COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Human Resources Department

DATE:

November 30, 2009

BOARD MEETING DATE:

December 15, 2009

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Donna Vaillancourt, Human Resources Director
Peter Bassett, Benefits Manager

SUBJECT:

Renewal of Agreements with Health Insurance Companies

RECOMMENDATION:

Adopt a resolution:

1) Authorizing the Human Resources Director to renew coverage with Kaiser, Aetna, Blue Shield, and Secure Horizons to provide health benefits to County employees, retirees and their dependents for the period from January 1, 2010 to December 31, 2010 with the aggregate amount not to exceed $82,690,167 ($67,662,608 for actives and $15,027,559 for retirees);

2) Waiving the Request for Proposal process; and

3) Authorizing the Human Resources Director or the Director's designee to execute contract amendments which modify the County's maximum fiscal obligation by no more than $25,000 (in aggregate), and/or modify the contract term and/or services so long as the modified term or services is/are within the current or revised fiscal provisions.

BACKGROUND:

Approximately 5,000 out of 5,600 active County employees (or 89%) participate in one of the County’s medical plans. A total of 53% of employees are with Kaiser, 26% with Aetna, and 21% with Blue Shield. Approximately 1,916 out of 3,935 County retirees (or 49%) participate in one of the County’s retiree medical plans. About 70% of these retirees are covered by a Medicare integrated plan and 30% are early retirees covered by a basic health plan. Approximately 57% of retirees on a County health plan are with Kaiser, 42% with Blue Shield, 6% with Aetna and 5% with Secure Horizons.

Each year, the County aggressively negotiates health plan renewals in an effort to control increasing benefit costs to the County. National health care trends, however, continue to increase due to increasing patient demand for services, an aging population, increasing medical technology costs, increasing price and utilization of prescription drugs, and poor lifestyle choices.

DISCUSSION:

Agreements with Kaiser, Aetna, Blue Shield and Secure Horizons are being recommended for continuation without a formal request for proposal process because no new health plan options have arisen which would represent less cost and less disruption of patient-physician relationships.

The rate increase by health plan for 2010 for health insurance for active and retired employees is as follows:

• Kaiser HMO: 4.3%

• Aetna HMO: 11%

• Blue Shield POS: 0%

• Kaiser Senior Advantage (retirees): 6.8%

• Blue Shield PPO (retirees): 9.7%

• Secure Horizons (retirees): 15%

The County continues to work with each health plan on specific initiatives to help improve employee health. Kaiser has provided behavioral health and allergy/asthma workshops to County employees. Aetna is working with the County to offer pain management and diabetes weight management courses. Blue Shield offers financial incentives to employees who participate in its Healthy Lifestyle Rewards Program.

The contractors have assured compliance with the County’s Contractor Employee Jury Service Ordinance, as well as all other contract provisions that are required by County ordinance and administrative memoranda, including but not limited to insurance, hold harmless, non-discrimination and equal benefits.

County Counsel has reviewed and approved the Resolution and Agreements as to form.

Approval of this Agreement contributes to Shared Vision 2025 of a Healthy Community by providing cost-effective health benefits to County employees, retirees and their dependents.

Performance Measure(s):

Measure

2008

2009

2010 Projected

Average annual County contribution to an active employee’s health premium

$10,240

$11,160

$11,810*

*Increased health premium cost is partially offset by a decrease in health plan enrollment of approximately 70 employees.

FISCAL IMPACT:

The net County cost increase for health insurance in 2010 for active employees is an estimated $2.5 million. The total cost increase for health insurance for retirees in 2010 is an estimated $960,000. The retiree health premium increase is primarily borne by retirees as County contributions toward retiree health (for most retirees) are capped at fixed amounts specified in the Memoranda of Understanding and Board Resolutions. County costs for both active and retiree health have already been included in the FY 09-10 budget.

The County anticipated that healthcare costs for active employees would rise by 10% between calendar year 2009 and 2010. With overall premium increases being lower than expected, the County will realize a savings (cost avoidance) of over $2.5 million.