COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Employee and Public Services

DATE:

September 15, 2005

BOARD MEETING DATE:

October 18, 2005

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Mary Welch, EPS Director

Paul Hackleman, Benefits Manager

SUBJECT:

Renewal of Agreement with Blue Shield

RECOMMENDATION:

Approve a resolution waiving the Request for Proposal process and authorizing the Employee and Public Services Director upon approval by County Counsel to sign an amendment to the current agreement with Blue Shield for provision of health plan benefits to County employees, retirees and their dependents for the period from January 1, 2006 through December 31, 2006.

VISION ALIGNMENT:

Commitment: Responsive, effective and collaborative government

Goal(s) 20 and 21: Government decisions are based on careful consideration of future impact rather than temporary relief or immediate gain; and County employees understand, support and integrate the County vision and goals into their delivery of services.

Performance Measure(s):

Measure

FY 2004-05
Actual

FY 2005-06
Projected

Percentage of employees enrolled in a health plan within 30 days of employment

N/A

98%

Total percentage of enrolled employees

21%

21%

BACKGROUND:

The Blue Shield plan currently covers approximately 1,025 active employees (21%) and 688 retirees.

The Blue Shield plan was designed by a Labor-Management-Retiree Health Care Committee in 1994. Modifications were made to the plan in 1998 and 2001 by the same Committee. The changes kept Blue Shield premiums 8% lower for active employees and 23.5% lower for retired individuals over age 65 than they would otherwise have been without modification. Blue Shield provides a Point-of-Service option to active employees incorporating HMO, PPO and out-of-network options. The plan provides world-wide coverage for retirees.

DISCUSSION:

Blue Shield is being recommended for continuation without a formal request for proposal process because:

• They were initially selected in 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.

The increase for Blue Shield is 5.37%. The PPO plan for out-of-area retirees under age 65 decreased by .96%.

The premium decrease for retirees age 65 and over is 1.46% due primarily to the implementation of Medicare Part D effective January 1, 2006. Under this new program Medicare will reimburse a portion of prescription drug costs, reducing the cost for employers. Employers have two main options. They may “integrate” the coverage provided by Medicare with their current coverage, allowing health plans to receive reimbursement and pass savings along to employers through premium reductions. Alternatively, employers must obtain annual actuarial assessments of costs and apply direct to the Centers for Medicare and Medicaid Services (CMMS) to obtain a maximum reimbursement of 28%. Health plans have been analyzing the comparative savings under both options and concluded that the integration provides more direct savings to employers and involves less administrative expense.

Because of the requirement that Health Plans secure CMMS approval for their integration of benefits, all health plans anticipate a delay in being able to get contracts to employers. For this reason, we are requesting Board approval of the renewal of agreements and authorization for the Employee and Public Services Director to sign amendments upon approval by County Counsel.

FISCAL IMPACT:

The net County cost increase for 2006 is an estimated $459,250. This cost has already been included in the FY 05-06 budget.