1 2 3 4 5 6 7 KERR COUNTY COMMISSIONERS COURT 8 Workshop 9 Tuesday, December 4, 2001 10 4:00 p.m. 11 Commissioners' Courtroom 12 Kerr County Courthouse 13 Kerrville, Texas 14 15 16 HEALTH INSURANCE OPTIONS 17 18 19 20 21 22 PRESENT: FREDERICK L. HENNEKE, Kerr County Judge 23 H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 LARRY GRIFFIN, Commissioner Pct. 4 24 ABSENT: WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 25 JONATHAN LETZ, Commissioner Pct. 3 2 1 On Tuesday, December 4, 2001, at 4 p.m., a workshop of 2 the Kerr County Commissioners Court was held in the 3 Commissioners' Courtroom, Kerr County Courthouse, Kerrville, 4 Texas, and the following proceedings were had in open court: 5 P R O C E E D I N G S 6 JUDGE HENNEKE: It's 4 o'clock in the 7 afternoon on Tuesday, December the 4th, Year 2001. We'll 8 call to order this workshop of the Kerr County Commissioners 9 Court. Topic for discussion today is to consider some 10 health insurance options that we've been exploring with the 11 County Treasurer's office, as well as our health 12 administrator, Mr. Brian Findley. So, Barbara, do you want 13 to take it and go with it? 14 MS. NEMEC: Well, I'm going to let Brian 15 Finley and Ray Rothwell make a presentation of the different 16 plans that we may be able to look into, compared to the plan 17 that we have this year. So, whoever's ready to go. While 18 do you that, I'm going to ask my secretary to come in here. 19 MR. FINLEY: Judge and Court, we have been 20 giving some consideration to revising the existing medical 21 insurance plan to provide more latitude to the county 22 employees in selecting a health plan that might be more 23 suited to each individual need. We've worked with E B.A., 24 who is the third-party administrator. Ray Rothwell has done 25 almost all of the calculations on this; very familiar with 3 1 the way that we have arrived at the different figures and -- 2 and the different amounts of coverage that could be 3 presented, possibly, and we would like to discuss those with 4 you today. And I'm going to ask Ray to come up and review 5 the proposal, and certainly we're seeking your input, and 6 hope to answer any questions that you would have in order 7 that we might fine -- begin to fine-tune this thing for a 8 January 1 effective date. 9 JUDGE HENNEKE: Brian, if I can interrupt you 10 before you do that, why don't you kind of explain -- I mean, 11 you said that we're trying the give more flexibility to the 12 employees, but before we get into the details, why don't you 13 just kind of explain what this would do, how it would be 14 different than what we're doing now, and what the possible 15 benefits would be, and then we'll let Ray talk about the 16 specifics, if that's okay. 17 MR. FINLEY: Certainly. Thank you, Judge. A 18 modern concept that has begun to evolve in the last several 19 years in employee benefits in the area of medical insurance 20 has been to go with a larger deductible on a base plan. We 21 have, for example, a school district insured at the present 22 time where there is a rather large deductible, and the 23 employee then has the option of buying up to better 24 coverage, more complete coverage. That -- that's become a 25 very popular concept in providing medical insurance on a 4 1 group basis. Going a step beyond that, through the 2 cafeteria plan administration of what we call a flexible 3 spending account, an employee has the capability of putting 4 money aside -- the County is not doing this at the present 5 time, incidentally -- has the capability of putting aside 6 funds on a -- on a pre-tax basis, to be used to plug into 7 areas where there may not be any medical insurance providing 8 coverage. 9 Out of that concept has evolved the thought 10 of -- of generating a program that has not only a large 11 deductible, but the employer then pays a -- an amount or 12 sets aside an amount for each employee based on, perhaps, 13 the best plan, the one with the lowest deductible, that -- 14 that is available, and then the employee has the option of 15 taking the higher deductible, taking the difference in the 16 premium between the lower deductible and the higher 17 deductible and utilizing it in any of a number of ways. 18 Number one would be to -- to literally put it aside through 19 the cafeteria plan's flexible savings account, to be used 20 for medical expenses that are not covered by the health 21 insurance plan, per se. In your deductible, your 22 coinsurance, are things that even medical insurance policies 23 do not cover, like eyeglasses, hearing aids, and a 24 multiplicity of things, dental work and so on. 25 Another thought, of course, is that they 5 1 could use those -- the difference in the premium for 2 ancillary benefits, whether it be cancer care, life 3 insurance, disability insurance, or any of a number of 4 things that might be more appropriate for that individual 5 employee. You take a young family or a -- particularly a 6 young couple. They may have a very healthy background and 7 not be terribly concerned about the amount of -- of medical 8 insurance deductible, because they just never get sick. 9 Subsequently, they could take the large deductible, take the 10 difference and buy additional benefits that could be of -- 11 of ultimate value to them, whether it be life insurance, 12 disability insurance, or what-have-you. And, so, the 13 concept is to provide the degree of flexibility through the 14 utilization of -- of the difference between, say, the 15 highest deductible and the amount of money that is set aside 16 by the employer. 17 Let me give you a hypothetical case. Let's 18 just simply say that a plan with a $1,000 deductible costs 19 $300, and a plan with a $500 deductible costs $250. Well, 20 there's $50 difference there, and so if the employee elected 21 to take the $1,000 deductible, but the employer says, "We're 22 going to set aside the premium that would fund the $250 23 deductible," that gives them that $50 to play with, so to 24 speak, to utilize wherever they would benefit most from 25 that, whether it be in the medical savings account or 6 1 flexible savings account, or whether it be to acquire 2 additional benefits that are available through the employer. 3 COMMISSIONER GRIFFIN: Question. 4 MR. FINLEY: Yes, sir? 5 COMMISSIONER GRIFFIN: Based on that concept, 6 and on what is presented here in the handout, if a -- if one 7 of our employees chose to keep exactly the same coverage 8 they have today -- 9 MR. FINLEY: Mm-hmm. 10 COMMISSIONER GRIFFIN: -- they could do so; 11 is that correct?? 12 MR. FINLEY: Well, the renewal plan, 13 Mr. Commissioner, would have perhaps some slight variations 14 in the benefit back package that we have today. And those 15 will be explained in just a moment. 16 COMMISSIONER GRIFFIN: Okay. 17 MR. FINLEY: But, to answer your question 18 categorically, yes. An employee can say, "Hey, I want to 19 stay with the basic plan." Now, that basic plan may have 20 some small nuances within it. 21 COMMISSIONER GRIFFIN: Right. 22 MR. FINLEY: That are cost savings to the 23 County. 24 JUDGE BROWN: What are the nuances? 25 MR. FINLEY: Well, we'll get to those in just 7 1 a moment, if you'll give us a moment, Judge. 2 COMMISSIONER GRIFFIN: I'm just trying to 3 understand the concept. You've answered the question for 4 me. 5 MR. FINLEY: Yeah. Does that answer the 6 question? 7 COMMISSIONER GRIFFIN: Yeah. 8 COMMISSIONER BALDWIN: Brian, I have a 9 question. Will the savings account -- will we be able to 10 use it towards the deductible? 11 MR. FINLEY: Sure. 12 COMMISSIONER BALDWIN: Okay. 13 MR. FINLEY: Oh, absolutely. Absolutely. 14 And for the -- and without going into great detail about how 15 a -- how a cafeteria plan works, I think that's not the 16 primary issue here, but to answer your question, yes. Okay. 17 JUDGE HENNEKE: Isn't there -- there's a -- 18 there's a tax benefit to a cafeteria plan. 19 MR. FINLEY: Yes, definitely, there's a tax 20 benefit to the cafeteria plan. The County has been enjoined 21 to a limited degree. There are basically three aspects of a 22 cafeteria plan. One of those is referred to as a "premium 23 only" plan, which is what you presently have, where eligible 24 premiums may be paid for by the employee with before-tax 25 dollars. That includes your medical insurance. Let's say 8 1 that an employee wants to insure his or her wife or 2 dependents, and the premium's $350. Well, he can elect to 3 have that $350 withheld from his paycheck from before-tax 4 dollars. Well, in a 15 percent tax bracket, that's a 5 significant savings. That is never taxable, and not only is 6 it a savings for the employee, but it ultimately is a 7 savings for the County, because you don't have to pay the 8 attendant state and federal taxes on that amount of money. 9 So, it works both ways. It saves money for the employee, 10 saves money for the employer, whether it be a county or a 11 bank or any other commercial business. That's one aspect. 12 That's the premium aspect. 13 Now, going beyond that, there is the -- the 14 savings account. And let's call this, for lack of a better 15 word, for just a moment, a medical savings account, because 16 that's what the money is primarily directed to. The -- the 17 medical savings account allows the employee to anticipate 18 certain medical expenses or medically-related expenses, and 19 it's a pretty broad definition in that. You have obvious 20 things like the deductible, Buster. Have you coinsurance, 21 but it goes on beyond that to take in glasses, hearing aids, 22 orthodontia work, even things like contact lens solution, 23 things that are required in order to maintain one's health. 24 Doesn't take in an aspirin and across-the-counter 25 nonprescription drugs, but it's a very, very broad list of 9 1 things that can be incorporated in that. The -- there are 2 some limitations to that. Uncle Sam says if you set that 3 money aside -- let's hypothetically say a person was going 4 to set aside $1,200 a year; they have a kid in braces and 5 that's a hundred bucks a month, so you -- you instruct the 6 payroll clerk -- 7 JUDGE BROWN: Who pays that, the employee or 8 employer? 9 MR. FINLEY: Employee. 10 JUDGE BROWN: Pays the $1,200? 11 JUDGE HENNEKE: It could be either or both, 12 Judge. We'll get to that in a minute. 13 JUDGE BROWN: Okay. 14 MR. FINLEY: The employee's the one that's 15 got to anticipate the incurred expense. And so let's say 16 it's $100 a month for braces, and so he sets aside $100 each 17 month from his paycheck. He pays no tax on that, ever. 18 Now, the government's regulation on that says that he must 19 use it within the -- the contract period. Let's say it's a 20 calendar year, January 1 through December 31. He has to use 21 the money within that time frame or he loses it. Now, the 22 principal is that, since there's no tax due on that, Uncle 23 Sam is simply saying if we're going to play this game, then 24 you're going to play it according to my rules, and my rules 25 say you use the money within that time frame or you forfeit 10 1 it. Well, we tell people be very, very conservative until 2 you get familiar with this. Well the -- the illustration 3 I'm using is a slam-dunk; you got a kid in braces, it's a 4 hundred bucks every month, and so a person in a 20 percent 5 tax bracket has saved a pretty good chunk of money, 400-plus 6 bucks in a 12-month period on those braces. That's not a 7 bad deal. 8 Now, likewise, there is a -- there are some 9 constraints placed on the employer. And Uncle Sam says that 10 if that employee, once he has enrolled in that plan, if this 11 is an adopted plan of the employer, once he has enrolled in 12 it, then if he walks in -- let's say he's had, in this case, 13 $100 deducted from his paycheck. And this doesn't work on 14 braces. Let's just say it has to be an incurred expense, 15 okay? It's a reimbursement type of a plan and has to be an 16 incurred expense for which the employee has paid. So, let's 17 say he's paid out the second month, $1,200. Okay? He's -- 18 he's written a check for the entire thing, the $1,200. He 19 comes in and he says, "I've paid for this." I have $100 20 being taken out every month, but you've only taken out two 21 months, 200 bucks. Then the County's fund must advance the 22 $1,200. The County continues to deduct the money from the 23 employee's paycheck for the balance of the time frame for 24 the balance of the year, but part of the Section 125 25 requirements under the medical savings account state that 11 1 the employer must advance the money once the bill is 2 presented. 3 Now, we have a lot of people that -- 4 incidentally, that is an unusual set of circumstances, 5 because most -- in most instances, employees will -- will 6 backlog their receipts until Christmastime or some special 7 event and bring them all in at one time, toward the end of 8 the year. They have 60 days from the end of the year in 9 which to file a claim. But the medical savings account is 10 one that we find being used more and more and more. The 11 first year that it's introduced into a company, the 12 utilization is pretty modest. The second year, the people 13 that used it begin to talk about, "Hey, this was great." We 14 are doing cafeteria plan in schools as we speak, and -- and 15 we have people who will be in a meeting and they'll say, 16 "Yeah, that thing saved me a bundle last year." And the 17 County can set an arbitrary limit on the amount of money. 18 You can say, okay, we have a $2,000-a-year limit, 19 $2,400-a-year limit, whatever you arbitrarily wish to set, 20 and people must stay within the confines of the limitations 21 that you impose. You can adjust that from year to year if 22 you want to, but that's the second aspect of that. Any 23 question on how that functions? Yes, sir? 24 COMMISSIONER GRIFFIN: One more question 25 on -- on the carryover or lack of carryover in forfeiture. 12 1 Are you saying that if, at the end of the year, Employee A 2 has -- has $300 in the medical savings account, and he has 3 no legitimate medical expenses to be reimbursed for, that he 4 loses that; it does not carry over? 5 MR. FINLEY: That's correct. That's correct. 6 JUDGE BROWN: Where's it go? 7 MR. FINLEY: Stays in the County's coffer. 8 Put your mind at ease. We -- I can think of one case that 9 we have had, out of hundreds of people, where they have 10 actually not utilized all the money. One of the primary 11 reasons is that, in our particular case, the third-party 12 administrator that we use on that sends a notice out about 13 three months before the end of the -- of the contract year 14 saying, "Hey, you have X number of dollars left in your 15 account," so that people are not caught unawares. The one 16 case I can think of was a math teacher in a school district, 17 which is a little surprising. 18 COMMISSIONER GRIFFIN: Math teacher. 19 MS. NEMEC: Brian? You said that amount can 20 change from year to year. Can they change it in the middle 21 of the year? 22 MR. FINLEY: No. The amount -- I'm sorry. 23 The amounts that can be changed from year to year are the 24 limits -- the contribution limits set by the county. An 25 employee cannot change the amount that they are contributing 13 1 during the year. 2 MS. NEMEC: So, if they start off with $50 a 3 pay period and then, let's say, six months later they decide 4 they only want $25, they can't do that? 5 MR. FINLEY: No, ma'am. No. As a matter of 6 fact -- 7 MS. NEMEC: That's very important, you know, 8 for employees to know that. 9 MR. FINLEY: Another aspect of a cafeteria 10 plan -- cafeteria plan that you already have in place has 11 constraints on it to the extent that an employee, when he 12 signs up for it, acknowledges that he cannot make any 13 changes in his payroll deduction deducted premiums during 14 that plan year unless he has a birth, a death, a marriage, a 15 divorce, or a job change within the family. Or a 16 disability. Those are the only ways that he can legally, 17 within the concept of I.R.S. regs, make a change. 18 COMMISSIONER GRIFFIN: That's today? I mean, 19 that's with the current plan? 20 MR. FINLEY: Yes, sir. And, obviously, then 21 if you add the medical savings account, it falls in that 22 same category. That's a good question. Thank you. Now, 23 there is one other aspect -- and, incidentally, there is a 24 charge -- there is a charge to the participant of the plan 25 by the third-party administrator, and in every instance that 14 1 I know of, for administering the medical savings account. 2 It's -- it's a charge of $4 a month. Now, obviously, it's a 3 simple matter of arithmetic. If you're saving $10 a month 4 and it's costing you $4, you're still 6 bucks ahead, okay? 5 Saving $6 in taxes, okay? But if you are -- if -- it's not 6 practical to put $10 a month aside, or $120 a year. The 7 numbers aren't there for you. So, it's for the larger 8 anticipated expenses. 9 Now, there's one other aspect to the 10 cafeteria plan that you all have not incorporated, and that 11 is a dependent care savings account. People have -- the 12 most common utilization is dependent children, where they 13 have day care. Well, that's -- the average in Kerr County 14 is about 300 bucks a month. Well, if a person at a 15 15 percent tax bracket, that's $45 that they know they can 16 save just like that. If it costs $4 to save $45, that's a 17 net gain of $41, just from a tax savings alone. And that 18 applies to dependent care, whether it's child care or adult 19 care. And, so, if a person has a dependent that they are 20 paying a licensed provider -- licensed in the sense that 21 they have a federal income tax or federal tax I.D. number -- 22 then they can take advantage of that. And, that $4 charge 23 covers both of those; it's not each. So, if a person had 24 dependent care and were putting money aside under medical 25 savings account, the $4 would cover both of those. 15 1 JUDGE HENNEKE: And -- 2 MR. FINLEY: And that's with one company. 3 Other companies may have different charges. That's the one 4 that we're using currently. 5 JUDGE HENNEKE: Let me -- let me do a 6 hypothetical here, which I think will help some people. 7 Let's go back to your situation you posed while ago where 8 the plan that the -- the base county plan is $300. 9 MR. FINLEY: Mm-hmm. 10 JUDGE HENNEKE: A month. They go to a higher 11 deductible, which makes it $250 a month, and they put the 12 $50 a month into the employee's medical savings account. 13 That employee can pull that money out at any time up to the 14 $600 a year and use it for whatever purpose. 15 MR. FINLEY: Yes, sir. 16 JUDGE HENNEKE: If they had -- had to go to 17 the doctor and had to go out of network, and they had a $200 18 charge, they could pull the money out and use it for that 19 $200 charge. The employee could also allocate pre-tax money 20 from the remainder of their salary into that account, so 21 let's say they allocated another $50 a month into that 22 account so they'd have a total of $1,200 through the year. 23 $50 from the County, $50 from their own salary. Again, 24 that's pre-tax money. They could use that hundred dollars a 25 month to pay part of their dependent care health care 16 1 expenses. 2 MR. FINLEY: Well, if they're going to use it 3 for dependent care -- 4 JUDGE HENNEKE: I mean, not dependent care, 5 like adult and child care. I mean medical insurance. 6 MR. FINLEY: Yes, it can be used for a wife, 7 children, yes. 8 JUDGE HENNEKE: That $100 a month could be 9 applied against the cost of health care for their dependents 10 through the County? 11 MR. FINLEY: Yes, sir. 12 JUDGE HENNEKE: And if they wanted to, they 13 could figure out how much their dependents' health care cost 14 was going to be through the whole year, and have that amount 15 put into their medical savings account, which would mean 16 that the total amount of the premiums for their dependent 17 health care insurance would be pre-tax. 18 MR. FINLEY: Mm-hmm, that's correct. 19 JUDGE HENNEKE: And let's say it's $2,500 a 20 year for dependent precare -- for dependent health care 21 expenses. They would save probably $600 or $700 on income 22 tax. 23 MR. FINLEY: Yes. 24 JUDGE HENNEKE: Because those dollars that 25 they were using to pay for health care for their children or 17 1 spouse, which today are taxed by the Internal Revenue 2 Service, would not be taxed. 3 MR. FINLEY: That's right. 4 JUDGE HENNEKE: So, what we're trying to do 5 here is to provide the employees with the ability to save on 6 their federal income tax as well as have more flexibility in 7 the way that they manage their health care dollar. I 8 mean -- yes, Becky? 9 MS. HENDERSON: I have a question. You said 10 that if you do not use that -- say you had $1,200 in there 11 and nobody gets sick and you don't use that $1,200, you lose 12 it, right? So why -- why would that be an advantage to not 13 taking and setting aside $50 a paycheck in Hilco Credit 14 Union? I mean, except that it's not pre-taxed, but at least 15 it's yours if you don't -- 16 MR. FINLEY: It's only -- you only do that -- 17 you only do that if it is going to be an advantage to you. 18 MS. HENDERSON: But, I mean, you don't know 19 if it's going to be an advantage. 20 MR. FINLEY: Then you don't do it. Just 21 don't do it if you have no anticipated health care needs for 22 the coming year. 23 MS. HENDERSON: But how do you anticipate 24 that? I can be diagnosed next week with cancer or 25 something. How do you -- 18 1 MR. FINLEY: Yes, ma'am, I understand that. 2 MS. HENDERSON: -- anticipate that? 3 MR. TOMLINSON: I've got a good example. 4 MS. HENDERSON: Okay. 5 MR. TOMLINSON: I go to a chiropractor that's 6 outside of our network. 7 MS. HENDERSON: Mm-hmm. 8 MR. TOMLINSON: And I have an $800 9 deductible. I could go -- I can go 12 months and never meet 10 my deductible on that chiropractor bill, so -- my total bill 11 for the year is approximately $500. So, if I know that I 12 I'm going to go every month -- 13 MS. WITT: Yeah, but you know you're going to 14 go. And, like Becky's saying -- 15 MR. TOMLINSON: That's what -- 16 JUDGE HENNEKE: Folks, how many of you don't 17 go to the dentist at least once a year? 18 MR. TOMLINSON: That's what I'm trying to -- 19 JUDGE HENNEKE: How many of you don't have a 20 checkup at least once a year? 21 MS. HENDERSON: I see what you're saying. 22 MR. ROTHWELL: Or wear glasses. 23 JUDGE HENNEKE: Or wear glasses. Those are 24 expenses that, if you went back in your checkbook for the 25 last three years, I bet you a dime to a donut you could 19 1 average and figure out how much you anticipate spending on 2 medically-related expenses. 3 MS. HENDERSON: Okay. What are you -- 4 JUDGE HENNEKE: Get your teeth cleaned, get 5 your eyes checked. 6 MS. HENDERSON: That's true. 7 JUDGE HENNEKE: Have a physical. You can -- 8 you can anticipate those things. And, yes, you may be wrong 9 one year; one year you may not get around to making your 10 dental appointment and only have one cleaning instead of 11 two, but you can probably find something else which 12 qualifies and you can make up with it. The things is, that 13 the kind of plan that we're talking about gives the 14 employees more control over how they spend their health care 15 dollars that the County has -- 16 MS. HENDERSON: Then do we have the option -- 17 say we don't have our family covered and it's just us and 18 the County's paying for it right now. Do we have the option 19 to keep what we have and the County continues to pay it? 20 JUDGE HENNEKE: Yes. 21 MR. FINLEY: Absolutely. No, there's no -- 22 there's no endeavor to force anybody into any position. 23 It's quite the reverse. It's to allow you a greater degree 24 of flexibility as far as your health care dollars that the 25 County provides. 20 1 MS. HENDERSON: So, anybody, even if they 2 don't have family coverage, could keep what they had? 3 MR. FINLEY: Absolutely. 4 MS. NEMEC: All this is doing is helping 5 those employees who are, on a monthly basis, going -- 6 MS. HENDERSON: Okay. 7 MS. NEMEC: -- and seeing a doctor. 8 MS. HENDERSON: Something that you already 9 know the answer. 10 MS. NEMEC: I know exactly how much I would 11 be putting over here. Rather than just give a check to the 12 doctor, I'm going to put it over here, because it's going to 13 be pre-taxed for me, and so I'm going to -- I'm going to 14 save in a lot of different ways, but I already know how much 15 that amount is going to be. 16 JUDGE HENNEKE: Another example are 17 prescriptions. I've been on high blood pressure since 1996. 18 I've got a pretty good idea how much I spend a month on -- 19 COMMISSIONER GRIFFIN: When did you run? 20 JUDGE HENNEKE: -- on high blood pressure 21 medicine. I can set that aside and get reimbursed for that 22 and have a fairly reasonable certainty that I'm not going to 23 lose that money, because I have a track record of that. 24 MS. HENDERSON: Just as long as we understand 25 we still have the option to keep exactly what we have. 21 1 JUDGE HENNEKE: Yes. 2 MS. HENDERSON: And the County's going to 3 still pay our -- whatever. That's mainly -- 4 COMMISSIONER GRIFFIN: That was my first 5 question. 6 JUDGE HENNEKE: We're not taking anything 7 away if you don't want us to. We're providing you the 8 opportunity to have exactly the same base coverage that the 9 County provides, be it what we have now or what we might 10 have in the future. But if you want to make a change and 11 free up some dollars, you can. The other thing is, if we go 12 to a cafeteria plan, even if you choose to have your 13 deductible stay the same, say you have the same coverage you 14 have today, you could still put your own money into this 15 medical savings account. 16 MS. HENDERSON: I see. 17 JUDGE HENNEKE: If you anticipate -- let's 18 say you end up that you go to the dentist and he says, 19 "well, you know, you're going to need a root canal," and it 20 happens to be at a time when it's the end of a year, and you 21 say, "How much is that going to be?" They say, "Well, about 22 $800 next year." When it comes time to re-enroll, you could 23 set aside that money. 24 MS. HENDERSON: What if you have dependents 25 who are -- say my child is on my husband's health insurance, 22 1 but I know she's going to have some stuff done. Can I still 2 set aside my money? 3 MR. FINLEY: Oh, yes, absolutely. 4 MS. HENDERSON: Even though she's not on 5 the -- 6 MR. FINLEY: That's right. And it's not 7 designated for a person, and you do not even have to be 8 under the County's health care program -- 9 MS. HENDERSON: Okay. 10 MR. FINLEY: -- in order to be able to set 11 funds aside in the cafeteria plan; the two are totally 12 different animals. 13 MS. HENDERSON: Okay, thank you. 14 JUDGE HENNEKE: Thea? 15 MS. SOVIL: On the -- I think some people are 16 missing the point on the cafeteria plan on the employee 17 only. You're -- what you're offering is a lower payment for 18 the County on the high deductible. And then, in order to -- 19 if they don't want to go with the high deductible, the 20 County's going to provide the -- like, the $442 a month, but 21 the high deductible plan is $350, so you have that other 22 amount -- the subtracted amount flexible. You can either 23 choose to put it in that savings account, or buy other 24 options. Is that correct? 25 MR. FINLEY: That's correct. The figures 23 1 you're using are just hypothetical figures, but you're 2 exactly right in the concept. 3 MS. SOVIL: Okay. So -- but that is County 4 money; that is not your personal money. 5 MS. HENDERSON: Right. 6 MR. FINLEY: Yes. 7 MS. SOVIL: That's what I think everybody 8 needs to understand. 9 JUDGE HENNEKE: We're going to provide each 10 employee with the same dollar amount for health care, but if 11 you want to, we're going to allow to you exercise control 12 over a certain portion of it. And you can use that money -- 13 if we decide to do this, obviously, you can use that money 14 to maintain the same coverage you have, same base coverage 15 the County offers, or you can use that money, as Brian has 16 explained, to reimburse yourself for other types of medical 17 expenses and you can add your own personal money on a 18 pre-tax basis to give you more -- a bigger pot to pay 19 medical-related expenses. I mean, I -- you know, just using 20 myself, I -- I'm supposed to have a thallium stress test 21 every year because I've had heart problems. They run about 22 $2,300, you know, and the insurance only pays -- not enough 23 of it, about $1,800 of it. So, I know I'm going to have a 24 $500 hit on my stress test every year, so I'm probably going 25 to take some of my own money, put it in the account on a 24 1 pre-tax basis, and draw it out when I have to pay for that 2 stress test. 3 MS. NEMEC: And think what it's going to do 4 to your income tax at the end of the year. 5 MS. HENDERSON: I mean, it makes sense, you 6 know, as long as we have the option. 7 JUDGE HENNEKE: Yeah. It's totally optional. 8 MS. HENDERSON: You know, and I understand 9 what Tommy's saying; that if you know in advance, like I 10 know my daughter's fixing to have braces, so I know it's 11 going to be -- you know -- 12 JUDGE HENNEKE: You go to Dr. Risinger; he'll 13 tell you to the penny. 14 MS. HENDERSON: He already has. 15 MS. NEMEC: My daughter's there right now, as 16 we speak. 17 (Discussion off the record.) 18 MS. HARDIN: Does that mean that every 19 employee is going to have different coverage? 20 MR. FINLEY: They could, conceivably. Yes, 21 ma'am. 22 JUDGE HENNEKE: But it's their choice. 23 MS. NEMEC: I think I'm having my employees 24 walk out here. What a nightmare. 25 MS. MARTELON: Somebody shoot me, now. 25 1 MS. HARDIN: I don't have to answer the 2 questions. 3 MR. FINLEY: She's brought up a good point. 4 MS. NEMEC: We're going to refer them all to 5 you, though. 6 MR. FINLEY: Thank you. That's -- Ray, pad 7 that thing a little bit, will you? We -- we have a lot of 8 communication with County employees as it is. Many of them 9 are accustomed to calling us and asking questions about 10 their coverage. And, quite frankly, we tried to take 11 Barbara and Ada out of the insurance business. I think 12 we've done a pretty good job of it to this point. We want 13 to continue to do that. The -- I think the significant 14 thing here is that it's going to be mandatory -- if you 15 gentlemen accept this concept, it's going to be mandatory 16 that we have meetings where everybody attends in order to be 17 informed about what the -- you know, the new plan might be. 18 Now, if we elected to just continue what we've got, then, 19 you know, it's pretty much status-quo. But I think the 20 concept here is one that would be tremendously attractive 21 to -- to a vast majority of your people, but would it take 22 some explaining so that one says well, you know, I've got 23 this huge deductible. Well, he's going to have a big 24 deductible, $1,000, only if he elects it. 25 COMMISSIONER GRIFFIN: Question. Employee 26 1 comes in midyear and makes that choice at the time that they 2 accept employment? 3 MR. FINLEY: Yes. 4 COMMISSIONER GRIFFIN: In other words, they 5 could set aside into a medical savings account even though 6 it's not the start of the -- 7 MR. FINLEY: Yes, sir. 8 COMMISSIONER GRIFFIN: -- of the period. 9 It's -- they can do it -- an employee that comes in 10 midterm -- 11 MR. FINLEY: Yes, sir. 12 COMMISSIONER GRIFFIN: -- can make that 13 election. 14 MR. FINLEY: We do the City's cafeteria plan, 15 and we do that on a regular basis. We have meetings with 16 every new employee that the City hires. They are organized 17 to the extent that they either send them to our office, or 18 if they have several at a time, they invite us to come to 19 City Council chambers, where we meet with them during 20 business hours, and they make the elections then that are 21 appropriate for them for the remainder of the plan year. So 22 that if somebody says, well, I -- you know, I know I've got 23 $500 in medical expenses, and there's six months left, you 24 just divide $500 by 6 in that case, if that's what they want 25 to do. Or if they're coming and they have a dependent 27 1 child, you -- you project it on the remaining amount of 2 time. 3 COMMISSIONER GRIFFIN: Okay. 4 JUDGE HENNEKE: Any other questions? Why 5 don't we listen to Ray for a little while, and if y'all 6 think of any questions, we'll stay here as long as we need 7 to to answer them. 8 MS. NEMEC: May I ask a quick question? 9 JUDGE HENNEKE: Yes. Go ahead, Barbara. 10 MS. NEMEC: What happens to employees that 11 choose a plan and then retire? 12 MR. FINLEY: Well -- 13 MS. NEMEC: How does that affect them? 14 MR. FINLEY: The cafeteria plan will 15 terminate with their retirement. In other words, if an 16 employee -- most employees know they're going to retire and 17 can plan toward that, but let's just say you've got an 18 employee that's in the cafeteria plan and he's terminated, 19 whether he walks out voluntarily or you fire him. Then his 20 cafeteria plan stops at that point. 21 JUDGE BROWN: Does he lose his money there? 22 MR. FINLEY: I'm sorry? 23 MS. NEMEC: Does he lose his money 'cause he 24 hasn't used it? 25 MR. FINLEY: No. No. No, he does not lose 28 1 it. That's a good question. He does not lose the money 2 he's accumulated. He still has till the end of the plan 3 year to use that money up. 4 JUDGE BROWN: But if he doesn't use it -- 5 MR. FINLEY: He'll lose it. Oh, yeah. 6 MR. ROTHWELL: No refunds. 7 MS. SOVIL: We don't lose our insurance, 8 though. We can opt to buy into it ourselves. 9 MR. FINLEY: Well, under -- yes, certainly. 10 Yes, certainly, that's correct, but you cannot pay for it 11 under cafeteria plan, because you're no longer an employee. 12 MS. NEMEC: You can't get it at pre-tax 13 dollars. 14 MR. FINLEY: You cannot take it -- it's no 15 longer payroll deducted. 16 MS. SOVIL: I see what you're saying. Okay. 17 MR. FINLEY: See, the only benefits that are 18 eligible under a cafeteria plan are those that are payroll 19 deducted, that's the way Uncle Sam structured it, and that's 20 where the tax savings comes in, both to the employer and to 21 the employee. It's a two-edged sword. 22 MS. NEMEC: Thank you. 23 MR. FINLEY: Ray? 24 MR. ROTHWELL: I'm not going to talk about 25 125 stuff. That's a little outside of my -- what I 29 1 normally, on a daily basis, do. But I do want to clarify 2 one point. I believe -- and from your question, Judge, 3 anyone, Barbara, that's in the employee benefit plan today, 4 health benefit plan, that has dependent coverage, that's 5 pre-taxed, the way you've got it set up for 100 percent of 6 your employees. If they're paying for dependent coverage, a 7 spouse, a child, or a family, those dollars are currently 8 being pre-taxed -- pre-tax dollars. So -- so, that's -- I 9 think your question -- and I'm not sure; I think I read that 10 question and answer a little bit differently a while ago. 11 But -- 12 MR. FINLEY: Ray, but they have to elect to 13 do that. Every employee must elect. 14 MR. ROTHWELL: They have to elect. 15 MR. FINLEY: That option, because if he does 16 not want to, for some reason -- 17 MR. ROTHWELL: Yeah. 18 MR. FINLEY: -- he does not have to have it 19 deducted. 20 MR. ROTHWELL: I understand. 21 MS. NEMEC: I think it's important for them 22 to know, too -- and if I'm wrong, correct me -- if they 23 pre-tax, then when it comes time for them to retire and get 24 Social Security benefits, that amount that they have 25 pre-taxed all these years goes against the amount that they 30 1 figure what their benefits is going to be, because it hasn't 2 been that much. So, there have been some employees who have 3 elected not to pre-tax for that reason. 4 MR. ROTHWELL: Because of a short-term -- 5 MS. NEMEC: Right. But I think the ones that 6 we have now are all pre-tax. There may be one -- I know 7 there was one at one time, but that person's no longer here. 8 MR. ROTHWELL: But, essentially, that -- that 9 pre-tax benefit to the County and to the employee currently 10 exists for the majority of the employees that have dependent 11 coverage. So -- so what they're adding through the 125 plan 12 is a lot of options that are very, very favorable employee 13 and employer options, and I would encourage you to -- to 14 expand your 125 plan to cover those things; child care, 15 medical reimbursement, those kind of things, 'cause they are 16 really good. They do take some calculations on each 17 individual part. With that said, does -- y'all have copies 18 of this, I believe. 19 COMMISSIONER GRIFFIN: Mm-hmm. 20 MR. ROTHWELL: Does anyone else here in the 21 room have copies? I don't have enough. 22 JUDGE HENNEKE: We passed a bunch out. Does 23 everyone have a copy of this? 24 MR. ROTHWELL: A bunch of y'all have these 25 copies. 31 1 MS. SOVIL: I passed out all those that you 2 gave me to pass out. 3 MR. ROTHWELL: Is it okay if I kind of stand 4 where I can see everyone? 5 COMMISSIONER GRIFFIN: Sure. 6 MR. ROTHWELL: Currently, your current 7 benefit structure is on a page that looks like this. And 8 it's got a $400 deductible on it, an $800 out of network. 9 It's got a $1,200 -- which is three times four -- family 10 deductible, $2,400 out of network. It's got an 11 out-of-pocket -- maximum out out-of-pocket of eligible 12 charges, $2,000 plus the deductible, $6,000 for a family, 13 and down through that structure is where we're -- is the 14 only place structurally in this benefit that the optional 15 plans that we're going to talk about differ. That and the 16 drug card. So -- so, your current plan is a $400 deductible 17 per family, $2,000 out of pocket. It's a 90/70 plan. You 18 need one of them? 19 MS. SOVIL: Here, David. 20 MR. ROTHWELL: Just one of these. And it's a 21 90/70 -- 90 percent coinsurance until you reach that $2,000 22 out of pocket, and then it's 100 percent insurance. The 23 drug card is currently a $5 generic, $20 single-source 24 name-brand, $35 multisource. That's on the last page of 25 this three-page handout. That basically is your current 32 1 benefit structure. Does anyone have any questions or -- or 2 anything dealing with the current benefits? Okay. Going 3 from that point forward, let me reemphasize, I believe 4 the -- I believe the contingent here is that every employee 5 can maintain that set of benefits. And that set of 6 benefits, the employee-only cost will be paid 100 percent by 7 the County, and you continue paying that portion of your 8 dependent costs, be it a child, a spouse, or a family, that 9 you're currently paying. And there's about a $5 or $6 10 increase -- $8 or $9, $10 max, on every one of those units. 11 The employee's cost on the new -- on the new renewal year 12 starting in January goes from -- it's $376 on the new year. 13 It was $367 this past year. For employee child, it's going 14 from $527 to $532. On employee spouse, it's going from $614 15 to $618. And I'm just rounding these off. On employee 16 family, it's going from $705 to $709. So, it's -- there's a 17 very small increase going next year -- do you have that? 18 MR. TOMLINSON: Yeah. 19 MR. ROTHWELL: A very small increase on your 20 current benefit structure going forward. So, I believe the 21 proposal, Judge, if I'm not -- 22 MS. NEMEC: Ray, excuse me. I know employees 23 are going, "What?" That -- those amounts that he's calling 24 out includes the $376. 25 MR. ROTHWELL: That's right. 33 1 MS. NEMEC: That the County pays for your 2 insurance. 3 MR. ROTHWELL: That's right. In each one of 4 those categories -- just taking the employee child, I said 5 it was $531. You have to take $376 off of that $531; that's 6 your contribution. So, in each one of those examples going 7 across, you take the $376.98 off of those, and that 8 difference is what you pay for dependent coverage. Did I 9 make that clearer? 10 JUDGE BROWN: I can't find it. 11 MS. SOVIL: You budgeted $442 a month per 12 employee. 13 JUDGE BROWN: Are you looking at the same 14 thing? 15 MR. ROTHWELL: Yeah, uh-huh. 16 JUDGE BROWN: These numbers are -- 17 JUDGE HENNEKE: Let me take a -- dependent 18 coverage is going up $4 a month up over what you're paying 19 now. Coverage for dependents, be it your spouse or your 20 children, or your spouse and children, is going up $4 a 21 month next year. 22 MR. ROTHWELL: Approximately. 23 JUDGE HENNEKE: Yeah. 24 MR. ROTHWELL: Give or take a little bit. 25 JUDGE HENNEKE: Give or take a few pennies. 34 1 MR. ROTHWELL: But, generally, that's 2 about -- and when we -- when we started talking about these 3 numbers and I started getting these numbers back, I was 4 astounded at the small increase we had in the County plan. 5 We've had a great year, claims expense-wise, so the County 6 has really benefitted from -- most of the rates we're 7 seeing, and Brian and I were talking about it, 40 percent's 8 not uncommon. Twenty percent -- 20 to 30 percent is the 9 norm. And we've got just almost -- you just almost can't 10 calculate the percentage. Anyway, I believe the plan for 11 the County, or the presentation that's being made, is that 12 the County is going to pay $376 for employee health 13 insurance. Now, what we're -- what we're doing to give you 14 some options is allowing the employee to select a Plan B or 15 a Plan C if they want to, and use the savings difference, 16 $40 to $70, depending on B or C, again rounding off a few -- 17 rounding that off a little bit, but $40 to $70 from what the 18 County's going to pay to what you could pay -- what you 19 would have extra each month if you went to a $750 20 deductible, or if you went to a $1,200 deductible. 21 So, what we're saying is -- is each employee 22 will have the option of staying exactly where they are, no 23 changes, approximately the same amount of money every month, 24 or opting for a reduced-benefit program. And I want to kind 25 of structure -- walk you through that. If you took this 35 1 sheet that we have the benefits on, and for Plan B, you 2 replace that $400 with $750, and the $1,200 right under the 3 $400 with $1,500. And out of pocket -- I'm sorry, the $800 4 with $1,500. And then three per family, and took the office 5 co-pay from $10 to $20, and that $20 piece, so they're out 6 of the network to $30. And you went down through everywhere 7 it said 90 percent on the schedule of benefits and made that 8 80. And you got over to the drug card and you change that 9 $5 to $10, the next number to $30, the next number to $45. 10 That's the benefit program you'd be buying under Plan B. 11 And under plan C, it goes to $1,200 deductible. 12 And, again, the premium rates, if you look on 13 the handout, Plan A is $376 per employee. Plan B is $337, 14 and Plan C, I think, is $312 -- if I can get these 15 separated -- $312. So, between $376 and $312 or $337 would 16 be the dollars you would have to buy things -- either buy 17 dependent coverage in a lesser benefit structure, or buying 18 into some of the potential new 125 benefits that are going 19 to be available to you, setting that money aside for medical 20 reimbursement or whatever. And if you look at Plan B and C 21 going across, you'll see the family cost goes from $709 to 22 $684 and $634. So -- and that's true in the children and 23 the spouses rates; the dollars go down as the benefits go 24 down. Every employee has the option of staying where you 25 are, deciding you want a lesser cost for dependents, or you 36 1 want some extra money to go buy something else with by going 2 to a lesser benefit structure. 3 Most of the plans that we administer have two 4 or three options like this in them. It's -- as Brian said, 5 there's been a lot of things happening in the health 6 insurance world. As costs go up, about the only way you can 7 affect them is benefits going down, so we've offered some 8 options that the Court will make a decision on whether to 9 opt for those options or to stay where you are. But, it 10 makes a lot of sense to -- to me and the folks in my 11 industry to give your employees some options and, to use the 12 Judge's words, to be able to manage your money more 13 effectively. And you can do that through what the Finley 14 operation -- agency is offering through that bigger umbrella 15 of a 125 plan. Yes, ma'am? 16 MS. NEMEC: I have a question. Are you able 17 to -- like, let's say that you have family coverage. 18 MR. ROTHWELL: Mm-hmm. 19 MS. NEMEC: And for your spouse, you want 20 Plan A, but for your child you want Plan C. Are you able to 21 do that? 22 MR. ROTHWELL: We don't recommend that. 23 MS. NEMEC: Okay. 24 MR. ROTHWELL: No, you start mixing a lot of 25 adverse selections into it. We think an employee ought to 37 1 -- the family unit ought to all be in one plan. 2 MR. FINLEY: Well, the insurance -- 3 JUDGE HENNEKE: It is possible? 4 MS. NEMEC: But you don't recommend -- 5 MR. ROTHWELL: It's theoretically possible. 6 We do not recommend it. 7 JUDGE BROWN: Are you going to give us a 8 printout on what the benefits are? 9 MR. ROTHWELL: Yeah, we're going to do -- we 10 will do -- once this is approved, if it's approved, we will 11 do a schedule of benefits, like the -- for each of the three 12 plans. 13 JUDGE BROWN: I'm not talking about the money 14 benefits. I'm talking about what's covered and what's not 15 covered. 16 MR. ROTHWELL: Well, it's pretty 17 straightforward. 18 MS. NEMEC: Everything's covered that's on 19 that paper right here, which is the same benefits -- 20 MR. ROTHWELL: If you go through all three 21 pages -- 22 JUDGE BROWN: That's covered now, right? 23 JUDGE HENNEKE: What's covered won't change 24 as far as types of illness; it's just the amount of dollars 25 you might have to pay out-of-pocket is the only thing that 38 1 changes. 2 MR. ROTHWELL: Yeah. Like I said, the basic 3 schedule, once you get past the deductible place and the 4 out-of-pocket place and the office co-pay place and back to 5 the RX display, those are where the changes visibly will 6 occur. Everywhere else on that schedule, where it says 7 90 percent, if you look down at the bottom of the first 8 page, hospital services room and board, 90 percent after 9 deductible. If you pick one of these other plans, that will 10 say 80 percent, so you you'll be paying 20 percent of the 11 cost as opposed to 10 percent of the cost. 12 JUDGE BROWN: Why would I want to do that? 13 MR. ROTHWELL: Well, it saves -- it saves you 14 money. If you, by yourself, are on the plan, Judge, it 15 would not save you any money, but if you had children or 16 dependents on your plan, you wanted to go to a $750 17 deductible, you could use that $40 to go over and pay part 18 of your dependent coverage where you'd be lesser -- out 40 19 bucks or $480 a year less expense to you to -- to have a 20 $750 deductible in that example rather than a four -- 21 MS. WITT: So, where you benefit the most is 22 if you have dependents on your insurance versus just 23 yourself? 24 MR. ROTHWELL: Yeah. Employee only, if you 25 -- if you wanted to keep your medical benefits exactly like 39 1 they are, and you use your own money for the medical savings 2 account or for your deductible or for your coinsurance, yes, 3 you could do that. If you wanted to opt for the $750 4 deductible and use that $40 a month set aside in the medical 5 savings, pre-tax, to pay that higher deductible with if you 6 had to use it, you know, deductibles only -- really only 7 come into play in certain instances in your plan. They 8 don't come into play in doctor's offices and those kind of 9 things. 10 MS. WITT: Right. 11 MR. ROTHWELL: So, there's a variety of 12 thought processES that you'll NEED to go through as you 13 think about which plan you want and how you want to impact 14 through the -- through the medical savings plan, whether you 15 want to use your income or part of the County's contribution 16 to do that. There's some things you need to think through 17 as you -- as you go through that. In answering your 18 question directly, Judge, if you're on the plan by yourself, 19 and -- and you want to keep the exact $400 benefits exactly 20 like you are, you can do that and stay right where you are, 21 and the County will pay the bill. 22 MS. NEMEC: But, Ray, for the employees that 23 don't have benefits -- don't have dependents -- 24 MR. ROTHWELL: Uh-huh. 25 MS. NEMEC: -- wouldn't something like this 40 1 come in handy for them if -- let's say that they didn't want 2 to go with a -- Plan A would be $400 deductible. They 3 decide to go with Plan B with a $750 because they're in good 4 health, and chances are they're not going to hit the $400 5 and they probably won't ever hit the $750 either, but they 6 have $40 that they could put away in a medical savings plan 7 because they do have this one prescription they take a 8 month. 9 MR. ROTHWELL: Mm-hmm. And they could put 10 that right over in the medical savings plan. 11 MS. NEMEC: So it does benefit the employees, 12 too. It's just your situation. 13 MR. ROTHWELL: Yeah. You've just got to 14 think this whole process through, where your expenses are 15 and how you want to handle those expenses. Do you want to 16 handle them with your money? Or a contribution from the 17 County's money? And in a pre-tax environment, you -- 18 MS. WITT: And use that whether you put it in 19 or not. 20 MR. FINLEY: Yes, ma'am, that's correct. 21 MR. ROTHWELL: Yeah. You can take that $40, 22 if that's what the number is -- it's somewhere in that 23 range. 24 MS. NEMEC: Right. 25 MR. ROTHWELL: You take that $40, you can 41 1 sign a form with Barbara's office and say, I want to take 2 that $40 out of my paycheck every month and I want it in my 3 pre-tax medical savings account or whatever -- wherever you 4 want to put it. 5 MS. NEMEC: And you would only probably want 6 to do that if you know that you're not going to meet your 7 $400 deductible; you would want to go with a higher 8 deductible, because chances are you don't need your $400, 9 but you do have a prescription you pay for every month, and 10 this way you can do it at -- with the County's money. 11 Because they're not going to be benefitting from that high 12 insurance. 13 MS. WITT: Why would it be taken out of my 14 check, then, if it's the County's money? 15 MS. NEMEC: Well, the contribution part of 16 your check. 17 JUDGE HENNEKE: You'll never know it's gone. 18 MS. WITT: I thought that's what he said. 19 MR. ROTHWELL: It's contribution. That $40, 20 they have to account for that somehow. 21 MS. WITT: Right. 22 MR. ROTHWELL: So I think you end up having 23 to put it in her paycheck, but take it out through the 125 24 plan, pre-tax. Is that -- technically, I think that's the 25 way -- technically, I think that's the way it would have to 42 1 work. 2 JUDGE HENNEKE: A good example might be if 3 your doctor is not in the net. Let's say you go to 4 Fredericksburg and you have an $800 deductible every year. 5 The last four years you've never met the deductible. You're 6 out $700 out of your own pocket. If you change to Plan B, 7 where you had a $750 deductible, or where you had a $1,500 8 deductible for out of network, but you put $40 a month into 9 a medical savings account, you'd have $480 to pay against 10 the $700 a month -- a year you pay in -- in doctor's bills. 11 MS. WITT: Right. Well, I was looking for -- 12 at prescriptions for the deductible. Unfortunately, I met 13 it this last year, but, you know, hopefully not again. But 14 the prescription you take would make the difference. 15 JUDGE HENNEKE: Yeah. 16 MR. ROTHWELL: Sure. You know, and using the 17 Judge's example earlier, he knows he's got "X" dollars every 18 month that he has to pay; he's going to pay 30 bucks or 19 whatever the co-pay is, and he's going to do that times 12. 20 And he -- he's been taking it long enough to know that he's 21 going to continue taking it. Well, 30 bucks a month times 22 12, if that's all you put in your account, 'cause you knew 23 for a fact that's what you were going to do, and that's all 24 you put in there, you save the taxes on that $300 -- however 25 many dollars that is, $390 or $360. 43 1 JUDGE HENNEKE: Another way this would come 2 into play, say my wife is covered under a different plan. 3 She has a $300-a-month -- a $500-a-year deductible, and I 4 don't hit my deductible. I go to Plan B, put $40 a month 5 into a medical savings account, and use that to pay her 6 deductible on a reimbursable basis. 7 MS. WITT: Makes sense. 8 MS. NEMEC: I wouldn't want to mislead the 9 employees in that. Let's say that they take $50 a month 10 from their paycheck -- or $25 from each paycheck, $50 a 11 month. They put it in this medical savings, and with that 12 money, they are planning to buy their prescriptions that 13 they know that they're on monthly. 14 MR. ROTHWELL: Mm-hmm. 15 MS. NEMEC: They are not able to come to the 16 third-party administrator and say, "Okay, I'm going to go 17 get a prescription; I need my money." They have to pay 18 their money up front and then wait to get reimbursed; is 19 that correct? 20 MR. ROTHWELL: That's correct. 21 MR. FINLEY: That's correct. It's a 22 reimbursement, the cafeteria plan. 23 MS. NEMEC: So you're going to be out -- 24 MR. FINLEY: It is a reimbursement program. 25 MS. WITT: How long does it take you to be 44 1 reimbursed? 2 MR. FINLEY: Well, with the third-party 3 administrators that we have used, it's mail time, normally. 4 If the mail runs properly, normally within five business 5 days, but you know what happens to the mail sometimes. 6 MS. WITT: Right. 7 MR. FINLEY: So it could be two weeks, but 8 it's a turn-around time, because it's a cut-and-dried type 9 of a situation. 10 MR. ROTHWELL: Incidentally, that's not my 11 T.P.A. that does that. We do not administer 125 plans, so 12 that's through a company that Brian's company uses for 125 13 plan administration. So, don't be calling me about wanting 14 $30 for drugs. 15 (Laughter.) 16 JUDGE HENNEKE: Does anyone have any other 17 questions for Ray? It's almost 5:00, and we don't want to 18 keep anybody. We'll stay as long as you want to, but -- 19 MR. FINLEY: Could I make one statement, 20 Judge? The school district has four different options 21 available to them presently on the medical insurance. Just 22 so that you know, this is not something that's just 23 off-the-wall. The school district has a bronze -- what they 24 call a bronze plan, a silver plan, a gold plan, and a 25 platinum plan, and each one of them has a smaller 45 1 deductible. The Plan A is $1,000 deductible. I think the 2 next one is $750 and $500 and $200 or $250, something like 3 that. So, the concept is out there all about us, and it's 4 been very well received, and I -- quite frankly, while we do 5 not write the school district's coverage any longer, I was 6 very surprised to find the tremendous number of people that 7 opted for the $1,000 deductible under their bronze plan. 8 They just felt that it was cost-effective for them. They 9 did not have the district saying, "We're going to give you 10 the extra money difference," like the County's talking 11 about. They just opted for that particular plan. They had 12 to pay the difference to get the better plans. So, it's 13 something that is not just a new concept. It's something 14 that is very well accepted today. 15 JUDGE HENNEKE: Any questions? Thea? 16 MS. SOVIL: Yes, I do. And it's not about 17 insurance coverage. Kerr County has a -- is self-insured up 18 to $20,000, each employee. 19 MR. ROTHWELL: Forty. 20 MS. SOVIL: Forty? When did it go up to 40? 21 MR. ROTHWELL: It's been 40 for two or three 22 years. 23 MS. SOVIL: Okay. I have never seen an 24 accounting. I mean, what do we have in our reserves? What 25 are we using every year? What -- I mean, why -- I was 46 1 sitting here looking at this, and our insurance payments for 2 the County has gone up almost -- a little over 40 percent in 3 two, three years, so where's the money? I mean, what have 4 we got in the savings? Where's the reserves? Do we not 5 have any? 6 MR. ROTHWELL: Barbara? Do you want to 7 answer that or do you want me to? 8 MS. NEMEC: Go ahead. 9 MR. ROTHWELL: I think the reserve -- I think 10 it's around $90,000, and that's a number that's between -- 11 there's a book number here in the County for reserves, and a 12 number that we have that we report monthly, I believe. 13 MS. NEMEC: Mm-hmm. 14 MR. ROTHWELL: That we report monthly that we 15 have. We have a -- a C.D. account, or some kind of 16 short-term investment account that I think has -- and I 17 don't know -- I don't have the current monthly reports. 18 Barbara, you'll be getting those. 19 MS. NEMEC: I have them in my office, for 20 October anyway. 21 MR. ROTHWELL: There's around $70,000, plus 22 or minus a little bit, investment amount balance. I think 23 on Barbara's reserve books, there's -- it typically stays 24 between 40 and 60, generally. 25 MS. NEMEC: Mm-hmm. 47 1 MS. SOVIL: So we're up to $200,000 right 2 now? 3 MR. ROTHWELL: No, that would be $110,000 or 4 $120,000 in reserve that's unexpended for medical claims, 5 that's earmarked for medical claims. 6 MS. SOVIL: What do we use, normally, a year? 7 JUDGE HENNEKE: This is -- this is something 8 we can take up another time. 9 MS. SOVIL: Well, you told me this was the 10 time to ask those questions. 11 JUDGE HENNEKE: Well, we're a little later 12 than I thought it would be. 13 MR. ROTHWELL: I can tell you this. Let me 14 just answer this question one way. As of a report that was 15 just faxed to me, since I wasn't available when I left the 16 office, available funds for claims payment this contract 17 year, through the month of November, is about a million 31 18 thousand dollars, available funds. Okay. We're not funding 19 it at that level, okay? We have paid -- I think the number 20 was $676,000 of claims through the end of November. So, 21 between 670 and a million 31 is kind of a fictitious 22 reserve, because we're not funding at that maximum level, 23 and that's by agreement of -- of the Court and -- and the 24 County Treasurer's office. We know we don't need to fund at 25 that level. 48 1 MS. SOVIL: I asked what was in our reserves 2 and how much is our average a year that we use. 3 MR. ROTHWELL: Well, we've used $670,000 for 4 claims. 5 MS. SOVIL: This year? 6 MR. ROTHWELL: This year. Yeah, the only way 7 you can -- you know, monthly, we report a complete total 8 breakdown to the County of every dollar that's spent for 9 reinsurance, for administration, for P.P.O., for all of 10 those things. We report that on a monthly basis, and it's 11 not a report that I dig into and look at every month. 12 JUDGE HENNEKE: Carrie, we're still talking. 13 Everybody remember that. 14 MS. WITT: Okay. 15 JUDGE HENNEKE: This is not a done deal. 16 We're still talking. That's what the purpose of the 17 workshop was, was to put some information out, to get some 18 feedback. If you've got questions, if you have concerns, 19 call me, talk to Linda, talk to Barbara. 20 MS. WITT: Okay, thanks. 21 JUDGE HENNEKE: We're trying to help. 22 MS. NEMEC: Your coverage will not go down -- 23 the coverage you have now, you can keep it. It's just if 24 you want -- you know, let everybody know that. Nothing's 25 being taken away. 49 1 MS. WITT: Okay, thanks. 2 JUDGE HENNEKE: Buster, do you have any 3 questions. 4 COMMISSIONER BALDWIN: No, not at this time. 5 JUDGE HENNEKE: Okay. Larry? 6 COMMISSIONER GRIFFIN: No, they've answered 7 my questions. 8 JUDGE HENNEKE: Does anyone else have any 9 questions on the insurance options on the cafeteria plan? 10 The reason we're bringing this up now is because before the 11 last Legislature, we couldn't -- a county couldn't do this. 12 The last Texas Legislature passed a law which allows 13 counties to offer these kind of cafeteria health insurance 14 plans, which is why it's something that we're bringing now. 15 This is really the first opportunity the County's had to 16 look at this type of program for the employees, so we've 17 been talking about it. We're looking at it. We're going to 18 have to make a decision as to whether or not this is 19 something we want to do here at the county level. But, I -- 20 you know, the -- we're still talking about it. The message 21 is, your benefits will not change if we decide to do this, 22 unless you want them to change. And if you want them to 23 change, then it will free up some money for you to use as 24 you desire in the health expense arena. So -- 25 MS. NEMEC: And with that being said, Judge, 50 1 I -- if the benefits aren't going to change for the 2 employees, then I really don't see where we need to have any 3 more workshops, other than between us, because the decision 4 is whether y'all want to go ahead and add this. 5 JUDGE HENNEKE: Well, yeah. 6 MS. NEMEC: And whether I'm capable, in my 7 office, of handling it. 8 JUDGE HENNEKE: The next decision will be, 9 does the Court want to adopt this kind of plan? And if we 10 do, then we will, and then we'll have extensive briefing 11 sessions by Brian and his people and work out the -- the 12 process and the enrollment and the -- how all this comes 13 down. 14 MS. NEMEC: Right. 15 JUDGE HENNEKE: This was a design for the 16 Court, really, to get some feedback, to get the information 17 from -- 18 MS. NEMEC: And to let the employees know 19 that nothing -- 20 JUDGE HENNEKE: To let the employees listen, 21 too, so we can get some feedback. 22 MS. NEMEC: 'Cause I know they were thinking 23 benefits were changing, they were being taken away, and this 24 was good to let them know. 25 JUDGE HENNEKE: Okay, thanks. We're 51 1 adjourned. 2 (Workshop adjourned at 5:01 p.m.) 3 - - - - - - - - - - 4 5 6 7 ESTATE OF TEXAS | 8 COUNTY OF KERR | 9 The above and foregoing is a true and complete 10 transcription of my stenotype notes taken in my capacity as 11 County Clerk of the Commissioners Court of Kerr County, 12 Texas, at the time and place heretofore set forth. 13 DATED at Kerrville, Texas, this 7th day of December, 14 2001. 15 16 17 JANNETT PIEPER, Kerr County Clerk 18 BY: _________________________________ Kathy Banik, Deputy County Clerk 19 Certified Shorthand Reporter 20 21 22 23 24 25