HomeMy WebLinkAboutMINUTES - 08162005 - C99 -=-- ' �
TO: BOARD OF SUPERVISORS -' Contra
i
Costa
FROM: JOHN SWEETEN, County Administrator
• m s n
County
DATE: AUGUST 4, 2005
SUBJECT: RESPONSE TO GRAND JURY REPORT NO. 0508,ENTITLED drqf
"CODE BLUE: COUNTY HEALTH CARE COSTS"
SPECIFIC REQUEST(S)OR RECOMMENDATIONS)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
APPROVE response to Grand Jury Report No. 0508, entitled "Code Blue: County Health Care
Costs", and DIRECT the Clerk of the Board to forward the response to the Superior Court no later
than August 30, 2005.
BACKGROUND:
The 2004/2005 Grand Jury filed the above-referenced report on June 9, 2005, which was reviewed by
the Board of Supervisors and subsequently referred to the County Administrator and the Health
Services Director, who jointly prepared the attached response that clearly specifies:
A. Whether the finding or recommendation is accepted or will be implemented;
B. If a recommendation is accepted, a statement as to who will be responsible for
implementation and a definite target date;
C. A delineation of the constraints if a recommendation is accepted but cannot be implemented
within a six-month period; and
D. The reason for not accepting or adopting a findin recommen tion.
CONTINUED ON ATTACHMENT: YES SIGNATURE: 0114 e�
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOM DATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
-------------------------------------------- ---- ---------- ----------------------------------------------------------------------------------------------------------------
ACTION OF BOARD ON �$ 1° � APPROVE AS RECOMMENDED X OTHER X
The Board requested this topic be brought back as a Short Discussion item at a meeting in the near future for a broader
discussion.Public comment provided by Kris Hunt of the Contra Costa Taxpayers Association.
VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE
AND CORRECT COPY OF AN ACTION TAKEN
UNANIMOUS(ABSENT blob) F. ) AND ENTERED ON THE MINUTES OF THE
BOARD OF SUPERVISORS ON THE DATE
AYES: NOES: SHOWN.
ABSENT: ABSTAIN:
ATTESTED: AUGUST 16,2005
CONTACT: JULIE ENEA(925)335-1077 JOHN SWEETEN,CLERK OF THE BOARD OF
SUPERVISORS AND COUNTY ADMINISTRATOR
CC: PRESIDING JUDGE OF THE GRAND JURY
GRAND JURY FOREMAN
COUNTY ADMINISTRATOR
HEALTH SERVICES DIRECTOR
CONTRA COSTA HEALTH PLAN DIRECTOR
HUMAN RESOURCES DIRECTOR
BY DEPUTY
BOARD OF SUPERVISORS RESPONSE TO
GRAND JURY REPORT NO. 0508: CODE BLUE:
COUNTY HEALTH CARE COSTS
FINDINGS
1. Since 2000,the County's cost of employee group insurance has increased at a compounded
rate of 19.2%per year.
County Employee Group Insurance Costs*
(In thousands)
Fiscal Year Ending June 30
2000 2001 2002 2003 2004
Active Employees $32,818 $39,421 $46,708 $56,524 $65,063
Retired Employees 11,889 13489 155928 205534 255108
Total Group Insurance $44,707 $5210910 $62!1636 $77,058 $90,171
%Increase over previous
year 18.3% 18.4% 23.0% 17.0%
* Employee group insurance is primarily health and dental insurance,but also includes life
insurance and a benefits administration fee. The figures include the County's general fund,
special funds, enterprise funds, courts, and special districts.
Response: Agree, with the clarification that as of January 1, 2005, the Superior Court
terminated its participation in the County's group insurance program.
Plan Information
2. County employees select a health plan from one of two lists:
• Employees in certain bargaining units and some retirees select from a list of health plans
designed by the California Public Employees' Retirement System("CalPERS"). For these
Ca1PERS plans ("CalPERS Plans"), Ca1PERS determines the co-pays and other design
features, which are not subject to change by the County.
• All other employees select from a list of County designed health plans ("County Plans").
For a County Plan,the co-pays and other design features are subject to negotiation.
Response: Partially disagree. The Board of Supervisors determines benefits,plan design, and
contributions for retired County employees.
3. The County Plans most frequently selected by those not eligible for Medicare are:
0 CCHP A.
Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 2
• CCHP B.
• Health Net HMO/EPO ("Health Net HMO").
• Kaiser Permanente HMO ("Kaiser").
Response: Agree.
4. The County Plans most frequently selected by those eligible for Medicare are:
• Health Net Seniority Plus ("Seniority Plus").
• Kaiser Permanente Senior Advantage ("Senior Advantage").
Response: Partially disagree. For Health Net, the County plan most frequently selected by
those eligible for Medicare is Health Net HMD/EPO,followed by a smaller group in Health
Net Seniority Plus. Note also that Kaiser Permanente Senior Advantage is mandatory for
Kaiser members who enroll in Medicare A & B coverage.
5. County Plans and Ca1PERS Plans do not include dental coverage, so the County provides a
separate dental plan("Dental Plan"). County employees and retirees can select either of the
following:
• Delta Dental ("Delta Dental").
• PMI Deltacare ("PMI Deltacare").
Response: Agree.
6. Health and dental insurance premiums are based on family status:
For County Plans and Dental Plans, there are two premium categories:
• Employee only ("Single").
• Employee plus spouse/partner and/or children("Family").
For CaIPERS Plans,there are three premium categories:
• Employee only ("Employee Only").
• Employee and one dependent("Employee+I").
• Employee and two or more dependents (Employee+2").
Response: Agree.
7. As of December 31, 2004,the number of active employees and retirees covered by health
plans was as follows:
Single Family Total
Active Employees
County Plans 25207 45382 65589
CalPERS Plans 324 847 15171
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 3
Total Active Employees 25531 59229 75760
Retirees
County Plans 15670 15456 310126
Ca1PERS Plans 133 404 537
Total Retirees 15,803 11860 39663
Total 49334 79089 11,423
Response: Agree.
8. A significant number of the County's union contracts (Memorandums of Understanding)
("MOUS") expire on September 30,2005.
Respo_ Agree.
Health and Dental Insurance Premiums
9. For County Plans, the employee's share is a percentage of the total premium. A comparison
of the County employee's share of premium with the average of employers from the Kaiser
Survey ('"Survey Employers") is as follows:
Employee's Share of
Premium
County Plans in 2005
Single Family
CCHP A 2% 2%
CCHP B 10% 10%
Kaiser 20% 20%
Health Net HMO 20% 20%
Medicare eligible plans
Senior Advantage* 20% 20%
Seniority Plus* 20% 20%
Survey Employers
2004 Average 16% 28%
2000 Average 14% 26%
* The share of premium includes the Medicare part B premium paid directly by the employee
or retiree.
Response: Partially disagree. The County employee share for active employees is correctly
stated. For Medicare (retiree contributions), the range varies from 0 to 12.1% (exclusive of the
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 4
PPO), unless the Medicare estimates were based on some form of averaging the Medicare
plans.
10. For each provider of a Ca1PERS Plan, the employee's share is the total premium(charged by
that provider) less a flat dollar allowance paid by the County under the terms of the current
MOUs. For each category of coverage,this dollar allowance is 87% of the total Kaiser
premium.
Response: Agree, with the clarification that the 87% rate cited in the fin ding is based on the
Bay Area Kaiser rates.
11. For Dental Plans,the employee's share is a percentage of the total premium, as follows:
Employee's Share of
County Dental Plans in 2005 Premium
Single Family
With a CCHP health plan:
Delta Dental 2% 2%
PMI Deltacare 2% 2%
With other health plans:
Delta Dental 22% 22%
PMI Deltacare 22% 22%
Response: Agree.
12. For employees on a County Plan, if the employee's share of premium were the same
percentage as the average for Survey Employers (16% for Single and 28% for Family), a
single employee would pay less and a family would pay more. In this case, the County's share
for a Family would be double that of a Single employee. The following example uses an
employee with Kaiser coverage and the average percentages for Survey Employers:
Employee's Share of Premium County's
Total Portion
Coverage Monthly County Survey Employers Using
Premium Survey
Percent Amount Percent Amount Employers
Single $407.68 20% $ 81.54 16% $ 65.23 $342.45
Family 949.90 20% 189.98 28% 265.97 683.93
Response: No response required(per the Grand Jury).
13. The County charges a single insurance premium for all non-Medicare participants, both active
and retired, regardless of age.
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 5
Response: Partially disagree. Insurance premiums vary depending on the plan selected by the
employee and the number of dependents.
14. The County's use of a single insurance premium for participants of all age groups results in
younger participants (who typically have a lower cost of coverage) subsidizing older
participants (who typically have a higher cost of coverage).
Response: Agree.
Medical Visit and Emergency Room co-pays
15. The Kaiser Survey reports that for medical visit co-pays,the percentage of employees at
various levels is as follows:
Medical Visit co-pay 2000 2004
$5 per visit 22% 1%
$10 per visit 54% 19%
$15 per visit 16% 37%
$20 per visit 3% 27%
Other 6% 15%
Weighted Average $11 $17
Response: No response required(per the Grand Jury).
16. The County's emergency room co-pays and a comparison of the County's medical visit co-
pays with those of Survey Employers is as follows:
Medical Emergency
County Plans in 2005 Visit co-pay Room co-pay
CCHP A None None
CCHP B* $5 $20
Kaiser $5 $5
Health Net HMO $5 $25
Medicare eligible plans
Senior Advantage $5 $5
Seniority Plus $5 $20
Survey Employers
2004 Weighted Average $17 N.A.
2000 Weighted Average $11 N.A.
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 6
* co-pay waived if services are provided at a County facility.
Response: Agree. Generally,for the Bay Area, most large employers'office visit co-pay
average is $10-15 and emergency room visit co-pay is $35-$50.
17. Emergency room co-pays are typically higher than medical visit co-pays to discourage the use
of high cost emergency rooms for routine medical situations. Although the Kaiser Survey
does not report emergency room co-pays, many health plans have emergency room co-pays in
the range of$50 to $100 (which is usually waived if the patient is directly admitted to the
hospital).
Response: No response required(per the Grand Jury).
Prescription Drug co-pays
18. Health care plans may have different co-pays depending on the category of drugs as follows:
• One-tier Plan: Employees pay the same co-pay for generic,preferred, and nonpreferred
rugs ("One-tier plan").
• Two-tier Plan: Employees pay one co-pay for generic drugs and a higher co-pay for all
brand name drugs ("Two-tier plan").
• Three-tier Plan: Employees pay one co-pay for generic drugs, a higher co-pay for
preferred drugs, and an even higher co-pay for non-preferred drugs ("Three tier plan").
Response: No response required(per the Grand Jury).
19. The Kaiser Survey shows that, over the past few years, Survey Employers have been moving
toward Three-tier plans:
Type of Plan 2000 2004
One-tier plan 22% 10%
One-tier plan 22% 10%
Two-tier plan 49% 20%
Three-tier plan 27% 65%
Other 2% 5%
Response: No response required(per the Grand Jury).
20. All County Plans are One-tier plans. A comparison of the County's prescription drug co-pays
with those of Survey Employers is as follows:
County Plans in 2005 Generic Preferred Non-preferred
co-pay co-pay co-pay
CCHP A None None None
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 7
CCHP B* $3 $3 $3
Kaiser $5 $5 $5
Health Net HMO $5 $5 $5
Medicare eligible plans
Senior Advantage $5 $5 $5
Seniority Plus $5 $5 $5
Survey Employers
2004 Average $10 $21 $33
2000 Average $7 $13 $17
* co-pay waived if services are provided at a County facility.
Response: Agree.
CCHP
21. Years ago, when CCHP was a new health plan, the County encouraged participation in
CCHP with a low employee share of premium(currently 2%) and no co-pays. In addition,
employees choosing a CCHP Plan pay only 2%for dental,while all other County employees
pay 22% for dental.
Response: Agree.
22. During the past few years,the County has upgraded the facilities used by CCHP, including a
new hospital in Martinez, new clinic in Pittsburg and other improvements.
Response: Agree.
23. The number of CCHP participants has continued to grow, so that now CCHP is chosen
by 44%of active employees who are covered by County Plans.
Response: Agree, based on 2004 enrollment.
Accounting for Retiree Health Costs
24. The County expenses retiree health costs on a pay-as-you go (cash)basis.
Response: Agree.
25. Governmental Accounting Standards Board("GASB") Statement 45, "Accounting and
Financial Reporting by Employers for Post-employment Benefits Other than Pensions",was
issued in August 2004 and requires that the County implement a new accounting standard for
retiree health costs and other post-employment benefits, effective in fiscal year 2007-2008.
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 8
800�
Response: Agree, with the clarification that GASB 45 applies to post-employment benefits
other than pension, including retiree health care, dental care, and life insurance.
26. GASB 45 establishes an accrual accounting standard for retiree health benefits analogous to
the treatment ofpension benefits. Accrual accounting for retiree health benefits has been
required in the private sector for many years.
Response: Agree.
27. Under GASB 45,the cost of retiree health is recognized at the time it is earned(over the
employee's service),rather than when it is paid(over the employee's retirement). GASB 45
requires the County to:
• Show on its balance sheet the unfunded liability for post-employment benefits that have
been earned by active employees and retirees.
• Increase its annual health care cost to include the normal cost of benefits as they are
earned,plus an amount that amortizes the unftmded liability for prior service,to the extent
either is funded.
Response: Partially disagree. Under GASB 45,the County will have to calculate the annual
required contribution necessary tofully fund its post-employment benefits (other than pension)
liability. An increase in cost will only occur to the extent the County chooses to fund amounts
in addition to the current normal(pay-as-you-go)premium cost. The annual required
contribution would include both a normal cost component and a component associated with
amortizing the unfunded liability. GASB 45 will not require the County to pay the cost of the
annual required contribution every year. However, the County will have to report any
difference between the annual required contribution and what it actually pays in any year as a
liability on its government widefinancial statements (statement of activities and statement of
net assets).
28. GASB 45 does not require advance finding of the liability for future benefits for retirees,just
accrual accounting and reporting;however,the decision to fund, or not to find, will influence
the allowable actuarial assumptions and the accounting results.
Response: Agree.
29. Although there is no current requirement to fund any of the obligation, a directive requiring
fimding could be issued in the future or the credit markets could require it.
Response: Agree.
30. The County has requested,but as of May 31,2005,had not received an analysis to understand
the accounting impact of current retiree health benefits under GASB 45.
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 9
Response: Partially disagree. The County is working with a consultant to develop a
preliminary calculation of the County's GASB 45 liability. This calculation is only intended to
give the County an initial estimate of this liabilityfor planning purposes. Accounting impacts
are not the focus of the analysis.
31. An accurate estimate of the County's retiree health liability for current benefits would
require the actuarial study that has not yet been received. However, actuarial rules of thumb
can be used to estimate the liability. These suggest that the County's liability could be
substantial, as much as one billion dollars or more, and that annual health costs could increase
by tens of millions of dollars or more, depending on the funding approach.
Response: Agree.
RECOMMENDATIONS
County Comment: The Grand Jury has made many recommendations worthy of further
consideration by the County. The Board of Supervisors notes, however, that some of the Grand
Jury's recommendations pertain to issues which are the subject of the County's current
negotiations with employee organizations. While the Board makes every effort to provide direct
and complete responses to the Grand Jury's recommendations, it is limited in its ability to respond
to those recommendations before concluding its obligations under the Meyers-Milias Brown Act
("MMBA'g. In order to bargain in good faith under the MMBA, the County may not take a
specific position on matters that are or may be the subject of labor negotiations before concluding
its bargaining obligations. In those instances, the County has indicated in its responses that it may
not directly respond to the Grand Jury's recommendation.
The 2004-2005 Contra Costa.County Grand Jury recommends that the Board of Supervisors
work toward achieving the following:
1. Prepare for MOU negotiations by doing the following, in addition to regular preparations:
a. Re-evaluate the County's framework for providing health benefits in light of
escalating health care costs and the switch to accrual accounting for retiree health
care. Questions should consider financial, legal and equity issues, and include:
• Should the County continue to contribute to health care premiums at the current
level?
• Should the County's contribution for retirees continue to be the same as for active
employees?
• How should the County's contribution to the premium of a Single Employee
compare to that for a Family?
• Should the County's contribution be a percentage of premium, or a fixed dollar
amount?
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No.0508 Page 10
• Should the County revise its approach to co-ordination of benefits for Medicare
eligible participants who are not enrolled in either Seniority Plus or Senior
Advantage?
b. Review the GASB 45 actuarial analysis (see finding 3 0) as soon as it is available.
C. Obtain additional GASB 45 analyses to understand the financial impacts of various
approaches to retiree health benefits in the upcoming MOU negotiations.
Response: The recommendations have not yet been implemented, but will be
implemented within the next six months.
2. Negotiate changes in the employee's share of premium, so different percentages are used for
Single and Family, as follows:
a. For County Plans, other than CCHP Plans, change the employee's share of premium,
to mirror Survey Employer Plans (16%for Single and 28%for Family).
b. For CCHP Plans, change the employee's share of premium to one-half that adopted
for other County Plans (8% for Single and 14% for Family).
C. For Ca1PERS Plans, reduce the County's flat dollar allowance to mirror Survey
Employer Plans (84%of Kaiser premium for Employee Only, and 72% of Kaiser
premium for Employee+1 and Employee+2).
d. For Dental Plans, including those selected by CCHP Plan participants, change the
employee's share of premium to mirror Survey Employer Plans (16% for Single and
28% for Family).
Response: The County may not respond because to do so would prevent the Board of
Supervisors from engaging in "good faith negotiations"with employee representatives
as required by State law.
3. Negotiate increases in County Plan co-pays so employees have an incentive to cut costs, by
being more selective in their use of health care services. Specifically,
a. For County Plans, other than CCHP Plans, increase the medical visit co-pay to the
average for Survey Employers ($20 per visit).
b. For CCHP Plans, increase the medical visit co-pay to one-half that adopted for other
County Plans ($10 per visit).
C. Increase the emergency room co-pay to at least$50 per visit(unless the patient is
directly admitted to the hospital)to reduce unnecessary use of high cost emergency
room visits.
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Code Blue: Health Care Costs August 4,2005
County Response to Grand Jury Report No. 0508 Page 11
Response: The County may not respond because to do so would prevent the Board of
Supervisors from engaging in "good faith negotiations"with employee representatives
as required by State law.
4. Negotiate modifications to the structure and increases to County Plan prescription drug co-
pays as follows:
a. Establish a Three-tiered co-pay for generic,preferred, and non-preferred drugs to
encourage the use of lower cost generic and preferred drugs.
b. Increase the prescription drug co-pays to the average for Survey Employers (at
least $10 for generic, $20 for preferred and $35 for non-preferred).
Response: The County may not respond because to do so would prevent the Board of
Supervisors from engaging in "good faith negotiations"with employee representatives
as required by State law.
5. Negotiate adjustments to co-pays during the life of any new MOUs,to prevent a repeat of the
experience from expiring MOUs,where County Plan co-pays were frozen for several years,
while other employer co-pays increased significantly.
Response: The County may not respond because to do so would prevent the Board of
Supervisors from engaging in "good faith negotiations"with employee representatives as
required by State law.
6. Negotiate changes to other plan design features in County Plans that are significantly more
favorable than offered by other employers.
Response: The County may not respond because to do so would prevent the Board of
Supervisors from engaging in "good faith negotiations"with employee representatives as
required by State law.
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