COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Employee and Public Services

DATE:

June 29, 2006

BOARD MEETING DATE:

July 18, 2006

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Mary Welch, EPS Director

Paul Hackleman, Benefits Manager

SUBJECT:

Approval of Agreement with Vision Service Plan for Vision Benefits to Employees and Retirees

RECOMMENDATION:

Adopt a resolution authorizing the HR Director to sign an Agreement upon approval by County Counsel with Vision Service Plan (VSP) for vision benefits for employees and retirees for the period from August 1, 2006 through July 31, 2011.

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

Contract Years 2005-06
Actual

Contract Years 2006-11
Projected

Claims processed with five business days

95%

95%

Average response time for incoming calls

<25 seconds

<25 seconds

BACKGROUND:

Vision Service Plan has provided vision services to employees, retirees and dependents since 1976. The Benefit Division has issued three requests for proposals during that period. The vision benefit provides eye examinations (with a $10 co-pay) and eye materials (lenses, frames and contact lenses with a $10 co-pay).

DISCUSSION:

A proposal was sent in May, 2006 to seven companies who provide vision coverage in the State of California. Three companies – Medical Eye Services (MES), Spectera and Vision Service Plan (VSP) – submitted proposals. One respondent, Spectera, was eliminated from further consideration because of the small size of their network. The other two companies were interviewed as finalists.

The Labor-Management Selection Committee is unanimously recommending that the County contract with VSP for a period of five years. VSP submitted a stronger proposal in the following areas:

• New administrative fees will be fixed, without increase, by VSP at $1.13 during the five years of the contract. MES proposed a $1.19 administrative fee for the five-year period. This VSP proposed fee represents a reduction (11%) from their current fee of $1.27.

• Both finalists offered strategies to reduce claims costs. VSP agreed to reduce claims by 12% through new negotiated fees with providers. The change will be effective January 1, 2007 and will represent a maximum disruption (loss of current providers) of 5% or less. MES estimated that they could reduce claims by 10% through their combined retail and wholesale network. The Committee recommends implementing the new plan and obtained a $2,500 guarantee that the reduction of providers would be 5% or less. The Benefits Division will work with VSP to minimize the loss of any providers.

• Although MES has a larger network because it includes wholesale vendors, the disruption (loss of current providers) would total an estimated 42% of current providers because MES does have as many providers who offer a combination of examination services and materials. For many MES providers an employee would be required to obtain an examination from one provider and material from another.

• VSP agreed to increase the current frame allowance from $115 to $130 because the allowance has not been changed in approximately seven years. MES’ proposal also included an option to establish a $130 frame allowance which would cost approximately the same.

FISCAL IMPACT:

The estimated 9% decrease in claims (12% reduction and 3% increase for the new frame allowance) and the 11% decrease in administrative costs represent a reduction of net County cost of $74,066 per year or an estimated five year savings of $370,331 during the five year term of the agreement.

1.

General Description of RFP

The RFP was for vision plan services for County employees, retirees and their dependents.

2.

List key evaluation criteria

Chief criteria were estimated claims costs (and cost control), administrative expenses, design of coverage and provider network.

3.

Where advertised

The RFP was not advertised publicly but the RFP was placed on the County’s website.

4.

In addition to any advertisement, list others to whom RFP was sent

The RFP was mailed to seven companies who do large scale vision insurance.

5.

Total number sent to prospective proposers

Seven

6.

Number of proposals received

Three

7.

Who evaluated the proposals

A Committee consisted of Charlene Shores (AFSCME), Ralph McGill (PDA) and Paul Hackleman

8.

In alphabetical order, names of proposers (or finalists, if applicable) and location

Medical Eye Services – San Francisco

Spectera – San Francisco

Vision Service Plan (VSP) – San Francisco