practice pattern. it is big enough that i can take that information. 4 more of the relevance of the actions, programs. some people want actuaries to put a reduction on a very strong wellness program. we take every consideration we can to affect all programs. thank you. i do not know if this goes back to the doctor, but in terms of the worst-case scenario? kenneth explained again -- can you explain again the liability? >> i will lead amil do that. i just wanted to show you the

example the model of the last 31 months. this is what our trend began to go down. blue shield looks back 31 months. they had to keep us on that 16% trend. down here, our last 12 months, the data that our actuary is using to propose for next year, next year we will do this again and keep an eye on what we're doing, month by month and this is where the aco's were implemented. blue shield is trending when they set the rate for a fully insured model. we are trending at 9.05%. your question was, well we have

enough money in the worst-case scenario. >> when you go into these arrangements, since you are now point to be collecting a premium equivalent from the bank and literally paying claims, you get coverage is to protect your worst-case scenario. you have an aggregate attachment point. the spread between what you will collect and what you are now insured of its $31 million. the likelihood is negligible to 99 out of 100 cases. but a thick practice is to take the anticipated spin and multiplied -- but the basic practice is to take the anticipated spent and increase it 125%. now, we will offer you blue shield coverage if the span goes over that amount. for your comfort level, will we

ever wind up having to fund of the worst case possible, our analysis is that it is less than a certain amount, and it never happens. i can say with almost certainty that it will not happen. supervisor kim: there is a 0.2% chance that we could exceed projection. that is kind of the spread we're looking at? >> yes. the boundaries in those graphs are which you should expect. close to $300 million. we're talking about active early retirees. that is what we anticipate. will they go to that amount? in my head it is some big number. that being the case, will it get there? our analysis of the graft

function is that it will not pass $300 million, but you are insured if the worst thing is that $328 million. ñ $y appropriated. operation, you could probably justify an additional $13 million in reserves. the worst he will ever see is likely $20 million. in my mind, as an actuary, my job is to assess risk, and it is highly unlikely that you will never see this. supervisor chu: one thing that i wanted to give committee members perspective on, we ask the

actuary to look at the potential bring down on the cost. we looked at renewing the rates potentially according to what the actuaries were saying and utilization looked like over 30 months. that would be paid by members, employees, and retirees. we asked them to run another, applying $5 million to stabilize the rates and bring down the rates. we asked them to do a fully insured product and apply $10 million to the plan. then, as we started to approach the flex funded approach, which started to get to a level where

the proposal before us, this is 9 million compared to 39 million. in order to pay for that, paying less in terms of a premium, we are taking on a risk with a maximum liability potentially of $31 million. there is a likelihood that we would pay that. i think that that is the trade- off. let's say that began with a fully insured plan, or going down the flex funded approach, we have a potential rift that we will reach of $31 million worth of liability. so, that was the decision that be grappled with. from the employee employer perspective, there is a big difference. we talk about maintaining affordability and preventing the

migration as much as possible. as the supervisor asked about, what were the factors? we were also looking at what they expected migration to look like. that was something that we were very sensitive to. in the flex-funded approach, employees would pick up $2 million and the employer would pick up $7 million. we think that that would help to buy a little bit of time. not forever, to be honest. we would have to look at the different offerings provided. it was a trade-off between for sure $32 million or $9 million more in taking a 0.2% risk that we could be $10 million worse off. that was really the choice that we had.

one thing i wanted you to cover in terms of the maximum liability, but was the level of funding we had in our reserve? we know that that is thernn5 mm to percentage probability. how much is in our reserves? if we were to exceed the reserve, what is the health service system next step? >> these usually come in three months after. when we move to flex funding, we will start accruing premiums, collecting premiums, while blue shield will still be playing those bills from the previous years -- paying those bills from the previous year. the actual estimate is that that will be $17 million.

we will have that incurred but not reported. those dollars will be in our budget. if we were to stop for some reason doing plaques funding, we would have that liability ourselves, but that gives us another $17 million. between those in the first three months, we would have more than a $20 million reserve fund to pay any bills that come in. we will be setting rates again next march. at that time we will look at utilization bids and if we should increase the cost of premiums based on those earlier ones that i showed -- showed you. utilization has gone up and we will have to increase premiums to cover the anticipated costs and costs that had been spent, which is exactly what we do with united healthcare. supervisor chu: thank you. >> can i? supervisor chu: go ahead.

>> you pointed out the issue of planned migration with a risk premium costs. i wanted to give you an example of how significant this is. over the past few years we have had 4000 members move out because of the rising cost of the shield premiums. in this last year we kept the premiums constant and only 300 people moved. if we had 2000 members moving out with their families into kaiser coverage, the city would save $9.8 million. but the loss of those younger, healthier families in the risk pool would increase the aggregate blue shield premiums, because all you would have left are sick, middle-aged people. to balance the risk pool, you need help the families in both.

that is why they apply only to dependent coverage. so, in the long run, there is still a lot of work to do. as you pointed out, this is a short-term solution and only the second time we have done this. it is essential in order to negotiate good premiums that we have competition in the health- care marketplace. it is essential. going from one provider to another, we would be negotiating with a monopoly. it is essential that we provide a choice of quality plans for all the members to balance the risk pool. tpacit is important that we take care -- take advantage of that momentum. we will be monitoring options closely as the insurance exchanges take effect. also, the increased purchasing power and transparency,ks

there willóil"ñ be greater transparency, but this is one of the issues that bill come up at the california state exchange meeting tomorrow. we are working to incentivize employee and retiree wellness end working to change doctor and hospital payment systems so that we are paying for quality, for all it -- for value, not volume. things that the government and purchasers have a stake in. i wanted to allow more specific details on the actuarial presentation. we could have them present. %ó let's have the: presentation of the 10-county amount.

>> all right, it is number one. before you have the present amount for this plan, we did the analysis per section 423, collecting information in 2013. the amount is now $534.78, a 2.6% increase. any questions? supervisor chu: thank you. let's go to the budget analyst report. >> on the bottom of page 6 of our report, in table 3, page 7, we have the total city employee and retirement costs for health , dental plans, and life by 1.4%.

this is from july 1, 2012, through december 31. on an annualized basis, 591 million for the calendar year 2013, which is before you, as you know. attachment #two gives details for the city employees and retirees. the blue shield flex funded plan has been thoroughly discussed. on page 9 be pointed out that it could result in a savings of a health -- savings to the health service system, but it transfers financial risk if the claims exceed premium penance. on that one item, we considered that to be approval for the

board of supervisors. we recommend everything else the two approved for both resolutions at this time. supervisor chu: thank you. are there members of the public it wish to speak on these items? 9mñseeing no one, public commens )nosed. colleagues, to the items, if we could take approval of item #9 first? this is a simple one, to approve the 10-county survey amount. can we entertain a motion to send this forward with recommendations? done without objection. item number eight, again, catherine walked us through this fairly clearly, but to reiterate, we are renewing ties are with no overall change to the plan designed. thereen we are allowing participation in

the employer plan. in addition, we made an deductible out of pocket costs pouring from a half plan year to a fall plan year. other than that, there were no plan design changes for that. for the fully insured plan, we are sticking to that with the retirees. as we talked about, it is applying only to the active retirees. we had planned design changes to incentivize employees to go with in a network dental providers. if people continue to go out of network, it is expensive and costly for the city. this is a renewal of the same this is a renewal of the same finally, on blue shield, the

flexible funded approached was an area that the health service system grappled with. in materials the trade-off was $39 million in the status quo for the fully insured plan= just a $9 million increase with a potential rift in terms of payout. it is a big change and i do not want to take this decision lightly. i want to make sure that colleagues are where we are taking on the potential risk, but there is a small likelihood that it could happen. i think that catherine did speak to the reserves, that we would have to deal with the exposure. fully funded, but we do have $7 million from the 2% pledge in

addition to the other levels. so, that is the decision before us. supervisor kim: i would like to hear from other committee members as well. i appreciate the time and thoughtfulness that went into this proposal before us. of course, there is some nervousness as we move into a different type of system. with the flexible funding and liability, however, the small risk might be what the city is taking on. i think that i feel comfortable with this proposal and that as we move forward we continue to assess how this benefits the city. because i think this issue is really important for our colleagues to understand, i would support moving it without recommendation just to give an indication to board members to evaluate this on their own. given that i think that it is important for each member of our

board to really understand and weigh in on tuesday. for myself, i plan on supporting this. if you want to appreciate the faultless that went into this, particularly i would like to thank dr. dodd, who spent some health care in the city. i was incredibly fascinated and am excited to continue learning more. supervisor chu: thank you. supervisor avalos: i will be supportive. i want to thank catherine and her team for her work and creativity. also, i am sure, looking at the risks, which are small but still there, there were probably some sleepless nights for part of this exercise. of course, supervisor chu as

well. i am ok moving forward with that recommendation. supervisor avalos: -- supervisor chu: thank you. there is a motion to send this forward without recommendation, which i think it's fine, given the direction this policy would take the city. i would also request that the director be available on tuesday to answer any questions about the plant and to ask you to reach out to board members in advance of tuesday to really explain it,n9 as that it takes time to understand the =p went through to get there. colleagues, we have a motion that i think we can do without objection. thank you very much. >> item #8 is without recommendation, item number nine

is recommended? supervisor chu: correct. i plan toíulay take item #10. it will likely be a relatively short item. it probably have toxyn, be continued. but we will take a 10 minute recess after that before moving on to the other items. 8ú ordinance amending: 1) the san francisco business and tax regulations code, article 9, section 604, and adding section 608, to exempt a limited number of special parking events operated by the volunteers of non-profit organizations on sfusd property for the sole benefit of san francisco public schools and earning less than $10,000 in gross revenue per event from rent, from the requirement to pay parking tax and other requirements; and 2) the san francisco police code section 1215 to exempt said organizations from the requirement to obtain a commercial parking permit, establishing an alternative permitting process, and establishing a sunset date. supervisor chu: thank you very much. we're joined by supervisor mar, the sponsor of this legislation. would you like to say a few words? >> thank you. y4 what the

chair said. j=this is an amendment i am presenting today that befit hopefully for one week and then be built upon within a week. first of all, i wanted to thank the mayor and treasurer and a number of parent organizations from the richmond district that have worked with us on this legislation. this is an important piece of legislation that will support local schools. it is also supported by almost all of my colleagues on the board of supervisors. they are all cosponsoring this with me. o appreciative of the hard work of jean alexander, and the treasurer's office.

i also wanted to say that the second district parent teacher leaders, like michelle parker and the jefferson are gone elementary school, i wanted to of knowledge one of the parent leaders from our richmond district for his hard work on this in his great insight in putting this together. guaranteed share organizations for several years have been holding special parking events on parking lots to raise a supplemental revenues. everything from fleet week to be hardly strictly bluegrass from october. currently the business tax regulation code requires that these events be taxed at a rate of 25%. this creates a burden on many of these parent-led volunteer

organizations who are staging these events for the sole benefit of the unified school districts. by amending the existing law to exempt these fund-raisers from being taxed, it allows volunteers and parent organizers reap the benefits of their efforts. follows. the tax collector would issue what is called a special school parking event permit to the city's pta umbrella for the following criteria. the event parking must be conducted by a volunteer in a tax-exempt organization and earnings must be for the sole benefit of san francisco public schools. a maximum of 150 school parking permits will be issued annually. gross revenues for the parking and not exceed $10,000 for each event. each day of the event is

considered a distinct the event. for example, the three day outside event coming up in august, at the school puts together a three day event to take advantage of the parking created by the concerts', each parking event. this would allow one school to raise as much as $30,000. the exemption will sunset in 2015 unless extended by the board of supervisors or the voters. the fiscal impact will be addressed by budget and legislative analyst's. we have estimated that the maximum court on tax revenue to the city would be about $300,000 per year. budget legislative analysts have noted that currently there are not paying these taxes and in effect it has no present fiscal impact and moreover i believe

these events should not be taxed in the same way the commercial parking lots are. it is simply good policy to remove burdens and obstacles from motivated parents looking to help students. the amendment as a whole, which the city attorney has alerted us of, there is at least one amendment that is substantive, but the amendments simply create a short set of findings and they are on your desk. the volunteers of nonprofit organizations must change to more accurately reflect the entity's qualified for the exemption. pta and pto's, within the school districts. in our amended version, the tax collector bill issue the permits to the second district for these events. also, there is a reporting

requirement that the set -- second district must make regarding relevant records and annual reports to the board. lastly, parking lot events no longer have to comply with the revenue control equipment requirements, streamlining the process and simplifying yet. changes have been made to reflect our adjustments to the sections enacted subsequent to the introduction of this ordinance. the city of san francisco, in my opinion, should be doing everything possible to keep our children and families in the city. this is helpful to the parents who are already going above and beyond to raise money and make sure that these schools are able to meet the needs of children. the legislative and policy manager for the treasurer's office is here with us to present enters to any questions you have. thank you for considering this.

i urge your support. supervisor chu: i also want to take a minute to recognize racial morton, who is here at the hearings. did you want to say anything them up or does that complete the presentation? supervisor mar: that completes the presentation. i should make note that rachel has been instrumental and i appreciate her support. supervisor chu: thank you. let's go to the budget analyst report on this item. >> as shown on table one of the report, also table to, the maximum for on a reduction in revenue for the city would be 489,003 under dollars annually, but as the supervisor has correctly stated, it should be

noted that fund raising events sponsored by the pta to benefit the unified school district at district locations are not currently paying these parking taxes or fees, although the city code provisions to permit required that such taxes and fees be paid. we consider approval of this ordinance to be a policy decision. supervisor chu: just a quick question for crag. i know that the legislation contemplates the treasurer's office being the issuer of single-day permits. i guess it used to be the department and whether you think you can do this within your existing staff level. >>