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KERR COUNTY COMMISSIONERS COURT
Workshop
Monday, October 8, 2007
1:30 p.m.
Commissioners' Courtroom
Kerr County Courthouse
Kerrville, Texas
HEALTH BENEFITS WORKSHOP
PRESENT: PAT TINLEY, Kerr County Judge
H A."BUSTER" BALDWIN, Commissioner Pct. 1
WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2
JONATHAN LETZ, Commissioner Pct. 3
BRUCE OEHLER, Commissioner Pct. 4
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On Monday, October 8, 2007, at 1:30 p.m., a
workshop of the Kerr County Commissioners Court was held in
the Commissioners' Courtroom, Kerr County Courthouse,
Kerrville, Texas, and the following proceedings were had in
open court:
P R O C E E D I N G S
JUDGE TINLEY: I will now call to order a workshop
posted for this date and time, Monday, October 8th, 2007, at
1:30 p.m., that being a workshop to participate in employee
health insurance benefits workshop with Gary Looney, our Kerr
County health benefits consultant. Good afternoon, Mr.
Looney.
MR. LOONEY: Good afternoon, ladies and gentlemen.
I'm sorry to have been late and miss lunch, but as I've
explained to Commissioner Letz and Commissioner Williams,
there was a significant automobile accident on Joshua Creek
Bridge; totally closed Interstate 10. It was five major --
or five vehicles, one major dump truck full of rocks that
dumped rock all across the bridge, and there was one
automobile that, if anybody had lived through that incident,
i
I'd be very surprised. I hope that they...
JUDGE TINLEY: And there's no service road in that
area either, is there?
MR. LOONEY: No. You have to reverse and go
backwards, and by the time that they would have been able to
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reverse anybody, the traffic behind there was backed up
probably for 4 or 5 miles, at least. So --
MR. WALLACE: Channel 5 or Channel 12 were there
covering it.
MR. LOONEY: Were you there covering it?
AUDIENCE: I saw it looked pretty nasty.
MR. LOONEY: Pretty ugly. What I'm here today for
is to bring you up to date on our status for the medical
review -- medical plan review, group term life, and group
term medical for the year 2008. As you all are aware, we had
talked about previously, that Mutual of Omaha has sold their
block of business to an outside company, and consequently,
would not be renewing their contracts on anniversary dates
for this year. The contract that they terminated or will
terminate has to do with third-party administration of the
medical claims plus the stop loss insurance, and the contract
for third-party administration included in their contract the
provision for them to pay claims through the end of this
year, and upon our selection, to continue to pay claims for
any outstanding incurred claims for the year 2008, if they
were incurred in the year 2007. So, under our contract,
Mutual of Omaha would pay all incurred claims through the end
of this year, and continue to pay claims until such time as
those claims are satisfied under our health insurance
contract.
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Typically, what we see, because of the turnaround
time in claims today, because the length of time that is
required by the state for a claim to be paid if it's a clean
claim, if that -- if all the claims are basically clean, we
expect to see about 95 percent of all the claims, 96 percent
of all claims paid within the first 45 days. After that, we
will have some claims that would have been reported in a
timely basis, and still receive some claims probably through
the end of the year the following year, but they would be
very minor. We're under contract by Mutual of Omaha to pay
those claims, and upon termination of their contract, we will
pay them a fee, which is equal to approximately three months
of the administrative charges, which is a little less than
$20,000, to satisfy all of the claims that we have from an
administrative standpoint for the balance of the 2000 plan
year -- 2007 plan year.
COMMISSIONER BALDWIN: We pay them for going out of
business?
MR. LOONEY: No, sir, you
claims. And we --
COMMISSIONER BALDWIN: We
they have done for us.
MR. LOONEY: Well, what's
there's several things. One, we've
delivery of services to the employe
pay them for paying the
pay them for work that
happening is that --
got a contract for the
es, which that contract is
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a basic plan document that we give to employees that says,
"Here's your benefits." So, they're going to pay claims in
relationship to that benefit package. The other thing is
that they've negotiated with other providers, P.P.O.
providers; they've negotiated with a lot of other services
for those claims to flow through that discount P.P.O. base,
and so we don't want to lose those discounts. Because if, in
fact, you were to terminate that contract, then that would go
back to full bill charges. And, as I'm acutely aware, since
I had back surgery about six weeks ago, I know what those
bill charges look like, and not having those contracts in
place could be a significant hit.
COMMISSIONER BALDWIN: Mm-hmm.
MR. LOONEY: So, we pay them for servicing those
claims for that full year, that time frame. And, again, it's
contractual. One of the things we did this year in our RFP
process, we had some significant things that we wanted to
look at. First of all, the -- the RFP produced seven pretty
solid quotes. In the past, we've had two, we've had one,
we've had three. But, obviously, you know, we're -- we're
looked upon more favorably in the insurance market than we
have been in the past, so that -- that is -- that's good to
see. We've got good --
COMMISSIONER BALDWIN: Seven?
MR. LOONEY: Seven good bids.
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COMMISSIONER BALDWIN: Great.
MR. LOONEY: So, from the standpoint of getting a
number of bids in, that's great. From my workload, it
increased substantially, because in the past, I only had one
or two, and I could throw half of them out right away. In
this RFP process, we wanted to look at three or four really
key areas that we want to pay attention to in moving forward.
One is the access to the P.P.O. networks. We want to make
sure whatever network access we have is complete, and
equivalent to, if not the same, as the current network that
we're in, so employees don't have to change physicians, and
particularly if they're in mid-care process. The other thing
we wanted to look at, too, is wellness programs. What can --
what can those individuals, you know, providing -- providing
RFP responses, what could they do for us in the form of
wellness? So, we put in a pretty extensive questionnaire for
the RFP for wellness as part of it.
The other thing that's pretty indicative by our
past history is the prescription drug program is being
heavily utilized. And the reports that I presented to you
earlier in the year showed that our prescription drug program
is probably somewhere in the 19, 20 percent of our total
costs for our medical plan, maybe even a little higher than
that in some cases. And depending on the time frame I've
looked at, it's been as high as 35 percent of the total
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claims, one-third during that time frame. So, one of the
things that we put into this RFP also was a -- was an
extensive questionnaire that has to do with what we call
prescription benefit managers, or P.B.M.'s. A prescription
benefit manager is an organization that -- actually, they
work a little bit like a Visa card. The co-pays or whatever
you have at the pharmacy, where you go in and have your
co-payment, they're a transactional organization, so
basically what they do is handle transactions.
So, if you go over to one of the local Walgreen's
or to H.E.B. or whatever, and you've got your identification
card, the P.B.M. is the organization that manages it from the
time you swipe your card until such time as the insurance
company pays for it. And what we do is negotiate for what
that price is going to be and what that service is going to
cost. So, when we're in that process, the RFP has probably
anywhere from 30 to 50 pages of response to the management of
that prescription drug program. That's probably the one area
in the medical delivery -- in the health care delivery field
nowadays that we don't have as strong a handle on as we do as
far as other medical care costs are concerned.
COMMISSIONER BALDWIN: Gary, boy-dummy question.
Do you negotiate the price of those medicines prior to our
contract? Or -- I mean, how does that work?
MR. LOONEY: Okay.
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COMMISSIONER BALDWIN: I can't see how that works.
MR. LOONEY: Let me tell you -- I'll tell you the
old way, and then I'll tell you the new way.
COMMISSIONER BALDWIN: Okay.
MR. LOONEY: Okay. The old way was that you had
branded drugs and you had generic medications. A branded
medication, obviously, was one that had a logo on it by
whoever the manufacturer was, and the physician would tell
you to take that particular medication. What we would do is
price, so we could go into an employer and say, "Okay, we've
got this volume of medications going through the system, this
volume of branded medications, and so we want a discount off
of the average wholesale price, which is 15, 16, 17 percent."
If we got something in the -- in the 17, 18 percent range as
far as a discount, we felt like we were doing pretty good for
negotiations. Now, the generic medication, we would
typically get somewhere in the 50 percent off of the -- what
they call MAC pricing, or just a wholesale price. MAC
pricing is the maximum allowable charge that's generated by
Medicare.
So, you had MAC pricing, AWP, average wholesale
average wholesale price doesn't exist. There's supposedly
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this book put out by a data management company that collected
pricing from all of these different service organizations,
and they printed this book saying, well, this is the average
wholesale price. Well, found out that that was pretty much a
negotiated price by different providers for different
P.B.M.'s by different services, but the average wholesale
price really didn't exist. So, getting all of that --
starting to gather all that information, that average
wholesale price, branded and generic, the next thing you saw
come out was the multiple-tier formula where, if you had a
brand medication and it fell into a certain category of
medication, then your co-payment for that medication was,
quote, $20.
COMMISSIONER BALDWIN: Mm-hmm.
MR. LOONEY: If it didn't fall into that
$40. So, what we were trying to -- the P.B.M.'s were trying
to do was direct you into using a branded medication in a
certain formulary for which they had negotiated the price.
Doesn't make any difference what we had negotiated, 'cause we
had branded 17 percent; it wasn't formulary branded. Found
out that, obviously, the reason they're doing it is because
they're getting kickback. They're getting kickback, and a
kickback in the P.B.M. industry is called a rebate. And they
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actually call it a rebate. And, so, the rebate function,
we got a kickback on those rebates. And actually in your
Mutual of Omaha contract, there is a paragraph in there that
talks about the fact that the rebate is calculated into your
admin. fee on an annual basis, so that they -- they have
already calculated what it would be and given you a credit
for it, quote, unquote.
Well, what we found out is, in the world today --
we call it transparency. What does it actually cost? Now
we're finding out there's some significant differences
between what a medication actually costs, all the add-ons for
admin. fees and dispensing fees and other kinds of fees, and
then what actually is paid by the insuring company. And I'll
give you one example, then I'll move on. I have a client
whose spouse takes a medication that's branded called
Benicar. I'm really not sure what Benicar is, but I think it
has to do with cardiovascular care or high blood pressure.
Benicar, by this insurance company, the fee that they
negotiated for was $80 for a 30-day supply of 40 milligrams
for this medication. That's the negotiated fee that they
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going to pay for. They came out with a new formulary this
year, and the co-payment required for that person to take
Benicar is $60, so they have negotiated for zero cost to the
insuring company for that medication. The actual price of
that medication -- the actual cost of it is about $23 for
that same prescription.
So, we've got this kind of behind-the-scenes thing
that's going on with all these medications. Well, when we
take our organization and we take the volume of over a
million dollars a year in claim payments, if we take
20 percent of that, if we're spending $200,000 a year in
prescription drug medications, then we need to figure out how
to best manage those dollars. So, part of this RFP process
was requiring these organizations to give us detailed
information about pricing, give us detailed information about
the prescription benefit formularies, and to offer what we
call a transparent model, which the transparent model means
that we're going to pay you what you paid for the medication
plus a small dispensing fee, what you have to do to get the
drug out the door. And then from there, we're going to pay
you a fee on a monthly basis to administer that whole process
for us. We're not going to allow you to take the profit
margin; we're not going to allow you to do these spreads.
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12
Projections that we're getting from the proposals
Now, the
other change that takes place is the branded medication.
What is the branded medication used for? If it's used for
you got headaches, you've got whatever it happens to be that
you need immediate relief for, infectious problem, colds,
flus, whatever it is, that analgesic medication, we want to
make sure that that's delivered quickly, promptly, that
everybody gets that. The other -- the other area you got is
the prescription medications that are used for maintenance
purposes. They typically have to do with diabetic care and
treatment, cardiovascular care and treatment, sleep aids, you
know, what we call GERD, which is gastroesophageal reflux,
which is the Prilosec.
So, you have what we call therapeutic classes in
those four classes; cardiovascular, sleep aids, diabetic care
and treatment, and the gastrointestinal reflux. Those are
maintenance medications. They comprise right now over
60 percent of your total drug costs. So, those therapeutic
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medications have a brand, but they also have a fairly large
j volume of generic medications that could be used to control
it. As you've seen, you have over-the-counter medications
now that used to be by prescription only. Prilosec is one of
those. If you haven't seen the advertisements for Ambien or
Lunestra with the little blue, you know, butterfly flying
around -- if you haven't seen those, you either don't watch
any television, don't go to any sporting events, don't go out
of the house much, because they're advertised constantly.
Now, the one thing that hasn't hit into the generic field yet
are -- what do they call them? -- the adult male
dysfunctional -- (Laughter.) I'm trying to think. We
haven't seen that too much. We don't have generic Viagra,
far as I can -- you know, they're telling me it's going to be
out sometime, you know, soon. What I've always found curious
was that Medicare, when Viagra first came out, approved 13
tablets per month for Medicare recipients. I always thought
that was kind of strange. (Laughter.)
COMMISSIONER BALDWIN: That is interesting.
MR. LOONEY: Yeah. So -- but that was -- but these
medications -- the reason I'm going through all this process
is that might very well -- and I know we're going to have to
have meetings with employees, because the prescription
benefit management cost is going to change regardless,
because we're going to change to another carrier. So, in
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that process, if we can then create a better utilization
process or model per our prescription drugs, then we need to
do so. Part of this RFP process, again, each one of these
organizations has a connection with a prescription benefit
management company. First thing we have to decide is that
organization that's providing that quote? Because if, in
fact, they're sharing in the gain that is gained by the
P.B.M., we want that disclosed. We want to know what dollars
are going through that process.
As an example, the City of Lubbock filed suit
contract it said that they would receive 100 percent of the
rebate, and they found that the third-party administrator was
not -- not giving them any of the rebate. And this is the
end of a three-year contract. To give you an idea, City of
Lubbock, the initial audit for one year was a reimbursement
of $270,000. And what happens with rebates -- that was the
most recent year. What happe-ns witn rebates, re~a~~5 yui~C
often are not paid until anywhere from -- from 9 to 12 to 15
months after the date that they're actually awarded. So, you
know, they requested an audit of this third-party
administrator, and the third-party administrator has denied
the audit, so it's going to court. It's in the court setting
right now. But that's how much that rebate function can
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So, the other -- the other piece of it that we're
looking very hard at is the Internet functionality of any of
the T.P.A.'s that provide services. We have a -- at this
time, we have the opportunity to go through a modernization
of our delivery system through our web-based Internet
functionality. We have some of that now. We have pieces of
it now, different parts. But what we're talking about now is
doing a global web-based Internet H.R. functionality, so that
in H.R., when a new employee comes into the system, that they
will be able to enroll that person in medical plans, the life
plans, group term life plans that are provided by the county,
and any of the other voluntary plans that are currently being
offered to employees, so that there is one site, web-based,
that accumulates and manages all of that information. That's
important for several reasons. One is that we've got a COBRA
obligation for our medical plan. We also have a COBRA
obligation for anyone that we're withholding payroll from for
dental, for some of the other voluntary plans. So, there is
a COBRA obligation that's a liability for us to manage
notification for not only that, but for HIPAA notification,
so that we can manage that liability under one -- under one
package or under one entry point.
The other thing that we've got right now is we've
got two different management companies that are handling our
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H.R.A. function, which is our health reimbursement account
that's under our medical plan, and our flexible spendable
account administration, which is the employee voluntary
contributions that they make to their accounts under the
structures. Why that's important now is that second piece of
information that I handed out to you in this print article,
the federal government passed a new regulation, and what that
regulation requires is that any -- any individual that uses a
debit card, which we have under our H.R.A. program, any
individual that uses a debit card, when they go to an
organization now, that organization has to be registered to
be able to accept that debit card. What was happening was
the debit card was being used for a lot of things other than
the intended purpose. They were buying, you know, whatever
because the debit card worked just as any credit card works.
It's got a balance to it; you pass the credit card.
It was the responsibility at that point for that
it was an eligible expense under our plan, under our
direction. That became just a horrendous administrative
headache. There's just no way of monitoring someone who goes
to a -- well, an H.E.B. store, and they buy some
over-the-counter medications, which are deductible under the
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213d expenses, and then they have other food items. They
have other items. So, I don't remember if -- you used to --
the grocery store, you know, used to go through, this is
taxable, this is not taxable. You have to separate those
things. Well, that's basically what they were trying to do
at the cash register, separate what was eligible to be
deductible and what wasn't, and then paying for it. Well,
under the new regulation, the vendor, whoever the -- the
retail operation, whether retail or Costco or whoever it
happens to be, they have to administer the rule by the
federal government to receive the debit card, which means
that those expenses that are eligible to be taken under the
debit card, when you pass that debit card through that
process, it will not accept those things that are not
tax-deductible under the plan. So, what that means is that
organizations have to go through the process of changing
their cash register systems and everything else to have that
identification process in there.
The list of companies so far that have certified is
there; you'll see on the last page you've got H.E.B. has been
certified, Walmart has been certified, Target has been
certified. So, there's a lot of those organizations. But if
wanted to purchase a medication through their pharmacy, if
they were not in that process, then you could do -- you could
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buy -- pay cash and then submit the claim on paper to be
reimbursed, but they wouldn't allow you to use your debit
card, because that organization wasn't certified. So -- and
that is -- that is federal regulation, and it goes into
that want to accept debit cards for the purposes of H.R.A.
payments, H.S.A. payments, F.S.A. payments, all of those,
they will get qualified, believe me, 'cause they don't want
to have to go through collecting cash and telling that person
that -- "Well, I'm sorry, we can't accept your card,' cause
they'll simply go find someplace that will accept the card
and go on in that process.
So, we're watching. We wanted that card management
function -- we wanted to make sure that whatever provider we
choose is qualified to handle that administrative process,
because it is a new administrative process taking place in
January. So, that F.S.A., the wellness incentives, the
prescription benefit management, all of those things were put
in into the RFP, and that's why we got books this thick. You
know, I was only hoping you were going to get two or three of
them. We got seven of them that thick, so it's been quite a
-- it's been quite a chore to -- to go through all that
process because of the new stuff and all the wellness stuff
that's involved in it. Plus, in working with Ms. Hyde, what
we were trying to do is eventually -- and if I'm wrong, you
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__ _ __
know, you stand up and wave your hand. I'm trying to get to
a paperless enrollment type process, that everything is
handled on the Internet, web-based Internet enrollment type
The way that -- two reasons. One is, it's a better
over the web-based function, so that we have one entry level,
one entry. What we find is that if you have a paper
application that you use for an employee, if that application
is perfectly clean, you have nothing else to do with it other
than just the administrative process of getting it to the
proper party, it costs about $17 to do that. If you have to
use -- if you have to do more than one working process with
that piece of paper, if it comes back where you have to go
and do additional information, it just adds incrementally to
that cost. If you have to -- if you have to deal with it
twice, that means that you've got to do additional research
to find out what the problem was, take the additional time to
redo it, and depending on the time length and time frame in
there, you may have generated a liability problem, so you
have to be careful about that. Well, that takes about $32 if
you have to do it on multiple times. So, if you have
multiple paperwork applications and entries and things like
that you're receiving, it becomes an expensive administrative
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We reduce a lot of that administrative expense by
Commissioner Baldwin to understand what we're doing.
(Laughter.) But I promise you, it'll work. We put -- we put
it into -- we put this -- what we -- several years ago, if
you were dealing with a company that had 3,000, 4,000, 5,000
employees, or even the major national companies, they move to
these processes, but the cost of creating that Internet
system and that functionality was borne by their Intranet
system; their own H.R. -- I mean their I.T. people were
dealing with it, so they built it internally. In the past
four to five years, six years, we've been able to have
software companies that are able to offer web-based
enrollment functionality that has been garnered from those
bigger corporations and what they do, so we are able now to
bring down to an organization with 250 employees the same
type of service format that we're able to get for much larger
employers at a much lower incremental cost. And the key to
that whole process is that the County wants to control and
maintain that database.
So, you know, there are a number of organizations
out there that'll offer services to you and say, "We're not
going to charge you for it," but you have to provide them
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with access to employees for voluntary products or you have
to provide them the medical plan or you have to give them
maintaining that data on your own database, you retain not
only the ability to fire that organization, but anyone that's
within that process that doesn't perform in the manner in
which they're supposed to perform. So, you want to maintain
and manage that database process.
Those voluntary products that we're looking at,
about a three-year transition process, where every employee
this year would sit down and go through the enrollment
process, and have that database built from current
information so that everything is updated, everything is
current, whatever information that H.R. wants to have in the
system is available, and then that is all done by enrollers
that are not commissioned sales agents. They come in and
they perform the process of educating employees on the whole
program. Second year, you have aides available for
individuals that may or may not want to make changes, but you
have a central location. Not everyone is required to meet
with an enroller. The third year, you become pretty much
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of paper; you say, "Go, enroll. This is what you need to
do." We're in the second year of this type of process with a
couple school districts right now, and they all are very
pleased with the way that process goes, 'cause we cut down
the enrollment process substantially as far as time is
concerned, and the data is very accurate and is very
confirmable and auditable, which is one of the things we want
to do.
The spreadsheet that I've given to you does not
as of this point, and we are still in negotiations with these
providers to get final numbers for the cost. We know this
should not significantly increase over the year's cost, so
we've taken these numbers and put it back into the projection
for the budget for our budget numbers for next year. And we
have a number of the offerings that are well within the
budget restraints that we had placed on the budget for this
year, so we're not having to impact the budget moving
forward. And we're, again, in the process of finalizing
negotiating the final rates with these individuals. As you
can see from the -- from the left-hand side of it, these are
the types of things that we ask them for information on. I
don't know if you've got any questions about that at this
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COMMISSIONER LETZ: Are you going to give us your
color codes? I think I've figured it out, but --
MR. LOONEY: The color codes are -- the red is, I
-- I've got a pain. I've got a pain; I've got a major
problem with Number 2. I've got -- the yellow numbers are
down at the -- where it says U.R., P.P.O., Rx broker, and all
other, all that means is that the yellow is what I included
in that cost on the rest of the page. For instance, under
Number 6, there is a prescription drug program cost of $6.50
that's listed there, and the organization has not given me a
complete explanation at this point as to what that cost
entails. I suspect I know what it is, but it was not in
their RFP as to what it all entailed, so I need additional
clarification on that. But the yellow typically is just an
accumulation of how I got to the total down in that one
category.
COMMISSIONER LETZ: Okay.
back to the individuals that made the presentation -- the RFP
presentation, and ask them to verify that the information
that I have on my spreadsheet is accurate in relationship to
the proposal that they've given to us, so that I'm not
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putting down numbers that they're not going to accept on
their bid specifications. So, they will -- I will give it
back to them, then they will give it back to me to verify
that, because these bid proposals have numbers all across the
board. They're all in different categories, under different
tabs; they're in different locations. They're -- you know, I
asked them to complete a particular form for me. Only one
company did it, which, unfortunately, may be the red company
that we're dealing with. But -- so, from an interpretation
standpoint, they will sign off on my numbers as being
accurate in relationship to their presentation, so that I'm
not jockeying with numbers in here, anyway.
COMMISSIONER WILLIAMS: Gary, does -- do the
numbers that you're showing on the bottom, total -- total
fixed, expected, max and so forth, do those numbers include
the cost of premium for stop loss insurance?
MR. LOONEY: Yes, sir. The maximum cost across the
bottom -- or that one maximum cost is the maximum aggregate
attachment point, including all of the expenses for the
administration of the plan that are identified with the
little yellow numbers. So that, for instance, under Number
3, we see at the top of the page there's a P.P.O. network,
there's a $4.50 number, a utilization review, there's a $2
number. COBRA, there's a dollar number. That number, then,
plus the $2 for the broker fee, shows up as a total monthly
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expense of 27,702 down at the bottom, and that's calculated
on -- or that's an annual basis, and then that's built into
the total million, eight that's at the bottom of the list.
The other item that is not included in that million, eight
number is our estimation, which is right below that, of our
H.R.A. expense, which is the $100,000 that's right below
that. That doesn't -- that's not included in that number,
because it's not subject to the specific or aggregate
limitations.
COMMISSIONER LETZ: Explain that. I mean, I think
I understand, but just explain the total fixed, expected, and
maximum, those three.
MR. LOONEY: Total fixed cost is the hard-dollar
cost that we pay to the -- the third-party administrator and
to the insurance company for the underlying specific and
aggregate insurance coverages. The specific coverage is that
item that we have for insurance that covers one individual
claimant during the year for up to a maximum of our $50,000
deductible. Anything in excess of that $50,000 is paid by
the insuring company.
COMMISSIONER LETZ: Okay.
MR. LOONEY: The aggregate is the accumulation of
all those expenses under that $50,000 and all of the fixed
costs associated with that process of administering the plan.
COMMISSIONER LETZ: So, the expected is what, in a
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normal year, we would expect. Does that include the total
fixed cost?
MR. LOONEY: The expected? Yes, it does include
the total fixed cost. What happens in a -- what we call an
aggregate insurance coverage, what the insuring industry does
is they take that projection of what they think that the
claims are going to be under that $50,000 level accumulated
for the 12-month period, and then they add a percentage to
that. They call it their corridor. That corridor may be 15,
20, or 25 percent. In these cases, all of these are
illustrated on a 20 percent corridor. That means that if the
insurance company thinks that we're going to have a million
dollars -- they're insuring a million dollars in actual
claims, that the -- what we expect is 20 percent less than
that million, or 800,000, and that expected number is based
on your experience history. So, that corridor that they
built in there is the insurance company's estimate as to what
they feel like the total maximum claims would be under --
COMMISSIONER LETZ: And the maximum is --
MR. LOONEY: That's total max, max.
COMMISSIONER LETZ: If we have a bad year, that's
what you...
JUDGE TINLEY: What do you see as the timetable
going forward now?
MR. LOONEY: We have two individuals, and possibly
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a third individual in the organization that we have to get
additional medical information on. One of the difficulties
with -- with being so far out in advance of the annual
anniversary date is that all of the insuring companies want
to have full disclosure on what the claims are. We have two
individuals, and actually a third now, that's a new entry
into what potentially can be a very high-risk, very high-loss
i
area. So, we will be requesting additional physical
information from them, which we hope to have -- hopefully
we'll have it by early next week. We haven't actually
', requested it yet. Typically doesn't take very long to get
it, but we will also get case management information from
Mutual of Omaha to show us where we are. But we have three
individuals, again, that will have that. My -- what my
intention is, is to bring the final numbers back to you, not
next Monday, but the following Monday.
JUDGE TINLEY: Are you talking about next Monday --
you mean next meeting?
MR. LOONEY: The day -- not next week, but the week
after.
JUDGE TINLEY: Okay. Be the next meeting, okay.
COMMISSIONER OEHLER: Regular meeting day.
MR. LOONEY: Regular meeting day.
COMMISSIONER LETZ: What do we have in our budget?
MR. LOONEY: You're not meeting every Monday?
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COMMISSIONER LETZ: We almost did. What do we have
in our budget, Judge?
JUDGE TINLEY: Well, the numbers that we have in
our budget -- what he's got at this point are within what
we've budgeted.
COMMISSIONER LETZ: The --
COMMISSIONER OEHLER: 1.8.
JUDGE TINLEY: Expected.
COMMISSIONER LETZ: Expected of 16 or 165.
MR. LOONEY: You know, you've got another expense
too that's not shown here, and that is the cost that you pay
for your group term life insurance for all employees on an
annual basis, but that's a pretty small number. I think
it's -- I don't remember.
(Discussion off the record.)
MR. LOONEY: 23,000, maybe. It's not -- it's under
$20,000. That's my story, and I'm sticking to it.
COMMISSIONER LETZ: They're pretty close. I mean,
it's -- with that number of bids, I mean, they're remarkably
clustered.
MR. LOONEY: We're looking at a number of things.
One is that we're looking for -- in our additional
negotiation, we're looking for a multi-year contract. We've
had two of the people that have been bidding on it that will
guarantee rates for two years on our specific and/or
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aggregates.
JUDGE TINLEY: For how many years?
MR. LOONEY: Two years.
JUDGE TINLEY: Two, okay.
MR. LOONEY: Getting more than that would be -- we
can get the administrative cost fixed, which is the
third-party administrator's fee for actual paying the claims.
We've pretty much got two-, and sometimes three-year
guarantees on that cost, but the -- it's difficult to get a
two-year rate projection on the specific and aggregate
expenses, because it being a new contract. If we were in a
renewal process where they had had some experience in dealing
with us, they might be more viable. But we do have two, and
I think maybe a third that has offered us a two-year rate
guarantee. So, what you might see in the final numbers, you
may see a 2, 3, 4 percent greater premium on the fixed cost,
but having it guaranteed for a two-year period, as opposed to
having to renegotiate next year. If we can -- if we can beat
them up to the point where I threaten them with bodily harm,
then we might -- we might be able to do better than that.
But it's turned out -- I was hoping to have it to you
earlier, but I guess in my desire to get as much information
as I could on the P.B.M. and the wellness programs and such
as that, it's really a very -- it became a much more
comprehensive analysis than I originally thought.
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COMMISSIONER LETZ: What are we looking at on the
organization that provides what the -- and don't confuse the
H.R.A. terminology, 'cause you have two different "H.R.A."
terminologies out there. One is a health risk assessment,
which is a wellness concept, and the other is our health
reimbursement arrangement. So, the H.R.A. of the health risk
that is not. Proactive approach means that you actually have
people come on-site and set up appointments and do
preliminary screening exams for those individuals, and
provide them personally with an independent report that is
very comprehensive in nature. Full blood test, full
urinalysis, cardiovascular care and treatment things. If you
identify people with problems, they come back directly to
that individual and offer services and provide services in a
manner to help them overcome that process.
Nationally -- if you go back and look nationally, a
large volume of our medical plan or medical expense increases
has been as a result of obesity. Obesity leads to a lot of
other complications and services, so one of the parts of this
is weight control and weight management, and a -- and health
and aid. We've asked them in their presentations to give us
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a recommendation on what they would consider to be incentives
to employees to -- to do these programs, so in our responses
to the RFP's, we have different recommendations from them as
to how they would implement the wellness program and how best
to be able to get that into the system. One of the
organizations talks about a wellness coach, and spending
anywhere from six to eight hours a week within your
organizational structure working with individuals to help
them have better, healthier lifestyles. So, it's -- it's a
wide variety, all the way from going online and fill out the
questionnaire and lie like a dog and get a good grade, or
have somebody come in and -- and sit with you and do the
test. So --
COMMISSIONER WILLIAMS: Did our system of providers
essentially stay the same?
MR. LOONEY: That's what we've requested. We've
had -- we've had one proposal that would not have access to
our current P.P.O., and we essentially probably will not
utilize that provider. Very weak network in this area.
Outside of that, we have all of the individuals that are
proposing we use the same current network, which is Texas --
Texas True Choice.
COMMISSIONER OEHLER: Same benefits in all of them?
MR. LOONEY: Well, now, that's the --
COMMISSIONER OEHLER: The benefits are similar to
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MR. LOONEY: Well, that's the other thing I meant
because they're not significant enough plan changes to impact
the overall cost of the reinsurance. However, in talking to
Ms. Hyde and staff, when we look at the possibility of
changing the waiting period for new employees from the
current 30 days, at least changing the terminology in it so
that the individual employee becomes effective on the lst of
the month following the completion of a certain number of
days of employment. Looking at turnover rates, the one
circumstance you want to protect against in using a longer
waiting period is for an individual that's coming to work for
you strictly for the health care benefits being able to get
on the health care plan, and then leaving and having COBRA
that's available to them for an additional 18 months. So,
once an employee is covered under the plan, they have COBRA
extension available to them for up to 18 months, so there's
no preexisting condition limitation for individuals coming
onto your plan who meet the HIPAA qualifications and a
certificate of coverage.
Now, all that means is that about four years, five
years ago, they passed HIPAA regulations which said that
health care by an employee was totally transportable to
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another employer, if, in fact, you did not have more than a
anything longer than 63 days, if you go to work for a new
employer, such as the County, you have to meet preexisting
condition limitations, which means you can't come in and
automatically be treated for something that you had prior to
a six-month period. So, anything previous, treated six
months prior to your coming, you're not going to be covered
for until you've been an employee for one year, so it
prevents somebody from just dumping into the system. Same
thing for dependents. If you've got a dependent spouse that
doesn't have coverage and never had coverage or whatever, if
they've got that 63-day break, they're going to have
preexisting condition. If, however, they're coming from
another employer that they've been covered, then you've got
an automatic transition that they're required to make. They
can come under the plan automatically if, in fact, they have
a change in their employment or if they've lost coverage from
.being previously covered. So, the HIPAA regulations are
pretty distinct. The federal regulations, we have to follow
those regulations. But we're looking at that and trying to
look at the turnover rates right now for either lst of the
month following 60 days of employment, or lst of the month
following 90 days of employment, to see which would be most
efficient for these. The other thing that is currently
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covered is dependents' pregnancies.
COMMISSIONER WILLIAMS: What?
MR. LOONEY: Dependents' pregnancies. So, if you
have a -- a child -- female child is pregnant and they are
classified as a dependent, then we would be covering them
under the current medical plan.
MS. HYDE: And the child.
MR. LOONEY: And the child at birth; that's
correct, and for 30 days afterward, after the birth, for
sure. "Dependent" definition also currently is up to age 25,
regardless of whether they're attending school or not. So,
we're talking about changing that definition to --
(Cell phone rang.)
COMMISSIONER BALDWIN: Sorry.
MR. LOONEY: -- the age of --
COMMISSIONER WILLIAMS: $25 fine.
COMMISSIONER BALDWIN: Is that all it is? Hell, it
was worth $25.
MR. LOONEY: Talking about changing the dependent
age from the current status, which is up to age 25, to the
age of 18 or 19; under the age of 19, completion of the age
of 18. Eighteen and 365 -- say 364 days up to the birthday
at age 19, then coverage up to age 23, 24, or 25, assuming
that they're attending school on a full-time basis, an
accredited college. What's happening now is that, by being
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more flexible and having the dependent be covered, you're
ending up with unmarried daughters moving back home under the
age of 25, having their parents have coverage for the child
and the grandchild at birth. So, by changing that clause in
the plan and moving forward next year, we will eliminate that
pregnancies, but it would also include any complications of
pregnancy. So, a dependent -- dependent moving home would
not automatically be covered.
having it all done on the Internet, again, it gives us a
database to be able to manage the dependent structure more
carefully. We want to make sure that if a person's
identified as a dependent, that they truly are a dependent.
We've had a -- a couple of problems where an individual comes
in and they'll enroll a person under their health care plan
and name them as their spouse in the health care plan, and
what many young men or young ladies don't understand is that
if you start holding yourself out as husband and wife, then
the state of Texas assumes you are, and that common-law
marriage is very easy in the state of Texas. However, you
don't get the same authority to divorce somebody by simply
going back in and erasing their name, so it becomes a much
more critical issue from a legal standpoint, because you have
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to go through the process of divorce. So, I'm not sure that
a lot of individuals that come in and name persons under
MR. EMERSON: That's pretty accurate.
MR. LOONEY: So, you know, those common laws will
JUDGE TINLEY: Also, this would -- what about
children as dependents?
MR. LOONEY: Unfortunately, you know, we can --
when we collect the information on the initial enrollment
process for the Internet enrollment process, we're going to
require them to name all their dependents, and going through
that process will give us a much better handle on who they
actually are claiming as a dependent. And while we do have
'~i some obligations to provide coverage for dependents through
the guardianship rules where we have grandparents that are
legal guardians, then we do have to handle them as dependents
under the plan, but at least we would be able to identify
them prior to the date of claim, in that if there are legal
restrictions, that they will know about them in advance so
that they will not assume that the child is covered and seek
help, and then find out at the time of claim that they are
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not certified as a dependent.
SHERIFF HIERHOLZER: What do they consider legal
guardian, though?
MR. LOONEY: What is considered a legal guardian?
The Judge can take care of that. Counselor, what's a legal
guardian?
MR. EMERSON: Depends on the insurance plan.
MR. LOONEY: Most of the insurance contracts use
definitions that they get from Internal Revenue Service as to
what a legal guardian is, about the child -- the amount of
support that they provide to them, and whether or not they
assume that they take a deduction under the Internal Revenue
Service rules or not. So, it requires a certain amount of
support; it's not just financial support. They have to
provide other levels of support. That's -- you know, that's
what we typically see. The -- there can be some significant
changes in the voluntary insurance plans that are offered to
employees. The administration of those voluntary plans, as
I've said, from the H.R. function is an expensive function,
based on that $17 number. With the web-based enrollment,
there would be voluntary plans, such as are identified on the
spread -- on my agenda. These are plans that Ms. Hyde has
suggested that we offer, that these would all be on a
web-based function.
They would all be on a guaranteed insurability
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base, which means that a person enrolling for these plans on
a web site would either be rejected or accepted based on the
application that they make online. The Department of
could enroll for voluntary plans and be accepted by using a
web-based enrollment function. These are the offerings that
they're suggesting be put onto the site. They're ranked in
many ways when you go through the web base. They're ranked
because of what you feel the basic need for an employee would
be. Medical plan, the basic group term life plan that was
provided by the county, voluntary life insurance, if needed
for employee, spouse, and/or children, long-term and
short-term disability based on the individual wanting to have
that type of coverage, dental plan, vision plan, then the --
what we call the specialty products, which have to do with
accidents and the critical illness plans. I'm not suggesting
that any employee lose any coverage that they currently have.
They'll all be eligible to participate and continue
participating in the plans that they're currently enrolled
in, but these could be secondary, in addition to whatever
else they currently have.
COMMISSIONER OEHLER: There's no problem with
taking -- the employees and the dependents that are now
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enrolled will automatically be enrolled into new plan?
MR. LOONEY: In the medical plan.
COMMISSIONER OEHLER: In the medical plan.
MR. LOONEY: In the medical plan, and the group
life plan will be automatic --
COMMISSIONER OEHLER: Right.
MR. LOONEY: -- enrollment. Everything else would
be subject to actual the enrollment process itself.
COMMISSIONER OEHLER: And did you say that the --
these debit -- the debit card thing will still be in place?
MR. LOONEY: Still be in place, and we're going to
have -- we're going to have that little window of transition
in there where we're going to have -- you'll have a new debit
card company, so there will be a cutoff date and a -- and
another enrollment date, so there will have to be a
distribution of the cards during that process. But all of
those records will be transferred as near the end of the year
as possible, so that all credits and debits can be
transferred effectively in the first week of January.
JUDGE TINLEY: Any more questions for Mr. Looney?
COMMISSIONER WILLIAMS: You covered it very well.
JUDGE TINLEY: You got anything you want to --
(Discussion off the record.)
MS. HYDE: One of the other things that -- on the
supplements. Right now, we manage those supplements. The
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insurance companies get the premiums. We pay the premiums
those programs. And under the new programs, people can get
all the supplementals that they want, and we will take it out
of their checks, but the ones that are not covered within
this program they need to pay themselves, just like their own
car insurance, just like their own mortgage payments, all
those things. Because what is occurring is, we are trying to
manage outside insurances that we have no business even
talking to those people about, and we've kind of opened up a
can of worms in the past where the employees may not really
understand. We have some retirement plans that people could
get five, six years ago, that aren't even offered any more,
and those employees still think that I should be able to go
in there and tell them how much money they have, or how --
what do they need to do? Should they sell? Should they
keep? Those are not part of our insurance package. So, I
just wanted to make sure that y'all were aware of that,
because there's going to be some blow-back on that. They're
not going to understand they can still keep it; they can do
whatever they want to, but it's not going to be part of what
we're trying to offer at a reduced rate.
JUDGE TINLEY: You came with all the questions,
right?
COMMISSIONER BALDWIN: Yeah. By gosh, I have to
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wake up a little bit.
MR. LOONEY: Sorry. Sorry about that.
COMMISSIONER BALDWIN: Not you, Gary, but the
topic.
MR. LOONEY: The topic or my monotone voice.
COMMISSIONER BALDWIN: So, how much is this thing
going to cost us more than --
MR. LOONEY: The -- no, sir, there's no change to
the employee contribution.
COMMISSIONER BALDWIN: No change. And in two
weeks, we're going to know who you're going to recommend.
All right. Good night.
MR. LOONEY: Thank y'all very much. Appreciate it.
COMMISSIONER WILLIAMS: Thank you, Gary.
JUDGE TINLEY: Thank you. Anything else in
connection with this subject -- workshop? We'l1 be
adjourned.
(Commissioners Court workshop adjourned at 2:40 p.m.)
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STATE OF TEXAS
COUNTY OF KERR I
The above and foregoing is a true and complete
transcription of my stenotype notes taken in my capacity as
County Clerk of the Commissioners Court of Kerr County,
Texas, at the time and place heretofore set forth.
DATED at Kerrville, Texas, this 12th day of October,
2007.
JANNETT PIEPER, Kerr County Clerk
BY : G __ _____
Kathy nik, Deputy County Clerk
Certified Shorthand Reporter
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