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HomeMy WebLinkAbout2002-07-08 AfternoonJuly 8, 2002 (Adjourned Meeting) (Page 1) An adjourned meeting of the Board of Supervisors of Albemarle County, Virginia, was held on July 8, 2002, at 4:30 p.m., Room 235, County Office Building, McIntire Road, Charlottesville, Virginia. This meeting was adjourned from July 3, 2002. PRESENT: Mr. David P. Bowerman, Mr. Lindsay G. Dorrier, Jr. (arrived at 5:37 p.m.), Mr. Charles S. Martin, Mr. Walter F. Perkins, Mr. Dennis S. Rooker and Ms. Sally H. Thomas. ABSENT: None. OFFICERS PRESENT: County Executive, Robert W. Tucker, Jr., County Attorney, Larry W. Davis, and, Clerk, Ella W. Carey. SCHOOL BOARD MEMBERS PRESENT: Mr. Kenneth C. Boyd, Mr. Gary W. Grant, Ms. Diantha H. McKeel, Ms. Pamela R. Moynihan, Mr. Gordon J. Walker and Mr. Charles Ward. SCHOOL BOARD MEMBER ABSENT: Mr. Stephen H. Koleszar. SCHOOL BOARD OFFICERS PRESENT: Dr. Kevin C. Castner, Superintendent; Mr. Mark Trank, Deputy County Attorney; Ms. Kimberly Suyes, Director of Human Resources; Mr. Bob Brandenburger, Human Resources Manager for Compensation and Benefits; and, Tiffany Townsend, Deputy Clerk of the School Board. Agenda Item No. 1. The meeting was called to order at 4:37 p.m., by the Chairman, Ms. Thomas, and by the Vice-Chair of the School Board, Ms. McKeel. _______________ Agenda Item No. 2. Health/Dental Contract 2002-2003. Mr. Brandenburger said the Board members were sent a copy of the report from the County's Health Care Executive Committee. He then introduced Mr. Tom MacKay, with Palmer & Cay and Associates, who have been working with staff for a number of years on health care and other compen- sation related matters. He said the task of the Committee was to look at and make recommendations as to the County’s health care and dental insurance providers. With the merger and acquisition of Qual-Choice by Southern Health, it was an opportune time to go into the marketplace again, since it had not been done for several years. He will speak first about the current status of the medical plan, then about health care costs in general, and, finally, will summarize the recommendations of the Committee. Mr. Brandenburger said the Boards’ strategies which were adopted two years ago, had to do with both compensation and benefits. One of the strategies had to do with maintaining the benefits at 105 percent of market. He asked Mr. MacKay to speak about this. Mr. MacKay said two years ago, the Boards appointed a Compensation Committee to look at both benefits and compensation. To get to 105 percent (a numerical term for ”slightly ahead of market”) of market for benefits was harder than determining compensation. A survey was taken of the County’s private competitors to determine what benefits they offered. It was found that the strength of the County’s benefit program was in its medical plan. It was the one piece that was above what its peers offered. The County has no control over a lot of the other benefits, because a lot of its competitors have the same benefits through VRS. Paid leave and dental benefits were competitive or slightly below market, but the medical program was ahead of market, mainly because of the co-payments, the deductibles and the employee’s contribution toward the premium. Mr. Brandenburger said at the beginning of the process the Health Care Executive Committee was given certain guidelines in which to work. They knew that QualChoice (which is now Southern Health) would no longer offer the plan the County had. It was a plan which was unique to QualChoice and the industry. So, they wanted to mirror those benefits as much as possible. Having a “level playing field” also made it easier for the companies responding to the proposal. During the budget development process this year, the Committee made recommendations which were approved; basically to keep employee premiums the same as they are in the current year. Mr. Brandenburger said he will speak about claims history. In the past, at the end of the plan year, revenues (revenues being the Boards’ contributions and the employee premiums) almost matched costs for the year. Current year plan costs are expected to exceed revenues. Most of that has occurred in the last three and one-half months because of the larger number of claims in excess of $10,000 each. Last year during the same time frame there were about 45 claims, and this year there are almost 70 such claims. Staff does not know if this is an anomaly. That has created a shortfall in the current year, which is expected to be covered by the medical reserves. Mr. Rooker asked if there is an individual stop-loss on costs. Mr. Brandenburger said there is a specific stop-loss of $125,000. Mr. Rooker asked if there is an aggregate stop-loss. Mr. Brandenburger said when the County first switched to QualChoice there was an aggregate cap for total claims. In the first year, that aggregate cap was used because the claims projections were extremely low. Once the claims projections were more in line with what the claims had been with Trigon, it was not felt the aggregate cap was needed because it costs approximately 15 percent over claims. Mr. MacKay said the other factor is that the reserves were healthy, and if claims were exceeded, it would only be by a small amount. July 8, 2002 (Adjourned Meeting) (Page 2) Mr. Rooker asked the total projected premiums on the plan. Mr. MacKay said the total expenses for everything total about $10.5 million. Mr. Brandenburger said that is the amount for the current year. Mr. Rooker asked if the reserves are 15 percent of the total plan. Mr. MacKay said the reserve for claims not reported would be about 20 percent. Mr. Brandenburger said when the current plan year began, the reserves stood at about $2.6 million. That was a little more than 20 percent. Mr. Brandenburger then showed a chart representing Claims History for the plan years 1999 through 2002. He said the chart shows that it is extremely difficult to be able to project when claims will occur. Mr. Boyd said given the current health care situation, did the Benefits Committee review the possibility of putting the aggregate back on this year? Mr. MacKay said that can still be reviewed, but the stop-loss market is very volatile, so claims are actually less than where they claim them to be. They are providing a margin. The market is very conservative now. Normally, that market is tied to the property/casualty insurance market, and that market has dried up. Mr. Brandenburger said part of the task was to find a benefits design which mirrored what the County has at the present. He said the Point of Service, Triple Option no longer exists. It was unique to QualChoice, and Southern Health was not willing to offer that plan. Likewise, in the Dental Program, there are two different plans (the Basic Plan and the Major Plan). He said the work of the Committee was to duplicate those plans to the extent possible. Mr. Brandenburger said the proposed Medical Plan design for the year beginning October 1, 2002, will be very similar to Option I benefits under the Triple Option POS Plan offered by QualChoice. There will be only the one plan offered. In-network benefits are very similar. A feature of this new plan is called “Open Access” where referrals are not required from the primary care physician to see a specialist. The specialist office co-pay will increase from $15 to $25 per visit. A vision exam benefit is being added with discounts available for the purchase of materials through participating providers. As to out-of-the-network benefits, there have been some changes. The deductible increases from $100 to $500 for an individual and from $300 to $1000 for a family. The out-of-pocket maximum increases from $1000 to $3000 for an individual and from $3000 to $6000 for a family. There are no changes in prescription co-payments because in January, 2002, there was a major change made with the transition to Southern Health. Mr. MacKay said the most important component of the Medical Plan versus the market is what the employee has to pay as a monthly premium for coverage. He then referred to a chart in the Board's materials for this meeting (on file in the Clerk’s Office). Mr. Boyd said the chart is somewhat misleading because it does not show what those plans included. Mr. MacKay said when the survey was taken in 2000, the Committee looked at that information. National costs are misleading when just looking at costs; a private survey is needed to see what they allocated per head. Mr. Brandenburger said they have tried to project the impact of this for the next few years. A survey of the marketplace will be taken soon. Mr. MacKay next showed a chart entitled “Annual Trend Survey of Health Care Costs” (on file in the Clerk’s Office). He said the POS program is the program being proposed for 2002. The trend rate on the HMO, POS and PPO programs are running about 14 percent, and have been at that rate for the last nine months. Mr. MacKay then showed a chart entitled “Annual Prescription Costs Per Employee” (on file in the Clerk’s Office). He said the cost has really spiked, but it is not so much about costs, as the number of prescriptions being utilized. He said that from 1997 to 2001, the County did not have a large increase in number of people covered under the plan, but the number of prescriptions filled has increased from 26,963 to 43,061 during that time period. He said that is not all bad because some of these drugs help keep people out of the hospital. He said the County went to a three-tier structure a year ago, but he thinks that in the future there will be more co-insurance offered than just co-pays. It will be more like the old medical plans where the payments were 80/20. There might be the same thing done for prescription drugs. Mr. MacKay said the County went out to bid this year to look at alternative health care and dental providers. The marketplace is tough now because the managed care people who have the ability to administer the complex plans have consolidated with other plans, so there are less choices in the marketplace. He then referred to a chart entitled “Medical Market Status” (on file in the Clerk’s Office). He said more emphasis is being placed on profitability rather than on market share. A few years ago when QualChoice came into the market place, their emphasis was on market share. He said Southern Health is the company which acquired QualChoice in September, 2001. It has the broadest network in this area. They have a competitive discount arrangement (the deals they have with hospitals and providers). The County is a self-insured program so manages its own claims costs. In a provider, the County needs someone to adjudicate claims and have customer service representatives that are knowledgeable and have the ability to control claims costs. Their administrative costs were also very competitive. Mr. Ward said that last year the School talked about having a central Virginia plan with several school divisions participating. He asked if Mr. MacKay is indicating that there would not be the infrastructure necessary to attract a provider. Mr. MacKay said there would be a difference depending on the size of the pool of participants. Mr. Ward asked if the pool could be doubled, would that make a difference? Ms. Suyes said there has been some discussion with the City School System about this idea. She understands there are some other counties that might like to be included. That is a huge process, so it will not happen overnight. July 8, 2002 (Adjourned Meeting) (Page 3) Mr. Rooker asked if this would be a pooling of claims. He said you still pay for your claims, and your administrative costs, so you are only tapping into a network of discounts. Ms. Suyes said because the County is self-insured, and some of the others are not, it makes the process even more difficult. Mr. MacKay said if claims are pooled, the minute you are subsidizing someone else’s claims, you want out of the program. The ones he has seen that stayed in effect are the ones where they paid their own claims, but got better administrative levels and better customer service guarantees. Mr. MacKay continued to explain about the companies listed in the marketplace survey. He said there was a fairly limited market. Also, for the dental plan, there is a limited PPO network available in the Charlottesville area. The Committee talked about going with a PPO plan or a straight indemnity plan (where employees would chose any dentist they want). The problem is that the indemnity basis will increase costs in the long-run because dentists get paid more. When they looked at the top 30 dentists being used by Albemarle County employees, 27 of those dentists where in the Delta Dental plan all ready. The County does not allocate a lot of money toward the dental plan. Based on the PPO plan match, only Trigon and Delta Dental have a 50 percent network match for dentists currently used by Albemarle members. Mr. MacKay said the recommendation for the Medical Contract is to award the contract to Southern Health based on the following evaluation criteria: network access (access to primary care physicians, access to specialists, access to hospitals, and prescription drug formula) - 30 percent weight; quality of administration (performance guarantees, customer service response rate, claim turnaround time) - 25 percent weight; cost (administrative fees, reinsurance premiums, ability to contain costs through discounts, guarantees for discounts, and cost containment features) - 35 percent weight; and offerors' credentials (how the proposal was prepared, references and how those references checked out, credibility of the marketplace based on their delivery to other organizations) - ten percent weight. Mr. Rooker asked the financial strength of Southern Health. Mr. MacKay said Southern was penalized in the evaluation because the rating agencies “hammered them good.” They were a “B.” But, the Committee agreed that it was not a big deal because the reinsurance is issued through SAFECO which is an A+ carrier, and they are the ones who are on the hook for any liability. Mr. Rooker asked if Southern Health is publicly-traded. Mr. MacKay said Southern Health is a division of a managed care company called Coventry which is publicly-traded on the New York Stock Exchange. They are based in Maryland. Southern Health is the Virginia name for that operation, which is an HMO based out of Richmond that has grown into other areas of the state. Mr. Brandenburger said that during this process the Committee brings to the table the heads of the organizations which are part of the health plan. Besides the Schools and Local Government, there is the Jail, CATEC, and the Albemarle County Service Authority. He said the Committee had a formal presentation by both Trigon and Southern Health. That helped the group deliberate in making their assessment of the proposals. A part of the request had to do with service guarantees in addition to just reinsurance issues. He said the overall service levels which have been favorable are: claims processing accuracy; call waiting and abandonment time; overall member satisfaction; separate prescription drug service guarantees; and, achievement of composite model claim discounts. He said that even though the County is a self-insured plan, there are incentives for the provider to manage the program effectively. Ms. Thomas asked what is meant by “separate prescription drug service guarantees.” Mr. MacKay said the service guarantees in the old plan had to do with the medical plan. When there was the transition on January 1, 2002, there were prescription drug issues. The Committee wanted a specific guarantee for the future for prescription drugs. Mr. Brandenburger said that in addition to the recommendation to award the contract to Southern Health, the employee premium structure needs to be reaffirmed. The Boards said earlier that the medical premiums for full-time employees would remain the same as the current rates. The budget allowed that to be done. He noted that there are a large number of part-time employees in the School Division, and even though the Schools contribution increased, they will still see an increase in their premium if they carry the family plan. Mr. Brandenburger said there will be some additional educational materials for staff to make them more aware of the cost of the program and costs of benefits, and to realize that for a self-insured plan the money only comes from two places, the Board as the employer and the employee through premiums. He said a reserve of about 20 percent has been built up to "take the edge off" of a bad claim year. As long as projections and the premium structure pays the cost, no further losses will be taken from the reserve. If necessary, in mid-year, staff could always return with a recommendation to adjust premiums, although that has never occurred before. Mr. Boyd asked about the payment for part-time employees. Mr. Brandenburger said it will go to the Strategic Review group. At this time, part-time employee payments are based on percentage of time worked. That is very complicated for everyone, so it will be studied further. Mr. Boyd asked if that committee will be reconstituted to look at that question. Ms. Suyes said Mr. Brandenburger is putting together a Total Awards Strategy and this is a piece of it. She said the group will come back together when staff is able to present it with good data. July 8, 2002 (Adjourned Meeting) (Page 4) Mr. Brandenburger then mentioned the monthly employee premiums for the dental contract. He said Delta Dental has offered second and third year rate caps; customer service guarantees; rate stabilization reserve available in years of favorable claims experience; and, Delta will liberalize the out-of- network usual and customary allowances (specific to Albemarle). Mr. Rooker asked how to compare the level of service being offered to that in existence now. Mr. MacKay said the triple option plan offered by QualChoice was a very unique plan. He said that 95 to 97 percent of the employees were in Plan 1. So, the Committee tried to find a plan which was close to that one. The major differences between the new plan and the Option 1 plan is that there is no longer a gatekeeper; the employee can go directly to a specialist, although they will have to pay a higher co-pay. Ms. Suyes said this plan has the least effect on the employee. She said the options the County has now are not being offered by anyone. Mr. Rooker said there was no maximum amount of out-of-pocket expenses. Mr. MacKay said that with the co-pays everyone was paying 100 percent. A person would have needed to be hospitalized ten times just to get to $1000. A lot of time HMOs have out-of-pocket maximums, but they never really come into play. Mr. Walker said there are factors which influence the cost of health care such as age and health. In regard to healthy lifestyles, quality of wellness, what is done in the way of health promotion activities? He said Southern puts out some regional publications which relate to quality of health. What incentives are there for employees? Mr. Brandenburger said in the past, the County held health fairs designed to identify problems and help to change lifestyles. Those programs ran for about four years. No direct results were seen from those fairs. They also fell by the wayside because of budget issues. He said at this time there are probably 400 or more employees who have chosen not to take part in the County’s health plan. He asked if the County wants to go to a flexible benefits program which basically puts money on the table that the employee can spend. He said there is the possibility of someone proving they have good health based on certain medical measurements, and then reducing their premiums. That has been talked about in the past, but the idea has not been vigorously pursued. (Note: Mr. Dorrier arrived at the meeting at 5:37 p.m.) Mr. Martin said he remembers the Boards talking about a wellness program. He did not know how there could be such a program with only one shower in the County Office Building. Having showers available would allow people to “work out” during lunch hours, or maybe ride a bicycle to work. Mr. Walker said there are a lot of issues. He said a dollar is saved for every three or four dollars spent on these activities. He would encourage the Committee to look at the idea because he thinks there is an aging workforce in the County. It will become even a bigger issue in the future. Mr. Boyd said he is interested in flexible benefits. Ms. Suyes said they are not looking just at compensation and benefits, but at total rewards. That is a much bigger picture. Ms. Thomas said she has a question about the mental health field. A few years ago, there were changes and most people in the mental health field despaired at what the insurance industry was doing. She noticed that there was a mention in the paperwork today that “what the County is offering usually works.” She asked if the Committee did any research of the staff to know how many people need a benefit for mental health. Mr. Brandenburger said they have no data from employees saying they are satisfied with the level of service offered. The only data they have are the monthly reports from QualChoice. It provides a breakout of claims by different categories and mental health is a category. Mr. MacKay said during the RFP process, the Committee looked at a separate mental health plan. The plan the County has today through Southern Health is contracted through Sentara Mental Health Substance Abuse. They have the largest network in the area. If an employee wants to use the services, there are many providers available. It was determined that it was the best network, and wherever the health contract was going to be awarded, that was to follow in terms of broad access. Ms. Suyes said it was taken into consideration. The Committee said if the County did not take the Southern Health contract, then it might consider carving out the mental health coverage separately. Mr. Martin suggested looking at insurance in the entire area by seeing if vendors have declined or increased. He knows that when Medicaid changed their rules, some of the vendors disappeared. He said a lot of the substance abuse programs followed because insurance companies where not paying them enough to make their programs viable. With no further discussion of this item, Ms. Thomas said the Board has a recommendation before it. Motion was offered by Mr. Martin that the Board approve the Health Care Executive Committee’s recommendation that the medical care contract for 2002-03 be awarded to Southern Health, and that the dental insurance contract be awarded to Delta Dental of Virginia to retain a fully-insured plan. The motion was seconded by Mr. Rooker. Roll was called, and the motion carried by the following recorded vote: July 8, 2002 (Adjourned Meeting) (Page 5) AYES: Mr. Bowerman, Mr. Martin, Mr. Perkins, Mr. Rooker and Ms. Thomas. NAYS: None. ABSTAINING: Mr. Dorrier. __________ Motion to approval the proposal presented today for health care insurance for the School System was offered by Mr. Boyd. The motion was seconded by Ms. Moynihan. Roll was called, and the motion carried by the vote which follows: AYES: Mr. Walker, Mr. Ward, Mr. Boyd, Ms. Moynihan, Ms. McKeel and Mr. Grant. NAYS: None. ABSENT: Mr. Koleszar __________ Ms. Thomas thanked staff for the information provided today. _______________ Agenda Item No. 3. Adjourn. With no further business to come before the Board, the meeting was adjourned at 5:40 p.m. (Ms. McKeel noted that the School Board would be in recess until 5:45 p.m.) ________________________________________ Chairman Approved by the Board of County Supervisors Date: 09/04/2002 Initials: EWC