COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Human Resources Department

DATE:

December 2, 2010

BOARD MEETING DATE:

December 14, 2010

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) Waiving the Request for Proposal process and authorizing the Human Resources Director to execute renewal agreements with Kaiser, Blue Shield, and Secure Horizons for the provision of health coverage for County employees, retirees and their dependents for the period from January 1, 2011 to December 31, 2011 with the aggregate amount not to exceed $85.2 million; and

2) Authorizing the Director of the Human Resources Department or her designee to execute subsequent amendments and minor modifications in an amount not to exceed $25,000

BACKGROUND:

Approximately 4,900 out of 5,400 active County employees (or 91%) participate in one of the County’s medical plans. A total of 52% of employees are with Kaiser and 48% are with Blue Shield. Approximately 2,380 out of 3,560 County retirees (or 67%) participate in one of the County’s retiree medical plans. Approximately 46% of retirees on a County health plan are with Kaiser, 45% with Blue Shield, and 4% with Secure Horizons.

Each year, the County aggressively negotiates health plan renewals in an effort to control increasing benefit costs to the County. The cost of healthcare continues to increase dramatically. Benefit costs have generally increased between 10% and 15% for both HMOs and PPOs in Northern California. Factors fueling increased costs include: increased use of new medical technologies, higher prescription drug costs, pressure on health insurance plans and the private sector to absorb higher costs as funding for public programs like Medicare and Medicaid decreases, and increased utilization due to the economic environment.

DISCUSSION:

Agreements with Kaiser, Blue Shield and Secure Horizons will be forthcoming prior to January 1, 2011, and will be reviewed by the County’s benefits consultant and the County Counsel’s office at that time. Authorization for the Human Resources Director to execute such renewal agreements upon approval by the consultant and the County Counsel’s office is being recommended in order to insure timely benefit renewals. Waiver of the RFP process is in the best interests of the County because no new health plan options have arisen which would represent less cost and less disruption of patient-physician relationships. To the extent that any such options become available, the County will conduct an RFP for 2012.

The County’s 2011 premium rates for Kaiser, Blue Shield HMO, and Blue Shield POS represent an average increase of 9.1%. The County continues to work with each health plan on specific initiatives to help improve employee health. In 2011, the County will offer employees an enhanced wellness program in partnership with the health plans which will include incentives for participation in health screenings and health risk assessments.

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 as to form.

Approval of these Agreements 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

2011 Projected

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

$11,100

$11,800

$12,600

FISCAL IMPACT:

The net County cost increase for health insurance for active employees in 2011 is an estimated $1.8 million. This was partially offset by approximately $360,000 in savings resulting from the 2010 Open Enrollment process in which many employees transitioned to a lower cost health plan.

The total cost increase for health insurance for retirees in 2010 is an estimated $1.2 million. This 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 FY2010-11 budget.