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HomeMy WebLinkAboutMINUTES - 04161991 - 2.5 TO BOARD OF SUPERVISORS FROM: ��e�, ,�,o Contra William B. Walker, M.D. Health Officer/Medical Director Costa "J o DATE; Ct� April 16, 1991 SUBJECT: 1st Choice Health Plan SPECIFIC REQUEST(S) OR RECOMMENDATION S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION Accept report prepared by Dr. William Walker regarding 1st Choice Health Plan, County Benefits Division and dental plans . BACKGROUND On January' 15, 1991, I was directed by you to assume overall policy and administrative responsibility for the 1st Choice Health Plan and the County's dental benefit plans for a ninety day period. Joe Tonda, County Risk Manager, assisted me in handling the day-to-day administrative responsibilities for these plans. I was also directed to work with IEDA and the labor/management subcommittees established by Phil Batchelor to investigate various aspects .of 1st Choice Health Plan operations .. I wish to recognize at the outset the extraordinary contribution of the labor/management subcommittees and the Union Health Care Coalition presided over by Jim Hicks (Attachment #1 ) . My final charge, as recommended by Mr.. Batchelor, was to work with County Counsel to formulate, in conjunction with the labor/management Trust Committee, a Joint Labor/Management Trust for health care. We made substantial progress toward that end. The Union representatives have taken their charge seriously and have contributed time and talent to the resolution of problems and the development of new structures for administering the, 1st Choice Health Plan. Summarized below are actions taken and recommendations relating to the 1st Choice Health Plan, County Benefits Division and dental benefits program. A. 1st CHOICE HEALTH PLAN 1 . Joint Employer/Employee Trust I believe that the single most important directive you gave me on January 15, 1991, was to pursue the development of a Joint Employer/Employee Trust. I met nearly weekly with the Trust X CONTINUED ON ATTACHMENT: YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATUREISI: ACTION OF BOARD ON _ April .16, 1991 : APPROVED AS RECOMMENDED X and OTHER X Also, DIRECTED Health Services Department to prepare .letter for the Chair's signature . to the State Attorney General requesting an opinion on the issue of a Joint Employer/Employee Trust to manage the 1st Choice Health Plan. VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE X UNANIMOUS (ABSENT AND CORRECT COPY OF AN ACTION TAKEN AYES: _ NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. CC: County Administrator ATTESTED Risk Manager PHIL BATCHELOR, CLERK OF THE BOARD OF County Counsel SUPERVISORS AND COUNTY ADMINISTRATOR Health Services Director Personnel Director M382/7-83 BY -- _,DEPUTY � 3 Committee on this project. Keith Fleming from IEDA was very helpful to us in this process. We believe that a Trust is the most effective way to manage a self-insured indemnity health plan such as 1st Choice and there are many such models in the public and private sectors. As its first task, the Committee developed a Request for Proposal for the provision of consultative services to (1) assist in the formation of a jointly managed employer/employee trust fund and (2) provide ongoing consultative services to the Trust for the management of the 1st Choice Health Plan. A copy of the RFP is attached to this report (Attachment #2) . We distributed the RFP to nineteen major health care consultant firms in the Bay Area and received thirteen responses. Five of the thirteen responders were interviewed and the final selection of a consultant is included in a Board order presented to you today. We are recommending that the Board contract with the Martin E. Segal Company, based in San Francisco, for a first year fee of $35,000 and a second year fee of $28,000. The scope of services is outlined in the RFP and will be defined by appropriate contract language. On January 30, 1991, County Counsel requested the opinion of the Attorney General for the State of California on the following issue: Can the Contra Costa County Board of Supervisors enter into a Memorandum of Understanding under the Meyers- Milias-Brown Act with one or more recognized employee organizations to establish a jointly trusteed employee benefit trust fund which will receive payments from the County and provide indemnity health benefits to participating County employees, retirees and their dependents, pursuant to a health plan adopted by the Trust? We have not yet been informed as to when an opinion might be received. Nonetheless, we are proceeding as if a Joint Employer/Employee Trust is permissible under law. If the Attorney General's opinion precludes such a Trust, then I recommend a formally designated Employer/Employee Committee to perform a similar function in the management of the 1st Choice Health Plan, albeit without legal or fiscal responsibility. It is clear to me that if there are necessary changes to plan design or benefits structure for the 1st Choice Health Plan in the future; these changes are best made in the context of a Joint Employer/Employee Trust or Committee. 2. Claims Administration Services The County currently has a contract with Synergetic Administrative Insurance Services, Inc. , (previously known as Stateco) for claims administration services . The previous fee of 9% of claims paid was reduced to 6% of claims paid effective January 1, 1991 . This has resulted in a substantial savings for the 1st Choice Health Plan. I recommend, however, that this fee and the scope of services provided be compared with the market for claims administration services by issuing an RFP. This should be the first charge to the newly hired benefits consultant, who has experience in the development and processing of RFPs for such services. Synergetic Administrative Insurance Services, Inc. presented their annual report to a meeting of the Trust Committee on February 28, 1991 . That report is available for review. 3. Stop-Loss Insurance A Labor/Management Committee, working under the direction of Joe Tonda, investigated the issue of stop-loss insurance. The 1st Choice Health Plan was covered by stop-loss insurance for the 1990 calendar year through the Hartford Life and Accident Insurance Company with a specific stop-loss deductible of $100,000. After consulting specialists in the field, the Committee determined that a policy to cover medical benefits in excess of $250,000 would be sufficient, given our claims experience. Requests for Proposals were sent to seven insurance carriers and bids were received from five. Standard Insurance Company quoted the lowest rates with coverage comparable to that of the other carriers, an annual estimated premium of $65,000 for coverage for claims in excess of $250,000 (Attachment #3) . This again results in substantial savings for the 1st Choice Health Plan. A Board order is prepared for you today .to approve this stop-loss insurance effective April 1, 1991 . 4 . Drug Prescription Expenses Synergetic has recommended that the County seek another claims administrator for pharmacy services . The Drug Prescription Subcommittee has reviewed pharmacy expenses and proposals from prescription vendors ' (Attachment #4 ) . There appear to be substantial savings achievable in this area through pharmacy network contracts, mail order prescriptions, etc. The Committee has recommended that the Benefits Consultant assist in the distribution and evaluation of an RFP for prescription services and that this be done in conjunction with the distribution of an RFP for overall claims administration. We need to determine if it is indeed desireable to unbundle prescription services from overall claims administration. This will depend upon the nature of the responses to the two RFPs. 5. Internal Administrative Costs A subcommittee was formed to investigate the costs of services provided by the Personnel Department Benefits Division for the 1st Choice Health Plan. Budgets and cost reports were reviewed and scope of service was identified. The recommendation of the subcommittee is that the Benefits Consultant assist the Trust in defining the most cost effective model of administering the 1st Choice Health Plan. It needs to be determined which services should be provided by the Benefits Consultant or the Claims Administrator and which services are more appropriately provided either by County employees in a Benefits Division or through other arrangements . 6 . Reserves In October 1990, the Fund balance was $686,000 . Using the recommended formula of 72 calendar days of claims, which equates to 19 . 7% of annual paid claims, the reserves should have been $1 . 7 million as of October 31, 1990. The TPF&C audit projected a steadily decreasing fund balance which would have been exhausted, most optimistically by September 1991, or most pessimistically, by May 1991 . Fortunately, there has been a steadily increasing reserve balance since that time, resulting in a current balance of $1,723,672 as of March 20, 1991 (Attachment #5) . This improvement in the Fund balance can be attributed to a combination of an 18% premium increase, cost savings in claims administration, reduction in stop-loss premiums and a first quarter decline in claims (Note: There are often fewer. claims in the first quarter of a calendar year in health plans) . Although the current level of reserves is encouraging, we must be ever mindful of the continuing spiral in health care inflation. It is therefore incumbent upon the Trust to remain watchful of the reserve balance and to be prepared to institute cost savings measures in the event of future declines . 7 . Peer Review Services Pacific Peer Review currently provides services for second surgical opinion, hospital pre-authorization, hospital bill audits and large case management. It is unclear to me whether the savings indicated from Pacific Peer Review are real and whether or not the services are cost effective. This is an area that needs to be examined by the Benefits Consultant and perhaps included as an option in the RFP for claims administration. 8 . Plan Design The TPF&C Audit of November 28, 1990 indicated concerns regarding deductibles, co-payments and out-of-pocket limits . The Plan currently provides 100% coverage for use of preferred providers and 80% coverage with a low out-of-pocket maximum for non-network providers . In some cases, preferred providers may be costing the Plan more than equivalent non-preferred providers. There are possible areas of cost savings here by changing incentives . The Trust needs to compare current plan design with that of similar jointly trusteed health plans . The Benefits Consultant should be readily able to make these comparisons and provide recommendations for any needed changes. 9 . Training Appropriate training needs to be provided for both management and employee trustees, such as the training program for new trustees, offered as part of The Benefits Conference for Public Employees sponsored by the International Foundation of Employee Benefits Plans . I recommend that at least one management and one labor representative be sent to such a conference this year. We are asking the trustees to make important decisions in a complex field and it is incumbent upon us to provide the training for them. It is also important to recognize that employees working in the Benefits Division need appropriate training for their specialized duties regarding health plan administration. Summary The County needs to maintain an indemnity-style health plan to meet the needs of employees, dependents, and retirees who live out of the service areas of the HMOs offered by the County or who prefer not to use HMOs for their health care. There is no reason why the 1st Choice Health Plan cannot continue to serve this role. The maximum cost savings should first be achieved by the above mentioned administrative measures . If these cost savings prove not to be sufficient to maintain the financial viability of the 1st Choice Health Plan, then the Trust must grapple with the more difficult issues of plan design and benefit structure changes . It is precisely to facilitate the making of difficult decisions that the Trust should be created. B. THE ORGANIZATION OF THE COUNTY BENEFITS DIVISION On January 15, 1991, the Board approved the transfer of policy and administrative responsibility for the 1st Choice Health Plan and the County' s dental benefit plan from the Personnel Department to the Risk Management Division of the County Administrator's Office. The Employee Benefits Manager and the responsibility for all employee benefits have also been transferred to the Risk Management Division. I recommend that this interim transfer remain in effect and that an ongoing evaluation of the efficacy of managing employee benefits through the Risk Management Division be carried out. The attached survey (Attachment #6) indicates that in equivalent counties throughout the state, employee medical benefit programs are managed in a variety of structures . Appropriate review should determine the structure and organization which best meets the needs of Contra Costa County and its employees . The Union Health Care Coalition, at its April 3, 1991 meeting, recommended that Employee Benefits remain in Risk Management for a maximum of six months after which a separate Employee Benefits Unit should be created to report directly to the County Administrator. The expressed concern of the Health Care Coalition was that employee benefits is such an important function that it deserves the undivided attention of the managers and employees working in the unit. There was concern that working within a Personnel Department or for that matter, within a Risk Management Division, would diminish attention to the issues of employee benefits . C. DENTAL BENEFITS With the assistance of Barbara Masters from the Health Services Department, I have investigated the County's dental benefits program as directed by the Board. The County currently offers two dental options: Delta Dental and Safeguard. Delta Dental has a wide network of participating dentists throughout the State. The current program offers 70% coverage for services, (except for 50% for prosthodontics) with a $1000 annual maximum and a $50 one time family deductible. Discussion with a committee formed by the Health Care Coalition indicated widespread employee dissatisfaction with not only the limited coverage under Delta Dental but particularly the $1000 annual maximum. Delta Dental was invited to give a presentation at the Health Care Coalition meeting on April 3, 1991 . Their representative indicated that there are a variety of alternative programs available with additional benefit options. The projected additional cost per month for various options was presented to the Coalition. Delta Dental also offers PPO and fully prepaid models of care. (Attachment #7 ) . Safeguard is a fully prepaid dental benefit option which also offers orthodontics . The main criticism of Safeguard is the relatively limited network of providers available in Contra Costa County. There are also other prepaid dental networks in the Bay Area which can be considered (Attachment #8) . I recommend that there be full disclosure and information-sharing regarding dental plan options prior to the next round of union salary negotiations. This communication should occur between the Benefits Division and the Health Care Coalition. fc.rpt ATTACHMENT #1 HEALTH CARE COALITION LABOR MEMBERS . Pamela Aguilar Nils Anderson Joe Barron Remy Bernardo Kathleen Brady-Pringle Mary Buda -Margaret Cabral Richard Cabral Carl Carey .Kathleen Carrier . Tom Church-dropped Henry Clarke _.Suzanne Condie Jere Copeland Zeny Cruz-alternate Duane Currey Carl Doolittle Raymond Dryer John Goularte Stephanie Harms Jim Hicks Vanda Hill Rick James Mary Celeste Jurien Edward King Gus Kramer Mary Majalca Gayle Middlekauff Susan Milligan Barbara Murfin Sharon Naramore Peasl ee Mike Price Ben Russell Jacque Salvador Michaelangelo Silva Laura Stout David ,Thacker-dropped Claudine Thomas Asenith Toliver John Wasson Lou Welke Billie Jo Wilson Bonnie Wolfe IST CHOICE TRUST COMMITTEE Nils Anderson Richard Cabral Carl Carey Dr. Walker Raymond Dryer Carl Doolittle Peaslee Andrea Cassidy .Claudine Thomas John Wasson Joe Tonda Holly Hand FINANCE SUBCOMMITTEE LABOR Nils Anderson Margaret Cabral Carl Carey Joe Tonda _ Kathleen Carrier Gus Kramer Billie Jo Wilson Mike Grant Julie Enea ADMINISTRATIVE COST SUBCOMMITTEE Jere Copeland Stephanie Harms Jim Hicks . Mary Celeste Jurien Kathleen Brady-Pringle Michaelanglo Silva Joe Tonda Claudine Thomas Art Miner Jean Soares AUDIT SUBCOMMITTEE Kathleen Carrier Tom Church-dropped Jere Copeland Lorna Bastia Wanda Hill Rick .James Mary Majalca Julie Enea Susan Milligan Mike Price Jacque Salvador Joe Tonda Claudine Thomas Andrea Cassidy CLAIMS/PROBLEMS SUBCOMMITTEE Rick James Mary Celeste Jurien Gayle Middlekouff Joe Tonda Barbara Murfin Sharon Naramore Laura Stout Jean Soares DRUG PRESCRIPTION BUBOOmITTBB Tom Church-dropped Mary Majalca Sharon Naramore Joe Tonda Claudine Thomas Billie Jo Wilson opeiu3afl-cio(253)jep 3/21/91 Attachment #2 5E L Contra Costa County Health Services Department William B. Walker, M.D. Medical Director and County Health Officer .-COUN February 6, 1991 "F1^ 1 .-RE: PROPOSAL SPECIFICATIONS Dear Sirs: Your organization is being invited to submit information with regard to the rendering of consulting services to Contra Costa County's 1st Choice Health Plan. Exhibit I provides background information pertaining to this Plan. County management in cooperation with representatives of employee labor organizations is desiring to establish an Employer/Employee Trust to manage the County's 1st Choice Health Plan. We anticipate the following responsibilities and services will be rendered by the selected consultant. Please indicate whether these would be agreeable with your organization. In addition, please respond to each of the questions set forth in Exhibit II . 1 . Provide the following types of services relating to assistance in the formation of a jointly managed employer-employee trust fund: a. Meet with the members of the Trust Committee to assist in the establishment of the Trust. b. Review the current benefits programs, paid claims data and other related matters which form the structure of the current employee benefit plan. C. Assist the -Trust Committee in the investigation of appropriate cost management programs, including the implementation of programs selected. d. Attend meetings of the Trust Committee to the extent required to perform consulting services. Review Minutes of Directors ' meetings and provide comments to administrative officials . e. Assist in the preparation of appropriate announcement literature and Summary Plan Description Booklets for distribution to all employees concerning the benefit plan. 20 Allen Street • Martinez,CA 94553 • (415)370-5010 office•(415)370-5098 FAX A-428 (10/90) f. Provide actuarial calculations as to the anticipated cost impact of plan modifications, including the preparation of annual budgets. g. Maintain a continuing review of fee-for-service benefit programs, with special attention devoted to benefit utilization, reserve accumulations, risk analysis and related matters necessary to maintain the program on a sound actuarial basis. Prepare annual final claims experience accounting reports . h. Analyze contracts entered into for administrative and other services and insurance carriers and perform a continuing study of the carrier's performance so as to make certain that premiums and expense charges are in accord with prior proposals and consistent with claim experience. Negotiate with carriers so that premium rates, reserves and other charges are maintained at the lowest possible level. i. Prepare any required specifications for bids for insurance or administrative services needed to implement the designed health care program and assist in the selection process . j . Provide advice and consultation with respect to the forms, procedures, equipment and personnel required for plan administration. k. Make. arrangements to obtain appropriate Trust Fund General Liability and Errors and Omissions coverage. 1. Research and assist in compliance with federal and state law (including, but not limited to, the Knox-Keene Health Care Service Plan Act) . 2. Provide the following services after formation of a jointly managed employer-employee trust fund: a. Attendance at Trustee and sub-committee meetings. These meetings will necessarily be biweekly to monthly initially with progression to quarterly at a later date. Between meetings, be available for consultation by phone and in writing to the trustees, the fund administrator and plan's other professional advisors. b. A written review and projection for the next year and a report of the Plan's experience at each quarterly Board meeting. Quarterly reports to cover such issues as the following: analysis of claims experience, benefits paid, employer and employee contributions, administrative expenses, gross and net cost of insured benefits, net cost of any self-insured coverage and other relevant items that pertain to the Plan. The report should also include projected income and expense budget based on an analysis of prior experience and known or anticipated factors affecting future operations. C. Upon request, provide information on cost of benefit changes requested by the Board of Trustees . d. As of each fiscal year end the consultant would provide an estimate of reserve requirements for "incurred but not reported" claims for all benefits provided. e. Working with the Trust and attorney, on an as needed basis in: (1 ) Drafting of participant booklet language (2) Drafting notices of benefit changes to Plan participants (3) Reviewing claims appeals (4 ) Claim payment questions brought forth by the Administrator's staff . f . Estimating cost factors of any benefit or eligibility changes for consideration in collective bargaining. g. Consultation with the Trustees on all matters concerning the benefit structure, eligibility requirements, claims, reserves and insurance company performance, as well as the plan's overall progress and development and other matters within the competence of the consultant. h. Negotiations on behalf of the Plan with service plans, utilization review providers, insurance carriers or other organizations providing benefits or related services to the plan members. i. Assistance in the preparation of forms, reports or other documents which are required in the operation of the Plan in which the Consultant is competent to render assistance. j . Consultation and assistance in preparing meeting agendas to aid the trustees in reaching decisions on issues that arise in the course of fund operation, plan design or administration questions, national and industry trends or public policy. k. Coordination of efforts with those of the Trust legal counsel, fund administrator, auditor and investment advisors regarding policy matters of interest to the trustees and the efficient operation of the fund. The preceding list of services generally describes the matters we 'anticipate might regularly arise in the course of the trust's annual operation that call for general consulting services . However, it is difficult to predict in advance whether our trust ., will be involved in complicated, time consuming special problems, and to what extent. Other services may be requested by the Board of Trustees (or Trust Committee) Please indicate the basis for .any charges you would make for additional services and whether you would discuss your fee for such services prior to commencement of work. Please state any other services you believe should be provided to a fund like this and if those would be included in your proposed fee. With respect to the charges you would levy for the above services, please respond to the following: 1 . Indicate whether you are agreeable to a flat annual fee (payable in monthly installments for the services described below and .state the amount of that annual fee) . If you are not agreeable to flat rate, please state clearly the basis of your rate and whether there would be a maximum annual charge. 2. Indicate for what period of time your rate will be guaranteed and if you would. be willing to accept a maximum percentage increase for each year beyond that time. If so, what would be the percentage increases you would accept and for how long would you commit to such a cap? 3. If there is some other basis for your fee, please state clearly how your charges would be calculated and estimate the amount of your annual charges . Inquiries regarding these proposal specifications should be directed to: Joseph J. Tonda, Risk Manager, Contra Costa County Risk Management Division, 651 Pine Street, Martinez, CA 94553 Phone:. (415) 646-2014 or to my office at (415) 370-5010. The County has a timetable for the events which will take place as part of this selection process. The schedule will be approximately as follows: Receive written proposals from consultants 3/1/91 Notify proposers selected to participate 3/15/91 in oral interviews Conduct oral interviews in Martinez 3/21/91 Selection of Consultant 4/15/91 The County reserves the right to accept or reject any proposals received by reason of this request and to waive any informalities in any proposal. Evaluation criteria will include, but not be limited to, related consulting experience, expertise, service and an understanding of the County's operations and needs . Five copies of your written proposal must be delivered in sealed envelopes prior to 4:00 p.m. on March 1, 1991 to: Joseph J. Tonda Risk Manager Contra Costa County Risk Management Division 651 Pine Street, 6th Floor Martinez, CA 94553 Sincerely, William B. Walker, M.D. Medical Director/County Health Officer Attachments : Exhibit I: Description of 1st Choice Exhibit II : Organizational/Reporting Inquiries EXHIBIT I INFORMATION ON 1ST CHOICE HEALTH PLAN Information included in this section: - 1st Choice Health Plan Brochure - Status Report of 1st Choice Health Plan Trust Fund (January 1 , 1988 through January 31 , 1991) - 1st Choice - The Contra Costa County Self-Funded Employees Indemnity Health Plan (Plan document) (The above described attachments to the RFP are available for review) EXHIBIT II ORGANIZATIONAL/REPORTING INQUIRIES 1. Who will be the Account Executive(s ) for this Fund if your firm is selected? Please describe the individual(s) experience with fund's similar to this. 2 . How many accounts does your typical account representative manage? What level of back-up support is available for your account representative? 3. With regard to clients having 1,000 or more active lives, please provide the following: a. A list of clients who have terminated your services in the past 3 years . b. A list of new clients (prior one year) . 4 . In the event your services were terminated in the future, state fully the following: a. The notification period required to execute such termination and specifically whether or not a 90- day notification period would be acceptable. b. The charges (if any) your organization levies for such termination. C. Any noteworthy restrictions or requirements imposed on a client wishing to terminate your services . 5. Please indicate the experience you have in providing consulting services to collectively bargained health and welfare trusts . Specifically indicate and describe experience you have had with public entities . Provide a representative list of your accounts in Northern California indicating the name, address and telephone number of the chairman and company of each fund. 6 . Does any foreign entity have any control or financial interest in your organization? If so, explain. 7 . Is your organization currently involved in any pending litigation regarding the types of services requested? If so, explain. 8 . Would you be subcontracting any of the work described in these specifications? 9 . What is the location of the office that would service this account? jtrust.ltr Benefits Consultant RFP letter sent to following firms: Rael & Letson 341-3311 635 Mariner's Island Blvd 341-5392 FAX San Mateo, CA 94404-1098 Noble Lowndes 495-5151 785 Market Street, 10th Floor 543-7355 FAX San Francisco, CA 94103-2003 Corroon & Black 981-0600 P.O. Box 3995 (Zip 94119 ) 391-4066 FAX 50 California Street San Francisco, CA 94111 J. Lane Associates, Inc. 883-0437 250 Bel Marin Keys Blvd, Suite C-1 883-0464 FAX Novato, CA 94949-5708 Barbanell Associates 929-1155 3629 Sacramento Street San Francisco, CA 94118 William M. Mercer, Inc. 393-5200 3 Embarcadero Center San Francisco, CA 94111 Martin E. Segel Company 882-4700 525 Market Street, Suite 3750 979-0510 FAX San Francisco, CA. 94105 Harry J. Wilson & Company 1-800-742-.1956 2549 West Shaw Avenue Fresno, CA 93711 Robinson, Wallach & Amodeo, Inc. 832-2351 Latham Square Bldg 832-2361 FAX 1611 Telegraph Avenue, Suite 723 Oakland, CA 94612 Athens Benefits Insurance Services, Inc. 1-800-234-6363 P.O. Box 5668 798-2780 Concord, CA 94524 671-9533 FAX Attn: John U. Leap, Consultant TPF&C - A Towers Perrin Company 773-3000 333 Bush Street, Suite 1600 San Francisco, CA 94104-2831 David S. Walker Company 398-2655 777 Davis Street San Francisco, CA 94111-1405 (2/6/91 ) C. W. Sweeney & Company 777-1770 642 Harrison San Francisco, CA 94107-1352 Glen Slaughter & Company, Inc. 451-8564 1999 Harrison, Suite 500 Oakland, CA 94612-3517 The Wyatt Company 98.6-6568 345 California Street San Francisco, CA 94104 Alexander & Alexander Consulting 391-9215 Group, Inc. 2 Embarcadero Center San Francisco, CA 94111-3802 Coopers & Lybrand 957-3000 333 Market Street 957-3385 FAX San Francisco, CA 94105 Curtis Day & Company 50 Fremont Street San Francisco, CA 94105 Attn: Jana Stradley, Account Executive Employee Benefits Johnson & Higgins 345 California Street San Francisco, CA 94104 Attn: Richard W. Smith, V.P. consultants .lst A Proposal to Contra Costa County for Group Employee Benefits Consultant Services Submitted by: Martin E. Segal Company, Inc. February, 1991 MARTIN E. SEGAL COMPANY Table of Content Page PROPOSAL SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 MARTIN E. SEGAL COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 COMPANY SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 COMPANY STAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 APPROACH TO CONSULTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ANSWERS TO SPECIFIC QUESTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 FEE PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 EXHIBITS I - Partial List of Clients II - Client References III - Sample Reports IV - Company Publications MARTIN E. SEGAL COMPANY Martin E. Segal Company Proposal Summary 0 The Martin E. Segal Company is a national, independent, broad based, full-service employee benefits, actuarial and compensation consulting firm. 0 The Company has one overall commitment - to deliver high quality consulting advice responsive to the diverse needs of its clients. The Company's emphasis on customized counseling rather than pre-packaged solutions, its focus on clear, timely and effective communications with its clients, its independence from businesses other than consulting, and its broad experience gained through its diverse clientele are its special strengths. 0 The Segal Company is owned by its executive and professional staffs and is not affiliated with any firm offering investment, insurance or marketing services for employee benefit plans. 0 Established 1939; San Francisco Office opened 1955. 0 15 offices; 650 employees. 0 Consult with over 3,000 employee benefit plans covering nearly 8 million employees and dependents. 0 Consulting style is: - clear communications meaningful information - practical solutions flexible approaches 0 Services delivered by Benefits Consultant are drawn from: - actuarial - group benefits - communications - administrative & computer - compensation planning - systems - health care cost management - investment performance services 0 Assigned consulting team to Contra Costa County: Supervising Officer - Tim Biddle Benefits Consultant - Florence McConnell Group Benefits - Jordan Smith Administration/Communications - Liz Border MARTIN E. SEGAL COMPANY o Conduct annually (since 1973) Survey of State Employee Health Insurance Plans. o Involved in the formation of the State and Local Government Benefits Association. o Helped establish the first contemporary PPO in America. o Early advocate of HMOs. o Initiated competitive bidding of life and health insurance. o Pioneered investment performance measurement of employee benefits plans, funds. o Introduced medical savings accounts. o The Company provides a full range of services to thoseorganizations utilizing or considering self-insurance, and has a special expertise in coping with the complexities of determining and managing the potential liabilities for retiree health care protection. 2 - MARTIN E. SEGAL COMPANY MARTIN E. SEGAL COMPANY SUTIE 3750 525 MARKET STREET SAN FRANCISCO,CA 94105 (415)882-4700 PAX(415)979-0510 February 28, 1991 Mr. Joseph J. Tonda Risk Manager Contra Costa County Risk Management Division 651 Pine Street, 6th Floor Martinez, California 94553 . Re: Consulting Services Dear Mr. Tonda: We are most interested in providing consulting services to the Contra Costa County, Risk Management Division. This letter identifies our Company and our qualifications, and constitutes our response to your Request for Proposal issued February 6, 1991. MARTIN E. SEGAL COMPANY The Martin E. Segal Company is a firm of employee benefit, compensation and actuarial consultants. The Company is a privately held corporation, owned and managed by its employees. Our sole business is consulting and act- uarial work in all phases of employee benefits. As a matter of policy, we are committed to remaining independent of insurers, brokerage firms or accounting firms, so as to avoid any possible conflicts. The Company serves as consultant to more than 3,000 employee benefit plans covering a total of nearly 8 million employees and dependents. Clients are located throughout the United States and Canada as well as in Puerto Rico, the Virgin Islands, the Bahamas and Latin America. The Martin E. Segal Company conducts an international business and has the capability of providing consulting services worldwide. Clients range in size from 25 employees to more than 250,000 employees. The Company is unique in its industry because it has fully developed practices in three distinct client markets: multiemployer; corporate and non-profit; and, state and local government. The Martin E. Segal Company was founded in 1939, early in the development of employee benefit plans in American history. Many widely accepted benefit practices were innovations first conceived, designed and introduced by the Company. We initiated the competitive bidding process for life and health insurance, pioneered investment performance measurement of employee benefit plans' funds and introduced medical savings accounts. ATLANTA I BOSTON I CHICAGO/CLEVELAND!DENVER I EDMONTON 1 HARTFORD I HOUSTON 1 LOS ANGELES I NEW ORLEANS NEW YORK I PHOENDC I SAN FRANCISCO/SEATTLE 1 TORONTO I WASHINGTON,D.C.�WEST PALM BEACH The Segal Company's work with the California Medical Association lead to the development of the first relative value schedules. Our Company helped establish the first contemporary PPO in America and was awarded numerous contracts by the Department of Health, Education and Welfare to provide actuarial services, to monitor and to assist newly developing HMOs. A copy of our recent Newsletter on health care benefits is enclosed. Company experts have been consulted by Congressional committees, state legislatures, the Treasury Department, the Pension Benefit Guaranty K... Corporation, the Department of Labor, the Department of Health and Human y Services, the Equal Employment Opportunity Commission and other executive and regulatory agencies involved with legislation such as the Employee Retirement Income Security Act (ERISA) , the Retirement Equity Act (REA) , the Age Discrimination in Employment Act (ADEA) , the Tax Reform Act of 1986 (TRA '86) , the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) , and a myriad of proposed laws relating to retirement and health benefits. The Segal Company served as technical advisor to several groups directly involved with ERISA during consideration of the law and after its enact- ment. The Company continues to serve as a research resource to other professional advisors serving our clients. COMPANY SERVICES A brief description of some of our services follows: Actuarial Services' include the design of health and pension plans, the preparation and review of actuarial valuations and the calculation of cost '• of plan amendments, as well as the valuation of retiree health plan liabi- lities and other health programs. The Company's actuarial reports pinpoint significant findings, present available options, explore alternatives, measure assumptions and highlight changes and trends. Our actuarial staff is comprised of more than 100 actuaries including Fellows and Associates of the Society of Actuaries, members of the American Academy of Actuaries, the Conference of Actuaries in Public Practice, Enrolled Actuaries and Fellows of the Canadian Institute of Actuaries. Group Benefits Services for health and welfare plans include benefit plan design, preparation of specification letters and bid analyses, premium, retention and reserve analyses, experience reviews, self-funding studies, claims audit reviews and other group benefit and cost management services. Our analysts are expert in group insurance programs, self-funded life and health benefit plans and in health care cost management. Health Services include development, evaluation and selection of alter- native delivery systems; screening and selection of health providers and vendors; design of retiree health benefit programs; design and implementa- tion of health promotion programs; long-term care studies including the feasibility of, design and implementation of long-term care insurance programs; hospital and medical claims audits; cost and utilization data 4 - collection and analysis; consultation for health care coalitions; and review and recommendations for financial and administrative procedures to assure effective cost management. Management and Computer Consulting Services provide assistance to manage- ment and staff charged with the responsibility for administering employee benefit and compensation plans. Services include computer acquisition studies, systems analysis and installation, office operations reviews, procedures manuals and staff recruitment and training. Investment Performance Services provided by Segal Advisors include invest- ment performance ,.analysis and evaluation, assistance in setting investment policy guidelines and objectives and assistance in the selection of invest- ment managers. Segal Advisors staff members combine general consulting backgrounds with extensive experience in organizing investment programs. Employee Communications Services include the development of summary plan descriptions, employee handbooks, individual benefit statements, benefit seminars, payroll stuffers, posters and audio-visual presentations. The staff is experienced in writing, designing and producing a wide range of benefit communications materials. In addition, the staff provides primary market research services such as designing and analyzing questionnaires and conducting focus groups and face to face interviews to gather qualitative information for our clients. COMPANY STAFF The Martin E. Segal Company's more than 600 employees nationwide are trained to provide comprehensive and expert services. Work for each client is coordinated and supervised by a team leader who confers with others within the Company whenever necessary. The Company's team approach allows the unique and broad experience of the staff to be available to every client. The following individuals will be working directly on your account: Supervising Officer: J. Tim Biddle, Vice President Team Leader: Florence McConnell, Benefit Consultant Group Benefits Analyst: Jordan Smith, Department Manager Administrative Analyst: Liz Border, Department Manager As Supervising Officer, J. Tim Biddle will be responsible for overall supervision of our work and will be available to participate in discussions and meetings. Tim first joined the Martin E. Segal Company in 1979 as a consultant in the New York office. He worked in the Company's Segal Associate division which consults with corporate and non-profit clients. Since joining the Segal Company's San Francisco office in 1984, he has assumed responsibility for corporate, multiemployer and public sector clients, and served on the Company's National Section 89 Committee. Mr. Biddle is a 1973 graduate of - 5 - Colorado State University and has also done graduate work in Business at the University of Richmond, Virginia. His specific areas of expertise include benefit strategy and design, health and welfare benefits, and benefit financing. In addition to his benefits consulting, Mr. Biddle has responsibility for the San Francisco office's financial services operations. Our team services will be coordinated and delivered by Florence McConnell. Ms. McConnell joined the Company in 1980 and served as Statistical Department Supervisor before being promoted to a Benefits Consultant and Health Care Cost Management Specialist. Her expertise is in the preparation of financial and statistical analysis for all types of group benefits programs including life insurance, hospital, medical, dental and vision. Areas of analysis include insurance carrier rate renewal, cost of benefits modifications, claims utilization patterns, self-funded cost projections and reserve requirements, and cost trends in health care. Ms. McConnell is a graduate of Golden Gate University in San Francisco. Governmental agency clients of the principals involved include the following: J. Tim Biddle - Central Region School Insurance Group Sacramento City Unified School District Stanislaus County Peace Officers Research Association of California Florence McConnell California Correctional Peace Officers Association City of Stockton Elk Grove Unified School District Oakland Unified School District Our San Francisco office staff has experience with public sector clients and is staffed to provide the full range of actuarial, group benefits, health and employee communications services required for the successful operation of your health program. We believe our value to our clients is the Company's overall commitment to deliver high quality consulting advice responsive to the diverse needs of its clients. The Company's emphasis on customized counseling rather than pre-packaged solutions, its focus on clear, timely effective communications with its clients, its independence from businesses other than consulting, and its broad experience gained through its diverse clientele are its special strengths. APPROACH TO CONSULTING The primary concern of the Martin E. Segal Company is its clients. The Company emphasizes this concern through its business philosophy. 0 The needs and objectives of our clients are basic to all analyses and recommendations, and they must be met efficiently and economically, with the best expertise and creativity. 6 o Clients, should be advised of alternatives and options including their costs, advantages and disadvantages. o Full consideration must be given to not only what our client's competitors are doing regarding employee benefits but how any program design dovetails with the business objectives and strategies of the client's own organization. The costs of the client's current employee benefit programs should be under constant review. Initiatives for cost management should be presented for periodic consideration. o Clients should always receive the most thoughtful, expert and ongoing attention. ANSWERS TO SPECIFIC QUESTIONS 1. Who will be the Account Executive(s) for this fund is your firm is selected? Please describe the individual(s) experience with fund's similar to this. Refer to Pages 5 and 6. 2. How many accounts does your typical account representative manage? What level of back-up support is available for your account representative? The accounts assigned to each Consultant vary depending on the level of experience of the Consultant and the size and complexity of the account. As described on page 5 of our proposal, the team assigned to the County will include a Group Benefits Analyst and Administrative Analyst that will provide back-up support for the Consultant. Additionally, our San Francisco office has a fully staffed Actuarial Department. We will, however, be able to draw upon our entire Company's expertise including staff members from other offices when necessary. 3. With regard to clients having 1,000 or more active lives please provide the following: a. A list of clients who have terminated your services in the past 3 years. CMTA-IAM Joint Health and Welfare b. A list of new clients (prior one year) . 1. Automotive Industries ,Welfare Fund 2. California Correctional Peace Officers Association 3. Eskaton Health Corporation 4. Southern California Professional Engineers Association The above reflect the activity in the San Francisco Office which would be handling your account. 7 - 4. In the event your services were terminated in the future state fully the following: a. The notification period required to execute such termination and specifically whether or not a 90-day notification period would be acceptable. A 90-day notification period would be acceptable. b. The charges (if any) your organization levies for such termination. Upon termination we would request payment for any outstanding time-charges up to the. maximum fees stated in our. retainer agreement. C. Any noteworthy restrictions or requirement imposed on a client wishing to terminate your services. None. 5. Please indicate the experience you have in providing consulting services to collectively bargained health and welfare trusts Specifically indicate and describe experience you have had with public entities. Provide a representative list of your account in Northern California indicating the name, address and telephone number of the chairman and company of each fund. The Martin E. Segal Company services as consultant to more than 3,000 employee benefit plans in which 758 are negotiated with union and/or employee associations. Please refer to Exhibit I for a Partial Client List and Exhibit II for Client References. 6. Does any foreign entity have any control or financial interest in your organization. No. Our firm is owned by its executive and professional staffs and is not affiliated with any firm offering investment, insurance or marketing services for employee benefit plans. FEE PROPOSAL We propose that the County retain the Martin E. Segal Company as Benefits Consultant on a flat annual fee of $35,000 for the first year payable on a quarterly basis. There will be no other commission or fees paid or received on services provided by the Segal Company. All insured products will be placed net of commission costs for the County. All materials, supplies, telephone, postage and travel expenses are included. Our fee proposal for the second year would be $28,000. We would be willing to establish a maximum increase of 108 for a third contract year. 8 - If the occasion requires that other services are requested by the Board, we would proceed only after consultation with and approval by the Trustees. For these services, we would charge on an hourly basis and provide an estimate of expected time and fees involved. We appreciate being considered for this challenging and important assignment. Our Company would be privileged to be engaged as consultants to the Contra Costa County. Sincerely, Florence McConnell Benefits Consultant kd Attachments 9 - EXHIBIT I Partial List of Other Public Sector Clients: Maricopa :Community Colleges County of San Mateo City of Mountain View NovatopFire Protection District City of San Rafael San Jose Police & Fire Department Retirement Plan County of Los Angeles City 'of Los Angeles Fire & Police Retirement System Los Angeles Unified School District City of Glendale Tennessee Municipal Health Plan New Mexico Public School Insurance Authority Denver Police & Fire Health Fund Arapahoe County City of Lakewood City of Aurora Employees' Health Fund Denver Public Schools Jefferson County Schools Adams County School District No. 12 Boulder Valley School District No. 2 City of Birmingham Retirement and Relief System City of Birmingham Firemans' and Policemans' Supplemental Pension System City of Birmingham Library Board Employees' Pension and Relief System City of Savannah Employees' Retirement Plan City of Tallahassee Police Officers' Pension Plan City of Tallahassee Fire Fighters' Pension Plan City of Tallahassee Employee Pension Plan State of Wyoming Retirement System Boston Retirement System City of Fairfield Employees' Retirement System State of Rhode Island Employees' Retirement System State of Rhode Island Municipal Employees' Retirement System City of Stanford Employees' Retirement System State of Vermont Employees' Retirement System Illinois State Teachers' Group Insurance Plan Kansas City Firemans' Retirement System Kansas City Public Employees' Retirement System Michigan State Police Retirement System City of Milwaukee Retirement System Utah State 401(k) Plan Utah State Retirement System Dayton Metropolitan Housing Authority Summit County Childrens' Services Board State of Hawaii Deferred Compensation Plan Town of E. Hartford Retirement System City of Meriden Retirement System Town of Wallingford Retirement System State of Ohio Deferred Compensation Plan City of Houston Employee Benefit Plan City of Houston Employee Pension Plan Houston Independent School District Employees' Health and Life Insurance Fund of the City of Alexandria Louisiana State Employees' Group Benefit Program State of Arizona Employee Health Benefit Program State of Arizona Retirement System New Mexico Teachers' Health Benefit Program City of Las Vegas Delaware State Employees Pension Plan Delaware Employees' Group Insurance Program Pennsylvania Municipal Retirement System Pennsylvania Municipal Employees' Retirement System Washington D.C. Retirement Board Wyoming State Retirement System Wyoming State Group Health Plan EXHIBIT II CLIENT REFERENCES Stanislaus County 1984; 2,700 employees William 'May, Director of Personnel 1000 'H' Street Modesto; California 95354 (209) 525-6341 Central Region School Insurance Group 1984; 1,100 employees Carl Wilsey, Ph.D. , Coordinating Consultant 801 County Center Three Court Modesto, California 95355 (209) 525-5052 Sacramento City Unified School District 1980; 4,300 employees Don Turko, Director of Employee Relations P.O. Box 2271 Sacramento, California 95810 (916) 553-4215 City of Stockton 1989; 1,400 employees George Bist, Employee Relations Office 425 N. E1 Dorado Street Stockton, California 95202 ' (209) 944-8344 Attachment #3 Stop-Loss Committee Report to Coalition April 3, 1991 IST CHOICE STOP-LOSS INSURANCE COVERAGE RECOMMENDATIONS• 1. Accept the joint Labor-Management Stop-Loss Committee recommendation that individual stop- loss insurance be purchased for the County' s 1st Choice Health Plan. 2. Recommend to the Board of Supervisors that stop-loss insurance coverage be purchased from Standard Insurance Company. BACKGROUND: Stop-loss insurance should be purchased to protect the 1st Choice Health Plan against catastrophic claims. The Plan was covered by stop-loss insurance for the 1990 calendar year through The Hartford Life and Accident Insurance Company with a specific stop-loss deductible of $100,000. The joint Labor-Management Stop-Loss Committee reviewed that insurance and decided not to renew it because of the high premium charge. The Committee requested that the stop-loss coverage be remarketed by the benefits consulting firm of TPF&C. Requests for Proposals were sent to seven insurance carriers. Bids were received from five insurance carriers--Federation, General American, Hartford, John Alden, and Standard Insurance Company. Standard Insurance Company quoted the lowest rates with coverage comparable to that of the other carriers. (See backside for stop-loss premium bids at different deductibles. ) The Labor-Management Stop-Loss Committee recommends the County purchase individual stop-loss insurance from Standard Insurance Company for claims in excess of $250,000 at an annual estimated premium of $65,000. Stop-loss coverage should not be purchased on Medicare eligible retirees because their Medicare coverage is primary and therefore the Plan's exposure to catastrophic loss is minimized. h h a} N .-t OD 0� . O N oD OD N N In tD � h b,.4 O h LnN fn C4 Ih t0 Ch t0 N Ot Ln en Ad x �a m roc m to toLn .� O N V+1 41 id tp0 •-1 Ot N O go u ad m N rt to N +1 O %0 Q to N t+1 N at N M C4 O tC O o h At c ri m x #4 m �+ xw 0 a p bA niw ...... O to N 0, N O .... rl a 1A rat f") `pb C� a M N r1 ':s> a rAl m co a 0 Ch r. M O tf1 O � V m m 't7 tT to N m P-4 frl 1r) O . .: ; to m 6r7co 9.4 Pf rl Ot tD :;:'::.. N m r1 Q %o m m ,rl N '::': :: O .r hOD t-d Ot M o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o to o to >: in c Ano to r4 P-4 o to N y Attachment f4 March 6, 1991 Drug/Pharmacy Subcommittee Report to Coalition From Stateco Annual Report for 12/21/89 - 12/20/90 No. of Prescriptions Billed Paid Average Prescription Cost PPO 34,863 $ 958,330 $ 885,208 $25. 39 Non-PPO 7,994 $ 222,524 184,112 $23 . 03 Totals 42,857 $1, 180,854 $1,069,320 $24.95 1990 prescription payments are 12.6% of total claims paid. ($1,069,320 } ( $8,515,882 = 12.6%) Comparison of Average Prescription Administrative Charges Based on $1,069,320 Paid on 42,857 Prescriptions in 1990 Average Charge Total Annual Per Prescription Charge 9% Stateco Charge $ 2. 25 $ 96,428 6% Stateco Charge $ 1. 50 $ 64,286 CCHP Contracted Charge $ . 95 $ 40,714 The Committee will recommend to the Coalition that the Committee: 1. Continue to gather information on drugs/pharmacy programs. 2. Look into and send letters of inquiry to drug/pharmacy vendors regarding: A. Mail order drug programs. B. Alternative drug networks. C. Alternative drug administration programs. Attachment #5 STATUS OF 1ST CHOICE HEALTH PLAN TRUST FUND JANUARY 1, 1988 THRU MARCH 20, 1991 REVENUE: Jan/88 - March 91 Payroll $21,853,605.58 Payroll. Subvention 7/90 - 9/90 150,282.00 Interest on investments 223,386.96 Refund checks 153,405.52 Third Party recovery 25,231.55 Reserve from Blue Cross 214,743.00 Total $22,620,654.61 EXPENDITURES: Claims 1/01/88 thru 03/20/91 $18,368,311.78 Stateco Administrative Charge 1,576,854.91 Foundation 68,552.75 Pacific Peer Review 19,551.00 Stop Loss 498,104.34 Benefits Staff Salaries 177,272.94 Claim forms 1,110.13 Claim Checks 2,281.82 Brochures 6,651.96 I .D. Cards 1,756.52 Checking account checks 18,631.31 Investment charges (Co. Treasurer) 3,189.00 Personnel Administrative Fee 90,011.50 Full page ad employee phone book 500.00 Case Management 2,640.00 Hospital Bill Audit 4,459.40 Copy Center Services 110.55 Computers 10,536.78 Medicare Refunds 34,580.72 Bank adjustments 5,461.76 Federal express - TPF&C 46.25 TPF&C 4,896.00 D.P. Charges 102.48 Stateco Accounting forms 1,063.42 Stop pay (refund checks) 82.00 Bank Service Charges 223.44 Total : $20,896,982.76 RESERVE BALANCE: $ 1,723,671.85 Incurred But Not Reported Claims (IBNR) $ 1,753,486.19 LOSS RATIO: Inception-To-Date Loss Ratio 92.38% MEMBERSHIP FEBRUARY 1988 MARCH 1991 Single Subscribers 358 1326 Family Subscribers 360 1450 STATUS OF 1ST CHOICE HEALTH PLAN TRUST FUND MARCH 1991 REVENUE: March Payroll $960,492.37 Interest on investments 6,803.61 Refund checks 4,832.44 Third Party recovery .00 Total $972,128.42 EXPENDITURES: Claims 02/21/91 thru 03/20/91 $762,537.69 Stateco Administrative Charge 45,462.32 Foundation 2,776.00 Pacific Peer Review 694.00 Personnel Administrative fee 10,621.50 -Case Management .00 Hospital Bill Audit .00 Brochures 825.85 Claim checks 2,281.82 Claim forms .00 Computers - equipment .00 "Federal express - TPF&C .00 'TPF&C .00 'D.P. Charges .00 Copy Center Services 110.55 =I .D. cards .00 Investment Charges (Co. Treasurer) 279.00 Stop-Loss .00 .-Benefits Staff salaries 4,476.87 , Total : $830,065.60 RESERVE BALANCE: $1,723,671.85 Incurred But Not Reported Claims (IBNR) $1,753,486.19 LOSS RATIO: Monthly Loss Ratio 85.39% MEMBERSHIP: Single Subscribers 1326 Family Subscribers 1450 ~ w Attachment #8 f____..SYRV.E,YOF EMPLOYEE MEDICAL BENEFIT PROGRAMS im cAuFoRNiA couwnES :REPORTS TO: :SELF OOUNTY ;DEPT -FUNDED :INSURED Tno :CAO �yes Alameda Versonnel Fresno Menefits ::General Services Mo* yel Los Angeles Benefits :GAO Ao Morin Personnel ::GAO ino ye Merced :Risk Manawment Numan Resources yes Monter `.Risk Management Tersonnel iyes Mo Personnel :no iyes FWerside 'Risk Manaqement :'Personnel yes Yes 'Personnel M Sacramento 'Personnel Benefits Dept ;no es pan Dieno ::Human Resources iDepuly GAO ino yes San Francisco :Health SerWce Sy%tern 'Board of Su ervisors yes yes es San Luis 0"1 po.*Risk Management :CAO San Mateo Nurnan Resources ::CAO no yes Santa Barbara Versonnel CAO es Santa Clara Personnel Bepuly GAO ye yes §_a­_n_t-a biu-i" —:Risk Management Personnel Director yes ino Yes :General Sendces ;`yes "yes Sonoma :Risk Mansuement i stanislaus ::Personnel ::CAO ye ej entura 'Personnel '.'CAO yes *Abandoned b any mor y.!kq.pqq!d in 1987 thpy did not want e risks **Stateco is paid 2 3/4%of claims � ' ( ( � ` � - � Attachmentto #� H1n a r Q ° p _ in tt Oi Z CCD, O 49 i� 40 40 Q W I-; Q A _ m CY W O o M 8 o C_ C7 N Z m m m 4sCY cc ul L Q C'3 U CL 0 =O a �. 0 CO W 2 , U gm 0 z LU 0 0 Q a ° $ o C F.. - Z w w o 0 0 LO 40 40 49 O -j JQ V W Q � U T c S- O am r 0 d ' r a o � N m m U, w E CL E o o Y� E U }, o o U c go U � o m � o � .c mIs W c «; ? � r Z 9 t 1 o c o c CM E r ma` Q o a0 v� � a Attachment. #7 ., 2 H Z O 2 Ir W CL cn O U } Z to I N ti CD Ua 1 460 9 ff) lo,� 69 W W H x 0 O Q W = H- UW W J nCDoZ S S S S r o M Z r 0 a. w f9 9 9 b9 C) � O U O 1-- E � u _ ui E m CO Z E J W•� +r JCD V Q m Z ¢ E E Q W Z _m $ $ � :... Q 9 E E Z W m Q E E U p > E o E w o s � i � E� m _ :3LO LL 7 C t UJ Z U Q Z' o m O O U L O - \ v Q o o = o 0 Z Ec '~ a. o- O o o F o o E m m O t t M H a, t t z O O co F- U E U U a Attachment #8 CONTRA COSTA COUNTY HEALTH SERVICES DEPARTMENT DATE: February 21, 1991 TO: William B. Walke , LM,Dt., ' FROM: Barbara Master 9'"'� SUBJECT: Contra Costa County Dental Benefits Plans I have conducted an overview of Contra Cosa County Dental Benefits Plans with two questions in mind: 1 . Is Safeguard the best pre-paid option available to the County? 2 . Does the County achieve significant cost savings with the Safeguard plan as compared to the County's indemnity plan, Delta Dental? 1. Is Safeguard the best pre-paid option available to the County? There are at least two other pre-paid dental plans that have Bay Area governments as clients : Pacific Union Dental(PUD) and Denticare. Although it is not essential that a plan be operating in the Bay Area, for a plan to be considered to be a legitimate option it is helpful to have participating dentists in the area. Pacific Union Dental (PUD) has 120,000" members in California and Nevada, including employees of the City of Oakland, the Counties of Solano, Napa and Fresno, and Hayward Unified School District. PUD offers different plans, depending on the needs of the client and promotes itself as experienced in negotiations involving both government and labor unions. Although PUD claims it has more providers in northern California than any other prepaid plan, only four dentists are listed in Contra Costa County. To be fair, however, without a membership base here, there is little reason for dentists to participate. PUD contends that they require participating dentists to give appointments to patients within two weeks of the request, although a staff person with Oakland said that she had heard complaints that indicate otherwise. Oakland just signed up with PUD in the last year and does not yet have a large enrollment of members or extensive list of participating dentists . Fresno County, on the other hand, enrolls about half of their total employees in PUD, about 3,500. There are at least 15 participating dentists in Fresno, and Fresno believes that its employees are relatively satisfied with the plan. San Francisco offers Denticare pre-paid plan to its employees, although the County does not make any contributions. They also offer Safeguard. Denticare was added fairly recently because of problems with Safeguard concerning provider stability. Although Denticare Is the .more recent addition, it has enrolled more members than .'Safeguard by over 10 percent. Denticare also has the contract with the State. One other option: It would be possible to develop different :benefit options and administer them all through the trust fund `system. Under this type of program, employees would be charged different premiums dependent on the type of plan. Safeguard has been operating in Contra Costa County since 1983. In that year it had enrolled a total of 294 employees and retirees. In 1989 , a total of 888 members were enrolled. In contrast, Delta has about 5, 000 members . Safeguard contracts with about 13 dentists in Contra Costa County, although there are none in East County and only three in West County. Additional Safeguard dentists practice in Berkeley, San Francisco, etc. From this limited survey, I think it is clear that there are other plans available that would be interested and could be competitive with Safeguard. Additional plans could readily be identified through a statewide organization of prepaid dental plans, if the County were interested. Although Safeguard is apparently successful in southern California, it's ability to attract dentists sand employees in Contra Costa has been limited, particularly as compared to PUD and Denticare. 2. Does the County achieve significant cost savings under the Safeguard plan as compared to the County's indemnity plan, Delta -Dental? This is difficult to determine. When the County negotiates with the unions regarding how much it will contribute toward insurance benefits, health and dental insurance benefits are negotiated as a package. The County agrees to how much it will increase its total contribution by but does not break out its contributions for each plan and for each bargaining unit. For example, if the premium for First Choice increased by $25 and Delta Dental by $10, the County may agree to pick up $15 out of the total $40 increase. How much of actually goes to each plan all depends on how the numbers are manipulated. =In situations where the County pays the entire premium for dental benefits - when an employee opts for CCHP or when an employee takes only dental coverage -- the cost differential to the County is clear: Safeguard was $7 . 17 less for an individual and $18 .27 less for a family than Delta in 1989 . Using these figures, the •maximum savings from Safeguard can be calculated. According to the Personnel Department, the resulting savings from individuals belonging to Safeguard versus Delta over the. last 6 years as a result of the premium differential was $47,761 . The Personnel Department believes that there have been two additional sources of savings . First, $815,000 in savings over the last six years are presumed to come from the claims which would have been paid out had all Safeguard members enrolled in Delta. Second, savings of $78,345 are assumed to be derived from not having paid the 10.2 percent Administration Fee of the Delta Dental program. However, I believe that there is a serious flaw with their calculations . The above savings calculation does not take into account the fact that if those individuals had been members of Delta, they would have been paying a premium into a trust fund that is intended to cover the cost of the claims and the Administration Fee. County's additional liability would only have resulted from claims paid above and beyond premiums collected. Data from Delta indicated that out of a total of more than $6 .6 million in claims and Administrative fees paid over the last two and a half years, the shortfall was . less than $100,000, or about 1.5 percent. One additional point of caution with the above calculations should be considered-- it assumes that no adverse selection is occurring. It's very possible that individuals may sign up with Safeguard until they need dental work, switch to Delta for that year and then switch back again. If that's occurring, then the utilization assumptions -- that the percentage of users in Safeguard would be the same as in Delta -- may be too high, thereby reducing the savings . The above analysis regarding County savings from Safeguard does not take into consideration the Broker fee. According to the Contra Costa Times, $18,000 a year is paid to Optima Financial for consulting fees . I did not investigate whether such a fee is paid by other counties or what it is for. Finally, the savings from the premium differential should be weighed against the interest earned by the County from the Delta Dental Trust Fund. A total of about $28,000 was earned from July 1988 to January 1991 . Figures prior to 1988 are unavailable. Conclusion Without more analysis, it's difficult to draw any firm conclusions as to whether Safeguard is the best pre-paid option for the County. However, the presence and apparent success of other plans in the region in conjunction with Safeguard's relative lack of ability to increase the number of participating dentists or enrollees suggests that it might be worth looking seriously at other alternatives. I have no doubt that the County achieves some cost-savings when employees enroll in a pre-paid plan; I don't believe they are significant savings. Savings to the County could certainly be increased with greater enrollment in a pre-paid plan. If that is the goal, Safeguard's 7-year history with the County does not suggest that such increases will occur anytime in the near future. BM:no TD- BOARD OF SUPERVISORS FROM: Phil Batchelor, County Administrator Contra Costa DATE , Ap r i 1 16, 1991 C�o^ SUBJECT: 1st Choice Health Plan - Stop-Loss Insurance SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION• Authorize Stop-Loss Insurance Participation Agreement with Standard Insurance Company and authorize Risk Manager to execute said agreement in the amount of approximately $65,000 per year based on monthly charges of $1. 34 per enrolled member and $1. 97 per enrolled dependent unit. Insurance covers catastrophic medical costs in excess of $250,000 effective April. 1, 1991 for 1st Choice Health Plan employees. Upon approval of this Board Order, the Risk Manager is authorized to approve premium payments. BACKGROUND• Stop-loss insurance should be purchased to protect the 1st Choice Health Plan against catastrophic claims. The Plan was covered by stop-loss insurance for the 199'0 calendar through The Hartford Life and. Accident Insurance Company with a specific stop-Loss deductible of $100,000. A joint Labor-Management Stop-Loss Committee reviewed that insurance and decided not to renew it because of the high premium charge. The Committee requested that the stop-loss coverage be remarketed by the benefits consulting firm of TPF&C. Requests for proposals were sent to seven insurance carriers. Bids were received from five insurance carriers--Federation, General American, Hartford, John Alden, and Standard Insurance Company. Standard Insurance Company quoted the lowest rates with coverage comparable to that of the other carriers. The Union Coalition, the Labor-Management Stop-Loss Committee, and the Risk Manager recommend the County purchase individual stop-loss insurance from Standard Insurance Company for claims in excess of $250,000 at an annual estimated premium of $65, 000. Stop-loss coverage should not be purchased on Medicare eligible retirees because their Medicare coverage is primary and therefore the Plan' s exposure to catastrophic loss is minimized. . FINANCIAL IMPACT: The stop-loss monthly premium rate is $1. 34 per enrolled member and $1. 97 per dependent unit. The annual premium will. be approximately $65,000 and funded from the 1st Choice Health Plan Trust Fund. CONTINUED ON ATTACHMENT: YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMEND T ON O B D COMMITTEE APPROVE OTHER SIGNATURE I S ACTION OF BOARD ON April. 16 , APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE X UNANIMOUS (ABSENT --- AND CORRECT COPY OF AN ACTION TAKEN AYES; NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. CC: CAO Risk Management - - ATTESTED April 16 , 199.1 Benefits D1ViSiOri PHIL BATCHELOR, CLERK OF THE BOARD OF Auditor-Controller SUPERVISORS AND COUNTY ADMINISTRATOR County Counsel Dr. William Walker BY ,DEPUTY M382/7-83 TO: 'I BOARD OF SUPERVISORS FROM: �,�.,�,}tra Phil Batchelor, County Administrator CJ� n DATE April 16, 1991 C SUBJECT; lst Choice Health Plan - Benefits Consultant Services SPECIFIC REQUEST(S) OR RECOMMENDATIONS) & BACKGROUND AND JUSTIFICATION RECOMMENDATION• Approve contract with Martin E. Segal Company to provide benefits consulting services to the County' s lst Choice Health Plan, and authorize the Risk Manager to execute said contract. The consulting charges of $35, 000 for the first year and $28,000 for the second year would be funded from the lst Choice Health. Plan Trust Fund. BACKGROUND: Health insurance and health care delivery systems have become an increasingly complex issue.'for employers and their. employees. A joint Labor Management Committee identified the need for a consultant and sent Requests for Proposals to 19 firms. Proposals were received from 13 firms. The Committee interviewed 5 firms and recommended to the Union Coalition that Martin Segal Company be selected. The Union Coalition concurs that the County select Martin Segal Company as consultant to the lst Choice Health Plan. The Union Coalition, the Labor Management Committee, the Risk Manager and Dr. Walker recommend the County negotiate. a specific contract with Martin Segal Company for a fee not to exceed $35,000 the first year, and $28,000 the second year. FINANCIAL IMPACT: The consulting charges of $35,000 for the first year and $28,000 for the second year would be funded from the lst Choice Health Plan Trust Fund. CONTINUED ON ATTACHMENT: YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMEN ION OF B D COMMITTEE APPROVE OTHER SIGNATURE(S): (�(� ACTION OF BOARD ON April 16-,. 1991 APPROVED AS RECOMMENDED x OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE X UNANIMOUS (ABSENT --- AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: _ AND -ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. CC: CAO Risk Management - ATTESTED _ April. 16,. _19.:91 Benefits Division PHIL BATCHELOR, CLERK OF THE BOARD OF County C011nt SUPERVISORS AND COUNTY ADMINISTRATOR Auditor-Controller ller Dr. William Walker 1 BY ,DEPUTY M382/7-83 —