1 2 3 4 5 6 7 8 KERR COUNTY COMMISSIONERS COURT 9 Special Session 10 Wednesday, December 1, 2004 11 3:30 p.m. 12 Commissioners' Courtroom 13 Kerr County Courthouse 14 Kerrville, Texas 15 16 17 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 I N D E X December 1, 2004 2 PAGE 3 1.1 Consider, discuss and approve plan design for Employee Health Benefits Program, adoption of 4 Employee Health Benefits Program, and acceptance and award of bid(s) for administration of such 5 program 3 6 1.2 Consider and discuss extension of temporary Lease and Operating Agreement at Juvenile Detention 7 Facility 66 8 1.3 Consider, discuss, and take appropriate action with respect to acquisition of Kerr County 9 Juvenile Detention Facility 66 10 --- Adjourned 83 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 On Wednesday, December 1, 2004, at 3:30 p.m., a special 2 meeting 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: Okay. Let me call to order 7 the special Commissioners Court meeting scheduled for this 8 date and time, Wednesday, December 1st, at 3:30 p.m. It's a 9 few minutes after that now. I appreciate all of you being 10 here. The first item on the agenda is consider, discuss, 11 and approve plan design for employee health benefits 12 program, adoption of the employee health benefits program, 13 and acceptance and award bids for administration of the 14 program. Mr. Looney, our insurance consultant, is here with 15 us today, and I'm going to turn it over to you, Mr. Looney. 16 MR. LOONEY: Thank you very much, Judge, 17 Commissioners. This has been -- it's been an interesting 18 day today. The bidders and the -- and people proposing on 19 the contracts, we were still on the phone with them as late 20 as about 12:30 this afternoon, so after what we call deep 21 negotiations, I guess is what we're dealing with, we had a 22 lot of numbers changed and crunched and had to get them back 23 into -- back into the system. One of the things that -- as 24 a consultant, one of the things that occurs quite often, you 25 get up in front of a large group like this, and those people 12-1-04 4 1 that are proposing, or people that are interested in the 2 program are sitting behind you, so you never really get to 3 see the expressions on their face, or -- or you all reflect 4 what -- what you see them doing back there behind me. So, 5 as a consultant, quite often I stand on the side like this 6 just to look around and make sure that -- that what I'm 7 saying is either being approved or not approved. 8 Keeping that in mind, it's very difficult for 9 someone sitting in the audience also to listen to me tell 10 about their benefit plans and how great they are or how bad 11 they are. I have asked -- see there? I didn't -- but I 12 have asked the two gentlemen that are the final two 13 finalists in this, I've asked them if they would take five 14 minutes or less and just make a brief statement to the 15 Court. That way I won't feel like I'm putting too many 16 words in their mouths, and give you an opportunity to listen 17 to them make a -- a brief statement about their services and 18 capabilities. With that in mind, I'd like to ask 19 Mr. Wallace if he will make a statement. And you -- 20 JUDGE TINLEY: Let me first inquire, if I 21 might, Mr. Looney, there were a total, I believe, of four 22 that were subject to final negotiation and -- 23 MR. LOONEY: There were four. 24 JUDGE TINLEY: -- final and best offer, and 25 you indicated we have two here today? 12-1-04 5 1 MR. LOONEY: We have two. The other two 2 recognize the fact that, after the best and final offer, 3 that their offer was not competitive, and -- and decided not 4 to present. 5 JUDGE TINLEY: They declined to be here 6 today? 7 MR. LOONEY: They declined to present. 8 JUDGE TINLEY: So, they were given the 9 opportunity, but chose not to -- 10 MR. LOONEY: Yes, sir. 11 JUDGE TINLEY: -- avail themselves? 12 MR. LOONEY: That's correct. 13 JUDGE TINLEY: Okay. That's all I needed, 14 thank you. 15 MR. WALLACE: Good afternoon, gentlemen. My 16 name is Don Wallace. I'm with Wallace and Associates. 17 We've been in business for about 17 years. If you'll look 18 in the little folder I gave you, you'll see this little 19 brochure, bifold thing. It gives you some information about 20 Wallace and Associates, who we are, how long we've been in 21 business, gives you a list of the products that we offer on 22 the back over here. We're a full-service benefit agency, 23 and that's our only business is employee benefits. We -- we 24 do group health, group dental, we do 401(k)'s. We also do 25 the supplemental products, heart attack, stroke. We do 12-1-04 6 1 everything that anybody would want far as employee benefits, 2 Section 125 plans. I don't know if you're familiar with 3 those, but we do those too. 4 The one thing that we do for our clients, if 5 you will take this right here out and look at it, for the 6 last two years, the clients that we have acquired in the 7 last two years, we give them a guarantee. We call it a 8 pledge of the services that we're going to give to you. 9 There's no doubt in your mind of what we're going to do for 10 you. We will make personal visits over here at least once a 11 month, or more often as necessary. There's a lot of agents 12 that just call you on the phone every now and then, they 13 come see you once a year or whatever. We guarantee you that 14 we will be here at least once a month, more if necessary. 15 We will return phone calls within 24 hours, usually the same 16 day, to your employees or staff. If they have a claim 17 problem, sometimes it takes a little longer; we will let 18 them know where we are on getting things settled within 48 19 hours. 20 Another thing that we provide -- this 21 guarantee is one thing that I don't know of anybody else 22 that does. We'll give you the guarantee that we'll do the 23 services that we are supposed to. You'll see there we will 24 provide 24-hour access to Wallace and Associates. You can 25 call our 800 number to our office 24 hours a day, seven days 12-1-04 7 1 a week, and you will get a number to page me. You can page 2 me; your employees can page me 24 hours a day. If you look 3 over here on the left, I guess it's your left side, you will 4 see some letters there, and I encourage you to read those 5 letters. Those are letters of recommendation. One of them 6 is Colorado Fayette Hospital in Weimar. We've had that 7 account for three years now. The next one is Austin County 8 and Bellville down by Houston. We have had that account for 9 over eight years. I think it's going on 10 years. And the 10 last letter in there is Wilson County. We've been their 11 agents for 16 years. And I think those letters will tell 12 you what kind of services that we -- we provide. 13 I have two ladies that do the service work 14 for me, Michelle and Minerva. Michelle's been with me seven 15 years. Minerva's been with me about seven months. Minerva 16 does speak Spanish, so if we need Spanish, we can take care 17 of that. Michelle has a degree in health care 18 administration, and she knows her business. And she's very 19 sweet; I have a lot of confidence on her. The last thing 20 I'm going to show you is what we do. If you'll just pass 21 those down to the next person, what I -- what these are, 22 what I call them is agent ID cards. If you look on the 23 back, we provide your employees -- every employee one of 24 these cards. On the back it will have Mutual of Omaha or 25 whoever. It'll have the group number, customer service 12-1-04 8 1 number, all that information. What we do is tell your 2 employees to call these numbers on the back first, try to 3 get your problems taken care of. If you have to hold more 4 than 10 minutes, hang up, turn it over and call us, okay? 5 And if you'll look on the front of this card, 6 you'll see a pager number. You'll see my cell number, 7 Michelle's cell number. You'll see an 800 number to our 8 office. You can get ahold of us. There's an internet where 9 you can get ahold of us by the internet. There's all kinds 10 of ways to get ahold of us 24 hours a day, so -- and we put 11 that in writing in the guarantee. And when we enroll your 12 employees, we tell them don't bother the people here at the 13 County. We get paid to take care of your health insurance 14 problems. We want you to call us, and leave the County 15 people alone; they got other things to do. And we've been 16 doing this for about two years, and it's worked real, real 17 good. Employees love it. The people here at the County 18 will love it, and I think we'll give you excellent service. 19 I do need these cards back, 'cause they have group numbers 20 on them. 21 COMMISSIONER BALDWIN: Oh, come on, man. 22 MR. WALLACE: I don't think the County and 23 the hospital would like you having them permanently. 24 COMMISSIONER WILLIAMS: I was ready to use 25 mine. 12-1-04 9 1 MR. WALLACE: But this is my own little idea 2 of driving up and down the roads doing health insurance, and 3 I think you'll find that we'll give you excellent service. 4 COMMISSIONER WILLIAMS: Is that the card an 5 employee would present to a doctor or the hospital? 6 MR. WALLACE: No, sir, they'll get their 7 regular medical ID card from Mutual of Omaha. 8 COMMISSIONER WILLIAMS: I see. 9 COMMISSIONER BALDWIN: Mr. Wallace, one of 10 the biggest issues to me is the convenience of enrollment. 11 How do you -- how do you handle that? 12 MR. WALLACE: We get with whoever here and we 13 let them help us schedule meetings. Mutual of Omaha has a 14 couple people. I have the two ladies in my office. There 15 will be anywhere from four to six people to come over here, 16 go up to different places -- you know, we can probably do it 17 in a two-day, maybe three day at the most. It just depends 18 on how we can schedule meetings. I know people are 19 scattered out in the county and the county barns. We go to 20 county barns; you know, we can enroll them on the front of a 21 pickup truck or, you know, any -- whatever you want us to do 22 as far as enrollment. We've been at county jails at 23 6 o'clock in the morning when they have shift changes. I 24 left a jail one night around midnight; I made a joke out of 25 it. Somebody said I got out of jail at midnight last night. 12-1-04 10 1 But we're flexible, you know. We have to be flexible, 2 because you got people -- Sheriff's Department with flexible 3 hours, and, you know, we can enroll them in group meetings 4 or we can sit in the jail for half a day and they can come 5 in one at a time, whatever's convenient. 6 COMMISSIONER BALDWIN: We've been spoiled 7 around here with our local agent. 8 MR. WALLACE: Right. 9 COMMISSIONER BALDWIN: To just run up the 10 street and do it. 11 MR. WALLACE: Right, I understand. 12 COMMISSIONER BALDWIN: I think that's kind of 13 important. It's convenience for our employees. 14 MR. WALLACE: I understand. But hopefully 15 we've got some good numbers with Mutual of Omaha, and I 16 think you won't be disappointed with our service. 17 MS. NEMEC: Commissioner, may I ask a 18 question? You had a very good question about enrollment, 19 and I -- and I think we got the answer, as far as the 20 overall enrollment. My concern also is new employee 21 enrollments. Right now, our office does not take care of 22 any enrollments. New employees go strictly to our 23 representative's office, and they do all the enrollment 24 there, and they turn it over to our third-party 25 administrator, and then they just send us an enrollment 12-1-04 11 1 sheet with all the fees, and that's all we input in the 2 computer. So, we are out of the enrollment business, and I 3 am concerned about how these agents are going to take care 4 of new employee enrollments also. 5 COMMISSIONER WILLIAMS: How about information 6 sessions that might be necessary for employee groups if 7 there are -- if there is a change in -- in the benefit 8 structure, all of which needs to be explained? How do we 9 handle that? 10 MR. WALLACE: We can -- 11 MR. LOONEY: Excuse me for interrupting, but 12 it was not intended for these brief presentations to be 13 actual sales presentations. 14 COMMISSIONER WILLIAMS: Oh, okay. 15 MR. LOONEY: It was not -- hopefully, that 16 was not the intent. We really wanted to provide just basic 17 information, because a lot of the questions that Barbara 18 would have and that you have about these are -- are things 19 that I handle in negotiation with the insurance company and 20 the agent themselves, to make sure that the offering that 21 they've made includes these services that you're requesting. 22 COMMISSIONER WILLIAMS: So, at some point 23 you'll answer my question? 24 MR. LOONEY: Yes, sir. 25 COMMISSIONER WILLIAMS: Okay. 12-1-04 12 1 COMMISSIONER BALDWIN: I hope it's not too 2 late. 3 MR. LOONEY: Yes, sir, I will. Mr. Finley? 4 MR. FINLEY: Thank you very much, Judge, 5 Commissioners. We've only been in business 50 years. We've 6 been in the employee benefit business over 30 of those 7 years. And I believe that in our original bids -- and I 8 don't know, Gary, whether the Commissioners Court received 9 any of that information, but we presented our credentials to 10 the Commissioners Court through -- in our original bid 11 packets that give you our services, our time in this 12 community, the letters of recommendation from school 13 districts, Schreiner College, Sid Peterson Hospital, the 14 City of Kerrville and so on. We've handled the County's 15 employee benefit program for eight years now. We've been 16 providing medical insurance, Section 125 oversight. We've 17 literally, as Barbara mentioned a moment ago, taken the 18 County out of the insurance business, or the ad -- or the 19 insurance service business. 20 One of the things that I think is so 21 significant is the fact of our convenience here, and our 22 ability to be able to coordinate with your employees, 23 whether it's an original enrollment or whether it happens to 24 be the new employees that we see one-on-one in helping them 25 coordinate their benefits through their overall benefit 12-1-04 13 1 package. Because, through the County, they have the ability 2 under the Section 125 plan to put money aside for the 3 flexible spending accounts. They have the opportunity to 4 put money aside for child care on a pre-tax basis. If they 5 are involved in -- in paying for day care, anything of that 6 nature, they have the ancillary benefits that are available 7 to them. And when we sit down with your employee, we make 8 absolutely certain that they understand the basic benefit 9 program that is available and provided by the County, and 10 that is the health insurance program, help them make the 11 selection that best fits their particular situation, and 12 then walk them through their involvement in the 125 plan and 13 in the acquisition of any other benefits that may be of 14 interest to them for their family's protection. 15 Now, we -- we have an office two blocks up 16 the street. We're open from 8:00 to 5:00 every day. We 17 have a staff of five people. We are bilingual, which 18 certainly has been of great assistance with a number of your 19 employees over the last several years. But we can meet them 20 early, before office hours begin, or we can meet them after 21 hours by appointment, if that's more convenient for them. 22 The thing I like about our staff is that they're very 23 service-oriented. And, you know, in 50 years in this 24 business, you learn that the key to a successful employee 25 benefit operation, particularly, is service. Instantaneous 12-1-04 14 1 service. We get as many as two and three County employees 2 in our office in a single day sometimes. When you have new 3 employees, they're -- you get the data sheet on them; we 4 make an appointment with them, and the whole thrust of our 5 endeavor is to do that at a minimum of job interruption, 6 because we understand the importance of keeping people on 7 the job and yet getting them properly educated as far as 8 their benefits are concerned. 9 The -- the bids that we submitted are from 10 nearby T.P.A.'s. We have one that was submitted from 11 Boerne, one that was submitted from San Antonio. We can go 12 down and pound on their desk if we don't like the way things 13 are going. You know from past experience that we've had 14 very, very satisfactory claims handling from -- from the 15 existing T.P.A. We have a longtime working relationship 16 with that particular firm. The claims payment situation is 17 one that we can address in our office if people have 18 questions about how claims are paid. If they want to know 19 the answer to a specific problem, we get it for them right 20 away. I think one thing that -- that gives us a dual 21 interest is not only wanting to be of continued service to 22 you, but as an interested taxpayer in Kerr County, I am very 23 definitely interested in seeing that the time that our 24 employees spend on the job and the efforts that they put 25 forth is not interrupted any more than necessary, and that 12-1-04 15 1 the actions of this Court are actions that will be expedient 2 and efficient in every manner as far as the employee benefit 3 program is concerned. 4 JUDGE TINLEY: Thank you. 5 MR. LOONEY: Thank you, gentlemen. 6 (Low-voice discussion off the record.) 7 MR. LOONEY: I'd like to go through the 8 report with you now, gentlemen, if I may. Did you have a 9 question? I'm sorry. 10 COMMISSIONER LETZ: We're just trying to 11 figure out a timing issue. 12 JUDGE TINLEY: We've got a timing issue on 13 another agenda item because of some pretty tight schedules 14 of some of the persons involved, and I don't know what the 15 other members of the Court may want, before we take up the 16 final action on this particular matter. 17 MR. LOONEY: I'm at your disposal if you need 18 to take the other item first, Judge. 19 JUDGE TINLEY: We've got -- we've got some 20 critical time constraints that I'm concerned about, and it 21 may run into a little bit of time. I hate to -- hate to 22 hang you on a hook and -- and put you on the wait, but I -- 23 this other is a pretty critical item, too. If we might -- 24 MR. LOONEY: I assume we're talking about the 25 lease on the juvenile -- 12-1-04 16 1 JUDGE TINLEY: We're talking about the 2 Juvenile Detention Facility. 3 MR. LOONEY: I've been here during that 4 session once before, Judge. 5 JUDGE TINLEY: You did not bring your supper 6 with you, did you? 7 MR. LOONEY: Been here once before. 8 COMMISSIONER BALDWIN: That's what I was 9 going to suggest. See which one of these groups want to buy 10 the pizza for us tonight. 11 MR. LOONEY: I -- I can make my presentation 12 briefer. It's -- 13 JUDGE TINLEY: Well, I'm thinking that we may 14 want to spend as much time as we feel comfortable and 15 necessary with you, and it's for that reason -- I think 16 there may be some threshold issues in this other item, and 17 we either might get through real quick or not so quick, but 18 until we get there, I really don't know, Mr. Looney. 19 MR. LOONEY: Judge, I assume that because of 20 the time constraints on the others, you should take them 21 first. 22 JUDGE TINLEY: I appreciate that, Mr. Looney. 23 COMMISSIONER BALDWIN: Thank you. 24 JUDGE TINLEY: Let me call the next two items 25 together, if I might. Consider and discuss the extension of 12-1-04 17 1 the temporary lease and operating agreement at the Juvenile 2 Detention Facility, and also the third item, consider, 3 discuss, and take appropriate action with respect to the 4 acquisition of Kerr County Juvenile Detention Facility. 5 That last item, of course, I have posted for executive 6 session if it's necessary to go there. Is there a 7 representative of the bondholders here present today? 8 MR. NEAL: Not in an official -- 9 MR. CAWTHORN: There are two bondholders 10 here, but our -- our attorney's not represented, nor the 11 trustee. 12 COMMISSIONER BALDWIN: Should we go to 13 insurance? 14 JUDGE TINLEY: Were you expecting -- were you 15 expecting those individuals, either one of them, to be here 16 today? 17 MR. CAWTHORN: No, sir. 18 MR. NEAL: No, sir. 19 JUDGE TINLEY: Okay. Looks like we'll defer 20 on that and come back to insurance, then. Mr. Looney? 21 You're back up. 22 MR. LOONEY: I'm back. 23 JUDGE TINLEY: Excuse the interruption. 24 MR. LOONEY: Let me see if I can remember 25 where I was. It's been two minutes. 12-1-04 18 1 COMMISSIONER WILLIAMS: We haven't started 2 yet. 3 MR. LOONEY: If it's been two minutes, I have 4 to be retrained. Let me go through the -- 5 COMMISSIONER BALDWIN: What the hell just 6 happened? 7 SHERIFF HIERHOLZER: I think it's safer to 8 stay in here right now. 9 COMMISSIONER BALDWIN: Do you have your gun 10 with you? 11 SHERIFF HIERHOLZER: I'm staying in here. 12 MR. LOONEY: Not really positive what just 13 happened, but thank you, Judge. The reason I asked the two 14 gentlemen to make statements in front of the Court, 15 obviously, is because there's an incumbent agent that has 16 been servicing your account for some time, and I didn't want 17 anyone to assume that, as a consultant, that it was just 18 arbitrary and automatic that I come in and make changes and 19 anything, and just -- so I have to take a very empirical 20 view, though, of the bids and the information as it comes in 21 and relay that to you, and that's what I will do. We bid 22 the contract out, as y'all are aware. We bid it for 23 third-party administration services. We bid it for stop 24 loss insurance and underlying insurance coverage for the 25 specific and the aggregate stop loss coverage, and we looked 12-1-04 19 1 at the group term life insurance products that are being 2 offered as part of your program. 3 The bids that we received, we had four 4 finalists that we looked at and asked for additional 5 information. Currently, under your current plan, under Tab 6 1, is kind of a summary of benefits under Tab 1, the way it 7 exists today. You have the three different plans that are 8 being offered; A, B, and C, variations in deductibles, 9 variations in out-of-pocket maximums, variations in the 10 percentage of -- of reimbursement provided by the insurance 11 company. Those plans are being offered with the County 12 providing 100 percent premium coverage for the more 13 expensive plan, which is Plan A, and the employees being 14 given the option to choose either Plans B or C and use 15 credits towards those premiums as a result of credits being 16 generated. Currently under Plan A, 63 percent of the 17 employees, 29 percent in Plan B, and 8 percent in Plan C. 18 And hopefully that adds up to 100 percent. 19 The current plan, as I stated, is Plan A. 20 There is 100 percent contribution for the employee by the 21 County. We had -- we bid that current plan, and we 22 requested information from the insuring companies and the 23 T.P.A.'s to quote on that plan with that benefit structure, 24 using the experience that had been generated by your plan 25 over the past two years, and even two and a half years. The 12-1-04 20 1 bids that we received are shown on the spreadsheet under Tab 2 2, and under Tab 2 it indicates that -- I need my glasses on 3 to be able to read the numbers. Insurance -- in insurance, 4 you learn how to read upside down, and typically you learn 5 how to read very, very small print. But, in an attempt to 6 get it all on one page -- we put it all on one page. 7 The bids that you see here are based on a 8 contract that's somewhat different than the current stop 9 loss contract that you have in force. You currently have a 10 12/12 contract, as we discussed in our -- in our brief 11 training session. That means that claims incurred in a 12 12-month period then must be paid in a 12-month period to 13 fall under the reinsurance for the specific and for the 14 aggregate accumulation process. The bids that I have 15 requested and the bids that are priced here are based on a 16 15/12 contract, which means that claims incurred during the 17 last 90 days of the year will go forward and be used as a 18 credit against any specific or aggregate losses that are 19 incurred during the next 12 months following the end of this 20 plan year. On the 15/12 contracts, the bottom lines, you 21 can see down at the very bottom there's a maximum claim cost 22 including the fixed cost. The -- the categories are listed; 23 total fixed -- expected claims cost excluding fixed, maximum 24 claims cost excluding the fixed cost, and then expected 25 claims cost and maximum claims cost including fixed costs. 12-1-04 21 1 The reason we categorized it in that manner 2 is that the insurance companies and the stop loss carriers 3 give us a factor. We multiply that factor times the number 4 of employees on a monthly basis, and then we take that to a 5 calendar year projection of what the maximum claim cost 6 would be for your plan under the plan design as presented. 7 And all that means is that the actuaries have looked at the 8 past histories. The stop loss carriers have looked at it, 9 and they say going forward into this next year, assuming 10 that you again have the 15/12 policy in force, that the 11 maximum claims liability is based on a population of 265 12 employees -- and that will change monthly based on 13 fluctuations in employment. But, based on that population, 14 then these are the projected numbers under the bid process. 15 COMMISSIONER LETZ: Mr. Looney, can you go 16 over, I mean -- 17 MR. LOONEY: Would you like each category? 18 Each line? 19 COMMISSIONER LETZ: Well, I guess to make 20 sure I understand what I'm looking at, explain the total 21 fixed -- the total annual costs. I mean, what is the total 22 cost to the County? 23 MR. LOONEY: The total maximum liability is 24 the number that says maximum claim costs, including fixed 25 costs, which is the bottom -- 12-1-04 22 1 COMMISSIONER LETZ: The bottom number? 2 That's the maximum that it can cost the County? 3 MR. LOONEY: That's the maximum claim cost 4 for the County during that time frame. The maximum claim 5 cost, if you'll recall our meeting -- and I really don't 6 expect you to, so let me refresh your memory. When we 7 talked about the aggregate maximum, we talked about all of 8 those claims underneath the specific deductible that 9 accumulate during that time frame that we identified, and 10 the insurance industry, as part of their insurance process, 11 will typically insure for that maximum loss. Well, they're 12 not going to insure for the exact amount of the loss; they 13 insure for what their estimated loss is, plus a corridor. 14 Plus a certain percentage. And then they charge a premium 15 for that loss in excess. The maximum loss is based on, 16 again, the factor that they give us, and then times the 17 number of employees, population. 18 The expected claim cost is what the 19 actuaries, with their Kentucky windage, say this is what we 20 really think it's going to be, but we're not going to insure 21 you for that; we're going to insure you for a percentage 22 greater than that. Because if we insured you for the exact 23 amount, it wouldn't be insurance any more. So, there's got 24 to be a corridor in there, and you pay a premium for that -- 25 that differential in expected and maximum costs. And, 12-1-04 23 1 typically, the cost for that -- that aggregate insurance is 2 -- is relatively small. It's not typically a very big 3 number, because insurance companies really don't expect you 4 to get there. They expect you to be less than that. So, 5 when we do our rating structures, when we do our comparison, 6 we give you the expected, and we also give you the maximum, 7 and the expected is typically a percentage of the maximum. 8 And that percentage in this case is 75 percent. Yes, sir? 9 COMMISSIONER LETZ: One more question. The 10 -- you said it was 265 employees? 263? What, 265? 11 MR. LOONEY: 265. 12 COMMISSIONER LETZ: Barbara, is that what we 13 -- is that the maximum? Is that if you're fully employed, 14 what our employee amount is? 15 MS. NEMEC: Yes, that's without the Adult 16 Probation. Adult Probation used to be on our census, but 17 they've gone with their own state insurance, so that is 18 with -- 19 COMMISSIONER LETZ: So that number is based 20 on -- 21 MS. NEMEC: -- everybody participating. 22 COMMISSIONER LETZ: -- everyone 23 participating, but everyone being 100 percent staffed? Or 24 is that based on what we currently have right now? 25 MS. NEMEC: That's currently. 12-1-04 24 1 COMMISSIONER LETZ: What we currently have. 2 And if we also have a percentage, you know -- okay. 3 MR. LOONEY: Depending on how you do your 4 funding, Commissioner, whether you're funding toward 5 position or actual number of people insured. 6 MS. NEMEC: Number of people. 7 MR. LOONEY: Number of people insured. 8 COMMISSIONER LETZ: Right. I guess my point 9 is that if we ever got to the point of being 100 percent 10 filled, all the positions, the number -- or the cost is 11 going to go up to us, because this is based on something 12 less than that. 13 MR. LOONEY: Everything is based on that -- 14 that population and the number of insured during the time, 15 and it's done on a monthly basis and then aggregated over a 16 year. 17 COMMISSIONER LETZ: Okay. 18 MR. LOONEY: So, it potentially could go up, 19 but we did take into consideration the Adult Detention being 20 moved out of the census information. 21 COMMISSIONER LETZ: Okay, thank you. 22 MR. LOONEY: Yes, sir. 23 COMMISSIONER WILLIAMS: Just a couple quick 24 questions. Under specific lifetime maximum reimbursement, 25 three of them, Columns 1, 2, and 3, are a million. Column 4 12-1-04 25 1 is 960. 2 MR. LOONEY: The maximum -- or the specific 3 deductible is 40,000. 4 COMMISSIONER WILLIAMS: Okay. 5 MR. LOONEY: And that 40 is self-insured by 6 the County. 7 COMMISSIONER WILLIAMS: Okay. 8 MR. LOONEY: So the actual liability or 9 actual obligation under the plan is only 960,000 for the -- 10 an individual that hits their maximum under the benefit plan 11 itself. 12 COMMISSIONER WILLIAMS: Okay. Under specific 13 contract, it looks like three of them are 12/12, as you 14 stated, and one seems to be a 12/15. 15 MR. LOONEY: They are -- the 12/15 contract 16 is essentially the same contract they gave us, 12/15 or 17 15/12. They're the same numbers, which were high. 18 COMMISSIONER WILLIAMS: Okay. Maximum 19 aggregate run-in. There's no entry for three -- Columns 1, 20 2, 3, but there is a $226,750 entry in Column 4. 21 MR. LOONEY: If you'll look up at the top, I 22 believe it says that the estimated run-out claim liability 23 is up in the -- the fourth entry in the column. 24 COMMISSIONER WILLIAMS: Mm-hmm. 25 MR. LOONEY: That maximum run-out claim 12-1-04 26 1 liability, that includes claims paid that were incurred 2 during the last 90 days of the year, plus the admin expense 3 to pay those claims. 4 COMMISSIONER WILLIAMS: Mm-hmm. 5 MR. LOONEY: That $145,000 number is what we 6 estimated. The estimations by Mutual of Omaha as part of 7 their contract was to allow up to 200, I believe -- 8 COMMISSIONER WILLIAMS: 260 -- 226. 9 MR. LOONEY: $226,000 to apply against the 10 aggregate reimbursement for the next plan year. 11 COMMISSIONER WILLIAMS: In the event there 12 were claims greater than anticipated? 13 MR. LOONEY: Those are the claims that would 14 be incurred prior to January 1st. And, as I said, our 15 estimation is approximately 145,000, and they allow 16 accumulated claims to apply against the aggregate for the 17 next year to a maximum of 226. 18 COMMISSIONER WILLIAMS: Thank you. 19 MR. LOONEY: The -- as you can see, 20 gentlemen, by the -- the bids that we received, the Mutual 21 of Omaha contract for their maximum out-of-pocket exposure 22 is at $1.673 million, and that is using the current plan of 23 benefits. The next closest bid is 2,073,000. So, at this 24 point, using that as a reference, then that would take care 25 of the first obligation under the bid specifications, which 12-1-04 27 1 was to examine the current plan of benefits in relationship 2 to renewals, in relationship to additional bids that were 3 taken in. At that point, strictly on a cost basis, the 4 Mutual of Omaha cost is a better cost basis than the renewal 5 and the other bid information. 6 Now, the other thing that we did also, as 7 y'all know, is we looked at the health reimbursement 8 accounts. The health reimbursement account, as we discussed 9 in our meeting, is the change in the employee attitude and 10 change in the plan design, and a great deal of change that 11 takes place in instituting the HRA accounts. We also asked 12 for the individual bidders to give us quotations on the 13 factors necessary to add an HRA account, or to actually 14 change the entire plan of delivery from the current three 15 different plans to a new style of plans which has two 16 different plan designs. And, Mr. Williams, at this time 17 it's not a working copy; it's more of a sample, and that's 18 under Tab number 3. This is a plan design sample on the HRA 19 account. 20 The way the HRA account would be designed 21 initially is to closely mirror what the benefit plan is that 22 you have in effect today for Plan A. The difference is in 23 the methods of which the benefits are delivered to the 24 employee. Currently you have a $400 deductible. You have 25 co-payments that are made to physicians' offices for 12-1-04 28 1 services, and then a list of benefits, as I showed you under 2 the Tab 2. Under the HRA account, what we do is we change 3 the deductible and we move the deductible to a much higher 4 deductible; in this case, $1,000. We move the deductible to 5 $1,000, and then we create an HRA, health reimbursement 6 arrangement, which allows the employee a $600 credit to be 7 used on their benefit plan during the calendar year. That 8 $600 credit can be used to offset deductible expenses, it 9 can be used to offset co-insurance expenses. So that, in 10 effect, by using that $600 benefit, they can then reduce 11 their deductible obligation back to where it is today, or 12 that $400 deductible level. 13 We included and still maintained in the plan 14 a co-payment to the doctor's office; however, we did 15 increase those. We looked at the plan design, and currently 16 you have a $300 supplemental accident benefit, which is a 17 relatively old benefit in a lot of plans, and we asked that 18 -- or in our demonstration, in the information we asked from 19 the proposers, we took that out. We removed that $300, 100 20 percent benefit. That doesn't mean that they can't receive 21 $300 of benefit in case of an accident. Actually, they can 22 receive up to $600 of benefits after an accident. It comes 23 out of that health reimbursement arrangement, as opposed to 24 being paid directly by the insurance plan itself. They 25 still can receive the benefit, even up to $600, but when 12-1-04 29 1 they start using that benefit, it comes out of that $600 2 HAR -- HRA arrangement. I'll let Mr. Williams -- you 3 wrinkled your eye there. Did you follow that? 4 COMMISSIONER WILLIAMS: I'm still with you. 5 MR. LOONEY: Okay. 6 COMMISSIONER BALDWIN: I'm not. 7 MR. LOONEY: No, I -- 8 COMMISSIONER BALDWIN: The -- where does 9 the -- that $600, where does it originate? 10 MR. LOONEY: $600 is an account -- an 11 arrangement, excuse me, as we say, that at the beginning of 12 the year, you give an employee a credit for that amount of 13 money. They have that $600 credit. Now, there's a number 14 of ways that that credit can be allowed. That credit can be 15 allowed $150 quarterly. It can be allowed based on 16 seniority. You can allow the credit to be based on years of 17 service, have the whole $600 up front for people that are 18 currently enrolled. There's a lot of different ways you can 19 allow that credit to be provided to the employee. 20 Typically, what we do in today's situation, when you're 21 making an immediate change, is we give the $600 credit 22 immediately to any employee, any dependent insured under the 23 plan, each dependent separately under the plan, so that 24 there is a $600 obligation per employee at that point that 25 can be used to offset medical expenses that they have as a 12-1-04 30 1 result of co-insurance or deductible expenses. It does not 2 include reimbursements for co-payments for physician office 3 visits, nor does it include co-payments for prescription 4 drugs. It has to be an eligible benefit under the plan to 5 be reimbursed. That's -- it's what we call a linked 6 program. It means that first the adjudication of the claim 7 is made, and if there are expenses applied to the 8 deductible, then the employee actually can choose as to 9 whether or not they want to use that $600 credit that they 10 have against that payment. 11 COMMISSIONER WILLIAMS: Is that a use-it or 12 lose-it concept, or does it roll over? 13 MR. LOONEY: No, sir, it can roll over, and 14 the recommendation is that it rolls over to the point where 15 the maximum rollover is equal to the maximum out-of-pocket 16 expense that an employee might incur should they have a 17 catastrophic illness. The maximum out-of-pocket exposure is 18 the deductible plus the co-insurance activators that the 19 individual pays. The 10 percent of the bill that is not 20 paid by the insurance, that 10 percent co-insurance that's 21 paid by the employee. Once that number plus the deductible 22 reaches $3,000, then 100 percent of claims are paid for that 23 individual for the balance of that calendar year. So, 24 rolling the $600 over, we'd be able to roll over to the time 25 when it reached $6,000, which would take five years. 12-1-04 31 1 COMMISSIONER LETZ: Mr. Looney, just to make 2 sure I under -- I'm understanding how that would work, is 3 that if you have a healthy employee who doesn't use any -- 4 go to the doctor, doesn't use any of the policy, which is, I 5 think, a pretty high percentage of our employees, and we 6 rolled it over, from the second year on they could -- they 7 would have no -- I mean, they basically apply the full 8 credit to the first deductibles? 9 MR. LOONEY: They could. 10 COMMISSIONER LETZ: So, in Year 2, instead -- 11 they wouldn't have any deductible. If they used it, you 12 know, got up to what it would have been, a $1,000 13 deductible. 14 MR. LOONEY: That's correct. But they only 15 have that $1,000 -- they have a $1,000 limit. 16 COMMISSIONER LETZ: Right. Then this next 17 year the limit goes down to only having 200 in their 18 account, so -- 19 MR. LOONEY: Right. But, you know, there's a 20 number of ways to impact or affect that accumulation. 21 COMMISSIONER LETZ: And the -- and the reason 22 that this is attractive to us as the employer is because 23 we're raising the deductible, and since most employees don't 24 use the health insurance, that we're insuring -- you know, I 25 guess it's costing us a lot less to get this insurance? 12-1-04 32 1 MR. LOONEY: It's costing us somewhat less. 2 But the way the plan design is right now, because we're 3 trying to keep this Plan A roughly equivalent to the new 4 plan going forward, there's not a lot of -- of savings 5 generated at this point. What happens is that, moving 6 forward in the future, you get a lot more flexibility in the 7 plan design utilizing the health reimbursement account, as 8 far as being able to adjust that on an annual basis and 9 being able to give credits going forward. Plus the fact 10 that an employee who is making a contribution toward the 11 plan that has no use of the plan currently, is not using it, 12 they feel like they're in a use-it or lose-it position, 13 because they're paying premiums and not really receiving any 14 benefit under the plan. Because they're not sick or 15 unhealthy or whatever, which is great, but their premiums 16 are then expended, and there's no credit given forward. 17 Using the HRA account, they feel like there is some 18 ownership in that account going forward, that they can -- 19 which hopefully adds to consistency in employment, because 20 the employees, if they terminate, there is no ownership in 21 that account. It is not a vested account. So, an HRA 22 accumulation is strictly for an employee while they work 23 here at the County. 24 COMMISSIONER NICHOLSON: Mr. Looney, if we 25 implemented an HRA, and three years down the road we were 12-1-04 33 1 looking back at our experience with it, what kind of things 2 would -- what kind of things would we say were the benefit 3 of having done that, and what kind of concerns or 4 reservations about it will we have? 5 MR. LOONEY: The HRA account, from a concerns 6 standpoint -- from a budget standpoint, is that when you 7 have those accumulations moving forward into the employee's 8 account, you have to be aware of a low liability that exists 9 for those employees, because currently you don't have 10 anything being carried forward. That carry-forward 11 exposure, though, is really only up to the maximum of what 12 the maximum out-of-pocket exposure is for the employee under 13 the health plan, because the insurance program underlying 14 that is going to pay 100 percent of maximum out-of-pocket 15 expenses at some point. So, your maximum liability during 16 any one given calendar year is going to be up to what the 17 employee maximum out-of-pocket exposure is under the plan 18 itself. So, that's one concern that employers have, is that 19 cumulative effect going forward. 20 The -- the negative side of the program, you 21 know, we have not had, really, a whole lot of experience 22 under health reimbursement arrangements. They've been 23 around for 18 months to 24 months now. Most of the reaction 24 -- negative reaction has been from the employees not 25 understanding how the plans work. That they -- quite often, 12-1-04 34 1 when the HRA account is presented, they have a $1,000 2 deductible, and it's a reimbursement, so they are requested 3 to make a contribution or payment up front, where in the 4 past they may not have. Now they have to make a payment up 5 to that $1,000 and then be reimbursed for that. Now, one of 6 the things that the insurance industry has done to offset 7 that is they've created a debit card that can be, you know, 8 provided to employees which, in a sense, is a credit card 9 with a limit of $600. And that can be provided to employees 10 so that they don't have that out-of-pocket cost up front. 11 And when that card is swiped, it's automatically -- goes 12 into the claim function, and then is deducted and shown as a 13 deduction against that deductible. And it also shows that 14 deductible. 15 COMMISSIONER LETZ: Another question -- when 16 you said that, something else came into my mind. So, am I 17 looking at this wrong, that if you give the credit, they can 18 use the $600 credit first and then use -- get a $400 19 deductible? 20 MR. LOONEY: That's correct. 21 COMMISSIONER LETZ: So, really, the employees 22 are a lot better off. 23 MR. LOONEY: They're better off, because they 24 have more first-dollar coverages if they want to use it in 25 that manner. 12-1-04 35 1 COMMISSIONER LETZ: Both of the people that 2 -- or whatever you call -- the agents, whatever, offer a 3 debit card? 4 MR. LOONEY: Yes. 5 COMMISSIONER LETZ: I didn't -- not sure 6 that's what I'm looking for. 7 COMMISSIONER WILLIAMS: If an employee used 8 that $600 judiciously throughout the course of a plan year, 9 he really wouldn't feel the impact. 10 MR. LOONEY: They'd have very little. 11 COMMISSIONER WILLIAMS: It would be minimal. 12 MR. LOONEY: Be very minimal. Remember, now, 13 it doesn't apply to co-payments. 14 COMMISSIONER WILLIAMS: I understand. 15 MR. LOONEY: Or to prescription drug 16 payments, so those payments would still be out-of-pocket 17 expenses for the employee. And we did increase the 18 physician office co-payment under this sample plan that we 19 have. The -- the health reimbursement account, if it's not 20 done this -- oops, excuse me -- if it's not done this year, 21 most likely it will be done next year or the year after, 22 because these are -- these are the way -- this is the way 23 that health care is going to be delivered in the future. 24 There's going to be more responsibility on the consumer to 25 actually identify what the cost is and what the cost of the 12-1-04 36 1 plan is. And, by seeing this deduction occur, this 2 reimbursement occur, that's an educational process in itself 3 for the employee. 4 COMMISSIONER NICHOLSON: I would expect, 5 regardless of what a good job we did of educating people 6 about this, that first year, we'd probably have a pretty 7 small number of participants. 10 percent, 20 percent, 8 maybe? 9 MR. LOONEY: That would participate? No, 10 sir. It's recommended that this plan be the primary plan 11 that the County offers to employees. This is not a health 12 savings account. This is -- 13 COMMISSIONER NICHOLSON: I understand the 14 difference. So, you're saying that you think a large 15 percentage of our employees would enroll? 16 MR. LOONEY: This would be the primary policy 17 offered to employees by the County, paid for by the County. 18 COMMISSIONER LETZ: This would be -- 19 COMMISSIONER NICHOLSON: This would be -- 20 COMMISSIONER LETZ: This is the plan? 21 MR. LOONEY: That would be the plan. It is 22 an option. 23 COMMISSIONER NICHOLSON: That solves a lot of 24 problems. 25 MR. LOONEY: It is an option to the -- to the 12-1-04 37 1 point where there is a second plan that is being offered, 2 which is a buy-down plan, which is similar to the buy-down 3 circumstance that you have currently, B and C. The Plans B 4 and C really have not much differential in their benefits 5 currently, and you can -- you know, you can see that. So, 6 they do, though -- there are some employees that wish to 7 have maybe a different plan, different style of plan, and 8 this plan under Tab 5 would be that second plan. It's -- 9 it's an 80/60 plan; it's got a higher deductible. 10 One of the things that I failed to mention a 11 while ago that -- that is not going to be carried forward -- 12 or under my sample, anyway, would not be carried forward, is 13 the deductible that is credited during the last 90 days of 14 the year. It's called the deductible carry-forward. The 15 deductible carry-forward has a lot of different definitions, 16 but typically, if you satisfied a percentage of your 17 deductible, but not the entire amount of the deductible, and 18 that percentage is satisfied in the last 90 days of the 19 year, then that's carried forward to satisfy the deductible 20 going forward. With the $600 HRA account, that's not 21 really -- combining those two together really wouldn't be 22 functional, so we prefer to have the HRA account be that 23 carry-forward against that deductible. 24 Same thing under the second plan, is that 25 they've eliminated some of those benefits. We've kept in 12-1-04 38 1 the plan, though, wellness benefits, kept in the plan 2 accident -- emergency care benefits, and have also put into 3 the plan document an out-of-network benefit program. If you 4 have an employee that lives outside the area and is not able 5 to access a P.P.O. network that's provided for you in this 6 area, and there's none in the area that they live in, then 7 there's a benefit plan design for them in case there's -- 8 those situations occur. We've also looked at the 9 prescription drug program. We've made some -- some minor 10 changes in that area as far as co-payments are concerned. 11 Also, looking at a more restricted formulary. And I can 12 tell you about that in just a second. 13 COMMISSIONER LETZ: Mr. Looney? 14 MR. LOONEY: Yes, sir? 15 COMMISSIONER LETZ: I think maybe you said 16 this, and I was trying to read ahead and didn't hear what 17 you said. On the Tab 5, where the deductible goes to -- up 18 to 1,500 -- 19 MR. LOONEY: Yes, sir? 20 COMMISSIONER LETZ: Does the credit go up or 21 credit stay the same at 600? 22 MR. LOONEY: There's no health reimbursement 23 account under that plan. 24 COMMISSIONER LETZ: Oh, okay. See? I didn't 25 pay attention. 12-1-04 39 1 MR. LOONEY: That's all right. 2 MS. NEMEC: I have a question, Mr. Looney. 3 In our present plan, they have A, B, or C. If they take B 4 or C, then the County -- 5 MR. LOONEY: Gives a credit. 6 MS. NEMEC: -- gives them a credit towards 7 their AFLAC or Flex One account. Is that not going to -- no 8 longer be an option if we change to this benefit? 9 MR. LOONEY: It would still be an option, 10 because the benefit plan that would be provided by the 11 County would be of a greater expense than the benefit plan 12 under the optional plan, so there would be a credit 13 generated for that, but it would just be the -- the credit 14 based on that plan design. And that's one of the things 15 that -- that we need to determine, is what that cost shift 16 is going to be in relationship to the overall cost to the 17 County. As I understand it, I've got the numbers now as to 18 what the employees are currently paying for those other 19 plans. And if -- if a change were to be made, you know, we 20 would adjust the funding -- my recommendation, which was -- 21 didn't make the final copy today, but my recommendation was 22 going to be to increase the employee contribution level by 23 anywhere between 4 and 5 percent, somewhere in that 4 to 24 5 percent range on the employee contributions for their -- 25 for their plan. That -- again, that's a number that, late 12-1-04 40 1 this afternoon, we were working with, and so I don't have it 2 under -- it states that I've got it under Tab 4 here, but I 3 don't have that distribution of the premium as far as the 4 individual premium cost. I do have a gross cost, but not 5 the individual premium cost. In relationship to the bids, 6 then, under Tab 2, the second page under Tab 2, we went 7 through the -- 8 JUDGE TINLEY: Let me -- before you get 9 there, Mr. Looney, the basic life -- that's the add-on 10 there -- is under Tab 6; is that correct? 11 MR. LOONEY: Yes, sir. 12 JUDGE TINLEY: And -- 13 MR. LOONEY: If you'd like to go over that -- 14 I can go over that real quickly, if you like, Judge. 15 JUDGE TINLEY: That's part of the fixed plan, 16 though, isn't it? That portion of it is part of the fixed 17 plan that's -- 18 MR. LOONEY: Yes. 19 JUDGE TINLEY: -- been presented? 20 MR. LOONEY: Right. Under the -- under the 21 life insurance that was bid also, I can go over that pretty 22 quickly, if you'd like. Let me go back, though, and finish 23 the -- under Tab 2. 24 JUDGE TINLEY: Okay. 25 COMMISSIONER WILLIAMS: Tab 2? 12-1-04 41 1 MR. LOONEY: Tab 2. The first page is the 2 spreadsheet on the current plan of benefits. Page 2, the 3 second page, is the spreadsheet assuming using a health 4 reimbursement arrangement. The health reimbursement 5 arrangement, again, the two final finalists are your current 6 incumbent carrier, and then Mutual of Omaha, based on their 7 information. The differential in cost is shown here. The 8 total maximum claim cost, including fixed costs, for Mutual 9 of Omaha is 1.632, and the maximum E.B.A. cost is 1.944. 10 Again, that is a maximum exposure expense. The other two 11 bidders that -- that offered bids were substantially higher 12 than those two numbers. 13 The costs -- to go through the costs, the 14 specific stop loss premium as presented by E.B.A. is 15 $216,000, whereas the Mutual of Omaha is 139,220 for the 16 $40,000 specific on a 15/12 basis. The aggregate stop loss 17 premium is 17,000. American United Life was the reinsurer 18 that was offered by E.B.A., and that number is also included 19 there, 17,744, and the 13,706 from Mutual of Omaha. E.B.A. 20 offered a number of different varieties of -- of plan 21 options, plan designs, including aggregating specific 22 contracts, including other distributions of 12/12, a lot of 23 different options under that. These two options compare 24 apples to apples, as far as the two options are concerned. 25 This is the option that I would recommend -- 12-1-04 42 1 that I recommend going forward, which is the 15/12 contract, 2 using set specific and aggregate attachment points. The 3 numbers where it says -- right above aggregate factors, 4 where it says total per employee, those are the admin costs. 5 The $17.75 factor by E.B.A. does not include the disease 6 management offering that they have made under Option 1, so 7 that dollar that's shown up there is not included in that 8 17.75. Under the Mutual of Omaha accumulations, as you can 9 see, down at the bottom where it says total annual costs, 10 there's a comparison between the disease management cost of 11 the two organizations and the U.R., P.P.O., COBRA, and those 12 numbers. Based on empirical numbers, based on the 13 distribution of the costs as presented by the insurance 14 company, Mutual of Omaha has the better bid, as far as the 15 specific aggregate and the administration charges overall. 16 Some of the things that Mutual offers, they 17 do offer online web assistance as part of their package, so 18 that individual employees who want to track the amount 19 that's in their reimbursement account can do so. It's 20 included in that. E.B.A. has it as an option, but it was 21 not included in their fixed costs. So, the second part of 22 it was the life insurance portion of it. Currently, the 23 insurance -- life insurance is $10,000 per employee -- per 24 active employee. Those numbers, as -- the face amount of 25 that insurance policy is reduced, based on the age under the 12-1-04 43 1 A.D.A. regulations, and under Tab 6, you'll see the life 2 insurance proposals as being made from the different 3 companies. 4 Based on the information received under group 5 term life, the current rate is 25 cents per employee, plus 4 6 cents for accidental death and dismemberment, for $10,000 of 7 life insurance coverage. The proposal from Mutual of Omaha, 8 again, is the lowest number on the life insurance proposal. 9 It has a three-year rate guarantee. They have conversion 10 privilege, accelerated death benefit, disability premium 11 waiver, not -- travel assistance program was not in the 12 presentation itself, and it does -- it's not a portable 13 benefit. But, based on the Mutual of Omaha presentation, 14 if, in fact, the County wanted to increase the employee 15 coverage from $10,000 to $20,000 -- $10,000 is really a 16 number that most insurance companies don't even offer any 17 more. If we were to ask for a new -- a new company for 18 $10,000 of life insurance, they wouldn't even offer it to 19 us. $20,000 is a -- is still almost a bare minimum. 20 Because of the rate change, increasing from 10,000 to 21 20,000, we'd have a net premium effect of only about $4,000 22 per year on the total cost of the plan. 23 COMMISSIONER LETZ: What is standard -- more 24 standard, say, $20,000, low end? 25 MR. LOONEY: More standard is -- actually, is 12-1-04 44 1 one times annual salary, to a maximum of $50,000. That's 2 typically standard. And that's the result of the I.R.S. 3 regulations that allow an employer to take full tax 4 deductions for any premium that's paid on behalf of an 5 employee up to $50,000. And then anything in excess of 6 that, the employee would have to be charged a certain income 7 tax as a result of a benefit provided by an employer. So, 8 most employers will provide one times salary up to $50,000 9 amount. 10 COMMISSIONER WILLIAMS: What would the rate 11 be for that? 12 MR. LOONEY: I can find out. I didn't have 13 all the salary information on all the employees. It's a 14 fairly -- relatively easy calculation once we know what the 15 volume of coverage would be, and I'll be glad to get that 16 for you. 17 MS. NEMEC: I'd like to remind the Court that 18 we do have that benefit through our retirement system that 19 was just adopted last year, where they have a death benefit 20 that if they do pass away, they get their retirement 21 benefits plus a one-time deposit to their beneficiary that 22 equals their annual premium. 23 MR. LOONEY: Do you know if that's -- if it's 24 insured, or is it just an equivalent of the total 25 accumulation? 12-1-04 45 1 MS. NEMEC: I'm not sure. All I know is 2 that, you know, if somebody makes $20,000, then the 3 retirement system gives them their benefits plus an 4 additional $20,000. It's whatever their annual salary is. 5 MR. LOONEY: If it's a straight reimbursement 6 based on the total accumulation account, it doesn't fall 7 under the -- the restriction of the $50,000, but if it's a 8 fully-insured amount that's provided by an employer, then it 9 would fall under that $50,000 limitation. That's something 10 that we can find out. 11 MS. NEMEC: Okay. 12 MR. LOONEY: For sure. So, based on the -- 13 on the information that we have -- that I have, based on the 14 bids that have been presented -- Mr. Williams, you had asked 15 the question about enrollment, and one of the things that we 16 have discussed with Mutual of Omaha is the ability for them 17 to provide additional assistance during an initial 18 enrollment, as to whether they would have a sufficient 19 number of individuals -- should a change be made, would they 20 have a sufficient number of staff to be able to access all 21 employees in the county on the short term, because we have 22 between now and the end of the year to complete an 23 enrollment. Actually, probably about a two-week period, 24 starting as early as next Monday. Mutual of Omaha produces 25 information and can produce information to be provided to 12-1-04 46 1 employees concerning their HRA accounts and how they're 2 accumulated and how they work. Regardless of whether you 3 change or not, that educational process is going to have to 4 take place. The employees -- if you change to the health 5 reimbursement account, there needs to be an educational 6 process for the employees. 7 COMMISSIONER LETZ: Seems that -- I mean, 8 first thing we need to decide is if we're -- I mean -- well, 9 I don't know if it's first, but I, personally, would like -- 10 I like the HRA accounts. I like going that direction. 11 JUDGE TINLEY: That's where the industry's 12 going. 13 COMMISSIONER LETZ: I think it's good for the 14 employees. I mean, the benefit to the employees is -- I 15 think is better than the current plan. I like the debit 16 card feature; I think if they start getting very used to, 17 you know, at least the feeling of paying for their health 18 care, I think that's good. 19 COMMISSIONER BALDWIN: I'd like to ask 20 Barbara a question. She's -- she's the one that has had the 21 hands-on communication with all the employees. How do you 22 think that the employees will react to this? It's kind of a 23 change here. 24 MS. NEMEC: I was going to say, they don't 25 like change. You know, I can tell you that. 12-1-04 47 1 COMMISSIONER BALDWIN: Well, neither do I. 2 MS. NEMEC: They get used to it being a 3 certain way and they get comfortable with that. So, you 4 know, I -- I haven't spoken to anybody about this, because I 5 really didn't know what was going to be proposed, so I 6 really don't know. 7 COMMISSIONER BALDWIN: How long will it take 8 to -- to educate? 9 MR. LOONEY: Depending on -- on the 10 availability of the employee -- it can be done, you know, 11 very quickly if they're available. 12 COMMISSIONER LETZ: I think -- 13 MR. LOONEY: Really depends on availability. 14 COMMISSIONER LETZ: I think my feeling is 15 that it's going to be more a commitment to train as you go. 16 I mean, I think that doing training in the month of December 17 and January really is somewhat meaningless until people 18 start using it during the year. I'd say, like, in the first 19 quarter, the second quarter, third quarter -- each quarter, 20 you have to have training, 'cause people -- you know, I 21 mean, I don't know how -- I mean, until you use it, you just 22 don't know how it really works. So I think it's an ongoing 23 thing for the year. There has to be a commitment by the 24 companies. 25 COMMISSIONER WILLIAMS: That's kind of what 12-1-04 48 1 -- that's kind of what I'm curious about. With Mutual of 2 Omaha, who -- who's going to come in here and do that? Is 3 there an agent that's going to be involved in that? 4 MR. LOONEY: Mr. Wallace is responsible for 5 making sure that that communication is in place. 6 COMMISSIONER WILLIAMS: That is Mr. Wallace, 7 okay. 8 MS. NEMEC: How about new employees? I still 9 haven't gotten that question answered. 10 MR. LOONEY: The new employees are -- are 11 enrolled when they come in now. The recommendation would be 12 that you establish a time frame, either once every two weeks 13 or whatever, and have those employees -- then Mr. Wallace's 14 organization would be available, or Mr. Finley's 15 organization would be available on a regular basis, but the 16 timing with an individual being enrolled in the plan, the 17 salary deduction period, you need to identify when that 18 salary deduction needs to be done for new employees and set 19 up a time for the interviews, and Mr. Wallace has assured us 20 that he would be available. And you know already about 21 Mr. Finley's access. So, the -- 22 MS. NEMEC: I know last -- in the last two to 23 three months, we've had more than 20 new employees, and so, 24 you know, those have all just run two blocks down. So, 25 that's my -- that is my main concern. 12-1-04 49 1 MR. LOONEY: Well, part of the -- 2 MS. NEMEC: And that's more than 20 new 3 employees per month. 4 MR. LOONEY: Part of -- part of the 5 information that was provided had to do with the flexible 6 spendable accounts, child care accounts, and Section 125 7 administration. None of those accounts have been suggested 8 to make any change in any of those accounts. Assuming that 9 the AFLAC organization would still be in place, and that as 10 a result of that, the agents that are responsible for that 11 enrollment would still maintain that responsibility for that 12 enrollment. 13 MS. NEMEC: I'm confused on how the 14 enrollment is going to -- if we go with a different carrier, 15 and Mr. Finley's office is the one that administers the 16 AFLAC account, and earlier you said that the employees were 17 still going to have an option to take -- if they went on a 18 different plan rather than Plan A, they were still going to 19 have the option to take the difference in the premiums and 20 use that premium to buy AFLAC insurance. If we have two 21 different reps, how are they going to work together to offer 22 that? 23 MR. LOONEY: Premiums are administered by the 24 payroll function, so the payroll function would set the 25 deductions for the premium. The premium would be -- 12-1-04 50 1 MS. NEMEC: Right, but the insurance -- 2 MR. LOONEY: -- either to AFLAC or to some 3 other location. 4 MS. NEMEC: No, no, no that's not my 5 question. How are the employees going to be able to -- how 6 are you going to be able to offer AFLAC and -- and enroll 7 them in Plan B or C and then tell them, okay, you have this 8 amount -- you have $103 in difference to buy AFLAC products? 9 So, if -- if we have a different agent, then -- then this 10 agent's going to enroll them in whatever plan; then they're 11 going to tell them, okay, now you go to your AFLAC rep and 12 tell him you've got $103 to buy AFLAC products with? Is 13 that -- 14 MR. LOONEY: That -- yeah. 15 MS. NEMEC: Right now it's the same person 16 doing the same enrollment, selling the AFLAC insurance, 17 selling Flex One, and they do it all in one office. And so 18 I'm real concerned on how it's going to work if we have 19 different agents handling it. 20 COMMISSIONER NICHOLSON: Barbara, there are 21 lots of employers in Kerr County who are -- whose insurance 22 carrier is in New York or Salt Lake City or somewhere, and 23 Walmart or Penney's or whoever have people in their 24 organization that handle enrollments, and that kind of 25 mundane administration, we can -- we can do that. 12-1-04 51 1 MS. NEMEC: I don't have the staff to do 2 that. I don't sell insurance. I'm not going to sell AFLAC 3 products to our employees; that's not my job. I don't get 4 commission on those sales. 5 COMMISSIONER BALDWIN: Wait a minute. 6 Commission? Commission? 7 MS. NEMEC: That's right. 8 COMMISSIONER WILLIAMS: What AFLAC products 9 are we pushing here? 10 MS. NEMEC: We're talking about cancer 11 insurance, accidental insurance. Mr. Finley knows more 12 about it, because that's his product. He sells it. He gets 13 commission on that. I'm not going to sell those products to 14 our employees. That's something that needs to be thought 15 about. 16 MS. MITCHELL: Excuse me. And I can speak on 17 that, because I take Plan B with the AFLAC, because I have 18 two kids. We don't have a dental plan. I use that money 19 for my kids, because I don't have them insured; I can't 20 afford to have them insured. So, that extra money goes to 21 medical benefits towards my kids. 22 JUDGE TINLEY: You just direct, as part of 23 your payroll direction, where it goes. 24 MR. LOONEY: That's part of the -- 25 MS. NEMEC: The agent gives me that 12-1-04 52 1 information. 2 MR. LOONEY: It's a payroll function. And, 3 you know, not -- not sitting down and explaining the AFLAC 4 product to a new employee, I can -- I don't have any -- that 5 probably -- that wouldn't be your job anyway. 6 MS. NEMEC: No, it's not. That's why I'm 7 saying, who's going to do that? How are the employees going 8 to coordinate -- 9 MR. LOONEY: Whichever insurance agent 10 represents the company that's receiving the commissions 11 would make that representation. That's their 12 responsibility. 13 MS. NEMEC: Okay. As long as everybody 14 understands that, that I -- I can't do that. 15 MR. LOONEY: That's -- it is not your 16 responsibility to sell voluntary products. 17 COMMISSIONER WILLIAMS: Well, let's go back 18 to the question again. What would change with respect to 19 AFLAC and whatever products they offer for an employee like 20 Kathy? The way she has it set up right now, what would 21 change under our new situation? How would it change? 22 MR. LOONEY: The one thing that needs to be 23 determined is what that credit is that she's receiving 24 toward that additional insurance program now. And that 25 number, then -- as I suggested, the -- the contribution by 12-1-04 53 1 the employee would increase by 5 percent, so that increase 2 would be an increase by 5 percent. That increase would show 3 up as a result of the differential between what the County 4 is using as their factor toward an employee cost. That 5 would then be reduced from the Option B, which is just one 6 option under the medical plan at this point, and then Option 7 B then would create that credit that could be used for 8 the -- for those other purchases. 9 COMMISSIONER WILLIAMS: Okay. 10 MS. NEMEC: And when an employee enrolls 11 right now -- new employee comes and enrolls, they go to 12 Mr. Finley's office, and the reps there say, Okay, these are 13 your plans -- different plans, A, B, and C. If you go with 14 B and C, then you have so much money to buy other insurance. 15 What best fits your situation? The employee's not going to 16 have that benefit if it's not the same provider doing it, is 17 what I'm trying to tell y'all. 18 COMMISSIONER LETZ: Why not? 19 MS. NEMEC: Because when they go to enroll 20 with the regular insurance, the county insurance, the 21 insurance that the County is giving them, all they're going 22 to be able to tell them is this is A and this is B. You 23 know, if you go with A or B, there's other products that you 24 can purchase through AFLAC, so you might want to do that. 25 At that time, they're not going to know what those other 12-1-04 54 1 products are. 2 COMMISSIONER LETZ: Why can't you say, Here's 3 our base plan. If you want additional insurance, see Finley 4 and Associates? 5 JUDGE TINLEY: Or anybody. 6 COMMISSIONER LETZ: Or anybody else. I mean, 7 I wouldn't -- you know, I mean, I think anybody -- I have a 8 question, then. We're asking a real payroll issue, as to 9 whether we're having too many different people, so I think 10 it kind of ought to be one company. It's currently Finley 11 and Associates. 12 SHERIFF HIERHOLZER: Buster, when you asked a 13 while ago about the employees and the change, I think it's 14 pretty obvious, the main thing you're going to hear from the 15 employees that I hear from is not whether or not the County 16 changes insurance. One's going to be -- be the coverage the 17 insurance provides, and number two is how much is their 18 premium's going to change and how much is their co-pay and 19 the prescription cards going to change? Is it going to go 20 up? Down? That's where you're going to get -- if it goes 21 down a little bit, stays real close to the same, you won't 22 hear much from the employees. If it goes up and their 23 co-pay all of a sudden jumps up, you know, 10 percent or 24 whatever -- I don't know what the premium amounts are -- 25 that's when you're going to really start hearing it from the 12-1-04 55 1 employees on change. It's not going to be on what the 2 company is; it's going to be on what kind of coverage it is, 3 how well does it pay off, and the main thing is how much 4 more out-of-pocket that employee's going to be. 5 COMMISSIONER WILLIAMS: Is there a 6 spreadsheet, Gary, that gives us that basic information of 7 what the employee's cost is going to be for insuring his or 8 her family? Is that in here? 9 MR. LOONEY: No, it's not in here. That was 10 the number that we were still getting phone calls on this 11 afternoon at 1 o'clock. I have -- as a matter of fact, I 12 have my disk with me, which won't take long to calculate 13 those numbers. But the intent was to -- with the plan 14 design is to keep the employee cost at no greater than a 15 5 percent increase over and above where they are today, and 16 to allow that credit to still go forward to reduce the 17 benefits that they're currently enrolled in. But it is 18 unusual, gentlemen, for the County to provide excess funds 19 for an individual to purchase a voluntary benefit plan. In 20 the sense -- in essence, that's what you're doing by giving 21 credit, as long as they use that credit against purchasing 22 one or the other volunteer insurance programs. If they were 23 using the credit to reduce premiums under the other plans, 24 that would be more, I guess, in tune with what other 25 employers would do. But to give a credit to be used for the 12-1-04 56 1 purchase of voluntary plans is unusual. 2 COMMISSIONER LETZ: I mean, I think the -- 3 you know, part of the -- one of the things that employees 4 need to understand, the difference in these two in this, the 5 HRA, is $300,000. I mean, they're not going to get the 6 benefits if we don't -- they may have to have a little bit 7 more work on their side and do a little bit more work, but 8 if we don't -- if they don't do that, the other option is to 9 get less benefits. I mean, I have to look at this as, as 10 long as the service is good, I mean, cost has to be the 11 primary consideration, as long as we're getting the same 12 benefits. 13 COMMISSIONER WILLIAMS: The number on 14 Spreadsheet 2, under Mutual of Omaha, that the Commissioner 15 is referring to, 1632, that's with the HRA, and that is 16 our -- currently our Plan A, as it exists today? 17 MR. LOONEY: No, that's the HRA sample under 18 2, which has the $600 -- 19 COMMISSIONER WILLIAMS: Okay. 20 MR. LOONEY: -- HRA accumulation. 21 COMMISSIONER WILLIAMS: All right. Okay, I 22 understand. 23 MR. LOONEY: There are some other changes, 24 Commissioner, that -- the other changes were the reduction 25 in the accident benefit, the $300 accident benefit that's 12-1-04 57 1 there currently. 2 COMMISSIONER WILLIAMS: Right. 3 MR. LOONEY: The maximum out-of-pocket 4 expenditure currently under Plan A is $2,400, and with the 5 new plan it would be $3,000. But, again that $3,000, less 6 the $600 health reimbursement arrangement, is the $2,400. 7 The physician's office co-payment was increased to 30; I 8 believe it's 20 now. 9 COMMISSIONER LETZ: The red are the changes, 10 correct? 11 MR. LOONEY: Pretty much. There are some 12 things that are not in red that were not included in the 13 previous plan. 14 COMMISSIONER WILLIAMS: It's under Tab 3? 15 MR. LOONEY: Under Tab 3. 16 SHERIFF HIERHOLZER: And, Jonathan, something 17 the insurance carriers, whoever they are, may take into 18 consideration, the biggest complaint I hear from all of my 19 94 employees -- 95 I have now -- 20 COMMISSIONER LETZ: Are they all complaining? 21 SHERIFF HIERHOLZER: In insurance? Yes. On 22 insurance, yes. Okay. But the biggest thing -- and this 23 isn't a comparison, but it's something that, when they 24 change, if their premiums are going to go up, somebody needs 25 to be able to explain to them, because the biggest complaint 12-1-04 58 1 I have is, Why is the County's insurance so much more 2 expensive than the City's? 3 COMMISSIONER LETZ: Than what? 4 SHERIFF HIERHOLZER: Than the City's. Why 5 does it cost us employees so much more than it costs that 6 City employee? Now, it may be -- City may put in more on 7 their side, you know, or the deductibles may be different. 8 But when you're looking at changing, and if it's going to go 9 up, I would encourage whoever the carrier is going to be to 10 try the best they can to explain that to the employee, so 11 they've got a good -- 12 COMMISSIONER WILLIAMS: You've got to know 13 what the City plan is. You've got to know what the City 14 involvement is. 15 SHERIFF HIERHOLZER: That's the problem. I 16 don't have any idea what it is, but that's the major 17 complaints I hear. 18 COMMISSIONER WILLIAMS: And then, as the 19 Judge added, then we -- do we care what the City does? 20 That's the other part of the equation. 21 SHERIFF HIERHOLZER: Well, you should care, 22 just to the point that that is what does concern your 23 employees. 24 COMMISSIONER LETZ: One of the things I think 25 is pretty important is what the P.P.O. is, because I know a 12-1-04 59 1 lot of people go to San Antonio for, you know -- 2 MR. LOONEY: Right. 3 COMMISSIONER LETZ: -- various procedures or 4 care, maybe all their stuff, and some local. What is the -- 5 MR. LOONEY: One of the things that was -- 6 was proposed by your current carrier was to incorporate 7 Texas True Choice P.P.O. network into their plan going 8 forward, as well as -- and that was also the recommendation 9 of the Mutual of Omaha, was to use their underlying Texas 10 True Choice product with the overlay of the Mutual of Omaha 11 network, which is a pretty substantial network. We did a 12 very extensive analysis for the City of San Antonio. We 13 examined -- I think we had nine different P.P.O. network 14 providers, including all of the major insurance companies. 15 We did a very in-depth analysis of those costs, and found 16 that Texas True Choice and Blue Cross were very comparable 17 in their discounts, and that all the others were marginal 18 steps, as far as being less beneficial to the employer. 19 COMMISSIONER LETZ: And that option's under 20 both -- 21 MR. LOONEY: Under both plans. 22 COMMISSIONER LETZ: -- both plans? And 23 the -- but, I mean, from the -- the sample with the -- with 24 the HRA, it's -- it is basically just the same coverage? 25 MR. LOONEY: Very close. 12-1-04 60 1 COMMISSIONER LETZ: I mean, the co-pay for 2 office visits is slightly higher, and the -- and the 3 prescription is slightly higher? 4 MR. LOONEY: Yes. 5 COMMISSIONER LETZ: What's the difference on 6 the prescription? 7 MR. LOONEY: I think we -- currently, we're 8 at $10 on generic medications, and we went to $5 on generic. 9 We actually reduced that because of the formulary that 10 Mutual of Omaha has available on generics. We're actually 11 encouraging more generic utilization, so we reduce the -- 12 the co-payment. And then it was $35 for single-source 13 brand, and that stayed the same. And it increased to $50 14 for multiple-source brand. And then for a 100-day supply, 15 it was -- for the generic, it was three times for a 100-day 16 supply on a mail-order, or a -- now you don't have to 17 mail-order; you can actually get your medications on a 18 100-day supply -- if you get it approved by the insurance 19 company, you can actually get it at the pharmacy. But we 20 changed that to two times for 100 days, which is 21 approximately three months, and so it's two times rather 22 than one time for each purchase. The formulary is a little 23 different. We have a little bit -- we get a discount -- or 24 Mutual of Omaha offers a discount to their premiums as a 25 result of the rebate program that's generated through their 12-1-04 61 1 company. All the pharmacists in the area pretty much match 2 up with the current pharmacy utilization. 3 SHERIFF HIERHOLZER: How about doctor visits? 4 Did you say there's no change in the doctor visits? 5 MR. LOONEY: Change in the doctor visit 6 co-payment. The current co-payment for Plan A is 20, and it 7 would go to 30. Go up by $10. 8 COMMISSIONER WILLIAMS: Current is 20 and 9 generic is 5, I think, right now. 10 SHERIFF HIERHOLZER: Right. 11 MR. LOONEY: Say again? 12 COMMISSIONER WILLIAMS: I think generic right 13 now is 5, and the co-pay right now on brand name is 20. 14 SHERIFF HIERHOLZER: Generic's 10 now. It 15 would go down under that. 16 COMMISSIONER WILLIAMS: Not in my pharmacy, 17 it's not. 18 SHERIFF HIERHOLZER: I need to look at your 19 pharmacy. 20 (Discussion off the record.) 21 COMMISSIONER NICHOLSON: It's my sense 22 that -- 23 MR. LOONEY: Plan A prescription drug is $5, 24 $20, and $35. 25 COMMISSIONER NICHOLSON: It's my sense that 12-1-04 62 1 we should accept our consultant's recommendation to adopt a 2 health reimbursement arrangement, increase life -- life and 3 A.D. & D. to $20,000, and that we select Mutual of Omaha as 4 the carrier, so I'll make that motion. 5 COMMISSIONER LETZ: Second. 6 JUDGE TINLEY: Motion made and seconded for 7 award of the benefit plan to Mutual of Omaha under their 8 proposal, health reimbursement arrangement, with an increase 9 in the life insurance benefit to 20,000. 10 COMMISSIONER NICHOLSON: And select Mutual of 11 Omaha as the carrier. 12 JUDGE TINLEY: Right. Right, in accordance 13 with their proposal as outlined herewith. Okay. 14 COMMISSIONER LETZ: And with Mutual of 15 Omaha -- Mutual of Omaha comes Mr. Wallace, correct? 16 COMMISSIONER WILLIAMS: Say it again? 17 COMMISSIONER LETZ: With Mutual of Omaha 18 comes Mr. Wallace. I mean, Mr. -- I mean -- 19 JUDGE TINLEY: He's the proposing agent, yes. 20 Wallace and Associates and Mutual of Omaha; it's a package. 21 MS. NEMEC: Are you the agent and the 22 third-party administrator? 23 MR. WALLACE: No, Mutual of Omaha is the 24 third-party administrator. 25 MS. NEMEC: They are third-party 12-1-04 63 1 administrator. 2 JUDGE TINLEY: Any question or discussion on 3 the motion? 4 COMMISSIONER LETZ: Yes. Just, I mean, a 5 comment. And it's really more -- I mean, in my opinion, 6 I've had limited experience with Finley and Associates and 7 E.B.A. I think they've done an outstanding job. I've never 8 had any problems at all. And the challenge is really to 9 Mr. Wallace, that that continue. I mean, I'm -- you're an 10 unknown, in my mind. My decision and second is based on the 11 $300,000 less in price. If the service is not equal or 12 better than what we were getting, that is going to be a real 13 big consideration after our first year. So, it's a 14 challenge for you to maintain the quality that we've had up 15 till now. 16 COMMISSIONER BALDWIN: I ditto my good friend 17 from the eastern part of the county. My only regret is that 18 our employees didn't get to see the -- the three-hour 19 presentation the other day. I just -- I'd give anything in 20 the world if they could see it before we actually take this 21 vote. But you're not going to find the Commissioners 22 sitting through another three-hour presentation. So -- 23 JUDGE TINLEY: Any other questions or 24 comments? All in favor -- 25 COMMISSIONER WILLIAMS: I -- 12-1-04 64 1 JUDGE TINLEY: I'm sorry. 2 COMMISSIONER WILLIAMS: I was just going to 3 echo that I think, from the County's perspective, as an 4 employer, to provide the maximum health insurance we can 5 afford, this is an opportunity that we should probably 6 accept. 7 JUDGE TINLEY: I think Commissioner Letz has 8 properly stated that it -- if the motion passes, it's a 9 challenge to Mr. Wallace to show us that he can perform as 10 he stated that he could, and I'm hopeful that he can. And I 11 think there is -- there's going to be a few bumps in the 12 road trying to change, but even making any change to an HRA 13 is going to cause additional bumps in the road, so we're 14 going to have that anyway. 15 COMMISSIONER WILLIAMS: I do have one 16 other -- just one other comment, Judge. And I sincerely 17 hope that by changing underwriters -- not necessarily the 18 agent, but the underwriter -- and going with Mutual of Omaha 19 with this particular plan, I really hope this is not just a 20 hook that lasts for one year, and then next year we're 21 standing up here looking at major, major increases. I 22 sincerely hope that doesn't happen. 23 COMMISSIONER NICHOLSON: I'll just make one 24 other comment. I really appreciate Mr. Looney taking us by 25 the hand and leading us through this decision-making 12-1-04 65 1 process. I think we probably made a better decision than we 2 would have otherwise. 3 JUDGE TINLEY: I don't think there's any 4 question about that. I feel more comfortable. 5 COMMISSIONER WILLIAMS: I appreciate 6 Gary's -- 7 JUDGE TINLEY: I don't think there's any 8 question whatsoever. Any other questions? Comments? 9 COMMISSIONER BALDWIN: We're -- just to 10 follow up on that, if it weren't -- if he weren't here, next 11 July we'd still be arguing over what a P.P.O. was, so -- 12 that's the way it's been for years here. Glad he's here. 13 MR. LOONEY: I'm not intending to disappear 14 by any means, because, you know, Mr. Wallace is not only 15 going to be responsible to the Court; he's going to be 16 responsible to the consultant that is up here presenting 17 this program. So, there's an obligation that he has a lot 18 more ways than we -- and if it were possible, from an 19 empirical standpoint -- if it were possible to continue with 20 the current provider, I would recommend it also. I have 21 heard no complaints at all about any of the services offered 22 by Mr. Finley, and have the greatest deal of respect for he 23 and his organization. Mr. Rothwell has been very 24 forthcoming in information during this process, and I 25 appreciate their -- I know it's not what they want to hear, 12-1-04 66 1 but I appreciate their work in the past. 2 JUDGE TINLEY: Thank you. All in favor of 3 the motion, signify by raising your right hand. 4 (The motion carried by unanimous vote.) 5 JUDGE TINLEY: All opposed, same sign. 6 (No response.) 7 JUDGE TINLEY: That motion does carry. Thank 8 you very much, Mr. Looney. 9 MR. LOONEY: Thank you. 10 COMMISSIONER BALDWIN: So, that ends our day, 11 huh? 12 JUDGE TINLEY: I'm not sure. I'm not sure. 13 No, in fact, it doesn't, because in the interim, I received 14 two participation forms with respect to the remaining agenda 15 item, so we will return to the second and third agenda items 16 previously called, and is Mr. Neal present in court? 17 MR. CAWTHORN: Mr. Neal is out of the room, 18 Judge, but I'm Sid Cawthorn. 19 JUDGE TINLEY: Okay, Mr. Cawthorn. You filed 20 a participation form. Please feel free to come forward and 21 tell us what's on your mind. 22 MR. CAWTHORN: Thank you, Judge, I appreciate 23 it. And members of the Commission, I appreciate -- members 24 of the Court, I appreciate the opportunity to visit with 25 y'all today. As y'all probably can tell, when we moved from 12-1-04 67 1 -- went through the process earlier where we changed from 2 the -- the insurance agenda item and we addressed ours, and 3 Larry and I went running out of the room, we were under the 4 impression that the Court was going to make a decision today 5 about whether to extend the moratorium, or at least advance 6 the deadline for us to respond to -- to your offer last week 7 of a million, 750. And, as you know, being that it was 8 Thanksgiving holiday and there are more than 15 banks 9 represented, not to mention the bond trustee and bond 10 trustee's counsel, it's been very difficult over the course 11 of the last few days to get everybody together to actually 12 act on your decision without having a lot of information at 13 this point about the valuation of the facility, exploring 14 other alternatives as far as getting -- getting it sold. 15 So, one point I need to make here at the outset is that I'm 16 speaking for the Bank and Trust. I am in no position today 17 to represent the bondholders in any way, and certainly don't 18 -- don't intend to do that as part of this discussion. But 19 I would like to ask the Court to consider the prospect of -- 20 of granting us another couple of weeks to -- to 21 appropriately address this issue so we can give you a 22 response that you feel like would be appropriate, and -- and 23 timely. And, quite frankly, at the end of the day, we want 24 the Court -- the County to get out of this as cleanly as it 25 possibly can. Obviously, I, as a banker, want to be paid. 12-1-04 68 1 We don't want this to be a contentious relationship in any 2 way, and we would just express -- I would express my 3 opinion, as one bondholder in this situation, to -- for you 4 to give us a little bit more time to consider this matter. 5 And I know Larry has some other comments he'd like to make, 6 and I'll -- I'd be happy to answer any questions that y'all 7 may have. 8 JUDGE TINLEY: Mr. Larry Neal from Security 9 State Bank in Pearsall, I believe? 10 MR. NEAL: Yes, sir. 11 JUDGE TINLEY: Thank you, Mr. Neal. 12 MR. NEAL: Judge and Commissioners, thank you 13 once again for allowing us to have the opportunity to come 14 before you. I concur with everything that Sid Cawthorn 15 said. It's been a very -- we just haven't had an 16 opportunity to get all of the bondholders together. 17 We've -- we have had about 90 percent representation. So, 18 none of us -- and I want to again express what Mr. Cawthorn 19 expressed. I'm only here expressing our position on the 20 bonds. I'm one of 15. And Security State Bank's position 21 would -- would ask the Court to consider extending the 22 moratorium for 15 days, if possible, to give us an 23 opportunity to all get together and to come to a consensus 24 to where we can respond to the offer that the Court has made 25 to us. We have not had 100 percent, as the Court has asked, 12-1-04 69 1 in representation, and we need that in order to respond. 2 Again, I am quite surprised -- I was hopeful, as I was 3 driving up to Kerrville today, that I would only be a 4 spectator and not a person who addressed the Court. And we 5 were both surprised when this issue came up and there was no 6 one here to represent us in this matter. But we would ask 7 the Court to consider extending it 15 days, to where we 8 could come together as the bondholders and respond in a 100 9 percent manner to the offer that y'all have provided. Thank 10 you very much. 11 JUDGE TINLEY: Thank you, Mr. Neal. Let me 12 make a comment, if I might, with regard to their request. I 13 understand their concern. We had some intervening holidays, 14 and I realize you need to get 100 percent participation. 15 The concern I have is that we're under -- we are under a 16 30-day notice provision with respect to extending the 17 moratorium, and if -- if we are to extend into January, we 18 need to -- to take that action today. However, time is of 19 the essence, and I think the only way I would have an 20 interest in permitting you, up through, say, the 15th day of 21 December, would be in the event the trustee would be willing 22 to amend the existing agreement to reduce our period of time 23 for extending the moratorium to 15 days, rather than 30. 24 That kind of leaves us all kind of where we are right now, 25 but it gives you the additional 15 days that you say you 12-1-04 70 1 need in order to properly review your alternatives and 2 properly respond to us. I realize that the trustee's not 3 here; is apparently not available. Frankly, I expected the 4 trustee's representative to be here. Possibly y'all did, 5 too; I don't know, but -- but that's -- that's the basis 6 upon which I think we can all still kind of hold our 7 position where we are today. 8 MR. HENDERSON: May I address the Court? 9 JUDGE TINLEY: Mr. Henderson is -- 10 MR. HENDERSON: Having a fit over here. 11 Excuse me, Judge. The trustee's counsel is not here. First 12 thing I want to say is, I'm not a lawyer. I am a 13 mouthpiece, okay? I have been in communication with Tom 14 Spurgeon, the County's bond attorney, who in turn has been 15 in communication with Mike Malone, trustee's counsel. They 16 do both apologize for not being here, and they both 17 apologize for the confusion that the Court is suffering with 18 this -- this afternoon at their hands. Mr. Malone has 19 conveyed the message to Mr. Spurgeon, who has conveyed it to 20 me, who has asked me to convey it to the Court, that that is 21 exactly, Judge, what they would like to propose. That 22 they -- that they would request -- or not request, rather, 23 the Commissioners Court extend the lease itself beyond the 24 existing 31-day date, but that the Court authorize you, 25 Judge, to execute an amendment to the existing lease 12-1-04 71 1 reducing the notice provision from 30 days down to 15 days. 2 And Mr. Malone assures the Court, via Mr. Spurgeon, via me, 3 that the trustee's counsel will execute that -- that 4 amendment. 5 COMMISSIONER LETZ: Judge, my question is 6 really to Ms. Harris. What is the minimum amount of time 7 you need to shut down, for lack of another way to phrase it? 8 MS. HARRIS: Here's the problem. Harris 9 County is going to be taking out about six of their girls, 10 probably in the next couple of weeks. If I don't know 11 what's going to happen, I would hesitate to lay off 12 employees when those six girls leave. If we're going to 13 stay open, I need to hang on to them, 'cause I'm going to 14 get more kids in. If those six -- when those six girls 15 leave, I will have the opportunity to lay off some of my 16 staff if I know that the 31st of December is going to be the 17 last day. I cannot get those kids out of there any sooner 18 than two weeks, 'cause you have to notify probation 19 officers, who have to notify judges in order to set hearing 20 dates -- modification dates for those kids. Most judges 21 start taking a Christmas vacation around the 20th or 21st of 22 December. Then we're looking at Christmas holidays. We get 23 a half a day off on the 23rd, all of the 24th, the 27th, and 24 we get New Year's Eve, December 31st. That leaves us three 25 days. If we're not going to know what's going to happen, 12-1-04 72 1 that leaves me three days to try to get the kids out, get 2 files loaded up. You need to understand, I can't leave 3 those files in the facility. Those files are -- every file 4 is going to have to be boxed up, labeled, and they're going 5 to have to be archived somewhere in the county. Food is 6 going to have to be taken out of our kitchen. I would 7 imagine Rusty's going to get a windfall on groceries, except 8 for the commodities. The commodities that we get from the 9 N.S.L.P. program is going to have to go to another entity 10 that's in the N.S.L.P. program; school district. We're 11 going to have to get food out of there, files out of there, 12 kids out of there, and lay staff off. So, if we're not 13 going to have a decision until the 15th of December, that's 14 leaving me, gentlemen, very little time. And I want to be 15 honest with you; my staff are hanging on by their 16 fingernails. 17 COMMISSIONER LETZ: If we went to our next 18 Commissioners Court meeting, I believe the 13th -- 19 COMMISSIONER WILLIAMS: Right. 20 COMMISSIONER LETZ: If we went to the 13th, 21 that would give you that week plus three days. I mean, is 22 it doable? 23 SHERIFF HIERHOLZER: I think one of our 24 hardest problems, Jonathan, is going to be with your judges 25 and your courts, because to move the kids out, they actually 12-1-04 73 1 have to have another court hearing to actually place them by 2 a court order somewhere else. And, as we all know, even in 3 this county, you start talking anywhere starting about the 4 15th of December, your judges and them are gone from -- till 5 New Year's. Well -- 6 JUDGE TINLEY: I take offense to that, 7 Sheriff. 8 SHERIFF HIERHOLZER: You aren't, Judge 9 Tinley, but I will promise you, most of them over the last 10 25 years that I've seen, you're not going to find them from 11 the middle of December until after the first of the year. 12 COMMISSIONER LETZ: If we went to our next 13 Commissioners Court meeting, the 13th, that would be the 14 four days that week, and that's about it. You know, then 15 it's during the Christmas holiday period. 16 MS. HARRIS: That's right. 17 COMMISSIONER WILLIAMS: That's what I was 18 going to suggest, the 13th. 19 COMMISSIONER LETZ: I can't see going beyond 20 the 13th. That's absolute, to me. 21 MS. HARRIS: My staff can't -- 22 COMMISSIONER LETZ: And the -- the other 23 option is to go to -- go to one week from today, to the 8th. 24 MS. HARRIS: If you could do that, that would 25 help. 12-1-04 74 1 JUDGE TINLEY: Or the 10th. 2 COMMISSIONER LETZ: Or Friday, the 10th -- 3 that just gives a week; that really doesn't help Ms. Harris. 4 I mean, that's the weekend; might as well do it on Monday if 5 you don't do it -- 6 MS. HARRIS: If you could do it on the 8th, 7 that would be better. 8 COMMISSIONER LETZ: I mean, I don't -- I 9 understand that -- I mean, the dilemma the bondholders -- 10 you all are in. I think y'all understand our dilemma. I 11 cannot understand why it would take -- a week wouldn't be 12 sufficient. 13 COMMISSIONER NICHOLSON: What -- 14 MR. CAWTHORN: May I ask a question? Would 15 it be appropriate if we set a date for the 13th, and promise 16 to bust our hump to get something to you by the 8th? 17 COMMISSIONER NICHOLSON: What are the 18 barriers to reentry if we made a decision now to stick with 19 our end-of-the-year shutdown and we shut it down, and 20 sometime -- sometime in the future we acquired that -- that 21 facility? Can it be started back up? 22 COMMISSIONER LETZ: Possibly. 23 MS. HARRIS: Can I comment on that? 24 JUDGE TINLEY: You don't want her to sit up 25 here, do you? 12-1-04 75 1 MR. HENDERSON: Keep her at arm's length. 2 MS. HARRIS: Here's going to be your dilemma 3 if you try to do that. It's going to depend on timing. If 4 you try to open it back up -- if you shut it down 5 December 31st, you try to open it back up within a month, 6 you got a good chance, because what I can do is I can convey 7 to my staff, "Hold on, we're going to open back up in 30 8 days. Just go have a long vacation." And I can probably 9 get the majority of them back. You wait much longer than 30 10 days to try to start it back up, and I'm afraid, 11 Commissioner, you won't be able to do it very successfully. 12 COMMISSIONER LETZ: What about the option of 13 us doing nothing today, and asking Ms. Harris not to do 14 anything until the 8th? In which case, the clock is 15 running, but in reality, no amendment is needed. I mean, 16 we're not extending it -- Mr. Henderson? 17 JUDGE TINLEY: No. No. Then, if -- well, 18 that's true, but we still got to have the -- the time frame 19 reduced to 15 days if -- if we want to have our options open 20 to make a decision to carry on over the -- if we strike some 21 sort of a bargain. I think an amendment -- at a minimum, we 22 need to get that implemented, the amendment to the existing 23 moratorium to reduce the notice period to 15 days. If you 24 want to give these gentlemen an additional, say, week or 25 till the 8th or the 10th or whatever, that -- that -- that's 12-1-04 76 1 independent of the other. 2 COMMISSIONER LETZ: I guess, you know, my 3 biggest problem with leaving it in any kind of an extension 4 is that, in a perfect world, it would be nice if something 5 comes back to us and we shake hands and agree, but that's -- 6 you know -- 7 COMMISSIONER NICHOLSON: We don't know 8 whether it's going to happen. 9 COMMISSIONER LETZ: With a lot of details, 10 that may not happen. And I can -- you know, the timeline 11 that we're up against, if you all come back in, the 12 bondholders -- the trustee comes back in with -- with a 13 counter, and then we say no, and y'all come up with a 14 different counter, we don't have time for that. I mean, you 15 know, it's -- it's going to be a yes/no -- from today on, in 16 my opinion, it's a yes/no. Whatever y'all say, it's either 17 going to be yes or no, and if it's no, it's shut down. 18 MR. NEAL: Commissioner, that's -- you're 19 having the same problem we're having on the other side, 20 because you've got 16 bankers on the other side to come to a 21 consensus. It's difficult. We've got to work through that, 22 but that's going to take time. 23 COMMISSIONER WILLIAMS: Are all the 24 bondholders -- as we meet and speak today, are they all 25 aware of the tender offer that's in front of the -- of you 12-1-04 77 1 and the others? 2 MR. NEAL: It's my impression they are, but I 3 could not assure the Court that everyone -- I know the ones 4 that are represented here are aware of it, but I cannot 5 speak for everyone. 6 COMMISSIONER LETZ: Only the trustee can 7 answer that. 8 MR. WATTS: What's magic about the end of the 9 year? It's not the County's fiscal year, is it? 10 COMMISSIONER WILLIAMS: What's magic about 11 it? 12 MR. WATTS: In other words, you meet every 13 two weeks, right? 14 COMMISSIONER WILLIAMS: The judicial needs 15 and requirements; that's where the magic comes in, and 16 staffing. It's not mystical, it's just pretty real. The 17 lady has problems with staffing, and she has judicial 18 requirements that have to be met. 19 MR. WATTS: What I meant, sir, y'all meet 20 every two weeks, right? 21 COMMISSIONER WILLIAMS: We can meet every two 22 days if we have to. 23 MR. WATTS: So if you don't take any action 24 today, and a week from now you take action, the 30 days, 25 that runs through the first week of January, correct? 12-1-04 78 1 COMMISSIONER WILLIAMS: The operating 2 agreement extends through the 31st of December. Is that 3 correct, Judge? 4 JUDGE TINLEY: That's right. 5 MR. WATTS: It's not 30 days, then. 6 JUDGE TINLEY: No. 7 MR. WATTS: Okay. 8 COMMISSIONER WILLIAMS: Pardon me? 9 COMMISSIONER LETZ: We're operating -- 10 JUDGE TINLEY: Under current -- under the 11 current scenario, unless there's affirmative action taken to 12 extend it, it automatically shuts down December 31st at 13 midnight. 14 COMMISSIONER WILLIAMS: The object is to try 15 to find an agreement before then, but leaving enough time 16 for Ms. Harris to do what she has to do by requirements of 17 law in the event we're unable to fashion an agreement. 18 MR. CAWTHORN: Judge, I would tell you that 19 tomorrow, I believe at 9:30, we have a meeting of the bond 20 -- conference call of the bondholders scheduled. Now, 21 whether we'll have 100 percent in attendance or 90 percent 22 in attendance, I -- I can't tell you, but I can tell you 23 that we're scheduled tomorrow to discuss the results of your 24 meeting -- of the Court's meeting today, so we're in a 25 position where we can actually effectuate a move. We just 12-1-04 79 1 need some help to do that. 2 COMMISSIONER WILLIAMS: Ms. Harris, does two 3 days -- does it make a significant difference to you to go 4 from, say, the 8th to the 10th? 5 MS. HARRIS: No, sir. 6 COMMISSIONER WILLIAMS: The 10th is a fish or 7 cut bait date. 8 MS. HARRIS: That's fine. That's fine. 9 COMMISSIONER WILLIAMS: I recommend the 10th. 10 That's a Friday. That gives you between nine days to get 11 the answer we need, or to get us to a position where some 12 serious bargaining could take place, if necessary. 13 COMMISSIONER LETZ: I don't see why we don't 14 -- why go to Friday? Nothing's going to happen over the 15 weekend. 16 COMMISSIONER WILLIAMS: Pardon? 17 COMMISSIONER LETZ: Nothing's going to happen 18 that weekend. Why not just wait till Monday? The banks -- 19 COMMISSIONER WILLIAMS: Well, she has work to 20 do. 21 JUDGE TINLEY: Yeah, she could -- there are 22 things that she could be doing over the weekend. 23 COMMISSIONER WILLIAMS: I understand your 24 point, Jonathan. 25 COMMISSIONER LETZ: I mean, if it's a benefit 12-1-04 80 1 to Ms. Harris, I don't have a problem with doing it on the 2 10th. 3 MS. HARRIS: It's a benefit for the 8th for 4 me, but I know that it's not for everybody else. But the 5 8th is a much -- a much more -- it's better for me. It's 6 better for us to be able to make phone calls if we have to. 7 COMMISSIONER LETZ: What's the proper 8 verbiage to what we're trying to do? What are we extending? 9 The moratorium? 10 JUDGE TINLEY: Well, there's two items. 11 There's an addendum to the -- to the existing moratorium 12 agreement to reduce the notice provision for extending the 13 lease/operating agreement period from 30 days down to 15 14 days on the one hand. The other is to extend the time for 15 the bondholders to respond to the offer until a given date 16 and time. 17 COMMISSIONER LETZ: I make a motion that we 18 extend the time to the bondholders to make an offer to 19 December 8th, and that we authorize the County Judge to 20 execute an addendum to the moratorium to shorten the notice 21 period from 30 to 15 days. 22 COMMISSIONER WILLIAMS: I second it. 23 JUDGE TINLEY: Okay. When you stay the 8th, 24 you're talking about close of business the 8th? Midnight 25 the 8th? 12-1-04 81 1 COMMISSIONER LETZ: At whatever date we -- 2 whatever time we set that meeting at. You know, whenever we 3 want to meet. 3 o'clock is fine with me. 4 COMMISSIONER WILLIAMS: Let's just set the 5 time right now so we know what we're doing. 6 COMMISSIONER LETZ: 3 o'clock on the 8th. 7 COMMISSIONER WILLIAMS: Is that working, 8 Judge? 9 JUDGE TINLEY: Yeah, sure is. Okay. Motion 10 made and seconded. Any questions or comments? All in -- 11 COMMISSIONER NICHOLSON: No, I'm -- I've got 12 a comment. 13 JUDGE TINLEY: Excuse me. 14 COMMISSIONER NICHOLSON: I'm sympathetic with 15 the predicament that the bondholders are in, and much more 16 sympathetic with the predicament Mrs. Harris and her staff 17 is -- are in. It's very unfortunate. I didn't vote for 18 the -- the offer that we made, and so for that reason, I'm 19 not going to vote for an extension. I have -- nothing's 20 changed since then. Doesn't look any better now than it did 21 a few days ago. 22 COMMISSIONER WILLIAMS: We're not voting on 23 an extension. 24 COMMISSIONER NICHOLSON: Extension of the 25 offer. 12-1-04 82 1 COMMISSIONER WILLIAMS: Oh. 2 JUDGE TINLEY: Any other questions or 3 comment? 4 COMMISSIONER BALDWIN: Are we going to handle 5 the -- posting a meeting on Wednesday in a separate way? 6 Or -- do you want to kind of give me a hint of what time of 7 the day? 8 JUDGE TINLEY: My intention is to post a 9 meeting for 3 o'clock on Wednesday, the 8th. 10 COMMISSIONER BALDWIN: 3 o'clock. 11 JUDGE TINLEY: And we'll need the offer -- or 12 response in-hand by that time. 13 MR. NEAL: We will pass that on. 14 JUDGE TINLEY: Okay. Any other questions or 15 comments? All in favor of the motion, signify by raising 16 your right hand. 17 (Commissioners Baldwin, Williams, and Letz voted in favor of the motion.) 18 JUDGE TINLEY: All opposed? 19 (Commissioner Nicholson voted against the 20 motion.) 21 JUDGE TINLEY: Motion does carry. 22 MR. CAWTHORN: Thank you, gentlemen. 23 MR. NEAL: Thank y'all very much. 24 JUDGE TINLEY: Okay. I think that takes care 25 of the other agenda item that we had. Any other business 12-1-04 83 1 under the agenda items, gentlemen? We will stand adjourned. 2 (Commissioners Court adjourned at 5:22 p.m.) 3 - - - - - - - - - - 4 5 6 7 8 STATE OF TEXAS | 9 COUNTY OF KERR | 10 The above and foregoing is a true and complete 11 transcription of my stenotype notes taken in my capacity as 12 County Clerk of the Commissioners Court of Kerr County, 13 Texas, at the time and place heretofore set forth. 14 DATED at Kerrville, Texas, this 7th day of December, 15 2004. 16 17 18 JANNETT PIEPER, Kerr County Clerk 19 BY: _________________________________ Kathy Banik, Deputy County Clerk 20 Certified Shorthand Reporter 21 22 23 24 25 12-1-04