HUMAN RESOURCES - G. COCHRAN

Receive a report regarding health care providers for county employees and retirees; direct staff to return on August 9, 2016 with a recommendation and appropriate documents as necessary.

SBC FILE NUMBER: 630

The County became a part of the Public Employees Medical and Hospital Care Act (PEMHCA) through CalPERS’ Health Care network in 1993.  Over the years, the County’s health care premium costs have been varied. In some years, the County experienced a zero percent rate increase, other years the rates were reduced, and yet in some years, the rates increased by double digits.

In 2014 and 2015, the County negotiated flat rate dollar contributions and negotiated caps on contributions for retirees of Medicare age with its bargaining units which significantly reduced the County’s OPEB (Other Post-Employment Benefits) Annual Required Contribution.  In FY 2014-15 the County’s OPEB Annual Required Contribution decreased by $1.5 million as a result of the negotiated flat rate and in FY 2016/17, the County’s contribution dropped nearly another nearly $1 million as a result of negotiated Medicare caps.  Unfortunately, in June of 2015, CalPERS announced their 2016 Health Premiums would increase in excess of 20% which significantly affected County employees and retirees. 

The County has now bargained generic health care premium language in all of its Memoranda of Understanding with its employee bargaining groups which no longer ties the County to CalPERS Health, but rather allows for the Board of Supervisors to move to a different health care provider other than CalPERS if it so chooses.

Earlier this year County staff invited representatives from all of the bargaining units to participate as part of the Insurance Committee to review a draft Request for Proposals (RFP) for alternate health care providers and provide input/recommendations to the County.  This RFP was circulated to known providers of these services and the County received two responses in late May; one from Keenan Associates and one from California State Association of Counties Excess Insurance Authority (CSAC-EIA).  Subsequently the Insurance Committee representatives reviewed the RFP submittals and heard presentations from both RFP responders with respect to the various merits of each provider.  Scoring of the proposals according to the RFP guidelines did not produce a clear direction.

County staff ultimately asked each bargaining unit to provide their recommendations and the reasoning for their recommendations in priority order.  This process also did not produce a consensus among the various groups and the RFP scoring was inconclusive as well.  Some bargaining unit representatives preferred to stay with CalPERS and both Keenan Associates and CSAC-EIA were rated first by other representatives. 

There are both risks and rewards regardless of whether the County decides to make a change in health care providers or maintain the status quo and stay with CalPERS for another year.

If the Board makes a decision to change health care providers, the rates may be lower for the first year or two, but the County has little control beyond that as premium rates will be determined by actual utilization of services by employees and retirees.  If the rates increase following the first year or two, the County is still barred from returning to CalPERS for five years following their exodus.  The earliest re-entry date into CalPERS would be January 1, 2022.

A reward/benefit to the County may be lower rates, at least for the first two years as well as the ability to modify/design health plans to more closely fit the desires of County employees.  Both providers have quoted rates for plans similar to CalPERS (Choice and Select) with recognized health care providers that are lower than what CalPERS has set for 2017.  A shift from CalPERS would also provide the County with the flexibility to change plan design in the future to provide for lower premium rates.

Any decision by the Board of Supervisors should not be entered into lightly, but after considering the pros and cons of each provider and after considering the input from the Insurance Committee which represents nearly 100% of County employees.  Since the County has no official or active retiree group, there has been no input from the County’s retired annuitants.  As such, County staff felt it appropriate to agendize this item to allow for public input at today’s meeting prior to a final staff recommendation being made to the Board. 

Other Agency Involvement:

County bargaining groups including SEIU, MEG, Institutions Association, DSA, and LEM, Auditor-Controller, County Counsel and County Administrator.

Recommendation:

1.     Receive this staff report, ask questions of County staff, and allow input from the various employee groups, both those who were active participants in the Insurance Committee and also from other groups who were not able to attend the meetings.

2.     Direct staff to return with a recommendation on August 9, 2016 for the provision of health care services as of January 1, 2017 and provide appropriate documents as necessary to effectuate any recommended change.