[ gavel ] >> >> the health service board meeting is now in session. all stand for the pledge. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. >> >> >> i want to say hello to dr. dodd. thank you for being here. [ applause ]

. roll call, please. city clerk: president breslin, lim, farrell, scott, fraser, shlain. item no. 1. regular meeting of march 13, 2014, approving of minutes. >> are there any corrections to the minutes? motion to approve? >> i move the minutes be adopted. >> second. >> any public comment on this item? all in favor say,

"aye". >> aye. >> opposed say no. it's unanimous. now we'll go into our rates and benefits committee section. commissioner scott you want to take that over. >> we are now in a regular session of the rates and benefits committee and i will call for action item 2. city clerk: item 2, action item review and approval of kaiser renewal option for actives and early retirees for the 2015 premium contributions, fully insured, flex funded or self funded renewal. >> your contract. good afternoon, everyone. it's a pleasure to be here. i'm going to review with you the proposed rate action for 2015 for the kaiser permanente

plan members. you have in front of you your packet under 2, >> rate -- restate your name for the record. >> hewitt. turn to executive summary on page 26789 on january 9th, we discussed the possibility of reviewing this in three different forms of fundings. fully insured, flex funded and self funded. i got all of your information from kaiser and given the variance in cost from period to period our analysis and our interpretation of the data and what they are offering on a fully insured basis, we recommend not pursuing either funding alternative where the hss trust would take risk as they do under flex funded.

that's our opinion. at this time, i'm going to review the fully insured options that kaiser has put together and are part of this analysis and review on your behalf to decide which one of these two options you prefer. okay the two options are: for 2015 as is with no benefit changes for the actives and early retirees because this is jointly pulled when it's rated. the active data indicates less of a decrease. the early retiree data says i want even more. so when we blend that for 1 year the answer is 1.277 which is different than a plus. it's a minus. the next one is they have multiple year option and what they are offering is minus 2

and we'll review some of the caveats. minus 2 for 2015. so if the rates a hundred, it's going to be 98 and it will stay at 98. it's a 24-month break. i don't know if there is any questions. i want to review and i won't be labor this because we have kaiser who would like to address the board given the path last year, i think we are on much firmer ground now and they want to talk to you and we have only so much time to go through materials. they presented data that runs from december 12th through november 2013. they always give you a comparison of the prior 12 months. so that would be the 12 months starting in 11 and going through november of 12. so if you go into your page 5 of this document i outlined

for you all the different increases that we were demonstrated in their package for the period of time comparison. you can see inpatient cost is up and outpatient cost is up. the other cost or other medical is 2.3. in that which goes up according to this 14.8. at this point i want to make a correction to my document. we got this a week 1/2 ago. we looked at this data and because of the fact that they have changed the 12 some of the ratios are bigger than they truly are. i don't think it's necessary except to say that this is not anywhere near as far apart because they went from a low rate to a $70 rate

in 126789 . if you look at that period it's overlapping. not to complicate the discussion, but those numbers overlap. >> just to anticipate what i think to be a generic question if we have increase shoesz across the page but yet the quote is citing a decrease, i think we have to take into account other information that would probably be provided at a later point. is that correct? >> to clarify, the nature of the quoting and how it was built one of the things and we'll just move along is that they have heard and they have positioned themselves as the champions of affordability in the marketplace. this is kaiser's approach. so generally they have had a book specific trend that's run approximately 7 percent. if you look at that and have to

trend it forward and the materials i was provided they have cut their trend to 3.72 percent. so they are giving you a fully insured quote based on this data set and they have trended it, increased it 3.72 percent per year. i actually have and that's a book trend. that's kaiser's basic trend for this case and other cases of that size. it's a very low number. the argument has always been why do you apply across the board 7 percent trend when my utilitization is coming down. this addresses that. this is a positive thing. i have their case specific data. my colleague, mr. brigs and i ran that data through my regression models and i want to say that i can't match their number which would be coincidence because it's only specific to them. but i'm very close to their number. so my

combined trend over the last 12 months is very similar to that. i think that their 3.72 is taking the data and actually applying what is true as far as kaiser for hss. is that helpful? >> it is. >> okay. with that i would like to continue and we go through page 7. what we have on page 7 is this same kind of information but it's for early retirees. so we go through all of that. i will just let you, you can review that at your discretion if there is any questions and as we go through this whole thing we have another piece which is southern california, which is very small. the pieces are active early retirees in southern california and the answer is minus 2.77. that being said we have a certain amount of dollars, we adjust

for large planes, we trim the data forward, we add our fees, our retention is approximately $24.97. on page on the document. we applied the retention and as you all know which has been an on going discussion under accountable care act there are fees the federal government assesses and there is an insurance fee and before fee and hit tax fee. kaiser is a benefactor than a much lower hit tax fee because of their status because the way they are registered. after all that is added at the end of the day, minus 2 and minus 2 at the end of 24 months. any questions? >> yes, commissioner? >> thank you. i just want to

make sure i understood in particular the pharmacy cost. so it doesn't matter which one you look at. they are all the same. we do have increases in both across for prescription and both brand formally medication and brand non-form larry which is interesting to me that it seems to be driven by an increase in the generic uses. >> say that again, the generic piece. >> why don't we go to a specific page. page 5. >> okay. >> the pharmacy cost increased by four. presumably the reason this occurred is because of the generic rate went up by 3 percentage point.

>> absolutely correct. >> so what i think is important for our audience to understand this is why generic uses really really matters. because we pull down the cost over all just by using generic. that was true. i noticed it was true for every single group. >> well-spoken, commissioner fraser. >> i'm curious as you know kaiser is slightly over 90, where does that stand in relationship to the regular hmo industry for brand? >> they would love to be at 80. kaiser is extremely high in proficiency and that's why they are generic and competitor in this situation is so much lower because they are so highly generic. just as a matter of information i read the data before i came over. roughly it's like $30 for generic, the non-generic is a

couple hundred bucks. it's really great to get as much out of generic as you can. >> the other question that i had was thinking about the difference between the 2 percent for 24 months, 2.77 for 12 just so i say out loud to make sure my assumption is correct. what that says is kaiser takes both the risk in the upside for year two. they are essentially equivalent from a financial perspective assuming the trends continue at the trend rate that is predicted here. if cost go down, kaiser makes the difference, if cost go up, kaiser has to eat the difference. just to make it clear, we are buying ourselves certainty but we are also potentially don't get any up sides if utilization continues to remain so low, but we also avoid the down side of it? >> yeah. i would say that is

basically true. so the amount of money if you took $298 in terms of 100 $100 and $97.23 to add those numbers, they are going to increase that. i think our risk is to be not -- locke it in now. >> are there other questions from commissioners? all right. >> okay. this could take a very long time -- >> let's not do that. >> thank you. okay. i have all the rate cards here. the basic message i have done for the 9010, 9383 which are the two sets if a certain segment of the population will move away from the 9010 and people who took the subsidy and took the

rate at $3.96 cents blue shield have agreed to take the 9383. all of that said, that's why there is two of these. >> i might say on behalf of the board we are taking no position in collective bargaining. we are doing due diligence here. we know what the realities are that these are options that are being addressed in other forms, we think it's a prudent thing we clearly understand the impact on our members. this is not a suggestion of direction in anyway, but rather an analysis of it so we have a full understanding of what the options are. >> yes, sir. >> thank you. >> so all of that material is there and the big message is that because kaiser lowered the rate in the county which we brought to you before went up, what happens is you create

a phenomenon that is no longer reality, but it is a calculation called gap dollars where the premium is not as much because of the reduction as what the 10 county says the deal is. all i need to do which does not preclude us from deciding which way to go is to ensure i'm doing at a piece rate. at the end of the day what that does is zero out the employee and employee plus one. they are paying nothing because of the reduction in the rates compared to how the form formula has been established. i want to share with everybody, if you go to page 15, you can see for year 15, we have two zeroes now under the very first one. see the zeroes. i just wanted to

point that out. this has benefited the member base regardless of whatever happens in terms of what algorithm is applied. it has made it very beneficial more specific towards one or the other. i wanted to share these there is quite a bit of information which we decided not to go through line byline. if there is no questions, i would like to make my recommendation. >> i have one question? >> yes, ma'am? >> where is the medicare group? >> that is not through yet. that has been historically the case. if i may it will be june before we see those numbers. they have to get all kinds of information from the federal folks and mix it in the blender and say this is the answer. do you have a question? >> sorry, i do. >> don't be sorry, you have

excellent questions, commissioner fraser. >> you have two lines one the actuarial difference. can you explain the actuarial difference? >> the actuarial difference i have written it down. it for the early retirees. do you have the definition because i forgot it. it's written down here somewhere. it's in here. i want to say it correctly. in our uhc deck in the per charter section this is page 10 of the uhc deck. per charter aa .428, employer contribution between a single member and none retired

medicare only. what does that mean? let's look at that. the actuarial difference says the employer contributes these amounts of money. if i do the math, i look at the employee cost and the retiree cost and hopefully this amount of money adds up to $1103. 40 because that's what you are doing and what you are required. whenever that is legislated, that is what that number is. is that helpful? does that make sense if we go to page 20, 53560. $1,000 minus the other number. is that

correct? i think so. i got it right. >> okay. i understand the math. why does the number change then on 22? the number changes on 22 because the rates change. the first one the 2.77. so i would think the 112115 minus the 155398 commissioner fraser because the rates are different.

>> i will assume that is correct. what is the gap dollars. >> it's when the term of this base is called gap dollars. it no longer sits in the trust. it goes back to the general fund. i'm not sure exactly how that money flows. that's the thing i haven't figured out. that's my only question is how exactly do you apply this money. because they won't necessarily send you the entire 10 county. they send it back to them. do you happen to know? we just need to check it out. >> director dodd, you have an explanation?

>> catherine dodd, director. since we haven't generated this money before, we will need to establish it as does it go back to the department or where it goes. we haven't established the trust for the recent ballot initiative. >> what i find confusing about that, first of all i think we should come up with a different name because it's a confusing concept. all it is is the amount in the difference. it's the difference between the 10 county amount and the amount required for the premium. but what i'm unclear about is the 10 county amount only contributed, we only contribute the amount that would be equal to kaiser even when it's an employee or

employee and family? >> we've always contributed from the 10 county the single employer amount regardless of rating here. that's the rule of your engagement. that's always been the case. >> right, i understand that, but here you are not. because you are taking away the gap dollars of the employee 1 and the employee and the family. >> right. i think employee only portion consistently across the board is less than the 10 county amount. so why we call them gap dollars. those gap dollars apply to the employee on the portion of employees with dependents. >> the county contributes the lesser of the 10 county

amount or the premium? >> it could be blue shield. >> right. whatever is the lower one for an employee. the fact that the premium is higher, the amount where there are dependents it doesn't matter? >> right. >> okay. i think in terms of again for the future, i would recommend that we do these to make them a little clear because otherwise you have questions like this from me. >> right. i think it's a confusing subject. >> yeah, i think we should just say maximum amount is x. >> even though there has been some language to this, we need to find the kind of english that makes some sense. i will charge you to do that and we've had that conversation before.

>> in terms of this topic. i agree. i want to further clarify it when we do the final paperwork we'll have better edification of gap dollars. we researched it and this is where we are at. >> all right. thank you. and we thank our council for interjecting as well. thank you, eric for the clarification. >> with that, i want to make a recommendation. i have looked at both it's my strong recommendation that you interlocking minus 2 in for 2 years. i looked at it and think that's a really smart way to go. in doing that, it's my responsibility to turn you to page 24. >> here you are going to tell us that nothing is guaranteed.

>> no. there is a rate proposal that is guaranteed. no. 1, we don't see that as an issue. these are five items the board needs to be aware of. no. 2, it goes in a direction that would direct kaiser permanente it's natural rate advantage. okay, we've had some discussions about that and it's our understanding that if you do anything to blue shield that makes them cheaper than kaiser, then that's a problem. otherwise, it's more than likely all good. we are no where near adjusting blue shield to anywhere near the rates of kaiser. so and i welcome kaiser's clarification on item 2 if they would like to come up. i want to go through those and if you want to have them clarify further, they can do that. blue shield levels, my strong

consideration for 2015 whether it happens or not because it gets kicked back is that we are not changing any benefits for blue shield. that's a non-shield. kaiser permit offered benefits to kaiser permanente only, that means, i think i have to have kaiser explain that clearly what that means. and no. 9, rates for any new legislative and regulatory changes. with that, if you don't mind, i would prefer cindy come up and go through these and clearly explain it. >> you got it. good afternoon, cindy from kaiser permanente. the spirit these are these were our understanding as we generated the rate. if there is going to be changes then we need to understand how that might impact the second year of our offering to make sure we are still comfortable with the offering. so the first one was pretty straight forward

if there was a carrier change we need to understand what that was like. the second is our rate was naturally the lower rate, then we want the contribution to reflect that. if there is not a lower rate, we want it to reflect that. as long as our contribution is lower and it reflects that we have a naturally lower rate, then it's in compliance with this. it doesn't preclude to be subsidies for the other plan for the contribution that allow greater contribution to the greater plan but if the rate is lower, then the contribution has some differential in there that indicates the lower rate. the third one if the benefit are changed. we need to under what those are so we can evaluate the member shifting because of

that. it doesn't entirely preclude it from happening, we just want to understand it before we finalize the second offering. we offer the vsp plan you offer would stay in place as a kaiser member. without any hardware coverage you are afforded a discount without walking into the optical department. if they want to get a pair of glasses, we offer a program that they would be eligible for. the last if there are things that are unknown, the federal government comes up with something new and says we are adding 10 percent to everybody's rates and we are unclear about that, it is excluded from here. the charges and fees that we know about now, are included in our rate guarantee. these are new legislative or demands of carriers that are unknown at

this point. >> all right. i thank you for those clarifications. i think that this under scores and i will start this colloquy a bit. the results of the efforts of discussion during the past fall season with the staff and your team to try to get to this place, i think broadly no one solicited my opinion this is extraordinary news in the main and as it's more talked about has to get over the skeptic of this belief that you are not buying in our business somehow but i absolutely feel that you have come to this discussion in very good faith in trying to layout a way of partnership that moves up substantially beyond where we were. so, i think these are very reasonable expectations. we ask if you had strategic