District retirees say bad leadership put their healthcare in peril

By Carrie Graham and Noah Biesiada in partnership with Voice of OC

When Pam Hernandez retired in 2019 after working for nearly forty years, she and her husband Mike planned to stay on the same healthcare plan they’d had through her job until they died.

That changed when officials with the Rancho Santiago Community College District decided to push all retirees age 65 and older off their current private healthcare plans and into the Medicare system last year.

Soon after, they got a firsthand look at what happens when insurance plans change unexpectedly.

Over the next few months, he went into intensive care, was transferred to a skilled nursing facility, with Pam adding that Mike had to have his hand and big toe amputated, receiving 72 staples across the surgeries.

Then, Pam remembers the bills started coming in.

While the procedures have since been covered, the couple says they’re still on the hook for $2,600 in ambulance fees, and Pam says it’s unclear what procedures will be covered for Mike’s healthcare going forward because they haven’t been able to get a clear answer from their provider or the district.

“Everything in those two months just blurred together, at one point we thought we might lose him,” Pam said about Mike.

Leaders at the Rancho Santiago Community College District, Pam’s former employer, say shifting all their retirees to a new Medicare system will save the district millions and offer retirees the same benefits or better as the old plan, adding that anything covered by Medicare is available to retirees.

But retirees are asking district leaders tough questions in public about why they’re the only community college district retirees that weren’t automatically directed to enroll in Medicare.

Their own chancellor, who came on board after the original health insurance plans were changed, is asking the same question.

“We were the only district I know of out of 73 community college districts, where when you retire, you’re not directed to Medicare,” said district Chancellor Marvin Martinez, who took over leadership of the district in 2019, in an interview. “I felt that didn’t make sense.”

While the district is covering late enrollment fees in Medicare for most of its retirees, some are not covered for life based on their employment contracts, meaning they’re potentially on the hook themselves for thousands of dollars in late enrollment fees from Medicare.

Retirees have filed multiple lawsuits against the district, but were ultimately forced to drop their efforts in Nov. 2022 after they ran out of money according to a message from the association’s board.

Those retirees are being led in part by John Didion, a former Executive Vice Chancellor of Human Resources and Educational Services at the district who helped set up the healthcare insurance contracts that are now being replaced.

Didion, who left Rancho in 2016, is listed on state incorporation documents as serving as the secretary of the board for the retiree association.

He has been a consultant for the district’s outgoing insurance provider, known as the Alliance of Schools for Cooperative Insurance Programs, since 2017, prompting questions from district leaders and retirees on whether or not he lobbied on the provider’s behalf or performed work for them while still employed by the district.

Didion also served on the corporate board of one of the provider’s subsidiaries, a role for which he was not paid, while working at the district.

He has denied any wrongdoing, saying publicly to retirees and the press that while he did work for the Alliance after leaving the district his focus was on construction insurance, not healthcare.

Who Kept An Eye Out For Retirees?

The controversy has put a spotlight on how the Rancho Santiago Community College District’s board of trustees often served as a stepping stone to higher office for many local politicians who approved these kinds of contracts.

While holding the elected board positions at the district worked out well for political leaders who moved on to higher office, there are questions about what kind of oversight they exerted when serving the students and faculty at the community college district.

Jose Solorio, who most recently ran for mayor of Santa Ana, went straight from being a state assemblyman to the board of trustees in 2012, and served for four years before he was elected to the Santa Ana City Council.

Claudia Alvarez, who this past November won an election for Superior Court judge, was elected straight onto the board after serving 12 years on the Santa Ana City Council. She served eight years on the Rancho Santiago board.

John Hanna, one of the longest serving members on the board, who just won re-election this past November, defends how the board handled contract approvals, but admits he and his colleagues failed to ask enough questions about insurance programs.

“We gave great deference to the staff,” Hanna said.

How Did We Get Here?

Rancho Santiago District leaders didn’t switch their health insurance to the Alliance plan until 2015, but the district’s history with the insurance provider goes back over 20 years.

A review of public records at the district shows that the public agency’s insurance contracts with the Alliance started in 1997, the same year John Didion left his job at Long Beach Community College to become the new vice chancellor of HR for the Rancho Santiago District.

Within six months of Didion’s arrival, public records show the district shifted from its longtime insurance provider –  the Statewide Association of Community Colleges –  to the Alliance, which mostly covers K-12 schools.

El Don could find no documents showing an attempt to solicit bids from any vendor other than the Alliance, but records of that nature are now generally thrown out after two years by most public agencies.

Over the next few years, records show the district consolidated its property, liability and workers compensation insurance programs with the Alliance.

District records show most of Didion’s work with the Alliance while he worked for the district was publicly disclosed, including his multiple stints as the unpaid president of the board.

Records from the state of Hawaii’s Department of Commerce and Consumers Affairs also show Didion served on the board of the Alliance’s affiliate company, Captive Insurance for Public Agencies, a fact that was mentioned on his district bio.

Didion was a founding member of Captive’s corporate board according to the company’s incorporation papers and served there for the next decade, all while the district was making multiple deals that benefitted Captive’s business according to public records.

At least $5 million was paid directly to Captive from 2007 to 2014, roughly 20% of the $25 million the district paid to the Alliance in that period according to its financial records.

Financial records do not go back far enough to determine how much was spent by the district before 2007.

Were There Conflicts of Interest on The Health Insurance Switch?

The biggest increase in payments to the Alliance came in 2015 when the district decided to give them its healthcare insurance plan, making it the only community college district in the state that contracted with the Alliance for all of their insurance needs.

When the Alliance got the district’s healthcare contracts, it gained over $12 million per year because the district was not requiring its employees to move to Medicare – the only community college district in Orange County to do so – meaning all the insurance payments from the district went to the Alliance.

Records show the move was approved by staff in a Joint Benefits Committee that both Didion and vice chancellor of finance Peter Hardash served on.

In the years leading up to the award of the health insurance contracts to the Alliance, disclosures filed by Didion and Hardash with the district reported they received gifts from companies connected to the Alliance.

From 2013 to 2015, Didion reported two games of golf and two $200 gift baskets from Declues, Burkett and Thompson, one of the Alliance’s law firms during that same time frame.

Hardash reported he golfed three different times at a cost of over $500 paid by the same firm.

Those golf trips took place over three years, but Hardash didn’t disclose the firm’s connection to the Alliance until the final year.

Over those three years, Didion and Hardash reported receiving more than $5,000 from companies connected to the district’s insurance, the disclosure records show.

In a 2015 Voice of OC investigative report, Hardash was called out for taking gifts from other vendors at the time.

At the time, Chancellor Raul Rodriguez defended Hardash in the wake of the Voice of OC published report, privately describing it as “good networking,” for district staff to take gifts from vendors.

The district’s board of trustees banned gifts altogether the year after Voice of OC published its investigation detailing how public records showed Hardash routinely received gifts of golf from businesses looking for government contracts just weeks before he recommended them to the board of directors.

Prior to that, in 2013, Hardash was fined by the state’s Fair Political Practices Commission for failing to disclose gifts unrelated to the Alliance.

It was after that fine, Hardash – and Didion – began reporting hundreds of dollars in gifts related to the district’s insurance.

Didion did not return multiple emails and phone calls from Voice of OC to discuss these issues.

Their disclosure filings show that neither made any disclosures connected to insurance prior to Hardash’s 2013 FPPC fine.

To review Didion’s disclosures, click here. To review Hardash’s disclosures, click here. 

Barry Resnick, who served on the joint benefits committee as the faculty union president, said he had no idea at the time that Hardash or Didion were involved in any way with the Alliance.

“In the two or three meetings we had, I do not recall (Didion) mentioning anything about a past or current relationship with (the Alliance),” Resnick said in an interview. “Why would you not disclose it?”

Didion did state in his online district bio that he served on the board of directors for the Alliance and Captive.

Why Weren’t Retirees Aware of Medicare?

According to a September 2021 email to district leadership from Dan Sanger, the Alliance’s executive director of health benefits, while at the district, Didion asked Alliance staff members to suppress communications to district staff about Medicare enrollment.

Copies of that email came from a public records request to the district.

To read that email, click here. 

While some retirees signed up on their own, many chose not to because they were told they didn’t have to according to email records from the district.

“The way that we were utilizing our resources to advise retirees not to enroll, to me, was wrong,” said the district’s new chancellor, Martinez, who came in after Didion’s departure.

After leaving the district in 2016, Didion became a Managing Director at Captive in 2017, receiving $8,000 a month according to a copy of his contract obtained by Voice of OC through a public records request of the district, a position he still holds.

In a text to reporters, Didion described his director work as “consulting work,” and said that he was never involved with the health program.

“I’ve heard this accusation of a conflict before but there never seems to be any specifics,” Didion said. “The issue is the district unilaterally changing the terms and conditions of their retiree health benefits. The district doesn’t want to discuss that.”

Some Retirees Are Getting Hit With Medicare Penalties

The district’s new health plan went into effect in July 2022 and many retirees are still trying to navigate their new coverage.

Nearly a dozen who spoke to el Don described issues ranging from increased co-pays to doctors and treatments no longer being covered, while others said they don’t know if the coverage works yet because they haven’t needed it.

Additionally, many more report problems receiving reimbursement for Medicare part A penalties, which are based on the number of quarters an individual pays into the Medicare system, something California teachers hired before April of 1986 were not required to do.

Karen Dennis, hired in 1984, said she never paid into Medicare. Her husband paid into it through his job, but didn’t enroll at 65 because they thought he would be on her plan for the rest of their lives, she said.

That delay wracked up a 120% monthly penalty, she said.

Dennis said she is frustrated as she tries to figure out whether she is supposed to be paying penalties for her coverage as well, but can’t get a straight answer.

She said she contacted the Social Security Administration and was told she would indeed owe penalties.

But when she followed up with Medicare, she was told no penalties were showing up in their system.

Another barrier to changing plans is the portion covered by the district. Currently, the district pays for any late fees incurred by signing up late for Medicare. But if retirees leave the district’s health insurance plan that stops, leaving them on the hook for massive monthly payments.

Mary Gulesarian was married to a professor who worked in the district for over 40 years.

After her husband passed away earlier last January, she said she got letters from district staff warning her she was about to lose her health insurance because it was missing the proper paperwork.

She managed to sign up in time for the new system, but said that she would have liked the chance to look at other options first.

“It was like, we’re moving you from this to this and  the other caveat was, if you decide not to do this, you can’t ever come back,” Gulesarian said in an interview.

At first, the district covered her Medicare penalties, paying her nearly $300 in the first month to block the penalty, she said.

But a few weeks later, she said they asked for that money back, saying it had been a clerical error and she’d have to pay it.

Getting Help to Retirees

In an interview with Voice of OC, Cheng-Yu Hou, the district’s vice chancellor of finance, said in the future retirees won’t be affected by those late fees since they’ll already be on Medicare and that without Medicare spouses like Gulesarian could have lost their insurance altogether.

“When the retiree passes away, we can’t continue to pay that for the spouse,” Hou said. “The earlier people move on (to Medicare), the more it stops the bleeding.”

Hou said that as of now, all complaints they’ve received about the new program have been addressed, and they’re ready to move forward with enrolling future retirees in Medicare to avoid the late fees.

“Let us know if something is not going super smooth and we’ll see what we can do to help you,” Hou said. “Through this process we’re able to smooth out almost all, if not all the complaints.”

There’s No Going Back

It doesn’t look like the retirees will be able to fight their way back to the old insurance plan.

While the Rancho retirees sued the district alleging the shift was a breach of contract, an Orange County judge denied their request for an order restraining the district from making  a health plan shift, finding that the case would not prevail in court.

“(The association) has failed to establish a likelihood that it will prevail on the merits,” wrote Judge Randall Sherman in a ruling published in February 2022. “(The association) has not established that Faculty, Staff and Child Care Teacher Retirees have a vested right to be provided with District-funded benefits under the same medical plan as active employees.”

The case never made it to trial.

In a message to members, the association’s board said they’d run out of money to continue pushing back against the district. The letter was signed by the full board, including Didion.

“This decision is based on one criteria only and that is MONEY. The District has unlimited taxpayer dollars at its disposal to legally block us and refuses to even discuss reasonable settlement,” the board wrote.

They also noted they were pursuing a potential class action lawsuit, which would have to be filed by March, but had yet to retain a law firm who would represent them on contingency.

“The District’s use of unlimited TAXPAYER dollars gives them the ability to unilaterally and retroactively destroy our medical benefits without any accountability,” the board wrote. “We continue to be committed to our cause and will do everything we can to continue this fight.”