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 given the reduction in services by kaiser but the profit margin

growing through the roof. that does not sit right with me. it does feel like we are being gouged by kaiser. i accept that you are saying that you are doing the best, but it doesn't sit right with me given the profits rising by kaiser for the services how our city is not getting a good deal. >> would you like for me to address that or kaiser? >> i would like to know who is here from kaiser? >> would you mind addressing the utilization rates on how it impacts us or not? >> the utilization if it improves and the cost to that utilization, since you are fully in insured, the cost goes down and the base creates the next year's rates should drive

a lower rate increase. the difference is realtime, utilization savings, under a flex plan and if it comes below that, you get the cash in your trust fund now. the one is getting a better premium in the future, the other one takes risk and gets all the realized savings in the true cost in your trust fund cash balances today. that's why they take a risk. they don't pay a premium. >> is there anyone from kaiser who wants to address supervisor mar's questions? >> hi, good afternoon. i'm cindy from kaiser and andrew is our v p of actuary and i'm happy to answer any questions. >> i would start with supervisors thank you for the

chance to speak this morning. i want to address supervisor mar's question. the time period from that report was from 2012. we take a look at the demographics today and we look at historic experiences and come up with a premium for let's say 2010. that would have been based on 2008 experience and that's how we come up with the 2010 premiums. during those years, we had what is called similarly size subscriber groups requirement from the federal government which says we have to rate the two top accounts using our standard methodology or whatever discount we give the top two accounts. you have to give

discounts to the federal government. it becomes a very prohibitive thing. the one key variable here is when we do a rating, the demographics we have is what we know today. what generated the gains if you will, i'm going to use that term, is really in during those years we gained so much enrollment that we didn't know. we had families coming in. that was not accounted for in our rating. the arrangement, it's lagging by 2 years. as we got good experience, we took it into account into a future renewal. for 2014, the migration has stopped. it's trickling now. there is a little bit more balance between the two and we really don't see that migration anymore. if you were to ask me what do i think of 2014. do i think the rates

are fair? i think the rates are fair because the demographics i have today are the demographics we are going to have in 2014. the dynamics of the huge migration is no longer there. i'm sorry if i confused anybody. >> i'm still not clear on the justification for the large increase and i know the health service board heard information about what factually the integrated care managed system is and why those cost were going up significantly. i still don't understand that and i know there was a lot of discussion at the health service board level. if you can take a stab at explaining why there is such an astronomical increase in different cost set are not understandable to me or many people from the public? >> i will take a stab at an

easy description of that. what you see in our buildup is composed of many different things. the easily recognizable pieces are traditional billable fee for service. you go to the doctor, they bill for that particular provider. kaiser is an integrated delivery system. we were not very good at billing, but very good at providing care. the administrative services dealing with billing is something that we had to put in place. the providers for the care of medicine, they don't care whether they can bill for it. these are items that are not traditionally billable and over time as we've incorporated more technologies, toes integrated care type management services have grown. we introduced the

fee in 2009. we took another look at how those types of services have gone up, things like e-mail. you don't need to go see your doctor to see your lab results anymore. you can get it online. those types of services we wanted to rebalance the way our fees look to the way we actually deliver care. >> i know that one of the charts from the health service board may meeting showed significant profit margin and growing for kaiser an is the restructuring, the justification for the increases are the restructuring of the fee schedule and other medical services, but could you just talk about that profit margin and how, again it's justified for a 5 percent increase while blue shield and the city's plan are going down. >> i can't speak on our competitors. i can only speak

on the way we do rating. we look at your historical experience and look at the membership we have today and we have trend factors that apply consistently with applying business. that's how we look at this. the city, given the favor able migration we have had in prior years given that accounts for our increases. the other thing is that blue shield was started from here in terms of utilization. whereas integrated type of managed system, we are pretty tight. we start off from a place that we really didn't have that much base to lose if you will. >> i know miss dodd and sacs have been negotiate wg you for

years with a 65 years or so with kaiser. if we were still hoping to renegotiate this, would you drop kaiser members from health service? >> i want to make sure i understood the question. would we drop the members? if we at the end of the year without an agreed upon contract, we would have to have a discussion for members that are continued to be covered at kaiser. our objective isn't to disrupt their care. we have to figure out a way to be reimbursed for the services that are provided. >> thank you. >> thanks. any questions ? why don't we move to the budget

report bef go to public comment. >> mr. chairman, members of the committee on page 43, this refers to the city's cost. not sf unified school district, community college district. the total 2014 cost of $595 million the city's total cost approximately 87.8 percent. over all the cost for the health vision and dental plans and long-term disability and life insurance is 1.1 percent more than the cost for these

plans of 2013. we recommend that you a pprove the proposed legislation. >> thank you. >> why don't we open up to public comment. i have speaker cards here. once you hear your names called. we have a number to get through. >> thank you. my name is tom

moore. it acts for improved acquisition for organized labor. on the one point because you are going to hear some very eloquent statements from other people. i would like to point out something that came to me watching this process. you watched a contractor come in and talk about a complexed project involving a lot of people, a lot of hard decisions and difficult work and a great deal of community relations and they are carrying it out. i cannot imagine the situation where someone is telling you we are going to do it and we are not going to tell you how. we allow that only for our health plan. why? i ask you to draw the line here and tell them

that you will not go forward until they open up the window and show us what they are doing. it is not just a matter of their making decisions. it's a matter of how much money they are saving by their policies is a question of our access to the fact about what they are doing with us. that's really the basic issue here. >> quick question, because i appreciate your comments and i have been working on the transparency stuff. your comments are more on transparency and i agree with it. we are working on timing crunch. i just want to be clear that you are willing to kick this back, this doesn't happen over night. we are going to put 40,000 kaiser members at risk. is that something that you are willing to do? i'm just very

clear on a lot of this hey, reject kaiser. i want to be very clear about that? >> one question was a question that was not addressed today even by mr. rap port, and that is is it absolutely out of a question for a simple continuations of current policies to occur over a period of months. no changes except in the change of dates to get this worked out. i don't hear that is the case. if that is the case, that you cannot simply extend the existing payment agreements to work this out. if kaiser is ready to work it out we can propose the agreements we have. if that's not possible, we can change it. that being said. there have been problems historically with the delivery systems where the

provider was a famous strike in canada where physicians have gone on strike and where they were refused. the outcome of that has not been to see people having to suddenly get a new doctor. the outcome of that is say yes there was continuing care, the responsibilities, the ethics of the profession require attention to public needs and personal needs. i think that it would be, i think it's unthinkable that kaiser would shut it's doors. don't see any patients. >> i appreciate that, but what you are saying is your core question is whether we can coast on the continued rates. if we can't do that, which i will ask once we are done with public comment, what's your position? ?

>> my position is not shared by anybody. my position is do it. because if you do not draw the line here, where is it going to take place, 6 months, i year from now. i would say do it. we can explain to the public in this community to help them understand. >> if those kaiser members to potentially not having those benefits. i'm a kaiser patient, and i have no problems having those doors shut. >> i have 2 minutes up here but i don't think i will need it and it's just 1 word. it's extortion. that's what it comes dwoun -- down to. it's extortion. give us $15,000,000

million. that's kaiser's choice. if we don't do this, there is going to be 40,000 people without health care. that's the decision kaiser made. that's going to be how they act as they want. as someone from formally a non-profit worker, to be in a situation where in the last month 1/2 non-profit workers have been here providing data, charts, spreadsheets and evidence, to get a cost-of-living adjustment and that got knocked down from 4 percent to 1.5 percent. we have done everything kaiser won't do. and we are supposed