benefits and our retiree benefits but also mitigated our long-term liability which is a significant concern do this city. with 50 percent of our members in kaiser, we know we could not obtain our goal of sustainable and affordable benefits without dealing with the financial waste in kaiser. we do have a plan and we are going to talk about that because it is an issue with 50 percent of our members in there. we have to draes that and we plan to. i wanted to spend just one more slide on good news. greg, did you have a question? so slide 8 again is reviewing the compressive cost containment strategies and really unprecedented single digit trends for the last 4 years. i know from our members that they appreciate and how

important it has been for them over the last four difficult years financially for families to have been able to deliver what is essentially flat trends for the last four years.4 years. there is also the view of this just for the city and county of san francisco on slide 9. the premium increase is a 7 percent increase. a 1.1 percent increase and a negative 2 percent decrease for that portion of that. that's primarily due to the blue shield and city plan premium. >> we did also want to mention on page 10, that there is a rates and benefit packet. a flat premium incentive subsidy. this was at the meeting on the

health service board. the board approved a rate card for the blue shield and city plan and this card will provide a subsidy from the trust fund to bring the 2014 only contribution to be the same contribution of the kaiser contribution for our members. this rate would apply to any member whose union agree to the contribution strategy. this was to ensure that a member didn't have to jump out of a plan 1 year and be able to jump back into a plan next year because the out of pocket to blue shield going up $60 for the employees only, feeling they had to move to kaiser and the next year it would be corrected. this would allow the continuity of care that is important to our members. >> moving on to slide 6. this is a review for the kaiser

negotiation project. we just wanted to share with you that there is a substantial effort made to engage kaiser into negotiations over the last 6 months. we had six meetings between health and service executives since january, numerous phone call conferences. two health board meetings in the last few months to deal with this and public comment from the mayor's office and all of our labor leaders. i think this is important, we are in discussions with the other large employers who do business in the city and county of san francisco and the surrounding area on collaborative efforts to address our joint concerns with the kaiser pricing process and will be moving towards that in 2015. kaiser has internal

challenges to changing their price structure. we are really very confident that for 2015, we'll be bringing back a pricing strategy to address all of our concerns. >> we would like to make a few recommendation. we recommend the health service system, the health service board and board of supervisors legislative analyst recommend approval for 2014 benefits. we think we should realize this really impressive renewal of 2.4 percent increase. we believe that it is important for all of us to preserve the continuity of care and avoid disruption of services for the kaiser

enrollees in the package. we have a deadline guideline for the enrollment period which requires the rate package to be an approved. we are engaging kaiser for a plan for 2015. lastly we did want to discuss the implications for not approving the rates. they are substantial and not immediately evidence. to exclude kaiser and not approve this rate package and ask the board to create a new rate package for you with or without kaiser in it, it will take until august 20, to complete. to get through the organization, health organization board and the

legislative analyst review. we would be looking at august 20th before we can bring you back a new rate package. in addition if kaiser were excluded we were would basically have blue shield and city plan. all of our membership would be in a self insured type model where the city would be taking on risk of700 000-0000. >> can i ask a question. so i understand from the city attorneys as well, we don't have the ability to parse out kaiser versus blue shield or plan anything separate. i know we've been looking into this for the last few days. would you mind confirming that or if there is someone else? i just want to make sure that's clear on the record. i know it's been a question from community members and i want to make sure that is formally addressed.

>> eric rap port from the city attorneys office. i would like to recommend that it has to be accepted as a packet or sent back to the board to be reformulated. >> there is no ability today or tomorrow. this is one package up or down from the board of supervisors. >> yes. this is from the charter a, the packet has to be supported from an actuarial report and this package had a report attached to the package and if you would modify it, it would modify the report which would have to go through health services board again. >> if this is not approved, what is the result on enrollment and people being able to continue coverage. >> i would be happy to answer your question. the charter creates a legal obligation for the city to provide health

benefits to city employees and retirees and provide access to health, maybe i don't understand your question. i'm getting a look from supervisor farrell that i don't understand your question. >> it's possible that this could get to the full board and that i have been told that we need 9 members to approve and with the kaiser rates, some of us might not want to approve. what if the board does not approve, what happens to the existing insurance plans that employees have? >> you will have a problem. i have a presentation. do you want to wait for that. the city has an obligation to provide the care. >> i think we are starting to parse questions from there. why don't we've her run through the implications for that. >> i will answer your question

in my presentation. >> great. thank you. >> okay. just to continue, the financial obviously we would have to update the budget and the liability for potentially increased rate in blue shield and city plan are higher than the kaiser rate and we would have to reschedule meetings for both the health service system and the board. the supervisors are in recess until august and we would have to reschedule that. we are also -- to be clear, that's to reschedule during recess? >> yes. we could not wait beyond august. the federal law requires that we have rates available to members as of october 1st. we do have to prepare our rates every year and it takes us about a month to do that. >> to be clear, if we did not

approve the rates here at the board and the board sent it back, and we did not reconvene during recess in august, now i'm talking the board of supervisors and the health services board, the only rate that you can give for open enrollment would exclude kaiser? kaiser would not be an option next year. >> the whole packet would have to be rebuilt because the rates would change. >> so we couldn't provide by open enrollment? >> no. the only way if the package is rejected is to come back with a new rate package in august and that would be the absolute latest that we can possibly go. those two options really are a new rate from kaiser which health service system and health service board do not believe we will get from

kaiser. there are kaiser representative here if you want to question them on that or to redo the rate package without kaiser and there is no one i hope that is actually considering that. just dropping 40 thousand people would be devastating medically to the people who are accessing care. >> the legal implications of violating the federal mandate. we'll get to that. >> i want to express a little bit of frustration. i know mr. got leeb, mentioned that we have a problem. kaiser has a problem about not being transparent by unjustifying this huge increase. my hope is that we are keeping this out there like you laid out the plan in that, but i guess i

resent this putting it to us that we have to approve it when it's clearly not justified at least with the documentation that we have. that's the frustration that i have. >> all right. i appreciate we are going to have some comments during this conversation. we have procedures here at the board of supervisors not to applaud. if you have comments, you have a chance to speak. i appreciate you not disrupting the dialogue. thank you. >> i appreciate that comment and i think you are echoing the comments of the health services and the health service board. >> the last item i suggest some action plans many and we are negotiating for 2015. it makes us responsible for the risk. there is an enormous amount of risk to assume and we have to evaluate that very carefully.

we are also looking at cost options or continued options for cost competitive of all the alternatives for in the potential that we have to move away from kaiser for 2015. for the board of supervisors to continue to work legislation for all contracts with the city and county of san francisco and continue negotiations with kaiser so we are not at the last bill for next year and working with legislative issues and supervisor farrell is leading the issue on transparency and we are leading the issue for that. and pledge commitment from all health plans doing business with the city. and on the union side, the unions are very supportive

of the transparentcy effort. there is always a voluntary boycott for kaiser. models that don't favor kaiser will be important as an opportunity to pursue that with that i would like to have eric rap port to speak to the charter obligation. >> okay. mr. rap port, thank you. >> good afternoon. h hf asked me to come here today to outline the city's benefits and rates process. first i want to make clear that the charter creates a legal obligation for the city to provide health plans for the city employees

and retirees and active care for the employees, san francisco unified school district and college district and superior court. by the way, 80 percent of unified district employees are kaiser members. the city's current contract with blue shield and kaiser expire this year. there is no obligation for kaiser or blue shield to provide services after this end of this year 2013. i understand there was a kaiser rep from the at the last board meeting. i don't think there is an ability to continue talking to provide the rates

from the packet now. >> what were those statements by the kaiser health board meeting single ? >> they were general information. >> that they will not drop services. >> i don't think you can read it as a binding statement. >> what did they say? >> i will let them speak for themselves. >> maybe i can paraphrase. it was a question and i share a lot of similar concerns as i have expressed a lot with community members on this issue regards to kaiser. and continue to work and sphere head all of the translation and going forward with the board of

supervisors with the health care system moving forward in supporting state senator leno's state legislation in driving the health care cost in our future in the city. the comment i believe from kaiser and i'm going to very much paraphrase here is the response to what if we don't approve your rates. they said i don't think we are going to kick anyone out of our system. the implications we need to think about are not legally bound and are we going to put our 40,000 members at risk of potentially getting throttled out and what can they charge us because no contract would be in place. perhaps they will charge us in good faith the rates they are proposing today but they have no obligation to do that.

>> there are legal authorities to make contributions required without approval by this board. the current rates package is recommended by the actuarial report. this benefit packet must be accepted as a whole or the board has to resubmit a new packet. so i think given the administrative deadlines outlined by hhf, there does not appear to be sufficient time to renegotiate with blue shield and kaiser where hhf can print out the member guides, load the enrollment information and

transfer the eligibility files to provide health care to employees and retirees effective january of next year. in a normal year, the health service board would get the rates and benefits package and hopefully approve it the first time they hear it. this year the health service board rejected the kaiser rates and spent several months trying to negotiate the best deal they could. it is unfortunate that we have this charter process that only gives a couple months for both the health service board and this board to approve rates and benefits. >> that's why we were essentially at in july now. is there anything we can do in the future to make sure we are not in this position again because it gets aggressively negotiating the new rates right out the door? >> i think that's exactly what we need to look at and i know

that health services is already looking at that and that's part of when they refer to a plan next year so we can start negotiations with kaiser early. we can figure out earlier whether they are going to be responsive to the city's concerns and if they are not, we can prepare and look at alternatives in a reasonable time and then bring them to the attention of this board so we are not placed in this last minute position with respect to charter deadlines. >> so, actually given the process that we have this year, i don't have a lot of faith in that. i have faith perhaps that hhf can start negotiations earlier, but i think without a threat of our actually rejecting the rates can we really achieve real leverage with the board of supervisors can we have the leverage that we need in considering that?

>> to answer the question, this is a question that would be better answered by hhf. to really back that up and look at that, that's something that just would need more time to make that -- i don't want to say it's not -- so that you really could feel confident in taking some other action and if you really were going to look at some option either bringing in another health care provider or having a package that did not include kaiser, that would be something that would require several months, half a year of hhf time to prepare. you would want to have that prepared and analyzed for you before making a decision. that is not really a city attorney opinion. that's a client opinion. so i would like to say that i spoke with catherine dodd yesterday and this morning and asked me on her behalf that it's taken hhh

two 1/2 years to where we are now first with the model with blue shield to reduce the growth in blue shield cost and working with the department of human resources to establish a rate structure to reduce migration of the blue shield plan into kaiser plan. it is catherine's position and hhf position to reduce the growth in long-term care cost to have the two programs available for hhf members. hhf has focused on blue shield for the last 2 years. now that that part of the puzzle is in place, hhf is turning it's attention to kaiser. kaiser has indicated a willingness for the plan next year, but for the reasons hhf described, it's not in the plan

for next year. she recommends the approval of this plan and with hhf to work with kaiser next year and look with coming meaningful alternatives. >> earlier you mentioned that we are federally mandated to open enrollment in october 1st. what are the implications if we don't? >> i'm not at this point to prepared to provide advice on litigation or liability of the city if we don't meet the charter obligation or obligations under federal and state law. >> i assume is exposed to by members who are not exposed to

the rate at this time. >> if the city fails to meet it's obligations city employees might take some action in that regard. >> okay. >> any further questions. >> any further questions? >> thank you for your presentation. >> do you have anything else at this point in time? if there is anything you want to respond to. hue wit is here. she's done a tremendous amount of work i believe on a continual basis and procedurally can answer questions about your process. do you have questions,

colleagues? >> any questions? i have prepared a report. in redoing my packet, is there anything that you would like reviewed by the budget analyst. >> i guess, two things. one, i imagine you do this work for other municipalities, can you comment on the rate trends that we've seen in the county of san francisco since miss dodd has taken over in the last few years and how we are doing relative to other municipalities? >> i have been a member of the society for 30 years and have done this kind of work for 27 years. if i finish now and call it a day, i finish with you having the most unprecedent results over my entire profession. i have never seen

this ever. this is incredible what's happened. in the foresight. i will make a quick comment. blue shield wasn't doing that great to be honest. they drove the numbers to the foresight. to implement those shields. the fact that they took the premiums with all the actions taken in conjunction with the fact that they have subsidized and pledged the money and stabilized the pool because this is one big risk pool that has shifted in the right direction. i worked a lot of these, big ones. this is incredible what's been done to improve what you have done and where you are now. that's my comment. >> i think that's as clear as it can be. second of all. if the board was to say no, the

health services board would take it up again and you would come up with potential options. or maybe one with kaiser with whatever rates they would come up with within the next few weeks. this has been negotiated for 6-9 months. from my perspective that they are going to come up with different rates is a little bit humorous. that being said, that would be the structure and process and then would you put together your actuarial assumptions with whatever rate the package system directs to do.o there is a couple things to consider is when you look at the kaiser rate. i have found a statement in my report that states all the

that these are fair and reasonable. they maybe slightly higher than you would like, but in terms of an actuarial range of cost. it's a reasonable rate. to consider that this rate needs to go down substantially given where we are now and they are no longer, they were constrained by the federal rules, etc. there is a whole a lot of things that you can have happened. it's not an unreasonable rate. if you charge me to go back and say get something through blue shield, the results would not be any -- you would not end up saving the people and members of the city of san francisco any kind of substantial money. i will sign off on that now. the exercise, and i will be honest, i have no reserve in saying this. it will be an exercise. i understand the

process. this is an exercise of futility. to go back and renegotiate the rates at this time i will be straight up is not a good idea. the overall cost increase is $16 million. the reason blue shield is flat, mr. sacs spokes to is a they are killing the utilization. they started up here and no where near kaiser price wise. the family at kaiser pays a couple of hundred bucks and the family at blue shield pays double. i could easily come back with a package that would be better. i could not. the better contribution formula is the thing you need to have happen. they have done everything, they want to

subsidize this all this to keep this boat floating correctly. maybe the overboard answer is, i don't want to do it, but i will do it if asked to. >> supervisor mar? >> i really appreciate mr. sacs presentation and other commissioners from the health service board and their effort to really get the best deal for the city. my understanding is that kaiser rep is here with us and what's not sitting right with me, i'm looking at the documents from the may meeting which give an occasion again that kaiser is making tremendous profits. there is a chart showing kaiser's pricing trends from the last 5 years that shows the profit margin growing and while the health service board showing that we should be paying much less