Inter-Departmental Correspondence

Employee and Public Services



November 23, 2004


December 14, 2004



Honorable Board of Supervisors


Mary Welch, EPS Director

Paul Hackleman, Benefits Manager


Waive a Request for Proposal and Approve an Agreement with Blue Shield.



Approve a resolution waiving the Request for Proposal process and approving an agreement with Blue Shield for provision of health plan benefits to eligible County employees, retirees and their dependents effective January 1, 2005 through December 31, 2005.



The Blue Shield plans current cover approximately 1,600 employees and retirees.

In 1994, the County formed a Labor-Management-Retiree Health Care Committee to oversee the Blue Shield Point-of-Service Plan. In 1998 and again in 2001, the Committee proposed and the Board adopted modifications to the design of the Blue Shield plans to reduce overall premium costs. These efforts have kept Blue Shield premiums more than 8% lower for active employees and 23.5% for retired individuals over age 65 than they would otherwise have been without modifications.



The Health Care Committee’s modification of co-payments enjoyed considerable success last year with a 4.66% increase compared to double digit increases throughout California. This year’s increase of 26.9% is almost entirely based on ten catastrophic claims that represent atypical utilization. Six of these individuals had medical expenses above $150,000. Four of the individuals had medical expenses between $100,000 and $150,000. Overall, high dollar claims represented 35.9% of total annual cost.

Blue Shield is actively managing these cases to minimize their ongoing impact on future plan increases. In addition, the Blue Shield Plan will be providing its final report on the pilot Healthy Rewards Program the County and Blue Shield implemented earlier this year. Based on outcomes for high-risk / high-cost participants, the County and Blue Shield will be considering next steps to focus on lower costs for the small percentage of participants that represent significant annual expenditures.

Blue Shield is being recommended for continuation without a formal Request for Proposal process because:

They were initially selected n a Labor-Management-Retiree Request for Proposal process that specifically conformed to the County’s previous self-funded plan,

No new options have arisen which would represent comparable design, less costs or less disruption of patient-physician relationships and

Blue Shield represents the only option for retirees who re-locate out of the coverage areas of Aetna and Kaiser as it provides coverage to retirees throughout the world.


Vision Alignment

The contract with Blue Shield represents Vision Statement #20 which focuses on careful consideration of future impact and #21 incorporating the County’s vision and goals into delivery of service.


Fiscal Impact

The premium increase represents an estimated cost of $1,975,000 for 2005. The budgeted increase was 10% and the actual increase was 26.9%. The premium reason for the significant different between estimated and actual expense was based on the high catastrophic claims identified above.