COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Human Resources Department

DATE:

March 8, 2010

BOARD MEETING DATE:

March 23, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Donna Vaillancourt, Human Resources Director
Peter Bassett, Benefits Manager

SUBJECT:

Agreement for Blue Shield to offer the County a Health Maintenance Organization (HMO) plan

RECOMMENDATION:

Adopt a resolution:

A) Waiving the Request for Proposal process and authorizing the President of the Board to execute an Agreement with Blue Shield to offer County employees, retirees and their dependents a HMO plan for the period from April 1, 2010 to December 31, 2010 with the amount not to exceed $15,468,000 ($14,561,000 for actives and $907,000 for retirees); and

B) 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:

Each year prior to open enrollment, the County negotiates health plan premium rates. In June 2009, Aetna provided the County a preliminary rate increase of 19.3% (rate increases for Kaiser and Blue Shield POS were 4.3% and 0% respectively). Given Aetna’s disproportionately high rate increase, the County requested a rate quote from Blue Shield for a HMO plan similar to Aetna’s. Blue Shield quoted a 6.8% increase for its HMO plan. Although Aetna subsequently revised its rate quote to an 11% increase, the Aetna plan was still $740,000 more expensive per year than the Blue Shield HMO plan.

DISCUSSION:

The joint labor-management Employee Wellness Committee, formed in 2009, is charged with exploring options for improving employee health and controlling rising healthcare costs. In light of the timing of Aetna’s notice of its intended rate increase, the Committee determined that it was not feasible to conduct a Request for Proposals process prior to the October open enrollment period. After receiving a rate quote for Blue Shield’s similar HMO plan as well as a revised rate quote from Aetna, the Committee recommended that the County move from the Aetna HMO to the Blue Shield HMO plan.

The County subsequently met with all employee organizations in the Fall of 2009 regarding the proposed change in health plans. Upon agreement with AFSCME and SEIU, on November 10^th and December 1^st, the Board of Supervisors approved AFSCME and SEIU Memoranda of Understanding (MOUs) which included reference to the change from Aetna to Blue Shield. Agreement was reached with all other bargaining units regarding this change in January 2010.

The agreement with Blue Shield to offer an HMO plan is being recommended without a formal request for proposal process as it is in the best interests of the County. Although the County plans on conducting a formal RFP on all of its medical plans within the next two to three years, it is in the best interests of the County to proceed with this health plan change without an RFP for the following reasons:

• The timing of Aetna’s rate change notice precluded conducting an RFP in light of the need to meet with all employee organizations and timely enroll employees and retirees in the selected plan

• Cost savings of $740,000 per year for the County and employees as compared to Aetna’s final rate quote

• This change will strengthen the County’s negotiating power and consolidate risk to two insurance carriers (Kaiser and Blue Shield) thereby reducing future costs

• Based on an analysis of current primary care physicians (PCPs) used by Aetna, there is no disruption of existing patient / primary care physician relationships

• Larger Blue Shield HMO network

• Enhanced benefits (no charge for lab/x-ray and the option to self-refer to HMO specialist)

• The opportunity for nearly 50% of County employees to participate in Blue Shield’s Healthy Lifestyle Rewards Program at no cost to the County (up to $175 wellness incentive per employee)

Blue Shield has 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 recommended Agreement and Resolution as to form. The insurance has been reviewed and approved by Risk Management.

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

2009*

2010 projected

Percentage of enrollment ID cards that are issued on or before an employee’s effective date

n/a

97%

Percentage of calls to Blue Shield Call Center being answered on average within 30 seconds or less

n/a

100%

*Performance guarantees are included in the Blue Shield contract effective January 1, 2010.

FISCAL IMPACT:

There is no net County cost associated with this agreement. Funding is included in the FY2009-10 Adopted Budget. The total contract amount shall not exceed $15,468,000 for the term April 1, 2010 through December 31, 2010. During the term of the contract, the County will save approximately $500,000 and employees will save approximately $55,000 as compared to Aetna’s final rate quote.