1 2 3 4 5 6 7 KERR COUNTY COMMISSIONERS COURT 8 Monday, November 15, 2004 9 1:00 p.m. 10 Commissioners' Courtroom 11 Kerr County Courthouse 12 Kerrville, Texas 13 14 15 16 17 HEALTH INSURANCE WORKSHOP 18 19 20 21 22 23 PRESENT: PAT TINLEY, Kerr County Judge H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 24 WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 JONATHAN LETZ, Commissioner Pct. 3 25 DAVE NICHOLSON, Commissioner Pct. 4 2 1 On Monday, November 15, 2004, at 1:00 p.m., a workshop 2 of 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 TINLEY: Let me call to order the 7 Commissioners Court workshop scheduled for this time and 8 date, Monday, November 15, 2004, at 1 p.m. The agenda item 9 today is a workshop with Mr. Looney, our insurance 10 consultant specialist with Catto and Catto, with regard to 11 the employee health benefit matters and the bids which we 12 received a week ago, I guess. 13 MR. LOONEY: Week ago. 14 JUDGE TINLEY: Mm-hmm. I'll turn it over to 15 you, Mr. Looney. 16 MR. LOONEY: Well, thank you. I noticed 17 we're keeping the crowds away today, so -- lots of other 18 things to do than listen to insurance, I guess. What I want 19 to do today is kind of give you the Insurance 101. I want 20 to kind of start at the beginning and assume that -- that 21 you all have a little knowledge, but I'm going to try to 22 give you the basics of the things that we're going to be 23 looking at during this bid process and try to give you some 24 more in-depth explanation of what it's all about, and tell 25 you about some alternate funding methods that we're going to 11-15-04 wk 3 1 be looking at. Some of the first screens in here are just 2 kind of, you know, how we got to where we are today, so 3 they're -- I'll go through them pretty fast. Then I'm going 4 to spend some time on -- on the new employee directives, or 5 the employee consumer-directed health care plans. There's a 6 lot of information out in the industry about those today, 7 and we actually are going to take a look at a couple of 8 those for possible options for you all when we get into that 9 point. 10 So, that's me, and 37 years. The only thing 11 on there that you may not know is that I work pretty closely 12 with Texas Department of Insurance on a couple of 13 committees, and part of what I deal with, the TDI is on what 14 they call the Prompt Pay Act for the prompt-pay claims, so 15 they passed the bill in the last session, and I'm on a 16 committee to help set the rules and regulations for TPA's 17 and insurance companies on how to file claims on a timely 18 basis. So, I also do and have done work with the Attorney 19 General's office on investigations for fraud in the 20 insurance area, particularly with third-party 21 administrators. So, this is what I -- one of my favorite 22 cartoons, I guess. You know, health care -- the job comes 23 with an excellent health care package, but no salary, you 24 know. So -- 25 COMMISSIONER NICHOLSON: Not bad. 11-15-04 wk 4 1 MR. LOONEY: Yeah. So we look at that quite 2 a bit. Actually, you know, this was the rise in -- in 3 percentage increase costs in the last -- oh, I guess 10 4 years or so. We've actually had a slight decrease going 5 forward into 2005 projected, over and above the increase 6 that we had last year. Part of that is a result of -- of 7 the election. In election years, we typically -- toward the 8 end of the year, we're -- we'll start seeing kind of a cost 9 fixing, and the insurance companies don't make a lot of 10 changes, and they've already done their renewals for next 11 year, so they kept it at a lower pace this year. 12 COMMISSIONER NICHOLSON: Gary, this would be 13 premium cost increases? 14 MR. LOONEY: Yes. That's overall premium 15 cost increases, estimated by most of the major insurance 16 companies. We get that out of -- I believe that report came 17 from Towers Perrin, I believe, but that has to do with large 18 number of insurance companies and what they gave us in 19 projections for their rate changes going forward on fully 20 insured plans. This -- this is a chart on what -- we did 21 a -- or Towers Perrin did a survey back in 2002. This is 22 hard to read, so I'm going to go to the next screen, really, 23 which kind of explains it. What did people do to control 24 costs? We know the that costs are going up, so what do the 25 people do, and what were they really planning on doing in 11-15-04 wk 5 1 2002? And now we've got some -- some more results to 2 actually see what people actually did to try to manage the 3 health care costs. The majority of the plans did something 4 to change their plan design. They increased their 5 deductibles. They changed their maximum limitations. They 6 did something in plan design. 60 percent of the companies 7 did something along that route to -- to try to reduce their 8 costs to their corporate entity. Now, that doesn't 9 necessarily mean that it changed the overall costs of the 10 plan or the overall premiums or anything else. What it 11 actually is is a shift in the costs from the employer to the 12 employee. So, about 60 percent of the companies shifted 13 risk. They shifted back to the employee by having them pay 14 more out-of-pocket. The three-tier co-pay plans for -- for 15 prescription -- 16 JUDGE TINLEY: Let me interrupt you, if I 17 might. The second figure of 18 percent, does that relate to 18 cost-sharing, or does that relate to a savings percentage? 19 MR. LOONEY: All that is is that percentage 20 of the people that actually -- when they made the projection 21 of what they were going to do, 60 percent of them said that 22 they were going to do that, and I believe that 18 percent is 23 what we see now has actually made significant changes in 24 those areas. Let me make -- make sure that that's right, 25 Judge. 11-15-04 wk 6 1 JUDGE TINLEY: Okay. Okay, yeah, I see it 2 now on your key -- on your graph. 3 MR. LOONEY: Yeah. The -- 4 COMMISSIONER WILLIAMS: No, this is a little 5 different than what you just said. 6 MR. LOONEY: Yeah, one -- I'm sorry. One of 7 them was -- that's what they did, and 59 percent actually 8 made the change, and 18 percent said they were going to make 9 the change in the next year. 10 JUDGE TINLEY: Okay. 11 MR. LOONEY: That's what that number was. 12 And, actually, the 18 percent number -- you had 59 percent 13 of the people that actually did it and 18 percent said they 14 were going to do it, and now what we're seeing is that 15 actually more than 18 percent actually did it. This -- this 16 report is about a year and a half old now. And so what's 17 happened from this point, from this report, the three-tier 18 drug program has now gone to four and five tiers, because 19 prescription drug costs are becoming such an impact on 20 health care plans. A three-tiered program -- or, actually, 21 you started with two-tier, generic and branded. And then we 22 went with generic, branded, and a third tier was for the 23 high-cost medications that were new on the market, so they 24 put in a third tier for those medications that were the real 25 high-premium medications that were still branded, but they 11-15-04 wk 7 1 were hard to get; you had to apply for them. They were 2 medications that were used for diabetic purposes, heart 3 problems, different things of that type. So, they put -- 4 JUDGE TINLEY: Formulary? 5 MR. LOONEY: That's where the formulary -- 6 the formulary now is either four or five tiers. 7 JUDGE TINLEY: Okay. 8 MR. LOONEY: Because what's happened with the 9 formulary is that the -- the generics are being forced into 10 the market as generics, and the generic prices are as high 11 as the premium prices. So, even though it's got a generic 12 title, the manufacturers are not reducing the price of the 13 medications. Since they're not reducing the price of the 14 medications, we had to put in another tier, which is a 15 generic -- you know, a more expensive generic medication. 16 So, one of the things that we're doing during this process 17 for the renewal process right now is, we're looking at the 18 prescription drug management company that's handling 19 your-all's prescription drug program, 'cause when you use a 20 third-party administrator, we have access to multiple 21 prescription drug managers. So, we're looking at -- we've 22 got proposals that are integrated into the -- what you've 23 seen here, from about six different prescription drug 24 management companies. 25 COMMISSIONER LETZ: Gary, are you going to 11-15-04 wk 8 1 spend a little bit of time on third-party administrators? 2 MR. LOONEY: Yes. So, this -- these other 3 changes -- the defined contribution plan was a real hot 4 topic item back in the early 2000's. First, the defined 5 contribution meant that the employer was going to give each 6 employee "X" number of dollars, and then they were going to 7 have a list of benefit programs over here that they could 8 choose from, and they could spend that money for anything 9 they wanted to in that program. They did that for a lot of 10 the bigger corporations where they actually put that into 11 place. 12 COMMISSIONER WILLIAMS: Gary, before you go 13 away from this one, on the first one there, where you talk 14 about change the plan design and cost sharing, 59 percent 15 actually did that, do you have anything -- any information 16 that tells us what -- what, if any, percentage of the change 17 might have been? Was it a 10 percent change? A 20 percent 18 change? Or -- 19 MR. LOONEY: I don't have that with this 20 particular screen, no. This was more -- 21 COMMISSIONER WILLIAMS: Okay. 22 MR. LOONEY: -- of a plan design change in an 23 effort to, like I said, shift costs. It was a shift cost 24 process. The things that they did to shift the costs were 25 -- you know, for one thing, HMO systems are going out of -- 11-15-04 wk 9 1 out of play. So, they would shift from an HMO. They 2 shifted away from the point of service plans to just basic 3 PPO plans. And y'all have just a basic PPO plan. 4 COMMISSIONER WILLIAMS: Right. 5 MR. LOONEY: So, managed competition was 6 another thing that -- that people were going to try to get 7 involved with, but that's really for major metropolitan 8 areas where you can get hospitals competing against each 9 other for negotiated fees and structures within that 10 hospital system. We get Baptist competing against Methodist 11 in San Antonio for -- for the larger carriers there in 12 town -- the larger companies there in town. Consumer-driven 13 health plan options are something -- this said 1 percent of 14 the people looked at it, a change to that, and then 13 15 percent. That was in 2002. That -- those numbers for 16 consumer-driven health plans now for 2005 are projected to 17 be somewhere in the 15, 20, 18 percent range where people 18 are going to shift into those types of plans. And I'll -- 19 I'm going to go into that a lot more thoroughly. Most of 20 the five major problems is it costs too much, it increases 21 each year, no flexibility, employees don't appreciate the 22 plan, and they don't understand how much it costs. 23 COMMISSIONER WILLIAMS: Amen to all of them. 24 MR. LOONEY: I mean, they don't understand 25 how much it costs, because the concept is, with all the 11-15-04 wk 10 1 co-payments that we put into the health care plans, 2 everybody's under the -- the idea that it costs $10 or $20 3 or $25 to go to the doctor's office. Well, we know it 4 doesn't cost that much, so -- but they've got into that 5 mind-set that a prescription only costs $15, you know. 6 Doesn't work that way, you know. So, one of the things 7 about understanding the costs is, again, these 8 consumer-directed plans, and I'll tell you more about that. 9 Why has the cost gone up? Lawyers. Everybody blames 10 lawyers for it. 11 COMMISSIONER WILLIAMS: Yeah, top of the 12 list. 13 MR. LOONEY: 99.9 percent of lawyers give the 14 others a bad name. So, is it the hospital and doctor 15 charges? Yeah. Pharmaceutical companies? For sure. 16 Legislators? One of the biggest increases in costs we have 17 is on mandated benefits, legislative mandated benefits, a 18 lot of things that you avoid by being self-funded. Having 19 to cover grandchildren under a health care plan, having to 20 cover children up to age 25, whether they're attending 21 college or not. All of the maternity regulations, 22 prescription regulations, all that regulatory information 23 flows with fully insured plans, which you are avoiding a lot 24 of that right now. Insurance companies? Look at the 25 profits that they're making and what they're paying their -- 11-15-04 wk 11 1 their directors and guys. They are causing a lot of this 2 cost increase too. And then just the consumers themselves. 3 Pharmacy costs, the aging population, over-utilization, 4 mandates. I'm going to go through some of those. Why? 5 Well, it requires us to properly design the plan and manage 6 it. So, should we be self-funded or fully insured? I'm 7 going to go through a general description of both so that 8 you'll get a feeling for what that does. 9 Fully insured means that each month, you pay 10 a premium for your health care in advance, based on the 11 estimations of insurance companies' costs for your program. 12 Fixed premium per each individual insured, full premiums due 13 one month in advance of the coverage being available. 14 Insurance carrier holds all the reserves, they hold all the 15 funds. You simply send them a check. You have a minimum 16 fluctuation in claim liability, because the insurance 17 company assumes all the risks. They assume all the risks of 18 claims. You know what your budgeted cost is going to be 19 based on your population as you go through the year. You 20 know how many insured you've got. You know what the rate 21 is, and that's the full cost of the plan for that time 22 frame. All state mandates apply. You have to pay all of 23 the premium taxes involved. The insurance company pretty 24 much provides everything on employee packets, all the 25 information for enrollments. They typically have web sites 11-15-04 wk 12 1 to access, and all kinds of new varieties of things that are 2 supposed to help you reduce costs. Summary plan 3 descriptions, all that's in your fully insured premium. The 4 premium is based on what you have as far as your incurred 5 claim cost is concerned and your required reserves. 6 Now, incurred claim is -- is the key word. 7 Incurred means that the individual has received service at a 8 certain point in time. That was incurred at that point. 9 Incurred versus paid. Paid claim means that the insurance 10 company has actually written a check for the services 11 rendered. Incurred, they had the service, but no claim has 12 been filed, or it hasn't been paid at that point. So, an 13 incurred claim is -- the required reserve is established for 14 those claims that are incurred, but not reported, the IBNR. 15 You also pay profit and risk charges. The insurance 16 companies have a profit motive. You pay state premium 17 taxes. The administration expense comes out of the fully 18 insured premium, which is claims, billing, operations, agent 19 commissions, all those items. 20 And this is something to take a look at. 21 This is a fully insured timeline. What this means is that 22 if you started your insurance program in January of '03, and 23 you went through 12-31-03, you had 12 months of a fully 24 insured contract based on incurred claims. The plan 25 document under a fully insured contract says that the 11-15-04 wk 13 1 employee can file a claim within 90 days of the date that 2 the claim has been incurred, and that the responsible 3 insurance company must pay that claim, and they have up to 4 12 months following the end of the termination date of that 5 contract to pay it. So, in terms of what I've just shown 6 you a few minutes ago, this becomes a 12/24 contract; 12 7 months of incurred claims, 24 months that you have the 8 ability to pay it over a period of time. The premium that 9 you pay during the 12 months -- the initial 12 months is the 10 total amount of premium required to meet all the obligations 11 of the 24-month runoff and payoff, because insurance 12 companies have established a reserve to do that. You start 13 in January for the next year, and you have the same type of 14 contract moving forward, 12/24, and it just dominoes from 15 that point forward; it's always 12/24. 16 In a self-funded plan, the employer -- you 17 guys -- assume a portion of the risk. The administrative 18 options. The administrative options are changing. 19 Insurance companies are trying to get out of the risk mode. 20 For them to get out of the risk mode, then what they do is 21 they become an administrative service only company. Blue 22 Cross, United Health Care, Humana, all these companies will 23 offer you their administrative services. Which means 24 they'll do claims administration and function as a 25 third-party administrator, and shift the claim liability 11-15-04 wk 14 1 back to the employer, so that's what an ASO contract is. 2 Insurance company comes in and says, "We're not going to 3 accept the risk. You're going to accept the risk for claim 4 payment, but we'll provide all the other services, and 5 here's our fee for doing so." That's an administrative -- 6 that's an insurance company functioning as a third-party 7 administrator. Those are called ASO contracts. 8 You can have a third-party administrator 9 which is independent, outside of an insurance company, as we 10 do now, or you could self-administer your claims. And if 11 you do that, you'll have to hire a new consultant, 'cause 12 I'm not -- I don't want to -- that is not recommended. 13 (Laughter.) You have some fixed costs, which are the 14 insurance premiums, and you have variable costs, which are 15 the claims costs. The fixed costs are included. Your 16 administrative service fees, and then the insurance items 17 that I'll tell you about. The administration fee is for 18 claims, billing, eligibility, customer service, plan 19 document maintenance. And TPA's -- when you're talking 20 about TPA's, plan document maintenance is one of the areas 21 that we find the TPA's are not as efficient as they should 22 be. We really get after the TPA's for trying to keep up 23 with all the regulations that we face from COBRA, HIPAA, all 24 those federal regulations that we're -- we're involved with, 25 and we have to really stay after the TPA's to keep up with 11-15-04 wk 15 1 those plan document changes that are required in 2 relationship to the actual law changes. 3 The administration fee typically has an 4 access charge to access a network that provides physician 5 and hospital services, the PPO network. PPO network, with a 6 third-party administrator, is typically a leased network. 7 They'll lease one from Texas True Choice, private health 8 care systems, Health Smart. You've got a local TPA over -- 9 that's in the -- the Hill Country -- I can't remember the 10 full name of it. The Hill Country Physicians Network or 11 something like that. That is out of Fredericksburg. I 12 think they manage it out of Fredericksburg. The insurance 13 companies typically have their own networks that they -- 14 they deal with. We look at a setup fee when we look at the 15 bid specifications, to see if there's an initial fee for the 16 initial contract enrollment, things of that sort. We also 17 look at expected claims. And this is what the underwriter 18 tells us that we -- they really feel that this is the amount 19 of claim volume you're going to have during the next 12 20 months. That claim volume is based on experience, and the 21 bids that we get in from the reinsurance companies will give 22 us an expected claim amount. 23 COMMISSIONER WILLIAMS: Is that experience 24 over one year, or weighted over a period of time? 25 MR. LOONEY: We gave them experience for a 11-15-04 wk 16 1 three-year period. 2 COMMISSIONER WILLIAMS: Okay. 3 MR. LOONEY: So it should be weighed over 4 that three-year period of time. Two years is usually 5 sufficient. You all are pretty consistent in your 6 employee -- number of employees that are insured, so three 7 years, we felt, was a more accurate representation. And the 8 claims information we're getting in on the bids are 9 projecting that. One of the things that we -- we see, and 10 that you'll see in the insurance stuff, is specific stop 11 loss. A specific stop loss premium is purchased by -- by 12 you all. And what that does is it protects you against any 13 one individual that's insured against having a catastrophic 14 loss. So it is, in essence, your deductible for a given 15 individual. Once they exceed that deductible level, then 16 the insurance company pays 100 percent of the expenses over 17 and above that level for that calendar year. When you start 18 into a new plan year the next year, you have to satisfy that 19 deductible again. So, one of the things that -- and I'll go 20 over that again, the timeline, here in just a minute to show 21 you how these carry-forward numbers stack up. But your 22 individual specific right now is 60,000, is where it's set, 23 I believe, isn't it? 24 JUDGE TINLEY: Forty, I think. 25 MR. LOONEY: Forty? 40,000, okay. Sixty was 11-15-04 wk 17 1 the other one I was looking at this morning. Forty. We had 2 bids that we asked for in addition above that, $5,000 3 increments above that, just to see if that would be 4 beneficial to go to a higher number or not. But the thing 5 that we looked at on this contract was the -- the 6 reimbursement process by the insurance company. The TPA is 7 supposed to notify the third-party administrator -- I'm 8 sorry, the TPA is supposed to notify the insurance company 9 when they exceed 50 percent of what that specific stop loss 10 number is. So, anything that goes over $20,000, there's a 11 report supposed to go to the insurance company. At that 12 point, they're supposed to start doing an auditing so that 13 if, in fact, it does go over the $40,000, they've done all 14 the audits; they've approved all the numbers for 15 reimbursement, and they should start reimbursing at 100 16 percent at that point. That's the type of contract that 17 we're looking for, something that you do not have to come 18 out of pocket once the specific is reached. So, that's the 19 type of contract that we're looking for, the aggregate 20 maximum. 21 JUDGE TINLEY: Excuse me. Once you hit the 22 specific -- if it's done in a manner that the auditing 23 process and everybody's on board early, once it hits that 24 specific, it's not a reimbursement process where the County 25 pays the amount over the specific and then gets reimbursed 11-15-04 wk 18 1 from the stop loss carrier, but rather paid direct by the 2 stop loss carrier? 3 MR. LOONEY: That's what we're looking for 4 right now. 5 JUDGE TINLEY: Okay. Well, that's different 6 from what's happened before. 7 MR. LOONEY: That's different from where 8 you've been in the past, because in the past you had to be 9 reimbursed. You had to put the money out first to be 10 reimbursed. Now we're looking at a clause in that specific 11 that says that once you exceed that number, that their 12 insurance company becomes liable for the payments at that 13 point, so that there's not any additional transfer of funds 14 necessary between you and the -- 15 JUDGE TINLEY: Okay. 16 MR. LOONEY: -- insurance company. That -- 17 that -- hopefully, that will protect cash flow and anyone 18 giving large claims and such, and you shouldn't have any 19 more auditing to be done at that point, if it's done 20 properly. There's two critical issues that you look at in 21 insurance. One is one individual having a huge loss, and 22 the other one is a high frequency of small losses. So, the 23 aggregate insurance coverage covers that high frequency, the 24 high utilization of coverage. 'Cause everything under that 25 $40,000 is aggregated during the year. It's accumulated. 11-15-04 wk 19 1 And if you exceed the actuarial determination, which is this 2 aggregate attachment factor; if you exceed that, then the 3 insurance company reimburses you 100 percent, anything in 4 excess of that. Now, a while ago we talked about expected 5 claims. Expected claims are determined by the actuary, and 6 let's assume they determine it's a million dollars in 7 expected claims. Then the aggregate insurance is a 8 percentage above that. So that if the -- it's typically 9 25 percent greater than that, so an aggregate insurance 10 point would be a million, 250. So, if your -- all of your 11 claims under 40,000 aggregated to more than a million, 250, 12 then the insurance company would start reimbursing at that 13 point. One is for the individual high loss; the other one 14 is for a whole lot of small losses on the aggregate. 15 Now, one of the things in the insurance 16 business that you look at is how much -- how much does the 17 premium -- how much does it cost? Aggregate premiums are 18 very inexpensive. Very inexpensive. So, they really don't 19 expect to have a lot of losses in that area. But aggregate 20 insurance for the County prevents the County from having an 21 open-ended budget. The aggregate fixes the maximum costs of 22 the health care plan for a given period of time so that the 23 budget doesn't have an open end on it where you would be 24 obligated for future expenses beyond the aggregate 25 limitation. And that's why we typically have aggregate 11-15-04 wk 20 1 coverage for y'all. Again, the aggregate stop loss, one of 2 the things that there's a -- we're going to look at -- I 3 don't know what the pricing might be. We're going to look 4 at what they call an accommodation agreement. An 5 accommodation agreement means that we take the maximum 6 aggregate limitation during the year, we divide it by 12, we 7 come up with what a monthly maximum would be. And if, in 8 fact, you start exceeding that monthly maximum, you start 9 bouncing up and down. This accommodation agreement has a 10 leveling effect, so that the maximum obligation you'll ever 11 have in any one given month is 1/12th of that total 12 aggregate stop loss. So, we're going to take a look at that 13 to see if it makes sense to put in the contract also the 14 stop loss, individual and aggregate. 15 Here's an example of how a $127,000 claim 16 would be handled. If, in fact, your stop loss deductible 17 was 25,000, the employer pays the $25,000 deductible. The 18 insurance company pays the excess over the deductible of 19 $102,000 on a $127,000 claim. I don't know where I came up 20 with $127,000; that's crazy. The amount funded, but not 21 reimbursed, in this particular example is 25,000. The 22 25,000 goes to satisfy the annual aggregate. The insurance 23 company pays 102,000 over and above what the deductible 24 level was of 25,000. So, 25 goes to satisfy the aggregate, 25 102 is reimbursed by the insurance company, and this is what 11-15-04 wk 21 1 we're talking about on the self-funded timeline versus the 2 fully insured timeline. This contract that -- that is -- 3 that's shown here is a claim and time frame from January of 4 '04 to 12-31-04. You have 12 months of incurred claims, and 5 then you have 15 months, or three additional months after 6 the end of the plan year, for those claims to be paid. That 7 will then apply against either the specific and/or aggregate 8 insurance coverage. 9 You all changed your plan last year. You had 10 a -- a 15/12 contract, I believe, that was changed to a 11 12/12 contract. A 12/12 contract means that 12 months of 12 incurred claims, and it must -- all claims must be paid 13 within that 12-month period to apply against your aggregate 14 or your specific insurance. It normally takes -- if you get 15 a TPA that's functioning -- or an insurance company that's 16 functioning properly, nowadays, with all the electronic 17 adjudication of claims, it takes about two and a half months 18 from the date that a claim is incurred until checks are 19 actually written, and that's because of the -- that's just 20 an average, and it's because of billing time frames, the 21 hospital getting, you know, whatever records are out there 22 necessary. So, we look at about two and a half months. If 23 somebody goes in on November the 1st, their claims should be 24 totally satisfied by the middle of January, end of January. 25 November 1st ought to be satisfied by the first week in 11-15-04 wk 22 1 February; 100 percent of them should be paid by that time. 2 If you have a 12-month incurred plan and you 3 don't have a 15-month paid contract attached to it, that 4 means that claims incurred in November and December may very 5 well not apply against your specific and/or aggregate 6 contract. And if your contract moving forward is also a 7 12/15 contract, that means that those claims will not apply 8 against that contract, so you end up with a gap. You end up 9 with an incurred claim gap, one that's not covered by the 10 insurance in any way. So, we try to be very careful about 11 these timelines when we renew your contracts. This is a -- 12 same basic demonstration, but the bottom two lines here give 13 you the most coverage from January 4 -- January '04 to March 14 of '06. 24 months of incurred; that means anything incurred 15 from the beginning of your contract period to the end of the 16 contract period, and you've got 15 months to pay that 17 contract at the end of that period of time. So, you've got 18 an extension of 90 days or three months after that time 19 frame to pay those claims. Ninety days -- sometimes it 20 doesn't seem like enough in some cases, but 90 days after 21 the end of the plan year, then your obligation as -- as an 22 employer is stopped at that time. 23 So, in an effort to manage costs going 24 forward and not, again, have an open-ended liability, we set 25 that three-month carryover period, that 90-day period. When 11-15-04 wk 23 1 we get more into the actual bids that we're getting, I'll 2 give you a lot more information about 15/12's, 12/15's, 3 15/24's, 12/12's -- you know, paid contracts. That's where 4 the underwriters and the insurance people really try to -- 5 to maneuver and manipulate, is in those numbers. The ideal 6 contract, again, starts at the beginning of the original 7 contract period, and it will either -- this one says 24 8 months incurred. It can also just simply say paid. And it 9 said paid from this time frame to this time frame, and then 10 that counts. Everything that's paid or written means that 11 it applies against your insurance program. You've got 12 flexibility in plan design. You've got a lot of things that 13 you can do from plan design. 14 COMMISSIONER LETZ: Gary, can you go back to 15 that -- 12/12's, 12/15's? Right now we have a 12/12 plan? 16 MR. LOONEY: I think that's what I -- 17 JUDGE TINLEY: Yes. 18 COMMISSIONER LETZ: So, if a -- who doesn't 19 get paid if you get a claim in December? 20 MR. LOONEY: If you have a claim in December 21 and you've got a 12/12 contract? 22 COMMISSIONER LETZ: And it doesn't get 23 processed. Who holds the bag? 24 MR. LOONEY: The -- 25 COMMISSIONER LETZ: The County? 11-15-04 wk 24 1 MR. LOONEY: The County does. The County 2 holds the bag. 3 COMMISSIONER LETZ: And if it's -- 4 MR. LOONEY: And the County does not have any 5 underlying insurance against that contract. 6 COMMISSIONER LETZ: As long as the -- it's 7 within the $40,000, it doesn't really make much difference, 8 but if you exceeded that, that's where you would have a 9 problem. 10 MR. LOONEY: Not only -- yeah. Well, if 11 you're over and above. But the concern is that if that plan 12 is terminated at that point in time and you don't have 13 another contract that's lapping over -- overlapping some 14 other way, that you have full liability, because all of your 15 underlying insurance is gone. It doesn't apply toward 16 specific, and it doesn't apply toward any aggregate, so you, 17 in essence, are the insurer. Your contract -- county 18 contract for delivery of benefits is with the employee. You 19 have a benefit booklet that you've given to the employee, 20 and it says we will provide you these benefits. The method 21 that we're using is through a self-funded program, but the 22 fiduciary liability for -- for providing that claim payment 23 under that contract is the County's fiduciary liability. 24 COMMISSIONER LETZ: All right. Thank you. 25 MR. LOONEY: Risk management effectiveness 11-15-04 wk 25 1 through stop loss insurance. Essentially, what that means 2 is we pay careful attention not to have those gaps. We want 3 to be sure that we don't have those gaps in coverage. Tax 4 savings. As I said, you know, this is an advantage -- an 5 advantage of the self-funded over and above the fully 6 insured plan. The average state premium tax in the state of 7 Texas is 2 percent. Assuming that your total premium would 8 be a million, five, that's $30,000 in taxes, and as a county 9 or any other, you don't have the ability to -- to not pay 10 that. That's a premium tax paid by the insurance company, 11 and it's part of the premium. It's built in, so you can't 12 defray the cost. It is -- it's a premium tax they have to 13 pay. 14 Retention, the administration of the plan. 15 This is one of the things that -- on the TPA function 16 that -- one of the problems that we run into in the fully 17 insured products is it seems like we invariably have to 18 change carriers every two years or every other year, 19 whenever the pricing just gets out of hand. So, you have to 20 go back to your full -- your employees. You have to go back 21 through the enrollment process. You change physician 22 networks. You disrupt the entire employment force by making 23 those changes on a regular basis. With the third-party 24 administrator, you can change the underlying insurance 25 company product, the stop loss insurance, without having to 11-15-04 wk 26 1 change the plan document. Anybody else that is providing a 2 service for the employee. You don't have to have them 3 change doctors. You can keep the same PPO networks. As far 4 as they're concerned, the transition from what they're being 5 delivered is consistent. We can under -- we can change the 6 underlying stop loss carriers and not have any impact on the 7 employee. So, from a retention standpoint, it costs money 8 to change plans when you move from one fully insured to 9 another fully insured plan. It's dollars spent based on 10 time lost and County time. It's a number that -- the number 11 of hours spent in relationship to the service rendered, and 12 it can get expensive sometimes. 13 The reserve. One of the things that the 14 insurance companies do, like I said, is they maintain that 15 reserve. They build it into your premium. As a self-funded 16 program, you don't have to maintain a cash reserve. 17 Assuming that you had a million, five in premium, again, the 18 reserves would be approximately $312,000. That's calculated 19 based on turn-around time, and this is just kind of an 20 actuarial rule of thumb. The million, five, divided by 12, 21 times 2.5, that's the approximate number of claims that 22 would be incurred over that period of time. That would be 23 your claim reserve. Now, in addition to the claim reserve, 24 you have a premium that you pay for administration of that 25 312, and that typically runs anywhere from 3 to 10 percent 11-15-04 wk 27 1 of that 312,000, so it could be anywhere from another 2 $30,000. But you don't have to accumulate the reserve. 3 We do try to -- if you've got to the budget 4 number -- fix a budget number. If we don't reach the budget 5 number, then those reserve dollars we do try to set aside 6 and protect against future fluctuations in premium. I don't 7 know whether you've had that ability to do that or not. I 8 don't know what the -- what your budget actually -- whether 9 you actually are funding toward a total budget projection, 10 or it's more -- fluctuates more than that. So, I haven't 11 had a chance to visit with you on that process, but -- but 12 informally we would -- normally we would recommend a funding 13 level for you, and we will recommend a funding level for 14 you. And then that -- if that funding level is not met, 15 then we'll carry those funds forward as a reserve against 16 future claim losses. The disadvantages of being 17 self-funded: One, again, is you take on the fiduciary 18 responsibility of the insurer. You have some asset exposure 19 in case an employee should sue the plan. You are the plan, 20 so they would sue the plan. And the risk assumption is that 21 risk between the normally anticipated claim level and the 22 stop loss premiums. You always face the possibility of a 23 roller coaster in the claims flows -- in the claim function. 24 We try to reduce that as much as we can. Those are the 25 disadvantages. 11-15-04 wk 28 1 Now, I'm going to try to go through this one 2 pretty fast, 'cause this gets pretty complicated sometimes, 3 but I do want to give you an overview of these -- of these 4 accounts, because this is what the hot items in the industry 5 are today. This is where you read in the -- all the 6 magazines and Wall Street Journals and all this; they talk 7 about these types of programs, and these are 8 consumer-directed or consumer-driven health care plans. We 9 typically can get an idea of what the -- the federal 10 government would like for us to do, because when they want 11 us to do something, they give us a tax deduction for it. 12 You know, if they want you to stop smoking, then they build 13 in a tax deduction for stop smoking clinics. If they want 14 to you lose weight, then they put in a -- into the eligible 15 benefits under Section 213(d) of the Internal Revenue 16 Service Code, they build in something that says, okay, you 17 can now deduct medications for weight loss. If they -- so 18 whatever -- whatever kind of things they're throwing out 19 there as far as tax deductibility is kind of like the -- 20 where they'd like for us to go. 21 So, these health reimbursement arrangements, 22 Section 105(h) -- I forgot I left this one in there. 23 Over-utilization of the health care plan. The employees 24 don't have any skin in the game. That's why we come up with 25 the -- the employee-directed health care plan. You know, 11-15-04 wk 29 1 we're going to put some skin in the game for them. They 2 think that the office visit co-pays are all it costs. They 3 think the prescription co-pays are all it costs. You know, 4 free Cokes and auto insurance. Yeah, sure. So, we've kind 5 of isolated the employees from what the true costs of the 6 health care plan is by giving them co-payments. All the 7 employees definitely want to go to the physician that's the 8 highest quality, highest profile, and most of them feel that 9 working for an organization, they're entitled to the 10 benefits on a co-pay basis. And so, "You're my mother; 11 you're supposed to take care of me in this process." So, 12 they've really lost, again, that concept of -- of, I guess, 13 buying health care protection, or negotiating with their 14 doctors, or even talking to the hospital about it. 15 78 percent of the individuals in the 16 organization will have $1,000 or less in claims. 35 percent 17 won't have any claims at all, and then 5 to 8 percent of the 18 employees will have about 50 percent of the total cost in 19 the plan, and it's just the kind of things that we see just 20 from drawing out of claims areas. You know, what happens 21 is, you get that 5 or 8 percent who have the real large 22 claims, and they end up having the big numbers, so they end 23 up eating up -- eating it up. 24 COMMISSIONER BALDWIN: Gary, is that a 25 national average, or is that related directly to us? 11-15-04 wk 30 1 MR. LOONEY: That number came out of a 2 national survey that was done by Hewett Company. They 3 pulled that out of -- of a survey that they had done. In 4 June of 2002, a letter was written by Internal Revenue 5 Service, under Section 105 of the Internal Revenue Code. 6 And what happened is that this -- this letter simply said 7 that under this Section 105 -- it's actually Section 105(h) 8 of the code. What it said was that if, in fact, you have a 9 health care plan that has an arrangement with your employee, 10 if you have an arrangement with that employee to reimburse 11 medical expenses, and if, in fact, you create an amount of 12 money that they can use -- and it becomes very hard not to 13 say "account," because account gives the indication that you 14 have vested interest. It has the -- "account" seems to mean 15 that, okay, that's my money. But it's not really; it's an 16 arrangement that you have with the employee, and that 17 arrangement says that we're going to reimburse you for 18 medical expenses that you incur, and this is the volume that 19 we're going to reimburse you at. Now, if you don't use all 20 of that volume during this calendar year or policy year, 21 then we will allow you to carry that forward to the next 22 year to use against the expenses you have in the following 23 year. 24 Well, the Internal Revenue Service made this 25 whole thing available simply by writing a letter. It was 11-15-04 wk 31 1 about a page and a half. It says, okay, you can now do 2 this. Before that, the only things that were available were 3 the flexible spendable account-type things, which were 4 use-it or lose-it type programs. You couldn't carry forward 5 any kind of accumulation for employees going forward. It 6 was a 12-month -- here's your deduction; that's it. No 7 more. Well, they changed the rules, and they changed it in 8 2002 and said, okay, we'll let you create this arrangement 9 now. And the hope is, by the federal government -- again, 10 the hope is that now that an employee that's got this volume 11 of dollars that are given to them to use for reimbursement, 12 that they'll pay attention to how those dollars are being 13 spent. You know, when they've got an arrangement in front 14 of them that says we're going to provide $500 for you to use 15 for your expenses this year, that when that number starts 16 going down, when they start using it for these benefits, 17 that they're -- they're going to start paying attention to 18 how they're spending it. 19 So, the whole concept is to get -- here's the 20 money you've got to spend to reimburse you for your medical 21 expenses. Spend it wisely, you know. You know, spend it 22 wisely, and our health care plan is going to take care of 23 most of the major expenses that you have. We still have 24 major medical. We still have -- we can still build in a lot 25 of different plan design options that provide, you know, 11-15-04 wk 32 1 first-dollar coverage in a lot of ways. Or you can simply 2 create this arrangement over here and attach it to your 3 current plan and say, okay, if you want to use these funds 4 to pay your co-payments or pay your deductibles or whatever 5 else you want, fine, you can do so. 6 JUDGE TINLEY: Is that a cafeteria plan, in 7 essence? 8 MR. LOONEY: No. 9 JUDGE TINLEY: Okay. 10 MR. LOONEY: This is under your health care 11 plan. 12 JUDGE TINLEY: Okay. 13 MR. LOONEY: It's under -- Section 125 is the 14 employee's dollars or employer's dollars put into that 15 account. Section 105 is strictly employer dollars. The 16 employer controls the arrangement. The employee has no 17 vested interest in it. If the employee leaves, then they 18 leave whatever account balance that they had accumulated. 19 It stays with the employer. 20 COMMISSIONER BALDWIN: I tend to agree with 21 the federal government on that. That gives personal 22 responsibility to the individuals. I like it. 23 COMMISSIONER WILLIAMS: So, if you have -- if 24 you have that feature, and an employee uses maybe only 25 70 percent of that amount of money, whatever that is, that 11-15-04 wk 33 1 amount -- the base amount is restored in the next year, and 2 it carries over, 30 percent added to the base amount? 3 MR. LOONEY: You can -- you can do it any way 4 you want. That's one of the -- the advantages, I guess, of 5 this 105 arrangement; we can write the rules. We 6 essentially can write the rules as to what we want to carry 7 forward. You can keep an account that is maximized, and you 8 can reimburse or replenish that account each year. You can 9 have it cumulative. You can have it equal to whatever 10 maximum amount you want it to be, or no end to it. If you 11 put it at $500 a year, it can be $500, then $1,000, then 12 $1,500, and it just accumulates on that basis. A couple of 13 things you need to remember is that, under the insurance 14 plan itself, we have a maximum amount of out-of-pocket 15 exposure for an individual employee or dependent during the 16 year based on total claims that they incur. And I'm sorry; 17 I don't know what it is off the top of my head. Probably 18 $2,000 maximum out-of-pocket. It's either $1,000 or $2,000. 19 So, if an employee has exceptionally high claims, then 20 they -- on the benefit plan itself, they get into 100 21 percent coverage based on their maximum out-of-pocket. 22 Well, you can set the HRA accumulation to be 23 whatever that maximum out-of-pocket is, so that 78 percent 24 of those people that don't, you know, have much claim, or 25 the 35 percent that don't have any claim at all, over a year 11-15-04 wk 34 1 or two, they can actually accumulate enough to satisfy 100 2 percent of their costs under the plan, if they've not used 3 it before that. If they use it on a cumulative basis, then 4 they won't have the money there. What we're seeing, again, 5 is people are -- people are actually not using their account 6 for reimbursement purposes. They're actually paying 7 out-of-pocket some of the expenses that they have, doctor's 8 office visits or whatever; they're actually paying that so 9 that they can accumulate their funds in case of a 10 catastrophic incident. You know, I'm not sure why they're 11 doing it, but that's -- that's kind of what we're seeing in 12 some of the cases we've got. 13 The 105, what is it? It's a health 14 reimbursement arrangement. And I really do, like I said, 15 fight myself not to say "account," but it's an arrangement, 16 and you agree to reimburse medical expenses after they 17 occur. So, it's self-funded; it's not prefunded. You don't 18 have to prefund the account. And the primary reason is to 19 help the employer save money by changing the attitude of the 20 individual and their employee's behavior and how they 21 purchase -- excuse me -- a couple of things. Again, it's 22 100 percent employer money, not employee. You can't cash 23 out. Employee can't take the money out on a cash basis, and 24 they can't pay their health insurance premiums with it. 25 It's not money that they can then revert back in to pay 11-15-04 wk 35 1 premiums with. It has to be used for reimbursement under 2 eligible medical expenses, as defined in the Insurance Code 3 under Section 213(d) of the code. 4 COMMISSIONER BALDWIN: And what are some of 5 those? Just a daily -- I mean, a regular doctor visit, 6 co-pay? 7 MR. LOONEY: Anything that has to do with 8 medical expenses, treatment of any type of illness, injury. 9 It covers anything that you can take off your income tax. 10 If you were filing an itemized statement under income tax, 11 mileage, weight loss programs, a lot of different things 12 under 213(d), some cosmetic surgeries -- some things are 13 covered under that. You, though, do not have to accept 14 everything under 213(d). You decide what the HRA can be 15 used for. There's two types of plans. One is a plan that 16 we -- that we call -- it's tied into the medical plan. It's 17 directly tied to the medical plan, so when the medical plan 18 has either a co-payment or a co-insurance or something that 19 the employee is responsible for, then they can use their HRA 20 to reduce that expense. So, the claim is adjudicated by the 21 third-party administrator, and then the individual is given 22 the option to offset that expense if they want using their 23 HRA account. 24 COMMISSIONER BALDWIN: Gary, does this 25 include -- and you and I have talked about this before. 11-15-04 wk 36 1 I've always had this thought of -- of helping people -- 2 preventive medicine, giving them the opportunity to be a 3 member of the health spa or something. Does it include 4 those kinds of things? 5 MR. LOONEY: If you want it to. If you 6 wanted -- if you want to put in a design that provides for 7 reimbursement of an expense for utilizing the health care 8 facilities, typically what we would -- what we would have 9 them do is do some sort of profile, some sort of physical 10 profile, so that they would qualify for using the facility. 11 COMMISSIONER BALDWIN: They're too fat, so 12 they need to go work out. 13 MR. LOONEY: Too fat; you need to work out. 14 We'll pay for it. You want to stop smoking? Here's a -- 15 here's how you stop smoking, and you can use it under your 16 HRA account. You can -- it can pay for it. But -- but the 17 employee does not own the account. That's one of the 18 critical issues in this whole thing. They do not own the 19 account. HRA accumulation, the employer decides the amount. 20 The employee can accumulate the unused amount for the 21 previous years, or they can file for it. The employee now 22 has decision-making power. They have to decide. You know, 23 the plan design issue comes in here big-time, because you 24 can set up your plan to have a very high deductible. You 25 can set your plan up to have a $1,000 deductible before any 11-15-04 wk 37 1 benefits are paid at all out from under the plan. And then 2 you can give the employee an HRA arrangement that says, 3 okay, we will allow you to have this HRA arrangement of 4 $750, so they can have $750 to use for first-dollar coverage 5 on their account. After they've gone through that, then all 6 that applies to the deductible. After they've gone through 7 that, then they have a $250 deductible; then they have 8 benefits under the plan. That's just one off the top -- you 9 know, kind of benefit design. So, you can -- you can create 10 a situation where they have to use the HRA account for 11 reimbursement of expenses initially, and that really gets 12 them into the concept of how they're spending their dollars. 13 The other thing is that the -- probably what 14 we'll show you is we're going to show you two plans, an HRA 15 option and a regular option, so that the employee may choose 16 to go an HRA option versus wanting to stay in a standard PPO 17 contract. So, when we come back to getting down to the 18 actual proposal for the County employees, my guess is we're 19 going to show you side-by-side an option for an HRA account 20 and an option for just a standard PPO account. One of the 21 things that the employees complain about constantly is the 22 premium that they have to pay for their health insurance or 23 their dependent care insurance. What happens with an HRA 24 accumulation plan is, they start seeing what they feel is a 25 vested interest in the plan. Even though it's not vested 11-15-04 wk 38 1 totally to them, they're putting premium dollars into a 2 plan, and instead of saying, "Well, I didn't use the plan at 3 all last year and I got nothing out of it," well, they 4 didn't use the plan at all last year, so they accumulate an 5 asset going forward to the next year. And so that has a 6 tendency to change that attitude about making contribution 7 for the health care plan. Plan design options. Again, we 8 can accumulate it or not. We can cap the accumulated 9 amount. We can do HDHP. That's insurance for high 10 deductible health plan. 11 COMMISSIONER WILLIAMS: Say again? 12 MR. LOONEY: High deductible health plan. 13 That's -- that's -- the acronyms are starting to flow pretty 14 heavily along these lines now. It does not have to be 15 funded. It's a self-funded type of approach. You can have 16 it on a monthly accrual or an annual accrual. You can treat 17 it just like you treat an FSA account, which means that if 18 you give them an annual amount, the full amount is available 19 when they first enter the plan, or you can accumulate it on 20 a monthly basis so that they only have, you know, each 21 month's accumulation applied in case you've got short-term 22 employees. Again, the employee defines the eligible 23 expenses. Highly flexible, employer control, allows for 24 employee acceptance and participation under the plan. 25 JUDGE TINLEY: Why don't we take about five 11-15-04 wk 39 1 minutes and give our reporter a little break here? 2 MR. LOONEY: I think I'm right at a point 3 where that would be a good deal. 4 JUDGE TINLEY: I kind of -- yep. 5 MR. LOONEY: There we are. 6 (Recess taken from 1:58 p.m. to 2:12 p.m.) 7 - - - - - - - - - - 8 JUDGE TINLEY: Tell us about 223 now. 9 MR. LOONEY: I.R.S. -- Internal Revenue Code 10 Section 223. This is one of those very unusual animals. It 11 was actually a Medicare regulation that was passed in 12 November of last year, went into effect and went into law in 13 January of 2004. For the federal government to move that 14 quick, putting a law on the books and making it effective, 15 is somewhat of a miracle to begin with. But what they felt 16 that they did was they created a health savings account, but 17 they mirrored it after a couple of other previous laws. One 18 was the IRA regulations, independent retirement accounts -- 19 individual retirement accounts, and the old Archer MSA's, 20 Archer medical savings accounts, which were restricted to 21 small employers and employers that had 50 or fewer 22 employees. So, they felt that they had enough law out there 23 that they could blend that together and create this health 24 savings account. 25 Now, the health savings account is truly an 11-15-04 wk 40 1 account. It's an ability for an individual to establish, in 2 their own name, under their own assets, an account that's 3 very, very similar to an IRA. They put money into it; they 4 have total control over it. And once money is deposited 5 into the account, they have 100 percent vested ownership. 6 Now, what -- the health savings accounts have to be, you 7 know, connected to a high deductible health plan. And once 8 they're connected to a high deductible health plan, at the 9 end of the year, the employee will have -- and you'll see it 10 on 1040's this year, if you do your own tax return; there's 11 going to be a line entered in there that you can take a 12 deduction off the top for the expenses that you have 13 deposited -- or the moneys that you've deposited into your 14 account. It doesn't have to have been an expense. It 15 doesn't have to be expended out of the account. It just has 16 to be deposited into the account. And that becomes an 17 above-the-line deduction. The investment earnings are 18 tax-free. The employer, if they make contributions, receive 19 a deduction for making contributions into the HSA account. 20 But the difference that we talked a while ago 21 about the HRA being an employer-controlled account with 22 employee no-vesting, this is exactly the opposite. This is 23 an employee-controlled account, and they're 100 percent 24 vested from the very beginning. The amounts are excludable 25 from tax base. The distributions for any qualified medical 11-15-04 wk 41 1 expenses are not taxed, so you get above-the-line 2 qualification on the tax, and then you have no concept of 3 income tax upon the payment. Again, this law was passed in 4 November of 2003. It's similar to MSA's. Any qualified 5 high deductible health plan can be paired with an HSA 6 account, which means the employee controls the account. All 7 the employer has to do is provide access to a high 8 deductible health plan. 9 COMMISSIONER LETZ: Are you going to define 10 that in a minute? 11 MR. LOONEY: Yeah, I'm going to tell you all 12 about that. Specified disease coverage, hospital indemnity, 13 auto insurance, prepaid legal, a lot of those other optional 14 plans are -- they don't fall under the high deductible 15 health plan definition. Vision, dental, accidents, they do 16 not count as other coverage, so a high deductible health 17 plan doesn't -- is not restricted by that. The requirements 18 for a high deductible policy, the deductible must be at 19 least $1,000 for an individual, and it has to be a minimum 20 of $2,000 for families. The out-of-pocket maximum cannot be 21 greater than $5,000 for an individual, nor $10,000 for 22 families. Now, the deductible is a little bit different 23 setup under a health savings arrangement -- health savings 24 account. If you have an individual account and you have a 25 $1,000 deductible, then you're not supposed to have any 11-15-04 wk 42 1 co-payments under that $1,000. 2 A high deductible health plan means that you 3 satisfy $1,000 first, and that $1,000 is not reimbursed from 4 any of these sources -- any other sources. You do not have 5 co-payments for physician office visits; you pay full fare. 6 Once you go over $1,000, then your health care benefit plan 7 kicks in at that point to pay whatever expenses and whatever 8 deductibles that you -- that you have -- or not deductible, 9 the co-payments. So, the way they're designing these plans 10 is to put the emphasis on the individual having $1,000 11 exposure under the plan. And the way they sell that -- the 12 way they satisfy that 1,000 is by setting up their own 13 $1,000 deductible health savings account, so that then they 14 can take the money from the health savings account, satisfy 15 the $1,000 deductible, then move into their health care 16 plan. So, it's the employee's responsibility to set up the 17 health savings account. It's not the employer's 18 responsibility; the employee does it. 19 Now, there's certain things that can be 20 provided under the high deductible health plan that do 21 not -- or the deductible's waived for, where you don't have 22 to satisfy the deductible. Again, these are some of those 23 things that I was telling you that the federal government 24 wants to encourage you to -- to do, so they have obesity and 25 weight loss programs don't have to go under the deductible. 11-15-04 wk 43 1 Routine prenatal and well-child care don't have to go under 2 the deductible. Periodic health exams, including tests and 3 diagnostic tests, don't have to go under the deductible. 4 So, you can have your high deductible health plan that says, 5 yes, we will pay you for these areas initially, so that you 6 don't have to use your health savings account for these 7 purposes. 8 The other thing that -- that has come out 9 since the original rules, and it's noted later, you are not 10 supposed to have co-payments for prescription drugs under 11 the original rules. They put a special, I guess, amendment 12 out in June of this year that said that they were going to 13 allow prescription drug programs on a co-payment basis 14 through the end of 2005, but in 2006, you would have to have 15 those prescription drug co-payment plans out of the plan. 16 They have to remove them by then. Well, one of the big 17 controversies has come in as far as wellness. What is 18 preventive care? Well, one of the things that they've also 19 determined is that if you're taking medications on a regular 20 basis for various types of -- control of a disease or an 21 illness, such as, I guess, the medications you take for high 22 blood pressure, medications you take for diabetes, the 23 medications you take that are on a regular, ongoing 24 maintenance-type basis, those are considered to be 25 preventive. 11-15-04 wk 44 1 COMMISSIONER BALDWIN: But not arthritis, 2 things like that? 3 MR. LOONEY: But they are authorizing them to 4 pay that under the health care plan. It's preventive 5 medication, and they set out special rules that allow to you 6 have the medications that are maintenance-type medications 7 not have to be satisfied by the deductible. So, you know, 8 trying to maintain health, trying to prevent something from 9 occurring. They were afraid that this high deductible -- 10 that individuals would not buy their medications, and 11 therefore end up with problems with cholesterol and high 12 blood pressure and things of that sort, so they built it 13 back in to where the insurance companies can actually 14 reimburse for that. But it's an option that you, as -- as 15 an employer, can determine too, because the plan design 16 underneath this is -- you don't have to put these things in 17 there. You can put these things in there. 18 COMMISSIONER BALDWIN: Gary, I take a 19 medication to relieve pain and inflammation because of 20 arthritis; we're prolonging a knee replacement. Does that 21 come into this picture in any way? 22 MR. LOONEY: Now, there's -- I don't think 23 there's any source for us to go to right now on those types 24 of medications. We'd have to -- what happens, though, is 25 that -- that whoever the underlying carrier is makes that 11-15-04 wk 45 1 determination. Whoever the third-party administrator is. 2 COMMISSIONER BALDWIN: I see. 3 MR. LOONEY: And they make it based on a lot 4 of different methods. Now, one of the things we look at 5 when we look at the TPA is who they're using for their 6 medical advisory committee, beyond where they are as a TPA, 7 to find out where they're getting their information in order 8 to answer questions like that. Right now, it's almost a 9 monthly newsletter that comes out that says, okay, we're now 10 approving this. We're now approving this. And we go 11 through -- the Internal Revenue Service has actually got a 12 hotline where you can send information in and ask them about 13 those things. But the concept, again, is trying to prevent 14 an illness by allowing an individual to maintain a 15 medication that will prevent something from occurring. 16 The thing about the deductible -- one of the 17 things you have to watch out for in a deductible situation 18 is that it's a $1,000 deductible; $5,000 max out-of-pocket 19 for an individual, or $2,000 per family. Now, the 20 deductible is the aggregate deductible, which means that if 21 you have a $2,000 deductible for your family, that you have 22 to complete the $2,000 before any benefits are payable under 23 the high deductible health plan. It's not $1,000 for an 24 individual and $1,000 for another individual equals $2,000. 25 It's $2,000 total. So, one person potentially could satisfy 11-15-04 wk 46 1 the $2,000, but you have to have $2,000 in total 2 deductibles. That's different from most health care plans. 3 Usually, once an individual exceeds the deductible, benefits 4 are payable. Under HSA's, it's an aggregating deductible, 5 so that you have to pay the entire amount. Office visits, 6 co-payments are not permitted under the plan, 'cause they're 7 not subject to the deductible. If you're in a network -- a 8 PPO network, the deductibles and maximum out-of-pocket 9 numbers apply to in-network services. What that means is 10 that, under the high deductible plan, if you have a -- a PPO 11 network, and they're paid benefits at a higher percentage, 12 then whatever that benefit is is what's applicable against 13 that plan. 14 These -- these rules and regulations, I'm 15 going to go through them a little faster, because it 16 really -- I'm going to get to the actual description of the 17 overall plan real quick, but contributions to the plan must 18 be made in cash. Individuals 55 and older can make extra 19 contributions in their account to help catch up years. The 20 amount for 2004 for an individual that's over 55 is an 21 additional $500. So, if you've got a $1,000 deductible 22 plan, you can put in $1,500 on your tax deductibility for 23 the next year. The contributions are only allowed for the 24 months in a year, so it's prorated if you change -- turn 55 25 or 65 in a year. 11-15-04 wk 47 1 Employers and employees can contribute to 2 the -- the HSA accounts. The HSA rules for contributions by 3 an employer are a little different from what would fall 4 under the discrimination rules for most health care plans. 5 The contributions have to meet a compatibility test, which 6 is a little bit different than the ERISA tests that they use 7 for a nondiscrimination testing. The individual that owns 8 the health savings account is totally responsible for the 9 claim flows and tax deductibility issues with that account. 10 The employer has no liability or responsibility to the 11 employee to make certain that when they do their tax filings 12 at the end of the year, that they are making the appropriate 13 tax filings. So that once -- once you create a high 14 deductible health plan, if you, as an employer, do not want 15 to participate in the HSA plan benefit for the employees, 16 then that's fine. What you've done as an employer is 17 provide them with a high deductible plan. Here's the plan. 18 If you want to participate, that's great, and this is your 19 premium allocation or non-premium allocation, whatever -- 20 however you want to do that. Here it is. 21 Now, you, as an individual -- if you want to 22 fund an HSA account on your behalf, then you have the 23 ability to do so, because we're providing you this high 24 deductible plan, and at that point, all you've -- you've 25 satisfied your responsibility to the employee. You do not 11-15-04 wk 48 1 have to make contributions. If you do make a contribution 2 to the plan, then you have to be certain that they have an 3 account to fund the moneys into. They have to have an 4 account established for you to fund the money to it, because 5 the money has to be deposited in the form of cash into that 6 account. Same way an IRA functions; money has to be 7 traceable into that account. Now, the deductions out of it 8 and the moneys coming out of it, that's up to the individual 9 employee. Anybody can contribute to the HSA. If you've got 10 family members that you wanted to fund, a daughter or 11 son-in-law or, you know, whatever -- if you, as a 12 grandfather, wanted to fund your granddaughter's HSA 13 account, you could do so, because the funds can come from 14 any source. You don't get the deduction; they do, but 15 that's all right. 16 If a person already has an MSA -- which I 17 doubt any of your employees do. Those are those Archer 18 medical savings accounts; there are very few of those sold. 19 Actually, then they've got transferability to the HSA 20 account from the MSA account. If you have a participation 21 in the HSA account, your deductions are prorated based on 22 the number of months that you participated in the plan. So, 23 if you have a $1,200 deductible plan, and you're in the plan 24 for six months, then the taxable year -- at the end of the 25 year, you're only allowed to take $600, only half of that 11-15-04 wk 49 1 amount, as your deduction for the next year. You're only 2 allowed to take the deduction up to and including the time 3 that you were actually insured under the high deductible 4 health plan. So, it's prorated on a monthly basis. And 5 that's why the activity in these accounts is going to 6 increase substantially during the next, you know, 30 days, 7 because if the plan is in effect January 1st, then they get 8 full credit for the entire year for tax-deductible purposes. 9 Contributions into the HSA account can be 10 made in one lump sum. They can be made monthly. They can 11 be made -- as long as they're made prior to filing your tax 12 return on April 15th of the following year, you're 13 completely open to making those contributions at that time, 14 in that time frame. Any accumulations in that account, if 15 you want to withdraw any of the money that's in that account 16 to use for something other than health care benefits 17 reimbursement, you can take the moneys out, take it as 18 ordinary income, and you have a 6 percent excise tax that 19 would be imposed on any excess with -- any excess that you 20 took out. One of the things about HSA accounts is that if 21 you reach age 65 and you have an accumulation in that 22 account, you can actually use the accumulations to purchase 23 Medicare insurance. Not Medicare supplement insurance, but 24 you can use it to pay your Medicare premiums, and/or you can 25 buy long-term care insurance with it, and you can use the 11-15-04 wk 50 1 funds going forward to satisfy any deductions or any 2 contributions you have under Medicare. 3 What we're -- what we're seeing is that 4 organizations will offer a high deductible plan; not make it 5 the sole basis, obviously, of their entire plan, because 6 there are a number of people that want to take advantage of 7 the accumulations. And, rather than setting the deductions 8 at the minimum, we're setting the deductibility at the 9 maximum, because they want to put in the maximum 10 accumulations they can into their health savings account. 11 So, we're setting the family deductible at $5,000, and then 12 the individual themselves can contribute into their family's 13 health savings account up to $5,000 a year. 14 COMMISSIONER LETZ: $5,000 would be tax 15 deductible? 16 MR. LOONEY: Tax-deductible dollars. Any 17 moneys that come out to be used for medical expenses are not 18 includable as income. Any interest earned is not includable 19 as income. And it's cumulative to any amount, whatever 20 amount. 21 COMMISSIONER LETZ: Is there a -- I don't see 22 a down side to these. 23 MR. LOONEY: Down side for employees is 24 whether or not they have enough dollars to meet the -- the 25 actual out-of-pocket expenses that they're incurring for 11-15-04 wk 51 1 medical care. If they -- they're actually having dollars 2 that they're spending for medical care, where it would have 3 been covered under a co-payment in the past, or -- or a 4 co-insurance factor in the past, now they're -- again, 5 they're having to pay careful attention to the moneys that 6 they're spending, because it's going to come out of that 7 account. It's going to be deductible, but that $5,000 is 8 going to be reduced by whatever expenses they have. If 9 they're healthy, you know, they have minimal expenses during 10 the year, it's not going to take long to accumulate the 11 dollars necessary to satisfy that. It takes a year to 12 satisfy the total amount of dollars there that are necessary 13 to satisfy the deductible going forward in case of a 14 critical illness problem. 15 We were doing a presentation in conjunction 16 with Fulbright and Jawarski, and the attorney that I was 17 doing the presentation with is also a C.P.A. And he had 18 done his portion of it, and then I was going through and 19 doing my portion of it, and all of a sudden, he was sitting 20 at the table and said, "I got it." And I said, "You got 21 what?" You know, I turned around, 'cause I'm right in the 22 middle of talking to a group of about 40 people, and I turn 23 around and look. He said, "I get it." He said, "I 24 understand this now. I can put this amount of money aside. 25 This is my premium allocation currently; this is the amount 11-15-04 wk 52 1 of money I'm contributing to my health care plan." He was a 2 partner at Fulbright and Jawarski, so they were having to 3 pay full bore on their premiums. And so he's 42 years old; 4 he's married, got two kids, and he figured that it would 5 take him 18 months to be ahead of the game by taking the HSA 6 account. And he did their -- he's a C.P.A. He did their -- 7 he had it figured out at retirement, you know, assuming his 8 kids were gone and all the -- I mean, he had a complete 9 chart all worked out there. And -- and he said, "This is 10 unbelievable." He said, "We're doing this right away," and 11 they put an HSA account effective in January for -- for 12 their options. 13 JUDGE TINLEY: The income and investment gain 14 remains tax-free? 15 MR. LOONEY: Remains tax-free. 16 JUDGE TINLEY: What if it's -- you leave 17 employment? You take the account with you? 18 MR. LOONEY: Mm-hmm. 19 JUDGE TINLEY: The only tax incidence you 20 have is to the actual contributions? 21 MR. LOONEY: Contributions that you've made 22 are tax-deductible under your April 15th, you know, filing 23 date. 24 JUDGE TINLEY: I understand that. But when 25 you then use them for some other purpose -- 11-15-04 wk 53 1 MR. LOONEY: If you use it for some other 2 purpose, then you've got a 6 percent excise tax on the 3 withdrawal. 4 JUDGE TINLEY: Okay. But is that only as to 5 the principal? Does the investment and earnings that's 6 accumulated on those funds -- 7 MR. LOONEY: It's characterized as total 8 assets. 9 JUDGE TINLEY: Okay. 10 MR. LOONEY: There's not any separation in 11 the interest-bearing or the other part of it. 12 JUDGE TINLEY: Okay. 13 MR. LOONEY: The -- 14 COMMISSIONER NICHOLSON: I may be getting a 15 little bit ahead of the game, but it will help me to follow 16 your thought process here. I can -- I can see the 17 advantages to this to employees who are paid well, and -- 18 and income tax is a concern. We've got a lot of employees 19 that are not paid well at all, and they probably don't pay a 20 lot of income taxes, and they're not paying anything for 21 their health insurance now. 22 MR. LOONEY: Right. 23 COMMISSIONER NICHOLSON: I'm beginning to get 24 a picture that this is going to be a cash flow issue for -- 25 MR. LOONEY: Absolutely. 11-15-04 wk 54 1 COMMISSIONER NICHOLSON: Okay. I just -- I 2 wanted the to make sure I was thinking right. Go ahead. 3 MR. LOONEY: That's why I say that these 4 plans are quite often just an option. It isn't necessarily 5 equal to the plan sponsored by the employer. The plan that 6 you sponsor, the one that you're paying 100 percent of the 7 employee premium for, that's one that needs to be 8 identified, that plan. And then you may very well have an 9 HRA plan and an HSA plan that can be associated with those 10 as part of the plan design. The -- the standard PPO plan is 11 more expensive, typically, than the HRA account, because the 12 HRA has built-in deductibles into it. And, typically, when 13 we design the plan, we design the -- the basic plan as the 14 HRA plan, because it still gives employees some 15 first-dollar, up-front coverages for the minor illnesses 16 and -- and expenses. And then the PPO plan would typically 17 charge for -- and then the HSA plan is typically the option 18 of the employee. And that distribution of premium, with 19 what you're going to sponsor as a plan for employees, will 20 be a major part of the next meeting that we have. As we go 21 over those -- the plan design options, which one, as an 22 employer, do you want to sponsor and pay 100 percent of? 23 We're trying, using these plans -- using 24 these HRA plans and HSA plans, to require a change in 25 attitude by the employee and the way they spend their money. 11-15-04 wk 55 1 Right now, you've got kind of an interesting, you know, plan 2 design, because you're paying 100 percent of the greater 3 plan, and then, you know, employees then are allowed to take 4 that differential and buy supplemental insurance for it. 5 That's a little backwards from what most employers do. 6 Usually they'll pay for the lower benefit plan, and then 7 have the employees contribute toward the greater plan. So, 8 you know, I still don't have a good handle on where all the 9 optional benefit plans are being purchased, or whether -- 10 whether that income is going to the employees. But if an 11 employee is required to make a contribution toward the plan, 12 and they can see an HSA or an HRA accumulation asset going 13 to it, then the attitude toward participation and making 14 premium payments is different. You see a better 15 participation. So -- 16 COMMISSIONER NICHOLSON: Since we're in 17 Insurance 101, a basic precept I thought about employee 18 group insurance plans was that nobody gets in free; that 19 there has to be some skin in the game, typically 20 percent 20 of the premiums or something like that paid for by the 21 employee. Is that -- does that still hold true? Or is 22 that -- 23 MR. LOONEY: It's either in that manner, or 24 it's in the plan design where they have a greater risk 25 transfer. If you're paying 100 percent of the premium, then 11-15-04 wk 56 1 the benefit plan typically is -- is a lesser plan, so that 2 the skin comes from the people that are highly utilizing the 3 plan, or the greater utilization. We still see employers 4 that pay 100 percent of employee premium. Not nearly as 5 frequently as we've had in the past. City of San Antonio, 6 we just changed and moved to an employee contribution. 7 Bexar County moved to a higher employee contribution, simply 8 to meet the demands of the -- of the costs of the plan 9 themselves. 10 COMMISSIONER NICHOLSON: Do you know if our 11 current administration includes the coordination of benefits 12 feature? 13 MR. LOONEY: It is -- it is supposed to. It 14 is supposed to have a -- and going through the claims 15 information and record files, I don't see a lot of credit 16 for coordination of benefits. I assume that it is -- that 17 it is being done, but I don't have a good -- based on the 18 reports, I don't see it. I don't see a lot of it. The 19 contributions to the HSA can be made by anyone, again. The 20 accumulations you can take out. Any balances roll over to 21 the next year and continue to roll forward as long as the 22 individual makes contributions. Well, let's see; 10 percent 23 is the excise tax, not the 6 percent. The 10 percent excise 24 tax. 25 JUDGE TINLEY: Kind of like an IRA penalty. 11-15-04 wk 57 1 MR. LOONEY: Right, that's what it is. IRA 2 penalty, it's the same thing exactly as an IRA penalty. 3 JUDGE TINLEY: Yeah. 4 MR. LOONEY: You can name beneficiaries with 5 an HSA account, so that if something happens to the original 6 individual -- if you have an HSA account for two years and 7 then you -- your employer does away with it or you leave, 8 you can maintain that account. It doesn't disappear, and 9 you can still use it for expenses when you reach the age of 10 65. But if you have expenses that are being reimbursed to 11 you under a non-high -- non-qualified plan, you cannot take 12 those as a deduction. So, if you move from one plan to 13 another -- the other thing is, if your spouse is covered 14 under a plan that's not a high deductible plan, and she has 15 you covered as a dependent under that plan, and your 16 employer has a high deductible plan, then you can't be under 17 her plan, 'cause you're receiving benefits under her plan. 18 So, you have to be totally insured, totally involved in the 19 high deductible plan. 20 There are a lot of these -- again, since the 21 law came out, we've had seven private letters come out with 22 examination of how the rules are supposed to work, and we 23 are expecting another one before the end of this month. So, 24 just clarification of the rules. Comparable contributions 25 for all comparable participating employees during the same 11-15-04 wk 58 1 period. It -- it's the same dollar amount for the same 2 percentage of the deductible under the high deductible plan. 3 The comparability contribution is a little more stringent 4 than the ERISA requirements for nondiscrimination. So, it's 5 actually a dollar amount measured against the total 6 deductible in relationship to the people. One of the things 7 about the HSA's that we are trying to be very careful of is, 8 the third-party administrator that we hire to administer it 9 must be savvy on the administration of these plans. They 10 have to know how -- if we're going to put in an HSA plan, 11 the third-party administrator -- we want to make sure that 12 they have the compatibility to do it. And I'm not sure your 13 current administrator has that potential. 14 The employee does -- you know, contributions 15 are reported on a W-2. The employee then is responsible. 16 What's interesting is that we're finding combinations of HSA 17 accounts and other forms of accounts. You cannot have an 18 HSA and an HRA. That -- but you can have an HSA and a 19 flexible spendable account, the FSA plan under the cafeteria 20 125 plan. HSA plans are not ERISA plans, which means you 21 don't have a filing under the 5500's to make. HSA's are not 22 subject to COBRA, so that you don't have any responsibility 23 for funding an HSA account upon termination of employment. 24 Those are kind of critical issues on the HSA, as far as 25 being COBRA viable, because that means you don't have to 11-15-04 wk 59 1 make any contributions to the employee after that. Under an 2 HRA account, it is subject to COBRA, and an HRA is required 3 to have contributions made. That's an employer-controlled 4 account, and it is required to meet COBRA responsibilities. 5 HSA employees, or employer, have to make the 6 contribution in the form of cash. Prescription drugs may be 7 provided through the co-payment up to 12-31-2005. After 8 that, no. COBRA premiums can be paid out of an HSA account. 9 Medicare Part A and Part B premiums can be paid out of an 10 HSA account. Qualified long-term care and long-term 11 insurance can be paid out of an HSA account. So, these 12 accounts do not have to be just totally used for 13 reimbursement of medical expenses. That's why we're seeing 14 more people looking at the higher deductible base, 'cause 15 they want these accounts to accumulate so they'll have 16 sufficient premiums to pay for some of the long-term care 17 insurance that they feel they may need at 65. The 18 custodians of the accounts are responsible for insuring that 19 the expenses are qualified medical expenses. An employer is 20 not responsible for that. Everything comes back to the 21 individual being able to qualify their own expenses on their 22 tax returns. 23 The account holder, the individual that has 24 the account itself, the HSA account, is responsible for the 25 recordkeeping, not the employer, so all you do as an 11-15-04 wk 60 1 employer is provide the account. From that point forward, 2 your employee is responsible if they want to participate. 3 Now, two differentials between the two accounts. The HRA 4 account is an employer-controlled arrangement where the 5 employee has no vested interest. Expenses can be used to 6 offset covered expenses or non-covered expenses under the 7 medical plan. The HSA account, the health savings account, 8 is an employee-controlled account. They're 100 percent 9 vested immediately upon making deposits into the account, 10 and it can be used for a wider variety of expenses than the 11 HRA account, but must be coupled to a high deductible health 12 plan. The HRA account can have any plan design you want. 13 Now, the flexibility of plan design under the HRA is open. 14 HSA is restricted. 15 The third type of account that becomes -- not 16 critical, but can -- can blend into these accounts, is the 17 flexible spending account, which is under the Section 125. 18 These are the cafeteria plans, the cafeteria accounts that 19 have been around for a long time. And you can have a health 20 flexible spendable account or a dependent care flexible 21 spendable account, or a premium only account. Premium only 22 means that any premium that the employee contributes toward 23 their health care, dental plan, anything that qualifies on a 24 deduction basis, that they can do a salary reduction on that 25 and have their benefits paid on a nontaxable basis to them. 11-15-04 wk 61 1 And I assume that -- you know, I -- I assume you're doing 2 that now. You've got the premiums -- any premium paid by an 3 employee is on a salary reduction basis. Or salary 4 deduction basis? 5 JUDGE TINLEY: Deduction. 6 MR. LOONEY: Salary deduction? 7 JUDGE TINLEY: Far as I know. 8 MR. LOONEY: By simple contract, we can 9 change that to salary reduction, which means any premiums 10 that they pay would come off the top before taxing. Save 11 y'all the FICA faxes and save them the taxes on it also. 12 And that -- we can do a premium-only plan very simply. That 13 -- that's simply a document that says that's the way you're 14 going to do it. The only difference is that your -- whoever 15 your payroll person is needs to know how to handle the 16 reduction versus deduction process. In addition to that, 17 then you can put in flexible spendable accounts or dependent 18 care accounts. The health flexible spendable account allows 19 you to put money aside -- individual employee to put money 20 into an account that is theirs from the very moment they put 21 it in till the end of the year. If you put in $100 a month, 22 you start in January, your account is credited and equal to 23 $1,200. The employee then contributes $100 a month to fund 24 that. The employer is responsible for the full amount from 25 the beginning, so if an individual has a claim against that 11-15-04 wk 62 1 account, they can claim up to the full $1,200 in January, 2 and then they continue to pay that off for the balance of 3 the year. That's salary reduction. 4 The moneys that the flexible spendable 5 account can be used for are the same deductions that are 6 used under the HRA program. They are -- you can pay 7 co-payments, you can pay premium using the premium-only 8 account, but anything that's not reimbursed by the insurance 9 policy can be paid out of that account. Now, I've got a 10 flexible spendable account. My wife goes in for a doctor 11 office visit and a lab test; our deductible is $500. She's 12 got $300 of expenses. We've got the $300, then, that comes 13 out of the flexible spendable account, and we -- we 14 accumulate that during the year for that purpose. The 15 flexible spendable account can be used for reimbursement of 16 over-the-counter medications that qualify under 213. The 17 other plans that we looked at, the HSA and the HRA plans 18 typically are tied to an insurance plan, and insurance plans 19 do not allow for payment of over-the-counter medications. 20 Flexible spendable account does. 21 There has to be uniform coverage. That's, 22 you know, use it or lose it. If the employee doesn't use 23 the amount of money that they've put into their account 24 during the 12 months that it's in there, then they lose that 25 money. It goes back to the employer. The employer then 11-15-04 wk 63 1 retains that amount of money, and they can use it to offset 2 expenses going forward in the future years for all 3 employees. Typically, what we see is the expense of an 4 account, based on the FICA savings and the people that 5 participate in it, it usually ends up to be a washout for 6 the employer to put in a flexible spendable account. The 7 I.R.S. doesn't limit the amount that an individual can put 8 into the FSA, but we typically set that limit under the 9 policy design, 'cause we don't want an employee to put all 10 their income into one of these accounts, which they could 11 do. 12 Dependent care. If you have individuals that 13 have work-related dependent care expenses -- that means that 14 if they're working and they've got a day care that they're 15 sending their child to -- then they can take the deduction 16 under their flexible spendable account for day care for 17 dependent care. This becomes an individual decision by 18 the -- by the family members. We've actually got a form 19 that they can go through to determine whether or not it's 20 more beneficial for them to take the salary reduction off of 21 the FSA or to take the tax deduction that they get for child 22 care expenses under their personal I.R.S. Frankly, we don't 23 put these into very many plans, because the process for 24 claiming this is much more difficult. You have to show a 25 receipt from the child care provider before you can actually 11-15-04 wk 64 1 be reimbursed. And that process of actually showing a 2 receipt and being reimbursed, to get into the plan, that 3 means that you've got to pay the first time frame, whatever 4 it is; first week, first month, whatever it is for child 5 care, and you don't get reimbursed until you submit that, so 6 you get double-dipped up front. You have to pay before you 7 get reimbursed. Our percentage of participation in the 8 dependent care FSA's is typically less than 3 percent. 9 We've got an FSA program for dependent care in place in San 10 Antonio. City of San Antonio's got -- we figured we had 11 about 9,000 eligible people to participate, and we've got 13 12 people that participate in the plan. So, it's just -- 13 JUDGE TINLEY: How many? 14 MR. LOONEY: Thirteen. And it's just -- it's 15 just not something that we really promote heavily. The 16 flexible spendable account, this is how it works for an 17 employee. Gross compensation is 2,000. You've got the 18 chart there in front of you. You can see what the 19 difference is between having a salary reduction and then 20 having a salary deduction. The total compensation, the -- 21 that's your take-home pay when you have a salary deduction 22 base. When you take it off the top, we move it up to here. 23 That takes it down to taxable income base, and then the 24 take-home based on federal taxes. You know, $225 versus the 25 $300; $75 difference in the federal tax, Social Security. 11-15-04 wk 65 1 Those taxes were where you're matching those taxes as an 2 employer, you don't have to match. So, that's $75 in FICA 3 savings. Same thing here for the employer. This is where 4 the FICA savings come in for the employer. The total 5 reduction for the employees. I've got my little zeros 6 flying across here. 7 Reimbursement process. This is what happens 8 when you get reimbursed under the FSA. You get an EOB from 9 your third-party administrator; they send it into the 10 flexible spendable area. They don't have to do any 11 adjudication on it. All they have to see is that the TPA 12 actually paid the claim that was outstanding. So, they 13 reimbursed them based on the outstanding amounts. The 14 differences in the HRA and the FSA, again, the HRA is -- and 15 you combine -- we're seeing a lot of companies combine the 16 two, the flexible spendable accounts. And what we're 17 finding is that under the -- the rules that we originally 18 set up, a flexible spendable account is not supposed to 19 reimburse an individual for any expenses that are due and 20 payable under a health care plan, so you set up a health 21 care plan where the individual has the decision capacity as 22 to whether or not they're going to allow the health care 23 plan to pay for an expense under their HRA account or their 24 FSA account. 25 So, we're actually having to establish the -- 11-15-04 wk 66 1 we have to establish the routine for the payment, and we do 2 that by plan document. Does the employee -- or was the 3 employee required to spend the money from their flexible 4 spendable account first? Or the HRA account -- you know, 5 which one -- what is the methodology? What we're seeing is 6 that most accounts are going HRA first, and then FSA second, 7 so that the -- the net of the HRA stays within the employer 8 control, and the FSA still stays under the employee control. 9 I don't know if that makes a whole lot of sense or not, but 10 -- but the way the regulations are written is that the FSA 11 cannot reimburse for a medical expense that's compensable by 12 a health care plan. So we just set up that rule of 13 transition so that it matches. What we're doing, we've 14 got -- I think y'all have got a list of the companies that 15 we received bids from. 16 JUDGE TINLEY: Mm-hmm. 17 MR. LOONEY: We've done an initial 18 examination. The only -- I guess the only negative so far 19 is that we received a request for some company that UPS had 20 delivered their bids to Laredo instead of to Kerrville, and 21 we told them that that was their fault, not ours. 22 COMMISSIONER WILLIAMS: That's numbers 12, 23 13, 14, 15? 24 MR. LOONEY: They actually sent the decline 25 letters through -- 11-15-04 wk 67 1 COMMISSIONER LETZ: 16, 17. 2 MR. LOONEY: 16 and 17. They -- Cigna called 3 and said that -- or sent us a letter requesting that we 4 accept their bid because UPS did not deliver it 5 appropriately, and we didn't accept it. Our bid 6 specification says it's not our responsibility to be certain 7 that they deliver their bids in a timely manner. 8 JUDGE TINLEY: Received -- it had to be 9 received here by a given time and date, and the 10 responsibility was that of the submitter or proposer. 11 MR. LOONEY: Right. 12 COMMISSIONER LETZ: So, same thing with 13 Shenandoah Life. 14 MR. LOONEY: Same thing. They were part of 15 that. 16 COMMISSIONER LETZ: Cigna? 17 MR. LOONEY: So we haven't seen it. We 18 didn't look at it. It went back to them. We didn't even 19 open it at that point. 20 JUDGE TINLEY: Essentially, what you got for 21 health are 1 through 7, looks like. 22 MR. LOONEY: We have, you know, complete 23 quotes with E.B.A. And it's kind of interesting, with 24 Benefit Planners -- Benefit Planners, if you'll note, their 25 stop loss carrier is Great West, and that's a very unusual 11-15-04 wk 68 1 combination. That's the first time we've seen that 2 combination. So Great West didn't get their own bid in on a 3 timely basis, but they coupled in with Benefit Planners to 4 provide stop loss quotes. That was kind of interesting. 5 Group and Pension Administrators is out of Dallas. Benefit 6 Planners is out of San Antonio -- they're actually in 7 Boerne. Benesight is a new one. I've not -- I don't know 8 anything about Benesight, unless they've changed the name 9 recently. But they had a very comprehensive proposal. Don 10 Wallace is an agent that's out of -- Luling, I believe. 11 JUDGE TINLEY: Seguin. 12 MR. LOONEY: Luling or Seguin. He's on the 13 other side of Houston. I think his office is in Seguin, 14 yeah. And he got a number of -- of bids in, as did 15 Mr. Finley. And then Jerry Immelman in San Antonio with 16 Group and Pension Administrators. Mutual of Omaha's 17 proposal is about 2 inches thick. I'm -- I've been working 18 on that one just to find the right pages, just so I can get 19 the right pages in there. Standard Insurance was strictly 20 life insurance, as was Jefferson Pilot, Kansas City Life, 21 and Hartford. So, we really have probably five, you know, 22 bids that we're -- we're looking very hard at. Maybe six. 23 I haven't seen all of the information from the Texas 24 Association of Counties yet. 25 COMMISSIONER LETZ: On the -- I mean, the 11-15-04 wk 69 1 only one that -- Providence and Mutual of Omaha, that they 2 would not use third-party administrators, is that -- 3 MR. LOONEY: Mutual of Omaha would be their 4 own administrator. They would be their own reinsurance 5 carrier, and they would be the administrator also. 6 COMMISSIONER LETZ: And Providence, the same? 7 Or is that a -- 8 MR. LOONEY: No, Providence is a third-party 9 administrator. 10 COMMISSIONER LETZ: That's not the providence 11 Insurance Company? 12 MR. LOONEY: No. No, it's -- it's Providence 13 Third-Party Administrators, and I -- I don't remember where 14 they're out of. But -- 15 JUDGE TINLEY: Are you going to be in a 16 position this next Monday to -- 17 MR. LOONEY: Next Monday? 18 JUDGE TINLEY: -- make a recommendation to 19 this Court as to which of these proposers you would like to 20 have the ability to continue to negotiate with and seek a 21 final and best offer? 22 MR. LOONEY: Yeah, I can do that. 23 JUDGE TINLEY: Okay. 24 MR. LOONEY: I can't have -- I can't have the 25 final for you, but I -- 11-15-04 wk 70 1 JUDGE TINLEY: Oh, no. No. 2 MR. LOONEY: -- I can definitely do that. 3 JUDGE TINLEY: Under the -- if I understand 4 the process on the -- on the professional services tab, once 5 the Court makes a determination that out of all the 6 proposers, these three or these five or these nine or 7 whatever -- 8 MR. LOONEY: Right. 9 JUDGE TINLEY: -- are ones that there's a 10 reasonable possibility that it may result in a final deal, 11 very well could be, that allows us, or you on our behalf -- 12 MR. LOONEY: To negotiate. 13 JUDGE TINLEY: -- to negotiate for a final 14 and best offer. 15 MR. LOONEY: Right. 16 JUDGE TINLEY: And, so, I would think come 17 Monday -- 18 MR. LOONEY: No, I can do that by Monday for 19 sure. No, I plan on having that done, actually -- 20 COMMISSIONER WILLIAMS: Are we going to see 21 some of these plans stack up against our existing benefit 22 structure? 23 MR. LOONEY: Yeah. 24 COMMISSIONER WILLIAMS: And be able to weigh 25 some options? 11-15-04 wk 71 1 MR. LOONEY: Very much so. 2 COMMISSIONER LETZ: I guess my -- do you -- 3 we pick the companies we want to use, and then decide how we 4 want to design our plan? 5 MR. LOONEY: Well, one of the things is that 6 we have to be sure that whoever we pick or choose can -- can 7 do the plan designs, have the option to do some of the other 8 plan designs. And some of the organizations can't do HRA 9 administration; they can't do HSA administration. Most of 10 them can do FSA administration, but they may very well not 11 have the capacity to have multiple plans. So, that's 12 something that we -- 13 COMMISSIONER LETZ: Seems that we need to -- 14 COMMISSIONER WILLIAMS: I'm sorry, go ahead. 15 COMMISSIONER LETZ: Seems that we need to 16 discuss what we want in our plan before we figure out who 17 you want to -- who the final ones to negotiate with. 18 COMMISSIONER WILLIAMS: That's kind of what 19 I'm getting at. Were each of these asked to bid or send a 20 proposal in based on the existing plan? 21 MR. LOONEY: Yes. 22 COMMISSIONER WILLIAMS: Okay. 23 MR. LOONEY: So the underlying insurance 24 coverages, the administration and expense over -- primarily 25 over all, is based on administering the plans you currently 11-15-04 wk 72 1 have, which is three different options under the plan. The 2 stop loss insurance is based on experience generated from 3 your overall package of experience for the -- for the 4 organization. It's not based on each plan classification; 5 it's based on overall experience. So plan design, when we 6 look at the total participation of different plans, we get a 7 better idea of what the impact is on the claims by making 8 other options available. So, what we have to do is, we have 9 to take your current plans and then give an optional -- you 10 know, here are the options that you've got. Here are the 11 premium rates for these options. And, again, it's kind of 12 backwards. Now, the way you've got it now, as far as paying 13 100 percent for the higher -- higher-price plan, how long 14 has that been in place? How long has that -- 15 COMMISSIONER BALDWIN: I can't answer that. 16 Long, long time. A good while. 17 COMMISSIONER LETZ: Yeah. 18 COMMISSIONER BALDWIN: I don't recall 19 changing anything like that, any kind of change. 20 COMMISSIONER LETZ: I think the -- the thing 21 about the different supplemental plans, that's only maybe 22 two years -- one or two years that that's been in there, and 23 we kind of added that on. 24 JUDGE TINLEY: The B and C options, you're 25 talking about? 11-15-04 wk 73 1 COMMISSIONER LETZ: Yeah. Added those on, I 2 think, two years ago. 3 MR. LOONEY: So that -- 4 COMMISSIONER LETZ: And left the main plan 5 the same. 6 MR. LOONEY: And paying the individual -- if 7 they take B or C, then you pay the individual additional 8 funds, and they're not required to buy the supplemental 9 insurance plans, but they can use it to buy supplemental 10 insurance plans? 11 COMMISSIONER LETZ: I thought they had to. I 12 don't know. They can't take cash, I don't think. 13 MR. LOONEY: They can't take cash? 14 JUDGE TINLEY: I don't think so. I think 15 they can use it to -- to apply on spouse or dependent 16 coverage. 17 COMMISSIONER LETZ: Right. 18 JUDGE TINLEY: Or other -- or related 19 insurance products, maybe. 20 COMMISSIONER LETZ: Or dental or, you know, 21 different type things. 22 JUDGE TINLEY: Did you ask -- in your RFP, 23 you asked for options? 24 MR. LOONEY: Right. 25 JUDGE TINLEY: For -- 11-15-04 wk 74 1 MR. LOONEY: I asked for them to give me 2 everything that they could do. 3 JUDGE TINLEY: Okay. 4 MR. LOONEY: Not anything specific. I said 5 tell me what you can do. Make a recommendation, if you've 6 got a recommendation. 7 JUDGE TINLEY: So, in some cases, as you 8 crunched these various plans, as it were, it won't be 9 strictly apples against apples. There may be some variables 10 in there, depending upon what the options are. 11 MR. LOONEY: The first thing we'll do is 12 apples to apples. The first thing we'll know is how they 13 match up with the plan design as it exists today, so that 14 we'll know from an administration cost standpoint, and from 15 a stop loss insurance standpoint, we'll know how those two 16 items match up. 17 JUDGE TINLEY: Mm-hmm. 18 MR. LOONEY: And, so, that'll -- that'll give 19 us a platform to work on to move toward the other optional 20 basis. It's still just -- you know, I'm still dealing with 21 this process of -- of moneys that are -- if you take a 22 lesser plan, having the differential of money going to 23 purchasing an individual policy by an independent agent. 24 That's just -- that's just kind of a -- that's very 25 extraordinary, you see. 11-15-04 wk 75 1 COMMISSIONER NICHOLSON: Needs to change. 2 MR. LOONEY: And I don't -- I'm not sure I 3 understand it at this point, other than -- 4 COMMISSIONER LETZ: Not sure we do, either. 5 MR. LOONEY: Other than that there's a -- 6 there's an agent that's very happy with that relationship; I 7 know that. So -- 8 JUDGE TINLEY: We have a meeting scheduled 9 for Monday, and it's our last regular meeting for November. 10 MR. LOONEY: Okay. 11 JUDGE TINLEY: Are you going to be in a 12 position at that meeting to help us hopefully define what 13 the design of our plan is, and to give you direction on 14 which ones we think are viable that you can go forward with 15 on final and best offer? 16 MR. LOONEY: I need to get you that stuff 17 before Monday, because that's something that you need to 18 look at without me just presenting it to you blank. And 19 just -- you need to have time to look at that. But other 20 than my trying to come in just saying, "Okay," you know, 21 "this is -- this is my decision; this is what you need to 22 do," you need have that information by Thursday or Friday to 23 give you a chance to look at it. 24 JUDGE TINLEY: Well, I'm concerned about 25 posting an agenda item. I'd like to be in a position to -- 11-15-04 wk 76 1 I guess, probably what -- well, I've already made my 2 decision; I'll post it as an agenda item. If we can get 3 there, fine. If we can't, why -- 4 MR. LOONEY: Yeah, just post it, put it on 5 for now, and I will try to have you something by Thursday. 6 JUDGE TINLEY: Okay. 7 MR. LOONEY: By Thursday. 8 JUDGE TINLEY: That we can disseminate. 9 MR. LOONEY: That you can -- 10 COMMISSIONER LETZ: If it's on the agenda, we 11 can also carry it over to Tuesday, think about it overnight, 12 and just have a -- just reset on this item. 13 JUDGE TINLEY: Sure. 14 COMMISSIONER LETZ: I mean, 'cause it's -- it 15 is something that we really need to get locked up. 16 JUDGE TINLEY: Or if we need to set a special 17 meeting, we can do that too. 18 COMMISSIONER BALDWIN: Yeah. 19 JUDGE TINLEY: Whatever we've got to do. 20 COMMISSIONER WILLIAMS: We need to make a 21 decision before the end of the year. 22 COMMISSIONER LETZ: The other thing, to me, 23 the -- I mean, I know we have to use the current plan as to 24 kind of the benchmark, and that's what's kind of in our 25 budget also. But, to me, this is a time that we need to 11-15-04 wk 77 1 make some pretty significant changes, offer different 2 things. And, I mean, I'd like to start going in that 3 direction. 4 MR. LOONEY: Yeah. And -- 5 COMMISSIONER LETZ: I mean, I'm more 6 concerned about getting a plan that works that we can start 7 going toward. Even if we can't implement everything this 8 year, that we can start going down the path that will get us 9 where we need to be, rather than using the benchmark of what 10 we have. 11 MR. LOONEY: Well, that's -- one of the 12 things that has to change is the employees' attitude. And 13 by changing the plan design, we look at trying to make the 14 HRA plan look -- as far as benefit to the employee, the HRA 15 plan looks just like one of your current plans, you know. 16 And whichever one that we're funding, it's going to be 17 redistributed in the way the benefits come out of it. It'll 18 be a different methodology, but it'll end up so that if 19 somebody has a $1,000 claim that's payable over here, and 20 $800 of it's paid, it'll be the same thing over here. It'll 21 be $1,000 and $800 paid. But it's restructured and re -- 22 and regenerated into something that gets more consumer, I 23 guess, oriented, and something that we've got more control 24 over as far as actual benefit plans on moving forward in the 25 future. HRA accounts are something, again, totally 11-15-04 wk 78 1 flexible. We can design anything we want to, which has 2 actually made it more difficult, because the options are -- 3 are wide-open. You can do it a lot of different ways. But 4 you can also change it. Since there's not a vested 5 ownership in that account, you can make alterations in the 6 account going forward in the future, because it's not 7 vested. You can always adjust and change the plan, which 8 helps us a great deal from a planning standpoint. The HRA 9 concept is probably the one we're seeing the most movement 10 toward, and the reason is because of the -- one, not having 11 the huge out-of-pocket expense by an employee where it 12 becomes strictly a financial decision for the employee and 13 the vested ownership in the accounts. But the -- have you 14 talked about having an employee contribution in the past for 15 the benefit plan? 16 COMMISSIONER BALDWIN: No. 17 JUDGE TINLEY: I don't think -- no, it really 18 hasn't been strongly urged. 19 COMMISSIONER BALDWIN: No. 20 COMMISSIONER NICHOLSON: I -- I think we 21 should. But -- 22 COMMISSIONER BALDWIN: I do too. 23 JUDGE TINLEY: We've got to get them 24 invested, I think. 25 COMMISSIONER NICHOLSON: We want to take care 11-15-04 wk 79 1 of our employees. All five of us agree with that. We 2 want -- I don't want to hurt them in any way. But I think 3 the benefits of -- for example, if we were going to start 4 charging for employee-only insurance, I'd want to give 5 people a pay raise to pay for it. But that's -- 6 COMMISSIONER LETZ: Yeah. 7 MR. LOONEY: Well, the one -- 8 COMMISSIONER NICHOLSON: You get there sooner 9 or later. 10 MR. LOONEY: The one down side to having the 11 employee contribute is that they have the right to waive out 12 of participation. That's the down side to it. So that the 13 base plan that you offer for all employees, and pay for for 14 all employees, that plan should be a lesser benefit plan. 15 And then the HRA account -- 16 COMMISSIONER NICHOLSON: Yes. 17 MR. LOONEY: -- should be a greater benefit 18 plan. As they make contributions to it, they can see the 19 accumulation of the account going forward. And that's 20 probably the primary thing that I'm going to bring back to 21 you, is that, okay, here's the -- here's the base plan that 22 I feel that you should be contributing 100 percent to, and 23 here's a plan that I feel can, by employee contribution, get 24 them with some skin in the game again. 25 COMMISSIONER BALDWIN: That's what we want to 11-15-04 wk 80 1 see. That's what we want to see from you. 2 MR. LOONEY: Yeah. That's basically, you 3 know, what -- that's kind of where I'm headed at this point, 4 you know, with the whole process. 5 JUDGE TINLEY: I think the industry's headed 6 that way. 7 MR. LOONEY: Absolutely. 8 JUDGE TINLEY: And -- and we don't want to 9 unduly penalize our employees, but we want them invested in 10 their own health care system, because I think it stabilizes 11 the cost a little more. 12 MR. LOONEY: Okay. I will get -- I'll get as 13 much information as I can to you on Thursday. And -- 14 COMMISSIONER BALDWIN: I just wanted to say 15 we meet on Monday, and we generally get our packets on 16 Thursday; that because of all that information, we have a 17 couple of days to review and look things over. So -- 18 MR. LOONEY: What time of the day do you 19 usually get it on Thursday? Thursday afternoon? 20 COMMISSIONER BALDWIN: Thursday afternoon. 21 COMMISSIONER LETZ: Thursday afternoon is 22 fine. 23 COMMISSIONER BALDWIN: That's fine. 24 MR. LOONEY: That would help, because we've 25 got our initial exam done now. You know, we've read through 11-15-04 wk 81 1 them all once. We're trying to pull out the ones that just 2 didn't -- didn't meet the qualifications in some way or 3 another. 4 COMMISSIONER BALDWIN: Would it be possible 5 that this thing could boil down to just one or two? 6 MR. LOONEY: Very easily. 7 COMMISSIONER BALDWIN: I can see that. 8 MR. LOONEY: Yeah, very easily. Because a 9 couple of them, I noticed, were pretty highly priced going 10 in as far as admin fees were concerned. They were pretty 11 substantially higher than everybody else. Which would -- 12 you know, unless they were willing to negotiate and bring 13 them down in price. 14 COMMISSIONER BALDWIN: And if I remember 15 correctly, January 1 is D-day? 16 MR. LOONEY: Yeah. 17 JUDGE TINLEY: That's it. 18 COMMISSIONER BALDWIN: Yeah. 19 COMMISSIONER WILLIAMS: Got to be in place by 20 the end of this year. 21 MR. LOONEY: So we definitely -- we need to 22 have something on the agenda Monday for sure. 23 COMMISSIONER WILLIAMS: What about enrollment 24 periods, if we change? 25 MR. LOONEY: It would have to be in the first 11-15-04 wk 82 1 two-week period in December. When does your payroll -- when 2 is the first payroll for January? 3 COMMISSIONER WILLIAMS: 1st and 15th. Or -- 4 COMMISSIONER LETZ: 15th and 30th. 5 MR. LOONEY: So, the first payroll would be 6 15th of January? 7 JUDGE TINLEY: Mm-hmm. 8 MR. LOONEY: Do you withdraw -- or withhold 9 for employees' medical in the December 31st pay check for 10 the month of January? 11 JUDGE TINLEY: No. 12 COMMISSIONER LETZ: No. 13 MR. LOONEY: December 15th -- 14 COMMISSIONER WILLIAMS: I don't know. 15 COMMISSIONER LETZ: We both said no, and 16 then -- 17 COMMISSIONER NICHOLSON: Ask your personnel 18 officer. 19 JUDGE TINLEY: Yeah. 20 COMMISSIONER LETZ: I don't think so, though. 21 COMMISSIONER WILLIAMS: Do we, Kathy? 22 MR. LOONEY: I don't know whether they submit 23 it or whether they take it all first or second. I don't 24 know. What -- you know, we'll have to be sure we match up 25 on the payroll deduction. 11-15-04 wk 83 1 COMMISSIONER BALDWIN: What about enrollment? 2 MR. LOONEY: One of the requirements that we 3 put on the bidders was that they provide enrollment 4 services. 5 COMMISSIONER BALDWIN: They come here -- a 6 human being comes here physically? 7 MR. LOONEY: They will be here, yes. 8 JUDGE TINLEY: Mm-hmm. 9 COMMISSIONER BALDWIN: That's always been the 10 plus of having a local agent, is that he's two blocks from 11 here, and I always felt like that that was a good thing, 12 anyway. But, I mean, really access. 13 MR. LOONEY: Well, your -- your Treasurer 14 feels like that's a major access, too. I think that she 15 depends a lot on him for that type of service. 16 COMMISSIONER WILLIAMS: Mm-hmm. 17 COMMISSIONER LETZ: Were you surprised at the 18 -- I mean, on the -- I guess the variety of agents was -- I 19 mean, there was three. 20 MR. LOONEY: Yeah, I was a little surprised 21 at that. 22 COMMISSIONER LETZ: Wouldn't you expect more 23 agents trying to get this business? 24 MR. LOONEY: Mm-hmm. I was -- I was 25 expecting, you know, somewhere between 12 -- maybe around 12 11-15-04 wk 84 1 proposals overall, so we're a little short on the number I 2 expected. It may be part of -- you know, it may be part of 3 the RFP process, because several of the people that called 4 in wanted to -- wanted to bid, and then reserved the right 5 to change the rates after the bid was set. They actually 6 asked if they could do that. I said no, you know. 7 COMMISSIONER BALDWIN: Seems like I've heard 8 that somewhere before. 9 JUDGE TINLEY: Yeah. Here? 10 COMMISSIONER WILLIAMS: Were the RFP's only 11 published in the local paper? 12 MR. LOONEY: Far as I know. 13 COMMISSIONER WILLIAMS: Might have a little 14 bit to do with it. 15 JUDGE TINLEY: Well, I think you also -- 16 didn't you also -- 17 MR. LOONEY: We got the -- 18 JUDGE TINLEY: -- indicate to some known 19 proposers? 20 MR. LOONEY: We sent it out to every known 21 insurance company. 22 COMMISSIONER WILLIAMS: Okay. 23 MR. LOONEY: Directly. 24 COMMISSIONER WILLIAMS: Okay. 25 MR. LOONEY: We also got a list of people 11-15-04 wk 85 1 that previously bid on it from the Treasurer, and we sent it 2 to them also. 3 COMMISSIONER WILLIAMS: Okay. 4 MR. LOONEY: So, we -- we contacted a fairly 5 large number of people. You know, it's not that you're an 6 undesirable case. 7 COMMISSIONER BALDWIN: Beginning to wonder 8 about that. 9 MR. LOONEY: Yes. That's not the problem. 10 Well, gentlemen, I thank you very much. 11 JUDGE TINLEY: We thank you. 12 COMMISSIONER LETZ: Thank you. 13 MR. LOONEY: I hope it hasn't been too 14 boring. 15 JUDGE TINLEY: Anything but. 16 COMMISSIONER BALDWIN: Let me ask you a 17 question now about Monday's agenda. Do you want to put a 18 specific time for him to be here? 19 COMMISSIONER LETZ: 1 o'clock. 20 COMMISSIONER BALDWIN: Or he can come in at 21 9:00 and sit here till 1:30. 22 JUDGE TINLEY: He was having lots of fun last 23 time, he told me. 24 MR. LOONEY: Yeah, I was enjoying that visit 25 on the Juvenile Detention Center. 11-15-04 wk 86 1 COMMISSIONER BALDWIN: Believe me, it gets 2 old after a while. 3 JUDGE TINLEY: There's going to be some more 4 of that on Monday. 5 COMMISSIONER WILLIAMS: You think 1 o'clock? 6 COMMISSIONER NICHOLSON: Also come back with 7 a solution to that, will you? 8 COMMISSIONER BALDWIN: Yeah. 9 JUDGE TINLEY: We were hoping by dragging you 10 through there, you'd -- you'd have it all figured out for 11 us. 12 MR. LOONEY: I thought we just threw money at 13 it. 14 COMMISSIONER BALDWIN: Yeah, that's what you 15 do. 16 JUDGE TINLEY: You want to just do it at 1 17 o'clock? 18 MR. LOONEY: Whatever's easiest. 1 o'clock's 19 fine. 20 JUDGE TINLEY: Okay. 21 COMMISSIONER WILLIAMS: Works for me. 22 COMMISSIONER BALDWIN: That's fine. I just 23 think it's wise to be -- be specific. 24 JUDGE TINLEY: Okay. 25 COMMISSIONER LETZ: Are we adjourned, Judge? 11-15-04 wk 87 1 JUDGE TINLEY: Well, we're fixing to be. 2 Anything else? We stand adjourned. 3 (Commissioners Court workshop adjourned at 3:30 p.m.) 4 - - - - - - - - - - 5 6 7 8 9 STATE OF TEXAS | 10 COUNTY OF KERR | 11 The above and foregoing is a true and complete 12 transcription of my stenotype notes taken in my capacity as 13 County Clerk of the Commissioners Court of Kerr County, 14 Texas, at the time and place heretofore set forth. 15 DATED at Kerrville, Texas, this 19th day of November, 16 2004. 17 18 19 JANNETT PIEPER, Kerr County Clerk 20 BY: _________________________________ Kathy Banik, Deputy County Clerk 21 Certified Shorthand Reporter 22 23 24 25 11-15-04 wk