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HomeMy WebLinkAbout2020 HealthCITY OF CHUBBUCK, IDAHO HEALTH PLAN TRUST AUDITED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 WITH COMPARATIVE TOTALS AS OF SEPTEMBER 30, 2019 HEALTH PLAN TRUST TABLE OF CONTENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2020 Page TITLE PAGE 1 TABLE OF CONTENTS 2 FINANCIAL STATEMENTS Independent Auditor's Report 3-5 Statement of Fiduciary Net Position 6 Statement of Changes in Fiduciary Net Position 7 Notes to Financial Statements 8-11 SUPPLEMENTARY INFORMATION 12 Statement of Surplus 13 COMPLIANCE SECTION 14 Report on Internal Control Over Financial Reporting 15-16 Schedule of Findings and Responses 17 01 Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, Idaho 8320I 5278 (208)232-5825 Members of Idaho Society of Certified Public Accountants Members ofAmcrican Institute of Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the Board of Directors City of Chubbuck Health Plan Trust Chubbuck, Idaho Report on the Financial Statements We have audited the accompanying financial statements of the business -type activities information of City of Chubbuck Health Plan Trust, a component unit of City of Chubbuck as of and for the year ended September 30, 2020, and the related notes to the financial statements, which collectively comprise the Trust's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business -type activities information of the City of Chubbuck Health Plan Trust, as of September 30, 2020, and the respective changes in financial position, and, where applicable, cash flows, thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Management has omitted the management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Chubbuck Health Plan Trust's basic financial statements. The schedule of surplus is presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of surplus has not been subject to the auditing prcoedures applied in the audite of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. We also have previously audited, in accordance with auditing standards generally accepted in the United States of America, the Trust's basic financial statements for the year ended September 30, 2019, and we expressed unmodified opinions on the respective financial statements of the fiduciary fund information. That audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Trust's basic financial statements as a whole. The summarized comparative information is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 2, 2020, on our consideration of the Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Trust's internai control over financial reporting and compliance. Pocatello, Idaho December 2, 2020 CITY OF CHUBBUCK, IDAHO HEALTH PLAN TRUST STATEMENT OF FIDUCIARY NET POSITION AS OF SEPTEMBER 30, 2020 WITH COMPARATIVE TOTAL AS OF SEPTEMBER 30, 2019 ASSETS Cash on hand On deposit with third party administrator Prepaid expenses Stop loss receivable LIABILITIES Accounts payable Health claims incurred but not reported Unearned contributions FUND BALANCE/NET ASSETS Fiduciary Net Position Co 2020 2019 606,720 $ 352,315 50,000 50,000 - 26,792 44,170 79,514 700,890 508,621 $ 35,486 $ 89,213 97,663 222,362 $ 478,528 $ The accompanying notes are an integral part of these statements 77,894 96,250 85,917 260,061 248.560 CITY OF CHUBBUCK, IDAHO HEALTH PLAN TRUST STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED AS OF SEPTEMBER 30, 2020 WITH COMPARATIVE TOTAL AS OF SEPTEMBER 30, 20'19 2020 2019 ADDITIONS Contributions $ 1,430,607 $ 1,023,925 COBRA contributions - 721 Revenue 170,188 160,669 Interest Income 553 - 1,601,348 1,185,315 DEDUCTIONS Stop -loss coverage 322,109 301,653 Taxes 984 921 Broker fees 24,020 24,080 Professional service fees 13,800 22,502 Continuation fees 500 500 Change in IBNR (7,037) 24,049 Bonded insurance expense 295 - Immunization 5,631 6,794 Claims administration/TPA fees 70,470 70,000 Claims incurred 875,546 762,429 Bad debt expense 65,062 - 1,371,380 1,212,928 INCREASE (DECREASE) IN NET POSITION 229,968 (27,613) FIDUCIARY NET POSITION EMPLOYEE HEALTH PLAN - BEGINNING OF YEAR 248,560 276,173 FIDUCIARY NET POSITION EMPLOYEE HEALTH PLAN - END OF YEAR $ 478,528 $ 248,560 7 The accompanying notes are an integral part of these financial statements CITY OF CHUBBUCK, IDAHO HEALTH TRUST PLAN NOTES TO FINANCIAL STATEMENTS (PAGE I OF 4) DOTE 1 - Plan Description The following description of the City of Chubbuck Health Plan Trust (the Trust) provides only general information. The Trust Agreement should be referred to for a more complete and thorough description of the Trust. A. General The Trust provides optional health care benefits to all City of Chubbuck (the City) full-time employees that regularly work at least 30 hours per week, employees' dependents, or employees eligible through Cobra. Coverage begins on the first day after 30 days of employment. B. Benefits Medical coverage is available to participants of the Trust. Medical coverage includes medical claims and prescription drugs. C. Contributions All medical and prescription drug coverages are paid by the City through contributions to the Trust. The Trust determines the contribution rates to meet funding requirements. D. Self -Insured All Trust benefits are self-insured up to $50,000 and an aggregate excess losses greater than $1,000,000. Regence Blue Shield of Idaho (claims administrator), selected by the Plan Trustees, administers the benefits and receives a fee per eligible employee for processing and paying claims. The responsibility for claim payments is retained by the Trust. The Trust utilizes a pharmacy benefit manager which makes monthly refunds to the Trust based on the actual utilization pattern of the drugs. All administrative fees and expenses are paid by the Trust through contributions from the City. Administration services are performed by the City to the Trust at no charge. In the future, the Trust may be charged an administration fee for services performed by the City. E. Insurance Premiums The Trust is insured by Excess toss Partnership LLC against specific losses greater than $50,000 and aggregate excess losses greater than $1,000,000 based on a set factor multiplied by the number of enrollees over a twelve month period. F. Plan Termination Although the City has no intent to do so, the City reserves the right to terminate the Trust. if the Trust is terminated, the net assets would be paid out after settlement of claims and expenses in accordance with the process defined by the Idaho Department of Insurance. E CITY OF CHUBBUCK, IDAHO HEALTH TRUST PLAN NOTES TO FINANCIAL STATEMENTS (PAGE 2 OF 4) NOTE 2 - Summary of Significant Accountinq Policies A. Basis of Accounting The accounting and reporting policies of the Trust included in the accompanying financial statements conform to generally accepted accounting principles applicable to state and local governments. Generally accepted accounting principles for local governments include those principles prescribed by the Government Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants in the publication titled Audits of State and Local Governmental Units. The Trust is accounted for and reported as a fiduciary fund using the accrual basis of accounting. Under this method, revenues are recognized when they are earned, and expenses are recognized when they are incurred. The statement of fiduciary net position and the statement of changes in fiduciary net position display information about the Plan. B. Assets, Liabilities, and Net Position Deposits For the purpose of the Statement of Net Position, "cash and cash equivalents" includes on demand, savings accounts, and accounts held by third party administrators with an original maturity of three months or less. Prepaid Expenses Prepaid expenses are future expenses paid in advance. The expenses will be recognized in the period incurred, and the prepaid asset will be reduced. Receivables Assessed contributions are recognized as revenue in the period needed to cover the anticipated expenses. The contributions not received in the needed period are considered receivables. Historically 100% of contribution receivables have been collected, therefore, there is no allowance for uncollectible contribution receivables. Payables Expenses should be paid in the period in which they are incurred. A payment that is not made in the period incurred is considered an accrued payable. The accrued payable is expected to be paid the next period. Payables for the fiscal year ended September 30, 2020 are as follows: September medical claims incurred (r $ 35,486 CITY OF CHUBBUCK, IDAHO HEALTH TRUST PLAN NOTES TO FINANCIAL STATEMENTS (PAGE 3 OF 4) NOTE 2 - Summary of Significant Accounting Policies (Continued)_ B. Assets, Liabilities, and Net Position (Continued) Fund Equity Equity is classified as net position and displayed in three components: a. Net investment in capital assets - Consists of capital assets including capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages notes, or other borrowings that are attributable to the acquisition, construction, or improvement of these assets. b. Restricted - Consists of assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c. Unrestricted - All other assets that do not meet the definition of "restricted" or "net investment in capital assets." Restricted assets include cash and investments of the general fund that are legally restricted as to their use. All assets are restricted for the employee benefits related to health insurance. Revenue and Expenses Prescription rebates are recorded as revenue when received. Claims payments are recorded when paid by the third -party claims processor. Amounts due to claims processors that have yet to be reimbursed by the Trust are recorded as claims payable in the accompanying statement of net position. Re -insurance premiums paid by the Trust are recorded as administrative expenses in the accompanying statement of changes in net position. Expenses of administering the Trust are the responsibility of the Trust. C. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the City to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE 3 - Cash Equivalents A. Cash On -hand Bank statement balance $ 646,565 Outstanding cash (39,845) Book balance 606,720 Cash with administrator 50,000 $ 656,720 B. Custodial Credit Risk Custodial Credit Risk for deposits is the risk that, in the event of bank failure, the government's deposits may not be returned to it. The Trust's deposits, at year-end, were covered by collateralized accounts or federal depository insurance up to $250,000. 10 CITY OF CHUBBUCK, IDAHO HEALTH TRUST PLAN NOTES TO FINANCIAL STATEMENTS (PAGE 4 OF 4) NOTE 4 - Medical Claims Incurred But Not Reported Medical claims incurred but not reported (IBNR) are claims that have occurred but are not settled and claims incurred but not reported. The liability is actuarially estimated based on historical claims experience and industry accepted actuarial methods and assumptions. It is assumed that most outstanding claims would be resolved in a three month period. Balance: October 1, 2019 Changes in estimate Balance: September 30, 2020 NOT E 5 - Risk Management $ 96,250 (7,037) $ 89,213 Regence Blue Shield of Idaho (claims administrator), selected by the Plan Trustees, administers the benefits and receives a fee per eligible employee for processing and paying claims. The responsibility for claim payments is retained by the Trust. (See Supplemental information for surplus break out). NOTE 6 - Subsequent Events Subsequent events were evaluated up to December 2, 2020, the date the financial statements were available to be issued. October 1, 2020, the Trust changed its administrator and its stop loss provider to Blue Cross of Idaho. 11 SUPPLEMENTARY INFORMATION 12 CITY OF CHUBBUCK, IDAHO HEALTH PLAN TRUST SCHEDULE OF SURPLUS FOR THE YEAR ENDED AS OF SEPTEMBER 30, 2020 WITH COMPARATIVE TOTAL AS OF SEPTEMBER 30, 2019 2020 Beginning surplus Net income (lass) Ending surplus Total surplus, fiscal year end Minimum required surplus*' Excess (deficient) reserves 2019 $ 248,560 $ 276,173 229,968 (27,613) $ 478,528 $ 248,560 $ 478,528 $ 248,560 (289,040) (256,517) $ 189,488 $ (7,957) Note: Although the Idaho Code §41-4010(3) stated to use the least amount of the two methods, the Health Plan Trust elected to use Method 1 based on their stop loss contract. *1 Minimum surplus is calculated by either method (1) or (2) under Idaho Code, §41-4010(3); see excerpt below: 41-4010(3): In addition to reserves required by this section, a self-funded plan shall establish and maintain in its trust fund surplus equal to at least: (1) The equivalence of three (3) months of contributions for the current plan year; or (2) One hundred ten percent (110%) of the difference between the total dollar aggregate stop- loss attachment point plus costs of operation and the total dollar expected contributions for the current plan year. Calculation of minimum required surplus Method (a) Average monthly contribution x three $ 289,040 Method (b) 1 a Aggregate dollar stop loss attachment point $ 718,534 1 b Estimated total expenses (including stop loss premium) 437,809 1 c Estimated contribtuions (1,156,160 1d Difference (minimum of $0): 1a+1b-1c $ 183 1e 110% of difference: 1d x 1.10 $ 201 Lesser of method (a) and method (b) $ 201 13 COMPLIANCE SECTION 14 Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, Idaho 83201-5275 - (208)232-5825 Anlf W- Members of Idaho society of Certified Public Accmmtanrs Members of American Institute of Certified Public Accountants INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors City of Chubbuck Health Plan Trust Chubbuck, Idaho We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standardsd issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund, and the aggregate remaining fund information of City of Chubbuck Health Plan Trust, as of and for the years ended September 30, 2020, and the related notes to the financial statements, which collectively comprise City of Chubbuck Health Plan Trust's basic financial statements, and have issued our report thereon dated December 2, 2020. Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Chubbuck Health Plan Trust's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Chubbuck Health Plan Trust's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Chubbuck Health Plan Trust's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Trust's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Chubbuck, Idaho December 2, 2020 CITY OF CHUBBUCK, IDAHO HEALTH PLAN TRUST SCHEDULE OF FINDINGS AND RESPONSES FOR THE YEAR ENDED SEPTEMBER 30, 2020 Findings Of Significant Deficiency And Responses NONE 17