COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Employee and Public Services

DATE:

November 23, 2004

BOARD MEETING DATE:

December 14, 2004

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, 2005 through December 31, 2005.

BACKGROUND:

The Kaiser plan currents covers approximately 46% of eligible employees and retirees which represent about 3,150 individuals.

Kaiser is the sole ‘closed panel’ HMO option available to employers. It also consistently provides the lowest premium cost as well as the lowest out-of-pocket costs for plan participants.

DISCUSSION:

The increase in the Kaiser premium for the County is 12%. By comparison, the Kaiser increase for PERS (Public Employees Retirement System) is 16.1%. Two years ago, in negotiations, the County modified co-payments bringing them in line with the upper co-payments of Kaiser plan options. Kaiser has developed a state-wide strategy to continue the process of examining and modifying co-payments annually to reflect inflationary increases to keep their plan design comparable to other plans offered by each employer. Kaiser recommended no change in County co-payments for 2005.

At the request of the County, Kaiser has proposed implementing a new program called PHASE (Preventing Heart Attacks and Strokes Everyday) which will focus on diabetes and cardiovascular disease for 330 identified high risk County Kaiser members to reduce their individual costs and help control overall County premium costs.

Kaiser is being recommend 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 has lower cost for both the employer and employee),

• Provide a closed-panel network of physicians that is not offered by any other health plan and

• Provide a network 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.

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 2005 is an estimated $1,735,066. The budgeted expense for Kaiser was 10%. The actual increase was 12%. The reasons for this difference were based on two factors: 1) higher overall medical trend figures in inpatient utilization and 2) higher diabetes utilization in the 51-60 age group for men and in the 51-60 and 61-70 age groups for women. The PHASE program mentioned above is specifically targeted to address this increased utilization.