COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Counsel

DATE:

September 8, 2005

BOARD MEETING DATE:

September 20, 2005

SPECIAL NOTICE/HEARING:

No

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

County Counsel

SUBJECT:

JPA Between County of San Mateo and Health Plan of San Mateo

RECOMMENDATION:

Adopt a resolution:

(1) authorizing the execution of a Joint Powers Agreement between the County of San Mateo and the Health Plan of San Mateo, creating the San Mateo Community Health Authority, and

(2) consenting to the assignment of the County of San Mateo’s Healthy Kids contract to the JPA, and

(3) acting in the capacity as governing board for the IHSS Public Authority, consenting to the assignment of the IHSS’ Public Authority’s HealthWorx agreement to the JPA, and

(4) consenting to the assignment of the contract(s) whereby the County of San Mateo provides non-Medi-Cal health services to Health Plan members.

(5) authorizing the County Manager to make nonmaterial changes to the agreement with the written consent of County Counsel.

VISION ALIGNMENT:

Commitment: Ensure basic health and safety for all.

Goal(s): The transactions would ensure that residents have access to healthcare and preventive care (Goal No. 5), as the JPA will maximize funding available for healthcare.

BACKGROUND:

In 1986, the Board of Supervisors authorized the creation of the San Mateo Health Commission, which is a local government agency separate from the County of San Mateo. Initially, the sole purpose of the Commission, which does business as the Health Plan of San Mateo, was to enable local control of the administration of the Medi-Cal program. The Health Plan of San Mateo has successfully administered Medi-Cal in the County since 1987.

Over the past five years, the Health Plan’s enabling legislation has been expanded, and the Plan has contracted to administer three other lines of health care business.

These include HealthWorx, in which the Health Plan contracts with the County, in its capacity as IHSS Public Authority to provide health insurance benefits for IHSS workers; Healthy Kids, in which the Health Plan contracts with the County to administer health insurance for all children in the county who are between the ages of 3 and 18 years old; and Healthy Families, in which the Health Plan contracts with the State Managed Risk Medi-Cal Insurance Board (MRMIB) to provide health insurance for families whose income is above the poverty level but who cannot afford health insurance. The Health Plan’s non-Medi-Cal lines of business require a Knox-Keene license, which was issued by the State Department of Managed Health Care in 1999. In addition, it is expected that the Health Commission will soon enter into an agreement to administer the MediCare program, which would be its fourth non-Medi-Cal line of business.

For the past three years, the financial health of the Health Plan has been compromised due to lack of adequate state Medi-Cal funding and the unavailability of Medi-Cal rate increases, both of which have resulted in the depletion of Health Plan reserves.

DISCUSSION:

Over the past few months, however, there have been several developments which have led to increased optimism about the financial strength of the Health Plan.

The first development was an inter-governmental transfer (IGT) which has allowed the Health Plan to pass through federal funding to the San Mateo Medical Center, whose participation is critical to the Health Plan’s provider network. Thus, the Medical Center has recouped some of the funds it could not otherwise access because of its participation in the Health Plan. An IGT involves the transfer of local government agency funds to the state, which funds are transferred to the federal government to draw down matching funds, which are returned to the local agency in the form of a rate increase. The IGT process is regulated and scrutinized by the federal Center for Medicare Services (CMS).

Next, the Health Plan is also anticipating a 3% Medi-Cal rate increase that would be financed by a Medi-Cal Quality Insurance fee, or QIF (WIC § 14464.5). The QIF is similar to the IGT, although it is specific to Medi-Cal managed care plans, and the agency’s contribution is obtained by a tax or a fee on the agency’s revenues.

State law requires that the QIF must be levied on all of a Medi-Cal managed care plan’s lines of business, including those that are not related to Medi-Cal. Thus, imposition of the QIF on all the Health Plan’s lines of business will cost the Health Plan $800,000 that it would not be required to pay but for the non-Medi-Cal initiatives.

To alleviate the inequity of this situation, the Department of Managed Health Care has authorized Medi-Cal managed care plans to form a “sister entity” and “spin off” non-Medi-Cal lines of business to that entity. The JPA would be the Health Plan’s “sister entity,” and in that capacity, the JPA would take over the contracts for the Health Plan’s non-Medi-Cal lines of business. The JPA will enter into a management agreement with the Health Plan, so the Health Plan would continue to operate and manage the non-Medi-Cal lines of business.

However, the County will need to consent to the assignment of two types of contracts to the JPA. The first of these are the major contracts by which the County contracts for the Health Plan’s administration of the HealthWorx and Healthy Kids programs. In addition, the County has several contracts with the Health Plan by which the County is a provider of non-Medi-Cal health services to Health Plan members. Therefore, it will also be necessary for the County to consent to the assignment of its provider contracts for non-Medi-Cal services.

The Health Commission would be the governing board for the JPA. Once the JPA is executed and the by laws and management and mutual guaranty agreements are in place, these documents are transmitted to the Department of Managed Health Care with a request to transfer the Health Plan’s Knox-Keene license to the JPA.

This transaction will greatly increase the benefits of the QIF to county residents who are served by the Health Plan. The transaction will have no impact on services, and should be invisible to the County as well as the Health Plan members, staff, and management. The format of the transaction is consistent with the guidelines established by the Department of Managed Health Care, and the sole impact will be to reduce the amount of QIF funds the Health Plan is required to pay in order to secure a Medi-Cal rate increase.

FISCAL IMPACT:

There will be no fiscal impact on the County of San Mateo.