COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Employee and Public Services

 

DATE:

November 18, 2002

   

BOARD MEETING DATE:

December 17, 2002

 

TO:

Honorable Board of Supervisors

FROM:

Mary Welch, EPS Director

Paul Hackleman, Benefits Manager

   

SUBJECT:

Approval an Agreement with Secure Horizons

 

Recommendation

Approve a resolution waiving the Request for Proposal process and authorizing the EPS Director to sign an agreement with Secure Horizons (PacifiCare) for provision of health plan benefits to eligible County retirees and their dependents effective January 1, 2003 through December 31, 2003.

 

Background

In July, 2000 the County was notified by Blue Shield and Aetna that they were terminating their managed care health benefits for retirees over age 65. As a result, a Labor-Management-Retiree Committee was formed to solicit proposals to replace the two plans that were terminating. Proposals were received from Secure Horizons and HealthNet.

In October, 2000 your Board accepted the recommendations of the Committee to approve an agreement with Secure Horizons because its premium was less and its network more closely matched those of Blue Shield's and Aetna's. The County contracted with Secure Horizons for the past two years from January 1, 2001 and through December 31, 2002.

 

Discussion

Retiree healthcare continues to be very volatile. The 1997 Balanced Budget Act which limits annual Medicare increases to 2% even when actual cost increases for hospitals and physicians were in the high single digit and, in the last several years, double digit range. This federal legislation forces health plan providers to terminate coverage or increase premiums. Since the passage of the Balanced Budget Act a total of 2.5 million retirees have been forced off of managed care and back onto Medicare (which does not cover prescription drugs). Another 500,000 retirees are expected to lose coverage in 2003.

PacifiCare changed co-pays this year in order to keep the premium stable. Office visits are increasing from $5 to $10 for primary care physicians and $20 for specialists. Generic prescription drug co-pays are increasing from $5 to $10 while brand prescription drug co-pays are increasing from $10 to $20. The new plan Secure Horizons plan also includes $50 co-pays for ambulance and emergency room visits, $250 for inpatient care and $125 for outpatient care.

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

· Offered the best proposal for 2001 in a formal process and

· No new options have arisen which would represent less cost and less disruption of patient-physician relationships.

Secure Horizons complies with the Equal Benefit provisions. Secure Horizons also modified last year the non-discrimination clause to meet their legal parameters. The non-discrimination language was reviewed and approved by the County Manager.

 

Vision Alignment

The contract with Secure Horizons 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 estimated increased annual cost to the County is $8,628.