COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Employee and Public Services

DATE:

November 20, 2002

BOARD MEETING DATE:

December 17, 2002

TO:

Honorable Board of Supervisors

FROM:

Mary Welch, EPS Director

Paul Hackleman, Benefits Manager

SUBJECT:

Approval of Amendment to Agreement with Kaiser

Recommendation

Approve a resolution waiving the Request for Proposal process and amending an agreement with Kaiser for provision of health plan benefits to County employees, retirees and their dependents effective January 1, 2003 through December 31, 2003.

Background

The Kaiser plan currently covers about 49% of eligible employees and retirees. Since 1997, Kaiser has incorporated into the cost of premiums two factors beyond the control of employers. The first is the recovery program Kaiser initiated in 1999 to offset significant operating losses in 1997 ($262 million) and 1998 ($285 million). The second is the compliance with State mandated retrofitting of all hospitals and facilities for minimizing damage in the event of an earthquake.

Additionally, Kaiser has recently renegotiated contracts with physicians and nurses which represented substantial increases in the cost of delivering care.

Discussion

The increase in the Kaiser premium for the County is 14.96% percent. By comparison, the increase for PERS (Public Employees Retirement System) is 23.3% with comparable increased co-payments for office visits and prescription drugs.

In negotiations, the County agreed to modify the co-payments for office visits and prescription drugs to coincide with changes to PERS and to reduce the overall premium from 20.71%. Based on these agreements the:

· Co-payment for office visits will increase from $5 to $10 and

· Co-payment for brand prescription drugs will increase from $5 to $15. The $5 co-payment for generic drugs will not change.

Kaiser is being recommended for continuation without a formal request for proposal process because they:

· Offer the lowest cost premium for employer provided health coverage (e.g. no other health plan can compete in terms of low cost to both the employer and employee) and

· Provide a closed-panel network of physicians that, if changed, would cause 100% patient disruption because no new plan would be able to offer coverage through the Kaiser primary and specialist physicians.

Kaiser began complying with the County's Benefits Ordinance in 2002. They proposed , in 2002, alternate language for the non-discrimination requirement which was reviewed and approved by the County Manager's Office.

Vision Alignment

The contract with Kaiser represents Vision Statement #20 which focuses on careful consideration of future impact and #21 incorporating the County's vision and goals into delivery of services.

Fiscal Impact

The net County cost increase for 2003 is $1,595,000. The monthly premium for retirees over age 65 will increase from $115.46 to $192.34 with an estimated $368,000 increase in annual County cost.