follow your instincts, listen to your gut, follow your heart, do what makes you happy and pragmatic and see where it takes you and get to the next place. trust if you want to do good in this world, that [gavel] there we are. good afternoon. i would like to now call this meeting of the health service system board of the city and county of san francisco. i order and ask that we please stand for the pledge of allegiance. i pledge allegiance to the flag of the united states of america, and to the republic for which it stands one nation under god with liberty and justice for

secretary would you please call. >> clerk: thank you, president scott. >> present. >> commissioner brezlap. commissioner freno. excused and commissioner saff. >> supervisor. expected. we have a quorum. >> the chair: thank you. i would like to ask the. members of the board stand with me for a moment of silence for the passing of commissioner frigno's mother during this recent period. so would you please.

thank you. we will now have action number 1. check check item 1. approval with possible modifications of the minutes of the meetings set forth bow low. special closed session of january 11th. 2018. regular meeting 2018. >> randy scott: are there any edits or changes regulated in the commission in the minutes of these two prior meetings? i do have a couple of edits i wish to bring forward. on page 5 of the minutes, it indicates that -- i indicated i had a duty to warm, w-a-r-m. to introduce to the board. i would like to clarify that for

the record that it's a warm welcome and a duty and a privilege to introduce the incoming executive director. also, as i did review the minutes, i failed to include recognition of the work that had been provided by the department of human resources during the executive director's search. and i particularly call out the fine coop rage we had fro -- cooperation from the director, nicky callahan and two members of her staff that were assigned to work with us. christina brussa and shaunda akita. they provided a lot of staff and meetings and assisting the executive search firm during a various active ways during the

process. i do thank them all for their hard work during that process. also in the minutes, there is a section regarding the discussion of the doctors, and i would like to highlight that commissioner fallensby will be talking directly to the medical director of best doctors, and we are hoping that those meetings will happen prior to our march meeting at which time he will be able to report on that. so those are the items i would like to have noted. lastly, i would like to have added to the minutes a timeline regarding the executive directors of the board. that was a piece that was shared by the commission paz we were doing the executive director search, identifying the key milestones of prior executive directors and i think it would

be a useful documentation o or appendix to the section of the minutes when we are talking about the executive director search. and lastly, i would like to include the link or the actual bio we used for the director that was put on the sfhss website. so i would like that pinned. clerk clerk i do. rand with that, i would like to -- are there any other comments? >> clerk: we are adding thing to the minutes that -- >> randy scott: well we did indeed discuss the announcement. the announcement was given on the date of the meeting. i and gave her a bik biography.

i'm asking that that document be included at that point. >> clerk: rules and order. >> randy scott: is there a motion to adopt the minutes? >> clerk: i have a motion to adopt the minutes. >> randy scott: this is our second. it's been properly moved and seconded. is there any discussion? any other discussion? we are now ready to [roll call] is there any public comment? hearing and seeing no public comment, we are now ready to [roll call] all of those in favor signify by saying aye. (calling of recorded vote) carried. item 2. >> item 2. discussion item on matters within the board's jurisdiction not appearing on today's agenda. >> randy scott: are there any public comments on any items that are not part of today's

agenda? hearing and seeing none we will now move into the rates and benefits portion of our meeting. as i've indicated on numerous occasions the board meets as a whole for the purses of rates and benefits so at this point we will take up item 3. >> clerk: initiation for the duration of the 2019 benefits process and actual wear request for proposal, acting executive director griggs. >> mitchell griggs: good afternoon, board members and to this time of year where we start out. rates and benefits process. and part of that pro sets is now services and given notification to the board that we are entering that process. so we are doing so for 2019. in addition we are also issuing a request or proposal, rfp for

actual water consulting services so when we do that we submit a blackout notice and i will explain to you what the blackout notice is, since this is an action item i will read out loud, the third and fourth packets of the memo. the a blackout period is a period of time from onset to the conclusion of a select process for a primary service provider. where incommunication to board members and service providers seeking contracts with sfhss on matters related to sfhss cracking is excluded. communiques includes outside the board or committee meetings or email and tax message, letter, faxes or uses of any other social media. board members shall not communicate with service matters on matters expect during board or committee meetings. board members who communicate with service providers for reasons unrelated to hss enclose

such in writing to the director or the board. unless you have any questions? >> randy scott: are there any questions from members of the board? is there any public comment on this item? >> i move in a we adopt a blackout period. >> randy scott: is there a second? >> second. >> randy scott: properly moved and sected that we adopt the blackout period as described in document attached to this meets minutes. any questions from the board? any public comment? hearing and seeing no public comment. all of those in favor say aye. >> eye. the motion carries unanimous i will. (calling of recorded vote) , i would like take this next item and move it to the board meeting if we may. if we pick up with discussion

item 5. >> yes, item 5. review of city plans, 2017 claims experience. >> good afternoon, i'm hewitt. >> randy scott: good a. >> i'm here to present the 2017 review of the utilization and claim experience for the city plan for active employees and early retirees. >> clerk: we have a presentation. thank you. >> so on the contents page we will start with summary of i will talk about today. introduction and go into the specific experience for the city plan broken into the active employees and the early retirees. this is the first year we are not if h specifically reporting

on claim experience for medicare retirees because 2017 was the first year that plan was fully ensured rather than self funded prior to that. so on page 1 on the summary, we will talk about the recent decisions to apply stabilization funds to the city planned subsidies and talk through the specifics of active employee and early retiree population experience. as noted the retiree is no longer captured in this presentation and talk about specific planned membership and contract size and average per cost per describer and average paid cost per describer. where the difference is incurred is an the service state. so service state would have been incurred by the member during calendar 2017 and would have been claimed by 2017 regardless of the service state.

so for the past several years, talk about the sustainability and i will have a full present taking on that shortly. the health service board has chosen to apply claims stabilization fund to subsidize the early employee and retiree rates. the conversion of the fund as i mentioned for the medicare funding to allow for land stabilization fund previously r allocated at that population to be utilized between the city plan and active employees and early retirees during the june 8th, 2017 meeting, the health service board approved the full allocation of stablation reserve as of december 31st, 2016 of 4 million, 529,000 to be 34r50eu -- to be applied toward the city plan for this year, 2018. one third of that was the normal allocation of policy.

1 million, 510 toward active employee and retiree group, and then the decision was made to allocate the remaining balance, 3 million and $19,000 for active employ subsidy. so we will refer to this when we balance our call cue layings on the existing state of the reserve. so on the next page, page 5, it shows a lot of numbers. a lot of detail. so let me describe what is here. so for each month during 2017, january through december, we capture -- in the first three columns the total number of describers. so these are the employees themselves. , that were enrolled in each of the three coverage tears. so the ee represents employee only. ee plus 1, employee plus 1 dependent. >> randy scott: i think we have that. >> perfect. so specifically we also show the

number of dependents and the average contact size for each month. the rates for the plan are right across the next three columns which result when you multiply the describers by tier times the rates to the monthly premium. compare them to the rate claims for each monday and the incurred claims for each month. we develop lots ratio which is the division of the claim amounts divided by the monthly premium. so i've highlighted and squared three specific observations which i will talk about on the following

to the early population. this page captures enrollment in each of the three coverage tiers of the describers, and we have also segmented two groups of dependents and the head count for each month. the first where you see the column heading -- and the dependents of retirees. these are the non-medicare dependents of non-medicare retirees, averaging 174 for the year. we also have 230 on average, non-medicare dependents of medicare retirees and their claims are also capture when we look at the total claim experience for the non-medicare

population. >> randy scott: alright. >> and on the following page we continue the evaluation by looking at what the total premium is. separated by about 12.3 million for the monthly premium in total for the year for non-medicare describer tiers. and then we also do a calculation on the non-medicare dependents of medicare retirerieretirees totaling 3.3 million in premium. and then you can see the comparison to the paid claims and the incurred claims and the resulting loss ratios. so on page 10, similar to what we have seen with the active employees, we have seen growth in the total manitoba of retiree describers in the plan for non-medicare. when we look at the average contract size which looks at the total dependents on non-medicare

dependents on the plan is a ratio of nonmedical describer, we have also seen growth on. that if we look at the average contract size only when comparing the non-medicare dependents of non-medicare retirees that's the 1.23 i remember to on the prior pages. >> randy scott: alright. i'm on page 12. are you getting to the conclusions? >> so page 12, just to summarize the information i've walked through, we have seen an increase in membership in the active employee and retiree pools. the average cost per subscriber for early retirees did decrease since 2016 but increased for active employees. we continue to see high loss ratios for the active employees which does validate the application of the incremental city planned stabilization reserve monies for the active employs on the 2018 rating and we will present recommendations on the coming months.

>> thank you. are there questions by the commissioner on this presentation? any members of the commission? is there any public comment? hearing and seeing no public comment we will then move to the next item. michael is going to stay where he is. and we will go on to action item 6. >> clerk: great. thank you. item 6, action item review the city plan rate stabilization reserve. mike clark. >> mike clark and hewitt. on the first page, page 2 of this document, i wanted to step back based on the conversation from last month and just outline that there are three distinct health plan reserve policies for the health service board. so there are three reserves for the self-funded health plan. so two i presented last month

are the first two i list here. the imported reserve which is the unpaid claim liability for runout claims as of a certain date where services have occurred. payments have not yet occurred. and we calculate that as of the end of the fiscal year, june 30th every year for the last plans. and we also calculate the reserve as of that date which is a determined amount that helps protect the trust and the plans from potential funding estimate shortfalls which could occur if actual claims occurred if a plan were to exceed projected claims when we develop our premium give lent. >> randy scott: thank you for reenforcing and responding to that request in this kind of context. >> you're welcome. and the third is today's presentation. i will be presenting specifically for the city plan on the stabilization, the rate

stabilization reserve. which is an annual determination of financial gain or loss for the self funded plans, which we will go into more detail, and we calculate this as of december 31st so the end of the plan year. so there is a distinct versus the first two there. >> so i would like to ask question. the difference between the stabilization reserve and the contingency reserve. now the stabilization reserve comes from the premiums being higher than the actual cost, is that correct? >> i would like to say higher or lower. >> right you about the contingency reserve is money put away out of a trust just like the ir is -- ibnr is. >> correct. >> randy scott: okay. >> so for today's discussion on page 3, the stabilization policy

is for a gain or loss over the calendar year for the self funned plans. with that difference added to existing stabilization reserve balance and for policy amortized over a 3-year waiting period. so on page 4, just as a timeline summary of what leads us to today, at this time last year, it was determined that the december 31st 2016 stabilization reserve for the city plan was 4 million, $529,000 available to stabilize rates. in may 2017, the board approved using one third of that or 1 million, 510,000 to buy down the 2018 active and early retiree premiums in the city plan which left 3 million and 19,000 in the research. the following month on june

2017, the board approved using the additional 3 million and 19,000 to buy down active premiums. so as of that period of time, the expectation was the entire december 2016 reserve, the rate stabilization reserve for the city plan would be applied to 201 rating. theoretically leaving no funding for 2019 and beyond. so today i stand at the beginning of this rates and benefits cycle into the 2019 planned year to report on the claim experience for 2017, and based on that, 1,661,000 is available for stabilizing rates for 2019 and beyond. so page 5 presents a table that shows the difference between the expected flow of monies on the city plan, active employs and early retirees for 2017 relative

to the actual flow of money. and there are footnotes that describe each of these elements and the pages that follow. essentially we are looking at the claims and expense for the plan offset by prescription drug rebates. that total is compared to the totality of contributions received for the plan, a combination of the system and employees. and retirees to calculate the revenue either shortfall or surplus. in this case a short fall in both columns but less of a short fall than was originally anticipate when the rate were first developed for 2017. per policy we also factor in the change in contingency reserve which in this case is a decrease to reserve of about $139,000. and so the difference between the expected revenue shortfall for 2017 of 7,586,000 and the

actual deficit of 5,925,000 becomes the 1,661,000 available to stabilize in the future that i referred to earlier. >> randy scott: are there questions from the commissioners regarding that? >> commissioner sass. >> just to be clear. the shortfall was expected to be 7.5 million and the actual was 6 million? is this -- is that the short fall from which you use stabilization to balance? or is this an additional short fall above and i don't know the overall stable sage w stabilization we use to balance? >> so the 7.5 million was expected and that was at the end of december 31st, 2016. if i may -- i will attempt to answer your question. and direction to you page 8. and by all means if you have

further questions, please let me know. >> randy scott: yes. >> whereas we have the surplus carried forward as of 2016, we now -- based on 2017, experienced and adjusted an increase by 1 million and 61. so that would create a stabilization reserve at the end of 2017 of 690,000 but we applied 4,520,000 through the combination of the next two items, and therefore that is our suggestion that 1,661 is available for the city plan carried forward for 2019 rating. and then based on policy we would suggest one third apply to 2019 rates. 554,000. of course your decisions on that will come when we present on rate recommendations in the

coming months. >> and that would be in the may time frame? >> correct. >> randy scott: questions from the commissioners regarding these calculations or the result at this point? >> so this is an action? >> randy scott: well this is a recommendation up to this point and it will be an action item. >> just looking here it's an action item. >> randy scott: it's listed as an action item so are you asking us to adopt this recommendation? >> yes. >> randy scott: they are asking us to adopt the recommendation listed on page 8. >> can i ask one more question? >> randy scott: commissioner sass. >> clearly the small rate will have a small impact on rates because rates were high in the year that we are currently in, but with the benefit of a $4.5 million stabilization amount. and it appears that -- even with growing enrollment, even if we have growing enrollment we just

have growing losses and lamper deficits and that appears to be the trend over the last couple of years. a $500,000 stabilization amount will result in extremely high rates, in any view. in fact, if the spire a.m. were used it would still have a very small impact on rates. because it's less than half of what we used for stabilization a year ago. should we do something like that dishes want to be clear on the implications on this, if we will come back with a recommendation later. if we use all of the stabilization money and we continue to incur losses that are greater than the amount of premiums and stabilization money that goes forward, we are going to wind up going deep into our contingency fund to go over the remainder. so i'm at a loss to have a administrative effect on rates

only to find us funding large deficits from contingency fund to the end of the year. >> randy scott: would you concur with this conclusion? >> yes, i acknowledge your conclusion. i acknowledge your statement. and we are currently developing suggestions that we will evenly come to the board for review. that address the situation that you describe. >> when you remove the medicare retirees from here, that was obvious this was going to happen. we said this two years ago. anybody looking at this would have known. that i guess that was the plan tosh get rid of plan 1. but i have a question -- most of the actives in the city planned, the premiums are picked up by the city. is that true? >> for the actives? and the city plan? so they do the same contribution model as any other rate. so it's 93, 93.80.

>> early retirees are not picked up. >> the early retirees or the contribution for retirees is the county. >> right. so to me anything applied should have been to the early retirees because the actives premiums usually are picked up by the city. and there's a new formula the last couple of years, so i can't figure all of that out but definitely it is picked up by them and the second thing is -- the early retirees have nowhere towels go if they are out of area. whereas the actives have other plans available to them. the early retirees, this is it. this he do not have any other option if they are not in the area. >> so i acknowledge your comments, and similarly to my comments to commissioner sass, we are developing ideas for discussion into the 2019 reading recommendations for early

retirees as well. >> randy scott: alright. we will await those. are there any other comments, commissioner lin. >> just on rates 8. you are doing the recommendation of doing 1.6 million, estimated stability. so it will be added to the premium for 2019, right? >> correct. >> and then out of that, 554 will be used to buy down the rates? at the same time? >> policy is written, yes. solely acknowledging we may have scenarios for the board to consider. >> adding 2016 rates for the 2019 -- when you will be presenting the premiums in the next month or two. >> randy scott: for the current policy, i believe that's what he is saying. yes. is that correct? >> so if we applied the policy

as written, we would apply one third of the 1,661,000 or the 554,000 figure. again i'm just stating what the policy would say, fully understanding that there may be alternatives for the board to consider into finalizing 2019 ratings. >> randy scott: will you bring those back to us, alright. other questions from the commissioners. alright. director levin. >> chief physician officer. commissioner, i'm not sure we heard your complete question you had at the beginning leading to the stablation reserve and the trust. could you restate that question. >> the stablization reserve. i know about a year before we put all the medicare retirees over into the new plan that there -- a year or so before, there was a big surplus from the

overpayment from the premiums to the medicare retirees that year because -- in fact there was even talk about the lowering the -- out-of-pocket at that time. that was probably about three years or so now. so there was quite a bit of reserve that was used -- left over from that towards the members after that. and i just wondered is this still part of that? so the stabilization reserve money is in the fun balance, so to the extent that there was funding that was available -- so in that year, yes. it's part of that. and what i do is, i have the fund balance for the trust. and in that i know that this amount is set aside for the

stabilization reserve so that it is available when you do your reads. i don't know if that addresses the question. >> randy scott: that question was largely around the source -- >> source, yeah. >> randy scott: the source of the funding not how it's being accounted for. so i think that's been clarified at this point. thank you. are there any other questions from the commissioners regarding the presentation, content or the recommendation? i'm willing to entertain a motion to accept the recommendation provisioned on the term that the actuary is also working on other options beyond the things that are being presented today. >> i have to be clear on what your recommendation is. >> randy scott: would you restate your recommendation, mike? >> my recommendation is the board adopt the call cue layings that the stabilization reserve as of december 31st, 2017, is

6,$190. as outlined on the third bill of the registration on page 8 of the materials, fully recognizing that 4 million, 529,000 of that amount has been allocated into 2018. city planned rates for active employees and early retirees. which would then leave myself as the actual water 1,$661,000 to consider for recommendations into 2019 rating. >> that's what is contained on page 8? >> correct. >> randy scott: thank you. is there a motion? >> i would move that the $554,000 of the 1,661,000 be used to stabilize rates as long

as is that is from an active gain versus premium cost. however that calculation worked its way out. and that those funds actually are due back to the plan in question according to our policy. >> randy scott: is there a second? >> second. >> randy scott: it's been properly moved and seconded, the recommendation as outlined on page 8 of the presentation be adopted with the understanding that additional options are being formulated by the actuary. and it will be presented later. is there a discussion on the motion by the commissioners? is there any public comment? hear and seeing no public comment we are ready to [roll call] all of those opposed. the motion is adopted. >> we are now ready to move to

discussion item 7. >> item 7. >> discuss item. presentation on cobay bench marking. 123450 on the table is bench mashing. this is something we are done the last few years in february. so it's time to take another look. the information represented in this presentation is the 2018 plan design for sfhss plans and it's compared among the databases that reflect the 2017 plan design information at this time. that database is being populated 2018 information. currently i'm happy to come back with an update if desired. on page 2, just beginning with

the ppo plans. i will orient you, and then i will go through the other slide quickly when we come to them. we have two different databases that we look at. the bench. they each give us different views into plan design. so you can see here the number of employer groups that are in each of these groups comparative and national as well as a number of plans which implies that many employer employers employers have multiple plans. >> randy scott: would you have an estimate of the number of lives that would be represented in these amounts roughly? >> do you know the number of lives in here? i cannot tell you offhand but i'm happy to come back with that. >> randy scott: thank you. >> certainly. looking at page 3, on the left-hand side we have the sfhss ppo plan and looking at deductibles and out-of-pocket maximums and coinsurance for in network and as network. at a high level, looking at

areas where you may be slightly different than the benchmark, your deductibles are slightly lower than the bench mashes of your out-of-pocket maximums are higher. your coinsurance is roughly in line at 15% compared to 10 and 20% for the bench marks and for the network, certainly lower on the deductible and higher on the pock. one key thing here is the bench marks tend to have out-of-pocket maximums between out of network benefits and yours match. so that's why you are out of network information looks much lower than the benchmarks, because of that differentiation or not. on page 4 we look at the office visits, hospitals and outpatient surgery and emergency room. the oopm are set.

the dollar amount. so it's not a great comparison versus the copays. as mr. co-pay based but an effect dolingly thinking about the cost of service for primary care, 15% is likely in line for the flat dollar co-pays. and on the bench marks editionly it's typically a different situation on the co-pay between primary care providers and specials. since you were coinsured you wouldn't have that differentiation. on page 5 looking at pharmacy, you can see that your copays are slightly lower on than the bench mashes at 520 and 525. for the male order which is the bottom section. at a two times factor of retail which is in line with the bench marks. page 6 has a couple of footnotes

from the prior pages. moving on to page 7, the hmo data. so this is the blue share plans and the kaiser hmo. the information on a number of employers and plans included in the database. on page 8, for the blue shield hmo. so this is both the trio and the xs plus plans combined. for interest on the space, we have one column because they match but that represents both plans. so there's no deductionible compares to the bench mark which we would see a deductionable and the deductionable is lowe deductible is lowerrer than the bench mark. and surgery and inline for emergency room.

on page 9, the generic drug is in line and the co-pay is slightly less than the benchmark but not too far off and the order is in line with the benchmark. moving on to page 11 for kaiser. you will note on the right-hand side the benchmark information is the same we don't discent s discern so the benchmark information is the same. looking at the kaiser plans, no deductibles versus no deductibles. the out o out-of-pocket maximum is lower and the co-pays for care providers and for emergency room and slightly lower on all others. as for farmsy, on page 12, your generic drugs and the brand drugs are lower than the database. but kaiser does have a slightly

different approach than the pharmacy. so i would say the 530 is typically what we see in line for hmo plans. moving on to page 14 and 15, we did want to call out specialty pharmacy. this isn't captured the same way as other pharmacy designed provisions are on the database, so we look at how others are handling specialty prescriptions for government. will you see the page splits between 14 and 15. that most have a different specialty drug co-pay or coverage level and for national entities they typically treat specialty drugs. most treat specialty drugs the same as the non-specialty drugs. so they fall in the tier of brand formula or non-formulary. moving on to dental. we look at the dental.

we look at the ppo plans on page 18 versus your delta plan which has the three tiers versus the bench marks. your plan is a little different because it does have that three tier setup. and it's slightly richer on tier 1 relatively inline with the bench marks on tier 2 and less on tier 1 which would be expected from a 3 tier plan. your plan maximum from the 2300 is higher than the typical benchmark we see. on 19, the benefit is in line as far as coinsurance and again slightly higher on tier 1, about equal to tier 2 and cyclely less on tier 3. for the dental hmo plan, looking at page 21, you can see what this information looks like for the delta carrier so you don't have a deductible and it's 100% coinsurance. versus the database.

which typically does have a deductible and a 20-year maximum. this is how they are outlined. the divisions are not easily comparable. on 22, you can see the copay versus typically a coinsurance with that lifetime maximum. but relatively in line with the market. on page 24, again dhmo you can see no deductionable and 100% coinsurance, not directly comparable to the benchmark, and then on the orthodontic copay of 1250 versus the lifetime maximum. and lastly visions. you can see that information on the comparative groups on page 27. on page 28 for your examine. that is in line with the bench marks for lenses and frames the

$25 is in line with the benchmark and the plan would be richer as expected. otherwise you allow -- have an allowance based plan design versus a copay or coinsurance based plan. so this is outlined on 29 and 30 for your allowances. this is in line with what we see in the market for other provision plans but not entirely captured in our database but the co-pay is in line. >> randy scott: we've had this presentation before. it occurs to me that it's great to have a snapshot in time but we know we've been seeing and experiencing the effects of co-pays and deductibles in ever increases rate over a period of time. so i think it might be useful -- as we may do this again, to do a couple of things. one to provide some summary conclusion about the senat

snapshot you are showing. has it changed? about the same? are we competitive in the dental, medical, whatever the major categories are. and just a conclusion, just a summary slide. and then to try to look at something that may be a if comparative of that maybe over the last 2 to 3 years. are we in line globally with what the mark is doing in this area? are we better than, worse than or some measurement like that? i think that would help to, in my mind, provide a utility versus just saying here's a snapshot. here's how you compare. >> sure. and i've done this presentation. i think this is my third year. so just high level thinking back to the presentation wes have done in the past. and we will certainly put this in writing going forward. i would say that the results overall are comparable to what we did last year and the year

before. >> randy scott: that's my impression. but i wouldn't know that for sure am i have sat here for three presentations now. i think that may help to inform us from a policy standpoint, kind of where are we? and what the market is doing and how you are seeing it but also what the impact most importantly are on the members around these issues. >> absolutely. >> randy scott: thank you. other questions or comments from the board? any public comment on this item? hearing and seeing none we now will go to the next discussion item. >> clerk: item 8, discussion item blue scale pharmacy on new tier structure. blue scale representative. >> randy scott: representatives, there are three. or maybe two. >> clerk: thank you. >> good afternoon, neil, senior manager, harvest services of california and i've brought

along with me stephanie lue, senior with california services and jeanette long. >> randy scott: welcome. >> so today i'm pleased to provide an update on how blue shield manages and categorizes medications in our drug formula. so these are the topics of which i would like to precept to you and discuss. it's the overview of the current tier structure in our drug formula. the proposed drug tier levels for 2019. the i will pact to hss. and the health service system membership. how the drug formula works, our communication plan with this new tier restructure and some additional information. so currently, the blue shield drug formula rate categorizes the drug by drug type. and the member copayment would depend on the category that

particular members predescribe drugs will fall in. so we have generic drugs, preferred brand drug drugs and non-preferred drugs and specialty drugs. this next highlights from publications of what has been noted by the activities of the farm ceutical industry and with the top line there, the consumer affairs actually had a little article on the issue of arise in drug prices. they include generics and you can see these other notable publications that have provided their commentary on the rise of communications, including generic medications and what we have seen particularly with hss data in itself. generics can cost as high as $800,000 per 30-day supply. so that is an example of how expensive generic medications have become. so this next slide is an

illustration as to how we proposed form similar formulary change for 2019. the tiers 1, 2, 3, 4. the next column for 2018 is now drugs are currently categorized and formulary structured with performed drugs and nonperform drugs and structured drugs. for 2019 because of the high number of drug cost and generic medications, some generic medications will now be in higher tiers, where tier 1 will include generic drugs or brand drugs they would be identified as extremely low cost and provides a utility. the next tier, tier 2 would provide brand drugs and generic

drugs. tier three would be typically nonbrand drugs and include expensive medications and now tier 4 which is primarily before the tier beginning change with specialty drugs, would now include medications that may cost over 60 $600 per monthly supply. and this is not to say that all medications that cost $600 will be placed in tier 4. that would not be the case. in the very right column would be how the co-pays will be assigned to each of these various tiers. >> is this page 7? >> page 5. page 6. so the move to this new tier-based formula structure would align hss with industry trends and serves a as tool for hss to help manage riding drug

cost. the new full nature structured as i illustrated. will be named tiers 1 through 4 and a clinical medical committee, the pharmacy committee and the valiant medications based on the clinical value and cost effectiveness, not truly on the drug type. whether it's a generic drug or brand medication. >> is this a group within blue shield itself or is it a consultive body to you? >> good question. so the group is come prized the network physicians and clinical pharmacists not employed by blue shield and the blue shield employees do not have any voting privileges. >> randy scott: so it's almost a third party review for this process. >> yes. >> randy scott: i think that's important. because it sounded like when you said it, we are going kind of blur the lines and move these things around. and we are going to do it.

so i'm happy to see at least there's some attempt to put it outside the process when you exceeded the recommendations for your group. is that the idea? >> the committee evaluates medications quarterly and they determine which tier they will fall into, and they evaluate the clinical studies. >> randy scott: alright. commissioner sheer. >> so what come prizes a committee? is this a group of general physicians? or will you have enough people from enough different specialtities? >> we have board certificate phiz specialists that sit on the committee within a network of california and the clinical pharmacists. >> so you could have a bunch of gps or you can have something that specializes. gps do you have one committee

come prized of a variety of different people or do you have enough different practitioners from certain medical specialties who are making these decisions? does that make sense? >> good question. so what the committee does, if there's a medication that is indicated by the fda in certain of these categories and the committee membership feels that a board certified specialist, a panel of them should renew the medication, that sets it out to board certified specialists in that specialty. >> but you don't start out with that. >> no the committee is come prized of numerous specialties not just gps. infectious disease. income gis. numerous specialties on the committee. but if a medication, again, is out of the specialty of the committee membership for that particular meeting, they would then slit an external review by the board specialist. >> randy scott: other questions. >> just one. i want to make sure i'm

understanding page 5, the table on page 5. would it be correct to say that you are taking drugs that were in the generic category at a lower cope, and some of them are being moved into tier 2 and others are being moved into tier 3 for higher and higher copes? >> yes. >> so basically what you are telling us on this table, copes would be increasing for san francisco hss members. >> or select medications. >> or select medications. i'm not sure which ones those are. because it's so general. i notice there's a couple of statistics. but i don't have that, all of us that are being impacted. these are select items that are you focusing your attention on. >> our initial path was 36 medications that would be moved to higher tiers. >> randy scott: it may be in the

presentation. i can't recall but one of the thing i would ask through the director that we see as a result of this change is a kind of a retro active application of what the cost impact would have been to hss members had -- let's say you picked a period -- i don't know what period are you dealing with, but let's say it was 16, 17. had those changes been made based upon the utilization of the members what would have been the magnitude or the cost impact. >> certainly. >> i'm kind of in the abstract at this point. i don't know which drug wes are talking about. i understand clearly what a generic versus a specialty drug is. but what i see this blurred definition as we go into 19 without moving some of them over without getting the sense what have they are. or the volume or utilization by a membership. i can't, from a policy standpoint, grasp whether i should be angry, satisfied, or

what? i'm just sort of like in the middle at this point. you are suggesting it might be useful beyond just the kinds of illustrations you have here to do another layer of analysis so that we could see -- okay if these are the 20 or 30 that you have put with these -- aligned with these 2019 changes, this would have been the cost impact, or the magnitude of the cost impact to the membership. >> okay. >> that would be helpful. commissioner brezlan. >> i notice you have typical generic drugs and brand drugs and then typical -- the next category, typical referred brand drugs and generic drugs, so you are moving some generic drugs -- you are moving some brand drugs back down to generic drugs. is that correct? >> that is the intent with this

design. >> so some of the brand maw be less expensive. >> yes. >> so that's why i think that cost impact analysis would be useful. i'm notin not asking to you go back and spend $1 million to try and do. it but try to give us a sense of the order of magnitude, if you would. >> certainly. >> you said there were 36 drugs. >> 36. and you mentioned -- on this page, like 4? is that correct? page 7. >> page 7. i think it's page 7. so this is just an example. of medications and how much they cost. this is actually based on actual hss data. so, for example, in the top category there. antidiabetic agents, the generic version called extended relief. that had an average cost for hss

of over $700 per 30-day supply. another version of that same medication cost over $4,000 per prescription. and then the brand version of that medication, called gl lumetzglumetza cost $6,500. if you look at the medication by population that only cost $7 per prescription. so we really want to drivualization towardif lent medication but at a lower cost. >> we've had these discussions in the past over drugs and many times the members would say that i guess there are different binders and many have different drugs. they claim they are the same but they are not, i guess. >> we are just following the fda