1 2 3 4 5 6 KERR COUNTY COMMISSIONERS COURT 7 Workshop 8 Monday, October 8, 2007 9 1:30 p.m. 10 Commissioners' Courtroom 11 Kerr County Courthouse 12 Kerrville, Texas 13 14 15 16 17 HEALTH BENEFITS WORKSHOP 18 19 20 21 22 23 PRESENT: PAT TINLEY, Kerr County Judge H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 24 WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 JONATHAN LETZ, Commissioner Pct. 3 25 BRUCE OEHLER, Commissioner Pct. 4 2 1 On Monday, October 8, 2007, at 1:30 p.m., a 2 workshop of the Kerr County Commissioners Court was held in 3 the Commissioners' Courtroom, Kerr County Courthouse, 4 Kerrville, Texas, and the following proceedings were had in 5 open court: 6 P R O C E E D I N G S 7 JUDGE TINLEY: I will now call to order a workshop 8 posted for this date and time, Monday, October 8th, 2007, at 9 1:30 p.m., that being a workshop to participate in employee 10 health insurance benefits workshop with Gary Looney, our Kerr 11 County health benefits consultant. Good afternoon, Mr. 12 Looney. 13 MR. LOONEY: Good afternoon, ladies and gentlemen. 14 I'm sorry to have been late and miss lunch, but as I've 15 explained to Commissioner Letz and Commissioner Williams, 16 there was a significant automobile accident on Joshua Creek 17 Bridge; totally closed Interstate 10. It was five major -- 18 or five vehicles, one major dump truck full of rocks that 19 dumped rock all across the bridge, and there was one 20 automobile that, if anybody had lived through that incident, 21 I'd be very surprised. I hope that they... 22 JUDGE TINLEY: And there's no service road in that 23 area either, is there? 24 MR. LOONEY: No. You have to reverse and go 25 backwards, and by the time that they would have been able to 10-8-07 wk 3 1 reverse anybody, the traffic behind there was backed up 2 probably for 4 or 5 miles, at least. So -- 3 MR. WALLACE: Channel 5 or Channel 12 were there 4 covering it. 5 MR. LOONEY: Were you there covering it? 6 AUDIENCE: I saw it looked pretty nasty. 7 MR. LOONEY: Pretty ugly. What I'm here today for 8 is to bring you up to date on our status for the medical 9 review -- medical plan review, group term life, and group 10 term medical for the year 2008. As you all are aware, we had 11 talked about previously that Mutual of Omaha has sold their 12 block of business to an outside company, and consequently, 13 would not be renewing their contracts on anniversary dates 14 for this year. The contract that they terminated or will 15 terminate has to do with third-party administration of the 16 medical claims plus the stop loss insurance, and the contract 17 for third-party administration included in their contract the 18 provision for them to pay claims through the end of this 19 year, and upon our selection, to continue to pay claims for 20 any outstanding incurred claims for the year 2008, if they 21 were incurred in the year 2007. So, under our contract, 22 Mutual of Omaha would pay all incurred claims through the end 23 of this year, and continue to pay claims until such time as 24 those claims are satisfied under our health insurance 25 contract. 10-8-07 wk 4 1 Typically, what we see, because of the turnaround 2 time in claims today, because the length of time that is 3 required by the state for a claim to be paid if it's a clean 4 claim, if that -- if all the claims are basically clean, we 5 expect to see about 95 percent of all the claims, 96 percent 6 of all claims paid within the first 45 days. After that, we 7 will have some claims that would have been reported in a 8 timely basis, and still receive some claims probably through 9 the end of the year the following year, but they would be 10 very minor. We're under contract by Mutual of Omaha to pay 11 those claims, and upon termination of their contract, we will 12 pay them a fee, which is equal to approximately three months 13 of the administrative charges, which is a little less than 14 $20,000, to satisfy all of the claims that we have from an 15 administrative standpoint for the balance of the 2000 plan 16 year -- 2007 plan year. 17 COMMISSIONER BALDWIN: We pay them for going out of 18 business? 19 MR. LOONEY: No, sir, you pay them for paying the 20 claims. And we -- 21 COMMISSIONER BALDWIN: We pay them for work that 22 they have done for us. 23 MR. LOONEY: Well, what's happening is that -- 24 there's several things. One, we've got a contract for the 25 delivery of services to the employees, which that contract is 10-8-07 wk 5 1 a basic plan document that we give to employees that says, 2 "Here's your benefits." So, they're going to pay claims in 3 relationship to that benefit package. The other thing is 4 that they've negotiated with other providers, P.P.O. 5 providers; they've negotiated with a lot of other services 6 for those claims to flow through that discount P.P.O. base, 7 and so we don't want to lose those discounts. Because if, in 8 fact, you were to terminate that contract, then that would go 9 back to full bill charges. And, as I'm acutely aware, since 10 I had back surgery about six weeks ago, I know what those 11 bill charges look like, and not having those contracts in 12 place could be a significant hit. 13 COMMISSIONER BALDWIN: Mm-hmm. 14 MR. LOONEY: So, we pay them for servicing those 15 claims for that full year, that time frame. And, again, it's 16 contractual. One of the things we did this year in our RFP 17 process, we had some significant things that we wanted to 18 look at. First of all, the -- the RFP produced seven pretty 19 solid quotes. In the past, we've had two, we've had one, 20 we've had three. But, obviously, you know, we're -- we're 21 looked upon more favorably in the insurance market than we 22 have been in the past, so that -- that is -- that's good to 23 see. We've got good -- 24 COMMISSIONER BALDWIN: Seven? 25 MR. LOONEY: Seven good bids. 10-8-07 wk 6 1 COMMISSIONER BALDWIN: Great. 2 MR. LOONEY: So, from the standpoint of getting a 3 number of bids in, that's great. From my workload, it 4 increased substantially, because in the past, I only had one 5 or two, and I could throw half of them out right away. In 6 this RFP process, we wanted to look at three or four really 7 key areas that we want to pay attention to in moving forward. 8 One is the access to the P.P.O. networks. We want to make 9 sure whatever network access we have is complete, and 10 equivalent to, if not the same, as the current network that 11 we're in, so employees don't have to change physicians, and 12 particularly if they're in mid-care process. The other thing 13 we wanted to look at, too, is wellness programs. What can -- 14 what can those individuals, you know, providing -- providing 15 RFP responses, what could they do for us in the form of 16 wellness? So, we put in a pretty extensive questionnaire for 17 the RFP for wellness as part of it. 18 The other thing that's pretty indicative by our 19 past history is the prescription drug program is being 20 heavily utilized. And the reports that I presented to you 21 earlier in the year showed that our prescription drug program 22 is probably somewhere in the 19, 20 percent of our total 23 costs for our medical plan, maybe even a little higher than 24 that in some cases. And depending on the time frame I've 25 looked at, it's been as high as 35 percent of the total 10-8-07 wk 7 1 claims, one-third during that time frame. So, one of the 2 things that we put into this RFP also was a -- was an 3 extensive questionnaire that has to do with what we call 4 prescription benefit managers, or P.B.M.'s. A prescription 5 benefit manager is an organization that -- actually, they 6 work a little bit like a Visa card. The co-pays or whatever 7 you have at the pharmacy, where you go in and have your 8 co-payment, they're a transactional organization, so 9 basically what they do is handle transactions. 10 So, if you go over to one of the local Walgreen's 11 or to H.E.B. or whatever, and you've got your identification 12 card, the P.B.M. is the organization that manages it from the 13 time you swipe your card until such time as the insurance 14 company pays for it. And what we do is negotiate for what 15 that price is going to be and what that service is going to 16 cost. So, when we're in that process, the RFP has probably 17 anywhere from 30 to 50 pages of response to the management of 18 that prescription drug program. That's probably the one area 19 in the medical delivery -- in the health care delivery field 20 nowadays that we don't have as strong a handle on as we do as 21 far as other medical care costs are concerned. 22 COMMISSIONER BALDWIN: Gary, boy-dummy question. 23 Do you negotiate the price of those medicines prior to our 24 contract? Or -- I mean, how does that work? 25 MR. LOONEY: Okay. 10-8-07 wk 8 1 COMMISSIONER BALDWIN: I can't see how that works. 2 MR. LOONEY: Let me tell you -- I'll tell you the 3 old way, and then I'll tell you the new way. 4 COMMISSIONER BALDWIN: Okay. 5 MR. LOONEY: Okay. The old way was that you had 6 branded drugs and you had generic medications. A branded 7 medication, obviously, was one that had a logo on it by 8 whoever the manufacturer was, and the physician would tell 9 you to take that particular medication. What we would do is 10 negotiate a discount from the different providers for that 11 medication based off of what was called average wholesale 12 price, so we could go into an employer and say, "Okay, we've 13 got this volume of medications going through the system, this 14 volume of branded medications, and so we want a discount off 15 of the average wholesale price, which is 15, 16, 17 percent." 16 If we got something in the -- in the 17, 18 percent range as 17 far as a discount, we felt like we were doing pretty good for 18 negotiations. Now, the generic medication, we would 19 typically get somewhere in the 50 percent off of the -- what 20 they call MAC pricing, or just a wholesale price. MAC 21 pricing is the maximum allowable charge that's generated by 22 Medicare. 23 So, you had MAC pricing, AWP, average wholesale 24 price. Well, what we found out about three years ago is that 25 average wholesale price doesn't exist. There's supposedly 10-8-07 wk 9 1 this book put out by a data management company that collected 2 pricing from all of these different service organizations, 3 and they printed this book saying, well, this is the average 4 wholesale price. Well, found out that that was pretty much a 5 sham, that there was no average wholesale price. There was a 6 negotiated price by different providers for different 7 P.B.M.'s by different services, but the average wholesale 8 price really didn't exist. So, getting all of that -- 9 starting to gather all that information, that average 10 wholesale price, branded and generic, the next thing you saw 11 come out was the multiple-tier formula where, if you had a 12 brand medication and it fell into a certain category of 13 medication, then your co-payment for that medication was, 14 quote, $20. 15 COMMISSIONER BALDWIN: Mm-hmm. 16 MR. LOONEY: If it didn't fall into that 17 classification, went into a higher classification, it may be 18 $40. So, what we were trying to -- the P.B.M.'s were trying 19 to do was direct you into using a branded medication in a 20 certain formulary for which they had negotiated the price. 21 Doesn't make any difference what we had negotiated, 'cause we 22 had branded 17 percent; it wasn't formulary branded. Found 23 out that, obviously, the reason they're doing it is because 24 they're getting kickback. They're getting kickback, and a 25 kickback in the P.B.M. industry is called a rebate. And they 10-8-07 wk 10 1 actually call it a rebate. And, so, the rebate function, 2 when we found out that these guys were getting rebates, we 3 went back and said, "Okay, you guys are getting these 4 rebates; we're going to negotiate with you to pay us back a 5 portion of that rebate," 'cause it's based on your 6 utilization. So, we went back into the negotiating table and 7 we got a kickback on those rebates. And actually in your 8 Mutual of Omaha contract, there is a paragraph in there that 9 talks about the fact that the rebate is calculated into your 10 admin. fee on an annual basis, so that they -- they have 11 already calculated what it would be and given you a credit 12 for it, quote, unquote. 13 Well, what we found out is, in the world today -- 14 we call it transparency. What does it actually cost? Now 15 we're finding out there's some significant differences 16 between what a medication actually costs, all the add-ons for 17 admin. fees and dispensing fees and other kinds of fees, and 18 then what actually is paid by the insuring company. And I'll 19 give you one example, then I'll move on. I have a client 20 whose spouse takes a medication that's branded called 21 Benicar. I'm really not sure what Benicar is, but I think it 22 has to do with cardiovascular care or high blood pressure. 23 Benicar, by this insurance company, the fee that they 24 negotiated for was $80 for a 30-day supply of 40 milligrams 25 for this medication. That's the negotiated fee that they 10-8-07 wk 11 1 will -- excuse me, that's the wholesale price quote. 2 Negotiated fee is $60. That's what they say that they're 3 going to pay for. They came out with a new formulary this 4 year, and the co-payment required for that person to take 5 Benicar is $60, so they have negotiated for zero cost to the 6 insuring company for that medication. The actual price of 7 that medication -- the actual cost of it is about $23 for 8 that same prescription. 9 So, we've got this kind of behind-the-scenes thing 10 that's going on with all these medications. Well, when we 11 take our organization and we take the volume of over a 12 million dollars a year in claim payments, if we take 13 20 percent of that, if we're spending $200,000 a year in 14 prescription drug medications, then we need to figure out how 15 to best manage those dollars. So, part of this RFP process 16 was requiring these organizations to give us detailed 17 information about pricing, give us detailed information about 18 the prescription benefit formularies, and to offer what we 19 call a transparent model, which the transparent model means 20 that we're going to pay you what you paid for the medication 21 plus a small dispensing fee, what you have to do to get the 22 drug out the door. And then from there, we're going to pay 23 you a fee on a monthly basis to administer that whole process 24 for us. We're not going to allow you to take the profit 25 margin; we're not going to allow you to do these spreads. 10-8-07 wk 12 1 We're not going to allow you to take the formulary so that 2 you don't have any out-of-pocket expense. We're going to pay 3 you a flat fee on a month of services. 4 Projections that we're getting from the proposals 5 at this point is that we should save somewhere between 20 and 6 30 percent of our prescription drug costs by using that 7 process by itself, not making any other changes. Now, the 8 other change that takes place is the branded medication. 9 What is the branded medication used for? If it's used for 10 analgesic treatment, which means something that you get -- 11 you got headaches, you've got whatever it happens to be that 12 you need immediate relief for, infectious problem, colds, 13 flus, whatever it is, that analgesic medication, we want to 14 make sure that that's delivered quickly, promptly, that 15 everybody gets that. The other -- the other area you got is 16 the prescription medications that are used for maintenance 17 purposes. They typically have to do with diabetic care and 18 treatment, cardiovascular care and treatment, sleep aids, you 19 know, what we call GERD, which is gastroesophageal reflux, 20 which is the Prilosec. 21 So, you have what we call therapeutic classes in 22 those four classes; cardiovascular, sleep aids, diabetic care 23 and treatment, and the gastrointestinal reflux. Those are 24 maintenance medications. They comprise right now over 25 60 percent of your total drug costs. So, those therapeutic 10-8-07 wk 13 1 medications have a brand, but they also have a fairly large 2 volume of generic medications that could be used to control 3 it. As you've seen, you have over-the-counter medications 4 now that used to be by prescription only. Prilosec is one of 5 those. If you haven't seen the advertisements for Ambien or 6 Lunestra with the little blue, you know, butterfly flying 7 around -- if you haven't seen those, you either don't watch 8 any television, don't go to any sporting events, don't go out 9 of the house much, because they're advertised constantly. 10 Now, the one thing that hasn't hit into the generic field yet 11 are -- what do they call them? -- the adult male 12 dysfunctional -- (Laughter.) I'm trying to think. We 13 haven't seen that too much. We don't have generic Viagra, 14 far as I can -- you know, they're telling me it's going to be 15 out sometime, you know, soon. What I've always found curious 16 was that Medicare, when Viagra first came out, approved 13 17 tablets per month for Medicare recipients. I always thought 18 that was kind of strange. (Laughter.) 19 COMMISSIONER BALDWIN: That is interesting. 20 MR. LOONEY: Yeah. So -- but that was -- but these 21 medications -- the reason I'm going through all this process 22 is that might very well -- and I know we're going to have to 23 have meetings with employees, because the prescription 24 benefit management cost is going to change regardless, 25 because we're going to change to another carrier. So, in 10-8-07 wk 14 1 that process, if we can then create a better utilization 2 process or model per our prescription drugs, then we need to 3 do so. Part of this RFP process, again, each one of these 4 organizations has a connection with a prescription benefit 5 management company. First thing we have to decide is that 6 connection, how -- what value is that to the person or the 7 organization that's providing that quote? Because if, in 8 fact, they're sharing in the gain that is gained by the 9 P.B.M., we want that disclosed. We want to know what dollars 10 are going through that process. 11 As an example, the City of Lubbock filed suit 12 against their third-party administrator because in their 13 contract it said that they would receive 100 percent of the 14 rebate, and they found that the third-party administrator was 15 not -- not giving them any of the rebate. And this is the 16 end of a three-year contract. To give you an idea, City of 17 Lubbock, the initial audit for one year was a reimbursement 18 of $270,000. And what happens with rebates -- that was the 19 most recent year. What happens with rebates, rebates quite 20 often are not paid until anywhere from -- from 9 to 12 to 15 21 months after the date that they're actually awarded. So, you 22 know, they requested an audit of this third-party 23 administrator, and the third-party administrator has denied 24 the audit, so it's going to court. It's in the court setting 25 right now. But that's how much that rebate function can 10-8-07 wk 15 1 function for us. 2 So, the other -- the other piece of it that we're 3 looking very hard at is the internet functionality of any of 4 the T.P.A.'s that provide services. We have a -- at this 5 time, we have the opportunity to go through a modernization 6 of our delivery system through our web-based internet 7 functionality. We have some of that now. We have pieces of 8 it now, different parts. But what we're talking about now is 9 doing a global web-based internet H.R. functionality, so that 10 in H.R., when a new employee comes into the system, that they 11 will be able to enroll that person in medical plans, the life 12 plans, group term life plans that are provided by the county, 13 and any of the other voluntary plans that are currently being 14 offered to employees, so that there is one site, web-based, 15 that accumulates and manages all of that information. That's 16 important for several reasons. One is that we've got a COBRA 17 obligation for our medical plan. We also have a COBRA 18 obligation for anyone that we're withholding payroll from for 19 dental, for some of the other voluntary plans. So, there is 20 a COBRA obligation that's a liability for us to manage 21 notification for not only that, but for HIPAA notification, 22 so that we can manage that liability under one -- under one 23 package or under one entry point. 24 The other thing that we've got right now is we've 25 got two different management companies that are handling our 10-8-07 wk 16 1 H.R.A. function, which is our health reimbursement account 2 that's under our medical plan, and our flexible spendable 3 account administration, which is the employee voluntary 4 contributions that they make to their accounts under the 5 cafeteria plan. So, we've got two different organizational 6 structures. Why that's important now is that second piece of 7 information that I handed out to you in this print article, 8 the federal government passed a new regulation, and what that 9 regulation requires is that any -- any individual that uses a 10 debit card, which we have under our H.R.A. program, any 11 individual that uses a debit card, when they go to an 12 organization now, that organization has to be registered to 13 be able to accept that debit card. What was happening was 14 the debit card was being used for a lot of things other than 15 the intended purpose. They were buying, you know, whatever 16 because the debit card worked just as any credit card works. 17 It's got a balance to it; you pass the credit card. 18 It was the responsibility at that point for that 19 individual then to go back and provide information to the 20 management company for that credit card as to whether or not 21 it was an eligible expense under our plan, under our 22 direction. That became just a horrendous administrative 23 headache. There's just no way of monitoring someone who goes 24 to a -- well, an H.E.B. store, and they buy some 25 over-the-counter medications, which are deductible under the 10-8-07 wk 17 1 213d expenses, and then they have other food items. They 2 have other items. So, I don't remember if -- you used to -- 3 the grocery store, you know, used to go through, this is 4 taxable, this is not taxable. You have to separate those 5 things. Well, that's basically what they were trying to do 6 at the cash register, separate what was eligible to be 7 deductible and what wasn't, and then paying for it. Well, 8 under the new regulation, the vendor, whoever the -- the 9 retail operation, whether retail or Costco or whoever it 10 happens to be, they have to administer the rule by the 11 federal government to receive the debit card, which means 12 that those expenses that are eligible to be taken under the 13 debit card, when you pass that debit card through that 14 process, it will not accept those things that are not 15 tax-deductible under the plan. So, what that means is that 16 organizations have to go through the process of changing 17 their cash register systems and everything else to have that 18 identification process in there. 19 The list of companies so far that have certified is 20 there; you'll see on the last page you've got H.E.B. has been 21 certified, Walmart has been certified, Target has been 22 certified. So, there's a lot of those organizations. But if 23 you were to go to a noncertified local grocery store and 24 wanted to purchase a medication through their pharmacy, if 25 they were not in that process, then you could do -- you could 10-8-07 wk 18 1 buy -- pay cash and then submit the claim on paper to be 2 reimbursed, but they wouldn't allow you to use your debit 3 card, because that organization wasn't certified. So -- and 4 that is -- that is federal regulation, and it goes into 5 effect in January. And the majority of the organizations 6 that want to accept debit cards for the purposes of H.R.A. 7 payments, H.S.A. payments, F.S.A. payments, all of those, 8 they will get qualified, believe me, 'cause they don't want 9 to have to go through collecting cash and telling that person 10 that -- "Well, I'm sorry, we can't accept your card,' cause 11 they'll simply go find someplace that will accept the card 12 and go on in that process. 13 So, we're watching. We wanted that card management 14 function -- we wanted to make sure that whatever provider we 15 choose is qualified to handle that administrative process, 16 because it is a new administrative process taking place in 17 January. So, that F.S.A., the wellness incentives, the 18 prescription benefit management, all of those things were put 19 in into the RFP, and that's why we got books this thick. You 20 know, I was only hoping you were going to get two or three of 21 them. We got seven of them that thick, so it's been quite a 22 -- it's been quite a chore to -- to go through all that 23 process because of the new stuff and all the wellness stuff 24 that's involved in it. Plus, in working with Ms. Hyde, what 25 we were trying to do is eventually -- and if I'm wrong, you 10-8-07 wk 19 1 know, you stand up and wave your hand. I'm trying to get to 2 a paperless enrollment type process, that everything is 3 handled on the internet, web-based internet enrollment type 4 function. 5 The way that -- two reasons. One is, it's a better 6 management function overall for any of the insurance 7 contracts who build a database, and you manage that database 8 over the web-based function, so that we have one entry level, 9 one entry. What we find is that if you have a paper 10 application that you use for an employee, if that application 11 is perfectly clean, you have nothing else to do with it other 12 than just the administrative process of getting it to the 13 proper party, it costs about $17 to do that. If you have to 14 use -- if you have to do more than one working process with 15 that piece of paper, if it comes back where you have to go 16 and do additional information, it just adds incrementally to 17 that cost. If you have to -- if you have to deal with it 18 twice, that means that you've got to do additional research 19 to find out what the problem was, take the additional time to 20 redo it, and depending on the time length and time frame in 21 there, you may have generated a liability problem, so you 22 have to be careful about that. Well, that takes about $32 if 23 you have to do it on multiple times. So, if you have 24 multiple paperwork applications and entries and things like 25 that you're receiving, it becomes an expensive administrative 10-8-07 wk 20 1 expense. 2 We reduce a lot of that administrative expense by 3 going through that web-based internet quarter. It will cost 4 us a little bit of money in the educational process to help 5 Commissioner Baldwin to understand what we're doing. 6 (Laughter.) But I promise you, it'll work. We put -- we put 7 it into -- we put this -- what we -- several years ago, if 8 you were dealing with a company that had 3,000, 4,000, 5,000 9 employees, or even the major national companies, they move to 10 these processes, but the cost of creating that internet 11 system and that functionality was borne by their intranet 12 system; their own H.R. -- I mean their I.T. people were 13 dealing with it, so they built it internally. In the past 14 four to five years, six years, we've been able to have 15 software companies that are able to offer web-based 16 enrollment functionality that has been garnered from those 17 bigger corporations and what they do, so we are able now to 18 bring down to an organization with 250 employees the same 19 type of service format that we're able to get for much larger 20 employers at a much lower incremental cost. And the key to 21 that whole process is that the County wants to control and 22 maintain that database. 23 So, you know, there are a number of organizations 24 out there that'll offer services to you and say, "We're not 25 going to charge you for it," but you have to provide them 10-8-07 wk 21 1 with access to employees for voluntary products or you have 2 to provide them the medical plan or you have to give them 3 their profitability side of it back. If you do that, you 4 don't maintain the ability to fire those people in case they 5 do a bad job. So, by maintaining the database and 6 maintaining that data on your own database, you retain not 7 only the ability to fire that organization, but anyone that's 8 within that process that doesn't perform in the manner in 9 which they're supposed to perform. So, you want to maintain 10 and manage that database process. 11 Those voluntary products that we're looking at, 12 I've listed them on there. What we try to look at is a -- 13 about a three-year transition process, where every employee 14 this year would sit down and go through the enrollment 15 process, and have that database built from current 16 information so that everything is updated, everything is 17 current, whatever information that H.R. wants to have in the 18 system is available, and then that is all done by enrollers 19 that are not commissioned sales agents. They come in and 20 they perform the process of educating employees on the whole 21 program. Second year, you have aides available for 22 individuals that may or may not want to make changes, but you 23 have a central location. Not everyone is required to meet 24 with an enroller. The third year, you become pretty much 25 self-sustaining in the process. Employees are given a piece 10-8-07 wk 22 1 of paper; you say, "Go, enroll. This is what you need to 2 do." We're in the second year of this type of process with a 3 couple school districts right now, and they all are very 4 pleased with the way that process goes, 'cause we cut down 5 the enrollment process substantially as far as time is 6 concerned, and the data is very accurate and is very 7 confirmable and auditable, which is one of the things we want 8 to do. 9 The spreadsheet that I've given to you does not 10 have any names on it. It's got numbers up at the top, and 11 the reason it has numbers at the top instead of names is that 12 we are in a workshop, so what we have is public information 13 as of this point, and we are still in negotiations with these 14 providers to get final numbers for the cost. We know this 15 should not significantly increase over the year's cost, so 16 we've taken these numbers and put it back into the projection 17 for the budget for our budget numbers for next year. And we 18 have a number of the offerings that are well within the 19 budget restraints that we had placed on the budget for this 20 year, so we're not having to impact the budget moving 21 forward. And we're, again, in the process of finalizing 22 negotiating the final rates with these individuals. As you 23 can see from the -- from the left-hand side of it, these are 24 the types of things that we ask them for information on. I 25 don't know if you've got any questions about that at this 10-8-07 wk 23 1 point. Be glad to go over and explain to you any of these 2 particular areas. 3 COMMISSIONER LETZ: Are you going to give us your 4 color codes? I think I've figured it out, but -- 5 MR. LOONEY: The color codes are -- the red is, I 6 -- I've got a pain. I've got a pain; I've got a major 7 problem with Number 2. I've got -- the yellow numbers are 8 down at the -- where it says U.R., P.P.O., Rx broker, and all 9 other, all that means is that the yellow is what I included 10 in that cost on the rest of the page. For instance, under 11 Number 6, there is a prescription drug program cost of $6.50 12 that's listed there, and the organization has not given me a 13 complete explanation at this point as to what that cost 14 entails. I suspect I know what it is, but it was not in 15 their RFP as to what it all entailed, so I need additional 16 clarification on that. But the yellow typically is just an 17 accumulation of how I got to the total down in that one 18 category. 19 COMMISSIONER LETZ: Okay. 20 MR. LOONEY: And the reason we do that is, you 21 know, I will take each one of these separately, submit it 22 back to the individuals that made the presentation -- the RFP 23 presentation, and ask them to verify that the information 24 that I have on my spreadsheet is accurate in relationship to 25 the proposal that they've given to us, so that I'm not 10-8-07 wk 24 1 putting down numbers that they're not going to accept on 2 their bid specifications. So, they will -- I will give it 3 back to them, then they will give it back to me to verify 4 that, because these bid proposals have numbers all across the 5 board. They're all in different categories, under different 6 tabs; they're in different locations. They're -- you know, I 7 asked them to complete a particular form for me. Only one 8 company did it, which, unfortunately, may be the red company 9 that we're dealing with. But -- so, from an interpretation 10 standpoint, they will sign off on my numbers as being 11 accurate in relationship to their presentation, so that I'm 12 not jockeying with numbers in here, anyway. 13 COMMISSIONER WILLIAMS: Gary, does -- do the 14 numbers that you're showing on the bottom, total -- total 15 fixed, expected, max and so forth, do those numbers include 16 the cost of premium for stop loss insurance? 17 MR. LOONEY: Yes, sir. The maximum cost across the 18 bottom -- or that one maximum cost is the maximum aggregate 19 attachment point, including all of the expenses for the 20 administration of the plan that are identified with the 21 little yellow numbers. So that, for instance, under Number 22 3, we see at the top of the page there's a P.P.O. network, 23 there's a $4.50 number, a utilization review, there's a $2 24 number. COBRA, there's a dollar number. That number, then, 25 plus the $2 for the broker fee, shows up as a total monthly 10-8-07 wk 25 1 expense of 27,702 down at the bottom, and that's calculated 2 on -- or that's an annual basis, and then that's built into 3 the total million, eight that's at the bottom of the list. 4 The other item that is not included in that million, eight 5 number is our estimation, which is right below that, of our 6 H.R.A. expense, which is the $100,000 that's right below 7 that. That doesn't -- that's not included in that number, 8 because it's not subject to the specific or aggregate 9 limitations. 10 COMMISSIONER LETZ: Explain that. I mean, I think 11 I understand, but just explain the total fixed, expected, and 12 maximum, those three. 13 MR. LOONEY: Total fixed cost is the hard-dollar 14 cost that we pay to the -- the third-party administrator and 15 to the insurance company for the underlying specific and 16 aggregate insurance coverages. The specific coverage is that 17 item that we have for insurance that covers one individual 18 claimant during the year for up to a maximum of our $50,000 19 deductible. Anything in excess of that $50,000 is paid by 20 the insuring company. 21 COMMISSIONER LETZ: Okay. 22 MR. LOONEY: The aggregate is the accumulation of 23 all those expenses under that $50,000 and all of the fixed 24 costs associated with that process of administering the plan. 25 COMMISSIONER LETZ: So, the expected is what, in a 10-8-07 wk 26 1 normal year, we would expect. Does that include the total 2 fixed cost? 3 MR. LOONEY: The expected? Yes, it does include 4 the total fixed cost. What happens in a -- what we call an 5 aggregate insurance coverage, what the insuring industry does 6 is they take that projection of what they think that the 7 claims are going to be under that $50,000 level accumulated 8 for the 12-month period, and then they add a percentage to 9 that. They call it their corridor. That corridor may be 15, 10 20, or 25 percent. In these cases, all of these are 11 illustrated on a 20 percent corridor. That means that if the 12 insurance company thinks that we're going to have a million 13 dollars -- they're insuring a million dollars in actual 14 claims, that the -- what we expect is 20 percent less than 15 that million, or 800,000, and that expected number is based 16 on your experience history. So, that corridor that they 17 built in there is the insurance company's estimate as to what 18 they feel like the total maximum claims would be under -- 19 COMMISSIONER LETZ: And the maximum is -- 20 MR. LOONEY: That's total max, max. 21 COMMISSIONER LETZ: If we have a bad year, that's 22 what you... 23 JUDGE TINLEY: What do you see as the timetable 24 going forward now? 25 MR. LOONEY: We have two individuals, and possibly 10-8-07 wk 27 1 a third individual in the organization that we have to get 2 additional medical information on. One of the difficulties 3 with -- with being so far out in advance of the annual 4 anniversary date is that all of the insuring companies want 5 to have full disclosure on what the claims are. We have two 6 individuals, and actually a third now, that's a new entry 7 into what potentially can be a very high-risk, very high-loss 8 area. So, we will be requesting additional physical 9 information from them, which we hope to have -- hopefully 10 we'll have it by early next week. We haven't actually 11 requested it yet. Typically doesn't take very long to get 12 it, but we will also get case management information from 13 Mutual of Omaha to show us where we are. But we have three 14 individuals, again, that will have that. My -- what my 15 intention is, is to bring the final numbers back to you, not 16 next Monday, but the following Monday. 17 JUDGE TINLEY: Are you talking about next Monday -- 18 you mean next meeting? 19 MR. LOONEY: The day -- not next week, but the week 20 after. 21 JUDGE TINLEY: Okay. Be the next meeting, okay. 22 COMMISSIONER OEHLER: Regular meeting day. 23 MR. LOONEY: Regular meeting day. 24 COMMISSIONER LETZ: What do we have in our budget? 25 MR. LOONEY: You're not meeting every Monday? 10-8-07 wk 28 1 COMMISSIONER LETZ: We almost did. What do we have 2 in our budget, Judge? 3 JUDGE TINLEY: Well, the numbers that we have in 4 our budget -- what he's got at this point are within what 5 we've budgeted. 6 COMMISSIONER LETZ: The -- 7 COMMISSIONER OEHLER: 1.8. 8 JUDGE TINLEY: Expected. 9 COMMISSIONER LETZ: Expected of 16 or 165. 10 MR. LOONEY: You know, you've got another expense 11 too that's not shown here, and that is the cost that you pay 12 for your group term life insurance for all employees on an 13 annual basis, but that's a pretty small number. I think 14 it's -- I don't remember. 15 (Discussion off the record.) 16 MR. LOONEY: 23,000, maybe. It's not -- it's under 17 $20,000. That's my story, and I'm sticking to it. 18 COMMISSIONER LETZ: They're pretty close. I mean, 19 it's -- with that number of bids, I mean, they're remarkably 20 clustered. 21 MR. LOONEY: We're looking at a number of things. 22 One is that we're looking for -- in our additional 23 negotiation, we're looking for a multi-year contract. We've 24 had two of the people that have been bidding on it that will 25 guarantee rates for two years on our specific and/or 10-8-07 wk 29 1 aggregates. 2 JUDGE TINLEY: For how many years? 3 MR. LOONEY: Two years. 4 JUDGE TINLEY: Two, okay. 5 MR. LOONEY: Getting more than that would be -- we 6 can get the administrative cost fixed, which is the 7 third-party administrator's fee for actual paying the claims. 8 We've pretty much got two-, and sometimes three-year 9 guarantees on that cost, but the -- it's difficult to get a 10 two-year rate projection on the specific and aggregate 11 expenses, because it being a new contract. If we were in a 12 renewal process where they had had some experience in dealing 13 with us, they might be more viable. But we do have two, and 14 I think maybe a third that has offered us a two-year rate 15 guarantee. So, what you might see in the final numbers, you 16 may see a 2, 3, 4 percent greater premium on the fixed cost, 17 but having it guaranteed for a two-year period, as opposed to 18 having to renegotiate next year. If we can -- if we can beat 19 them up to the point where I threaten them with bodily harm, 20 then we might -- we might be able to do better than that. 21 But it's turned out -- I was hoping to have it to you 22 earlier, but I guess in my desire to get as much information 23 as I could on the P.B.M. and the wellness programs and such 24 as that, it's really a very -- it became a much more 25 comprehensive analysis than I originally thought. 10-8-07 wk 30 1 COMMISSIONER LETZ: What are we looking at on the 2 wellness program? What type of program? 3 MR. LOONEY: There's three different -- three 4 different levels that we're talking about. One is an 5 organization that provides what the -- and don't confuse the 6 H.R.A. terminology, 'cause you have two different "H.R.A." 7 terminologies out there. One is a health risk assessment, 8 which is a wellness concept, and the other is our health 9 reimbursement arrangement. So, the H.R.A. of the health risk 10 assessment, it can either be one that is proactive or one 11 that is not. Proactive approach means that you actually have 12 people come on-site and set up appointments and do 13 preliminary screening exams for those individuals, and 14 provide them personally with an independent report that is 15 very comprehensive in nature. Full blood test, full 16 urinalysis, cardiovascular care and treatment things. If you 17 identify people with problems, they come back directly to 18 that individual and offer services and provide services in a 19 manner to help them overcome that process. 20 Nationally -- if you go back and look nationally, a 21 large volume of our medical plan or medical expense increases 22 has been as a result of obesity. Obesity leads to a lot of 23 other complications and services, so one of the parts of this 24 is weight control and weight management, and a -- and health 25 and aid. We've asked them in their presentations to give us 10-8-07 wk 31 1 a recommendation on what they would consider to be incentives 2 to employees to -- to do these programs, so in our responses 3 to the RFP's, we have different recommendations from them as 4 to how they would implement the wellness program and how best 5 to be able to get that into the system. One of the 6 organizations talks about a wellness coach, and spending 7 anywhere from six to eight hours a week within your 8 organizational structure working with individuals to help 9 them have better, healthier lifestyles. So, it's -- it's a 10 wide variety, all the way from going online and fill out the 11 questionnaire and lie like a dog and get a good grade, or 12 have somebody come in and -- and sit with you and do the 13 test. So -- 14 COMMISSIONER WILLIAMS: Did our system of providers 15 essentially stay the same? 16 MR. LOONEY: That's what we've requested. We've 17 had -- we've had one proposal that would not have access to 18 our current P.P.O., and we essentially probably will not 19 utilize that provider. Very weak network in this area. 20 Outside of that, we have all of the individuals that are 21 proposing we use the same current network, which is Texas -- 22 Texas True Choice. 23 COMMISSIONER OEHLER: Same benefits in all of them? 24 MR. LOONEY: Well, now, that's the -- 25 COMMISSIONER OEHLER: The benefits are similar to 10-8-07 wk 32 1 what we have now, or the same, or what? 2 MR. LOONEY: Well, that's the other thing I meant 3 to talk to you about. We are looking at making some plan 4 changes in the plan itself. It doesn't impact these numbers, 5 because they're not significant enough plan changes to impact 6 the overall cost of the reinsurance. However, in talking to 7 Ms. Hyde and staff, when we look at the possibility of 8 changing the waiting period for new employees from the 9 current 30 days, at least changing the terminology in it so 10 that the individual employee becomes effective on the 1st of 11 the month following the completion of a certain number of 12 days of employment. Looking at turnover rates, the one 13 circumstance you want to protect against in using a longer 14 waiting period is for an individual that's coming to work for 15 you strictly for the health care benefits being able to get 16 on the health care plan, and then leaving and having COBRA 17 that's available to them for an additional 18 months. So, 18 once an employee is covered under the plan, they have COBRA 19 extension available to them for up to 18 months, so there's 20 no preexisting condition limitation for individuals coming 21 onto your plan who meet the HIPAA qualifications and a 22 certificate of coverage. 23 Now, all that means is that about four years, five 24 years ago, they passed HIPAA regulations which said that 25 health care by an employee was totally transportable to 10-8-07 wk 33 1 another employer, if, in fact, you did not have more than a 2 63-day break in the service of which you had coverage. So, 3 anything longer than 63 days, if you go to work for a new 4 employer, such as the County, you have to meet preexisting 5 condition limitations, which means you can't come in and 6 automatically be treated for something that you had prior to 7 a six-month period. So, anything previous, treated six 8 months prior to your coming, you're not going to be covered 9 for until you've been an employee for one year, so it 10 prevents somebody from just dumping into the system. Same 11 thing for dependents. If you've got a dependent spouse that 12 doesn't have coverage and never had coverage or whatever, if 13 they've got that 63-day break, they're going to have 14 preexisting condition. If, however, they're coming from 15 another employer that they've been covered, then you've got 16 an automatic transition that they're required to make. They 17 can come under the plan automatically if, in fact, they have 18 a change in their employment or if they've lost coverage from 19 being previously covered. So, the HIPAA regulations are 20 pretty distinct. The federal regulations, we have to follow 21 those regulations. But we're looking at that and trying to 22 look at the turnover rates right now for either 1st of the 23 month following 60 days of employment, or 1st of the month 24 following 90 days of employment, to see which would be most 25 efficient for these. The other thing that is currently 10-8-07 wk 34 1 covered is dependents' pregnancies. 2 COMMISSIONER WILLIAMS: What? 3 MR. LOONEY: Dependents' pregnancies. So, if you 4 have a -- a child -- female child is pregnant and they are 5 classified as a dependent, then we would be covering them 6 under the current medical plan. 7 MS. HYDE: And the child. 8 MR. LOONEY: And the child at birth; that's 9 correct, and for 30 days afterward, after the birth, for 10 sure. "Dependent" definition also currently is up to age 25, 11 regardless of whether they're attending school or not. So, 12 we're talking about changing that definition to -- 13 (Cell phone rang.) 14 COMMISSIONER BALDWIN: Sorry. 15 MR. LOONEY: -- the age of -- 16 COMMISSIONER WILLIAMS: $25 fine. 17 COMMISSIONER BALDWIN: Is that all it is? Hell, it 18 was worth $25. 19 MR. LOONEY: Talking about changing the dependent 20 age from the current status, which is up to age 25, to the 21 age of 18 or 19; under the age of 19, completion of the age 22 of 18. Eighteen and 365 -- say 364 days up to the birthday 23 at age 19, then coverage up to age 23, 24, or 25, assuming 24 that they're attending school on a full-time basis, an 25 accredited college. What's happening now is that, by being 10-8-07 wk 35 1 more flexible and having the dependent be covered, you're 2 ending up with unmarried daughters moving back home under the 3 age of 25, having their parents have coverage for the child 4 and the grandchild at birth. So, by changing that clause in 5 the plan and moving forward next year, we will eliminate that 6 coverage in the contract. That would include not only normal 7 pregnancies, but it would also include any complications of 8 pregnancy. So, a dependent -- dependent moving home would 9 not automatically be covered. 10 Let me see what else. Look more closely at the 11 applications to be sure that upon -- one of the things that, 12 having it all done on the internet, again, it gives us a 13 database to be able to manage the dependent structure more 14 carefully. We want to make sure that if a person's 15 identified as a dependent, that they truly are a dependent. 16 We've had a -- a couple of problems where an individual comes 17 in and they'll enroll a person under their health care plan 18 and name them as their spouse in the health care plan, and 19 what many young men or young ladies don't understand is that 20 if you start holding yourself out as husband and wife, then 21 the state of Texas assumes you are, and that common-law 22 marriage is very easy in the state of Texas. However, you 23 don't get the same authority to divorce somebody by simply 24 going back in and erasing their name, so it becomes a much 25 more critical issue from a legal standpoint, because you have 10-8-07 wk 36 1 to go through the process of divorce. So, I'm not sure that 2 a lot of individuals that come in and name persons under 3 their health care plan as spouses understand that, so we're 4 going to have a better process of explaining that to them. 5 Is that right, counselor? Am I -- am I giving legal counsel 6 here? 7 MR. EMERSON: That's pretty accurate. 8 MR. LOONEY: So, you know, those common laws will 9 get you. 10 JUDGE TINLEY: Also, this would -- what about 11 children as dependents? 12 MR. LOONEY: Unfortunately, you know, we can -- 13 when we collect the information on the initial enrollment 14 process for the internet enrollment process, we're going to 15 require them to name all their dependents, and going through 16 that process will give us a much better handle on who they 17 actually are claiming as a dependent. And while we do have 18 some obligations to provide coverage for dependents through 19 the guardianship rules where we have grandparents that are 20 legal guardians, then we do have to handle them as dependents 21 under the plan, but at least we would be able to identify 22 them prior to the date of claim, in that if there are legal 23 restrictions, that they will know about them in advance so 24 that they will not assume that the child is covered and seek 25 help, and then find out at the time of claim that they are 10-8-07 wk 37 1 not certified as a dependent. 2 SHERIFF HIERHOLZER: What do they consider legal 3 guardian, though? 4 MR. LOONEY: What is considered a legal guardian? 5 The Judge can take care of that. Counselor, what's a legal 6 guardian? 7 MR. EMERSON: Depends on the insurance plan. 8 MR. LOONEY: Most of the insurance contracts use 9 definitions that they get from Internal Revenue Service as to 10 what a legal guardian is, about the child -- the amount of 11 support that they provide to them, and whether or not they 12 assume that they take a deduction under the Internal Revenue 13 Service rules or not. So, it requires a certain amount of 14 support; it's not just financial support. They have to 15 provide other levels of support. That's -- you know, that's 16 what we typically see. The -- there can be some significant 17 changes in the voluntary insurance plans that are offered to 18 employees. The administration of those voluntary plans, as 19 I've said, from the H.R. function is an expensive function, 20 based on that $17 number. With the web-based enrollment, 21 there would be voluntary plans, such as are identified on the 22 spread -- on my agenda. These are plans that Ms. Hyde has 23 suggested that we offer, that these would all be on a 24 web-based function. 25 They would all be on a guaranteed insurability 10-8-07 wk 38 1 base, which means that a person enrolling for these plans on 2 a web site would either be rejected or accepted based on the 3 application that they make online. The Department of 4 Insurance -- about four or five, six years ago now, we went 5 to Department of Insurance to make certain that a security 6 site -- a site that has sufficient security, that an employee 7 could enroll for voluntary plans and be accepted by using a 8 web-based enrollment function. These are the offerings that 9 they're suggesting be put onto the site. They're ranked in 10 many ways when you go through the web base. They're ranked 11 because of what you feel the basic need for an employee would 12 be. Medical plan, the basic group term life plan that was 13 provided by the county, voluntary life insurance, if needed 14 for employee, spouse, and/or children, long-term and 15 short-term disability based on the individual wanting to have 16 that type of coverage, dental plan, vision plan, then the -- 17 what we call the specialty products, which have to do with 18 accidents and the critical illness plans. I'm not suggesting 19 that any employee lose any coverage that they currently have. 20 They'll all be eligible to participate and continue 21 participating in the plans that they're currently enrolled 22 in, but these could be secondary, in addition to whatever 23 else they currently have. 24 COMMISSIONER OEHLER: There's no problem with 25 taking -- the employees and the dependents that are now 10-8-07 wk 39 1 enrolled will automatically be enrolled into new plan? 2 MR. LOONEY: In the medical plan. 3 COMMISSIONER OEHLER: In the medical plan. 4 MR. LOONEY: In the medical plan, and the group 5 life plan will be automatic -- 6 COMMISSIONER OEHLER: Right. 7 MR. LOONEY: -- enrollment. Everything else would 8 be subject to actual the enrollment process itself. 9 COMMISSIONER OEHLER: And did you say that the -- 10 these debit -- the debit card thing will still be in place? 11 MR. LOONEY: Still be in place, and we're going to 12 have -- we're going to have that little window of transition 13 in there where we're going to have -- you'll have a new debit 14 card company, so there will be a cutoff date and a -- and 15 another enrollment date, so there will have to be a 16 distribution of the cards during that process. But all of 17 those records will be transferred as near the end of the year 18 as possible, so that all credits and debits can be 19 transferred effectively in the first week of January. 20 JUDGE TINLEY: Any more questions for Mr. Looney? 21 COMMISSIONER WILLIAMS: You covered it very well. 22 JUDGE TINLEY: You got anything you want to -- 23 (Discussion off the record.) 24 MS. HYDE: One of the other things that -- on the 25 supplements. Right now, we manage those supplements. The 10-8-07 wk 40 1 insurance companies get the premiums. We pay the premiums 2 for the employees, but the Treasurer and H.R. are managing 3 those programs. And under the new programs, people can get 4 all the supplementals that they want, and we will take it out 5 of their checks, but the ones that are not covered within 6 this program they need to pay themselves, just like their own 7 car insurance, just like their own mortgage payments, all 8 those things. Because what is occurring is, we are trying to 9 manage outside insurances that we have no business even 10 talking to those people about, and we've kind of opened up a 11 can of worms in the past where the employees may not really 12 understand. We have some retirement plans that people could 13 get five, six years ago, that aren't even offered any more, 14 and those employees still think that I should be able to go 15 in there and tell them how much money they have, or how -- 16 what do they need to do? Should they sell? Should they 17 keep? Those are not part of our insurance package. So, I 18 just wanted to make sure that y'all were aware of that, 19 because there's going to be some blow-back on that. They're 20 not going to understand they can still keep it; they can do 21 whatever they want to, but it's not going to be part of what 22 we're trying to offer at a reduced rate. 23 JUDGE TINLEY: You came with all the questions, 24 right? 25 COMMISSIONER BALDWIN: Yeah. By gosh, I have to 10-8-07 wk 41 1 wake up a little bit. 2 MR. LOONEY: Sorry. Sorry about that. 3 COMMISSIONER BALDWIN: Not you, Gary, but the 4 topic. 5 MR. LOONEY: The topic or my monotone voice. 6 COMMISSIONER BALDWIN: So, how much is this thing 7 going to cost us more than -- 8 MR. LOONEY: The -- no, sir, there's no change to 9 the employee contribution. 10 COMMISSIONER BALDWIN: No change. And in two 11 weeks, we're going to know who you're going to recommend. 12 All right. Good night. 13 MR. LOONEY: Thank y'all very much. Appreciate it. 14 COMMISSIONER WILLIAMS: Thank you, Gary. 15 JUDGE TINLEY: Thank you. Anything else in 16 connection with this subject -- workshop? We'll be 17 adjourned. 18 (Commissioners Court workshop adjourned at 2:40 p.m.) 19 - - - - - - - - - - 20 21 22 23 24 25 10-8-07 wk 42 1 STATE OF TEXAS | 2 COUNTY OF KERR | 3 The above and foregoing is a true and complete 4 transcription of my stenotype notes taken in my capacity as 5 County Clerk of the Commissioners Court of Kerr County, 6 Texas, at the time and place heretofore set forth. 7 DATED at Kerrville, Texas, this 12th day of October, 8 2007. 9 10 JANNETT PIEPER, Kerr County Clerk 11 BY: _________________________________ Kathy Banik, Deputy County Clerk 12 Certified Shorthand Reporter 13 14 15 16 17 18 19 20 21 22 23 24 25 10-8-07 wk