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 issues that you were actively considering that would have an impact on our rates that you let us know about them. that was a very explicit request last year. so i think it is wholly reasonable on our part that you would have that expectation of us. >> absolutely. there is a segment that you offer at every meeting that gives us an opportunity to address you with things that are going on in the market. >> all right. thank you for that. director dodd? >> i just want to clarify the caveat number for optical benefits we would only be able to agree to that if it

doesn't violate our vsp contract. i think we talked about that before. you are okay with eliminating that if it isn't in any violation? >> absolutely. if you have a restriction from doing that, we would recognize that. you are absolutely right. i forgot that piece. any other questions? >> other questions from the board at this point? >> commissioner fraser? >> this is the lawyer in me. is this the rate of single employees. we have a multitude of rates. so what is the explicit understanding that yours remain lower even if it's by one penny? is that

okay? >> if our rate is lower by a penny and blue shield came in and united came in equal, that's not something we are going to come to the board and argue about. if our rate is $25 lower and there is no differential between the two categories and there should be normally. you pay 100 percent of the employee rate, for example, if that was an option, that's your contribution strategy even though our rate is lower, we've accepted that and we acknowledge it. it's where your normal process to develop the contribution generates a difference. and you may choose to eliminate that entirely. that goes against what you normally done or you made it lower. so you are choosing to disadvantage us rather than it being part of your contribution strategy. >> good luck writing that one down. >> sounds like a question of intent. the intent behind the

decision making, not just the decision itself. >> that's correct. >> my hope in the act of dialogue that we have maintained, if that was going to surface again, we would know why and what and who and when and so on. >> exactly and we would have a dialogue. all we are saying here is that we need to understand it to make sure that our second makes sense. that's really what the caveat is about. we made assumptions when we put this rate out and we want to make sure those assumptions are in the ballpark accurate. if not, we need to look at it to decide if it changes it and we would have conversations about it. >> other questions from the board? if there aren't any?

>> i want to make that recommendation to interlocking -- locke it in for 2 years. do you want to consider making a motion today. it's completely your call. >> i move we approve the fully insured new option for 2015 and also the minus 2 percent for 2015-2016. >> is there a second? >> i will second that motion. >> it's been properly moved and seconded. is there comment by the board? it's for the 2 years. comments, questions? is there any public comment?

affirmative public comment. i'm not supposed to say that. is there public comment on this item? it is absolutely remarkable when things go up we hear, when they go down, we don't hear. no public comment? are you then ready to vote? all those in favor of the recommendation as provided and described will signify by saying aye? >> aye. >> all those opposed. the ayes have it. so ordered. i would like to claim the privilege of the chair to call on one of the representative of kaiser to make some comments. this is not dress rehearsed so i have no idea

what peter is going to say. >> thank you commissioner scott. i think i did really want to comment on what you actually said and so thank you for giving me just a couple minutes here. this renewal and all this interaction we've had the last year has been a huge step forward on journey we've been together and built on that relationship. we have consistently engaged with hss staff to explore our share challenges and figure out how to make progress. i did want to thank the entire staff for really engaging us. we've had some difficult conversations but they have been straight conversations on both sides and both of us have moved forward. in fact we have a couple meetings coming up where we are going to continue to talk about what we can do together around clinical quality, better ways of controlling cost and improving the health of the population

and we are looking forward to that work. some of it is really breakthrough work with what we have not done with any customers. it's very exciting. as you know the rising cost of health care is a challenge that we are all facing, this whole country is facing. both insurance carriers and health care providers need to rise to this and ensure they can afford health coverage as demands in your budgets. we know that. as cindy has pointed out and others we are still the lowest cost plan for you but we recognize we have to do more and more to become more affordable to you and to our members. and what i think the questions are going to be is how are you doing it? this is great news. when rates go up, you want an explanation. when rates go down, there should be