COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Employee and Public Services

DATE:

September 23, 2004

BOARD MEETING DATE:

October 19, 2004

TO:

Honorable Board of Supervisors

FROM:

Mary Welch, EPS Director

Paul Hackleman, Benefits Manager

SUBJECT:

Agreement with Secure Horizons (Pacificare)

RECOMMENDATION:

Approve a resolution waiving the Request for Proposal process and authorizing an amendment to an agreement with Secure Horizons for retiree health coverage from January 1, 2005 through December 31, 2005.

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 coverage. Proposals were received from only two providers (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 first time in January, 2001.

DISCUSSION:

The Pacificare renewal for January 1, 2005 represents a decrease of 5.5% The main reason for this decrease is the revision of Medicare’s reimbursement. Since the 1997 Balance Budget Act, Medicare has limited the increase in its reimbursements to 2% annually even though health increases have consistently been in the double-digit range. This year, Medicare authorized a 10% increase in its reimbursement which reduced the amount that otherwise would have been paid by employers and retirees.

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

• They offered the best proposal for coverage in 2001 through a formal process and

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

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 5.5% decrease represents an annual savings of $17,000 compared to last year’s costs.