drug costs, company mergers, and huge financial losses in recent years by Florida HMOs, the challenge is to find companies that can provide acceptable service for reasonable prices. HIP's 1997 to 2001 contract with the school district is one of the factors previous company executives had blamed for the HMO's troubles, because the company was locked into a pricing scheme that failed to take into account industry inflation in the past few years. Outrageous fees to lobbyists, numerous contributions to political campaigns, and lucrative executive perks may also have played a role in the company's near demise before Scott.
To make the numbers work this time around, HIP's prices will have to go up. The school board was paying $188.53 per employee two years ago and $238.87 this year. The new rate would be $254.43. That, and the uncertainty of HIP's long-term financial viability, led the consultants to recommend against the insurance provider. "We would like to point out that the pricing ... is in excess of other competitive quotations, and that the Board must remain diligent in monitoring HIP's financial condition," consultant Lew Yeouze wrote in a June 26 letter to Scott Clark, head of the district's Risk and Benefits Management Office. Sherman Henry, president of the American Federation of State, County, and Municipal Employees, the union local that represents the school district's custodians, bus drivers, and cafeteria workers, puts it more bluntly: "HIP's rates are sky high, and quite frankly we don't think they will be in the insurance business much longer. It's strictly economics here. I have no other agenda. We can't agree with that nonsense that Tornillo is putting forth."
Henry represents one of the handful of labor unions and employee organizations that sit on the Fringe Benefits Council, an advisory board that suggests insurance plans to the superintendent and the school board. He's especially unhappy with Tornillo's plan to finance a four percent salary increase by taking the money from the dollars available to employees for extra benefits (the "extra" amount varies depending on the cost of the medical plan an employee chooses). Henry figures this move would cost his members $41.08 per month that they would normally use for benefits such as dental and vision plans.
In a July 10 meeting, Superintendent Cuevas told Tornillo he would recommend two major insurers to the school board, and neither one was going to be HIP. He also said he would not recommend the less-insurance-for-more-salary proposal. Tornillo told the superintendent that was unacceptable to the union and, according to Henry, threatened to "bring the entire process to a halt." Some of the other unions back Tornillo's proposals at least partially because UTD is the largest and most politically powerful union in South Florida. A review of the minutes of the last several Fringe Benefits Council meetings clearly shows that Tornillo is far and away its most influential member. He has used that dominance to keep HIP Health Plan of Florida in the running despite the reservations of consultants, staff, and some other unions.
The union claims its motivation is simply to accommodate employees who want to stay with a familiar health insurance company, since United Healthcare, the school district's other current major insurer with about 22,000 customers, won't be part of the new health plan. Why make the entire workforce of 39,000 have to choose another provider? Tornillo asks. "[HIP] currently covers 15,000 of our employees," he says. "They have the right to make the decision about whether they want to continue using HIP." Tornillo admits that lobbyist Sisser does "pro bono work for us" in the area of legislation and politics, but contends that the union's position on HIP has nothing to do with the money Sisser stands to make from the deal. "Ric Sisser's arrangements with HIP are his business and not the business of the union," he stonily proclaims. Asked how much that free work might be worth if the union was paying Sisser, Tornillo replies, "I have no idea, and I'm not about to speculate."
But it looks as though UTD already is winning on the public-relations front through a monthly radio show on WMBM-AM (1490), press conferences, letter-writing campaigns, and demonstrations that present insurance negotiations and a salary increase as a package deal. The school board is in a weak position to argue that it doesn't have the money for salary increases. The district, through the highly publicized foolishness of Cuevas and the school board, is perceived in the community as a mismanaged bureaucracy saddled with politicians eager to waste money on questionable land deals, lawsuits, and pet projects. So how could it possibly deny teachers their two bits?
What will probably happen is that the school district will contract with the consensus favorites Cigna and Humana, plus HIP on the side for those employees willing to pay higher premiums for continuity's sake. There will be a compromise of some kind on the salary increase. Perhaps the money will come from a different source or a combination of sources. The scuttlebutt among administrators and board members is that it won't matter if HIP is one of the insurance choices, because employees won't pick it. Clark says HIP is the most expensive HMO offering, about $26 per month more expensive than its closest competitor. "At the end of the day, it's six of one and half a dozen of the other," he concludes. "I think not many people will enroll in it, and it may kind of die its own death."
In political parlance this is called picking your battles. What helps Tornillo's argument is Sisser's long history of contributing to and arranging fundraisers for school board members. He's done it for Betsy Kaplan more than once, and for many previous board members. Several school system insiders say Sisser helped Perla Tabares Hantman hold on to the coveted chairmanship of the school board for a second year by convincing the favorite for the job, Kaplan, not to accept it. Last November it was Kaplan who nominated Hantman for the chair. Sisser helped Manty Sabates Morse collect about $11,000 at a fundraiser he set up for her this past March 1. Sisser himself wrote a $500 check, plus another $500 from his company, Employee Relations Services.
Frank Cobo, a board member elected in June, made a big deal in his campaign out of Sisser's and UTD's support for his opponent Jacqueline Pepper, because the price for that support was her hearty endorsement of the union's position. But will the politically savvy Cobo find it difficult to say no when he gets a call from his old friend and former Miami mayor David Kennedy, also a HIP lobbyist? The potential vote of newly appointed board member Frank Bolaños is a an X factor, but, interestingly, he once worked for HIP before landing his current job at BellSouth.
But anything can happen to change the balance of power in the weeks before the school board meeting August 22. Tornillo isn't making any public guesses about the outcome. "I have no way of knowing," he maintains. "We'll have some meetings in the next couple of weeks. Maybe I'll find out then."