$4,000,529,000,000 rate stabilization reserve to be applied by down 2018 premiums. we expected at the close of 2018 cycle, that we would have spend down the rate stabilization reserve. we looked at 2017 plan year experience. with that determined because of favorable experience, there was $1,000,661 available. that help all else equal to reduce the total rate increase by 4%. $1,661,000 equates to 4% of the

expected city plan spend for 2019. we have slides in appendix that provides more details for your convenience.

>> president breslin: when you apply a deficit, how does that work? i don't understand it. >> the deficit will then slightly increase the rates that we present in may and this is the case presently on the blue shield plan. blue shield plans today and for the last several years, carried a rate stabilization deficit. it will show an add-on component that build the total rate. that's been happening with the blue shield plans. that will happen with city plan for 2020. >> president breslin: it increases the rate and the premiums? >> correct. the $117,00 $117,000 we'd estimo

increase the premiums by 0.3%. >> calling back the question as to, have we looked beyond 2020? this going to continue to grow. we all know that. i'm seeing this in isolation and looking for bigger response on boo we're trying to do here. the plan is important. it's foundational to who we are. we need to kind of figure out how we're going to fix it. >> excellent comment. i are say if you recall everything that we talked about that was approved last may and june for city plan, applies to 2019. that helped equal impact for 2019 projections on the baseline. looking at page 5 as an example. this is all 2018 data.

the role forward for the 2019 changes will continue to apply for 2020 plan year. it's not part of this specific exhibit, since this is a 2018 plan evaluation. >> i'm raising the question. remedy got to be found at some point. >> that is captured in the statement a i made about doing the medical plans or rfp 0 we'll look for a newer design. >> so it's a band-aid? >> now, yes. >> president breslin: city plan choice is not available. that means everybody in the city

plan active and retirees? >> correct. >> president breslin: okay. go ahead. >> page 5 illustrates original expectations where i talked earlier about an expected shortfall of formal $4,529,000 and the rating for 2018. that was the amount of the rate stabilization reserve applied then to 2018 rating. those calculations are shown under the expected column on page 5. for the actual column, we had higher moment in city plan. that helps increase the numbers relative to what was expected. if you'll focus on row six from a pier surplus, these two numbers are different by $20,000.

as it turned out, the actual experience of what the actual shortfall was was very similar to the expected. for the rate stabilization reserve formula we look at the contingency reserve changes. there was an increase to the contingency reserve and therefore, that adds to the deficit for the plan. the $351,000 carry forward of deficit is almost all comprised of the contingency reserve change with a small amount about $20,000 due to the difference between actual experience and expected experience.

i won't go through slide 6 and 7, they have some notes on the items related to slide 5. for our recommendation on slide 8 as we do the math down the page, the bottom line is we're recommending that the health service board today approve claim stabilization deficit amount of $117,000 to be amortized for city plan and active employees and early retirees for 2020. there will be remaining number third of the amount that would carry forward past 2020. >> president breslin: i have a question about that. that's $3 million applied to the active retirees deficit, applied across all plans right?

>> correct. this applies across all -- everybody on city plan. >> president breslin: what we did last year, we applied some of the subsidy to the active only. since lot of the actives don't pay premium, it doesn't matter one way or the other. it's no benefit to them. why would we not just apply this deficit to the actives for the benefit of -- that will be really what will be the benefit of the members. >> okay. the remaining two thirds in 2017 was applied to the actives. that is correct for the 2018 -- >> president breslin: they don't pay the premium anyway. >> of all the employees on city plan, there are approximately 200 that do not pay a premium and the rest do pay some form of employee contribution for city

plan. >> president breslin: we don't know how many in this plan do or don't? >> about 200 in the city plan. >> president breslin: we should be doing what is for the benefit of the member. if they're not paying a premium, i don't see how that's a benefit for them. i think we can use little more training in this. one our training sessions coming up in october. if it is for the benefit the member, it's truly should have done -- >> i'm hearing a split though. it benefits some members but not all. >> it is true the majority of active employees do pay a contribution to be in city plan. all of the early retirees pay a

contribution to be on the city plan. >> president breslin: i wanted to point that out. if we applied the deficit in this case, it will be across the board. if we apply the deficit to the actives, early retirees wouldn't get an increase some of the actives who don't pay their premium, it wouldn't matter one way or the other. >> we applied this deficit. [indiscernible] >> president breslin: i said apply it to the actives. and not the early retirees.

>> you might. all the actives are also paying premiums >> the numbers increases last year because of the rate stabilization. only a few member will not take the burden. >> president breslin: active members that do pay, do they pay as much as the early retirees in

premiums? probably not. >> no. >> president breslin: depending on the contracts. that's my point as a fiduciary, we should put the money where most beneficial to the member. >> commissioner lim: i don't know how much the dollar amount of that is. >> if i add couple of comments. this particular recommendation as it is out outlined is based on how the health service board rate stabilization policy is written today. that is the basis of the recommendation. when we talked about alterations to apply rate stabilization reserves other than policy, there are certain discussions that need to happen with the

board to allow that to occur. $117,000 is across approximately 2000 total people, employees, retirees. that translates to per person. i'm doing the math right. approximately $6 per person. >> president breslin: i think it's something we should look at in the future. if we're going to apply a subsidy to someone who's not paying the premium, then i don't think we should be doing that. the reserves for this comes out the trust right? the stabilization? they come out of excess minus cost?

>> these are not cash reserves. i stand correct, $60 annual, $117,000 divided by approximately 2000, about $60 a year, and $5 a month per individual what that translates to. >> president breslin: move on. finish it up here and we'll see what everybody feels here. is that the end? >> i'm complete. thank you. >> are you asking for us to adopt your recommendation? >> yes, please. >> i move the adoption of the recommendation of the acon regarding the stabilization reserve for the coming year.

>> second. >> president breslin: any discussion? >> i would like to -- if we're going to seriously consider what the implications of change in policy would be in this particular effort, there's a broader principle that's involved. we are now talking about not surpluses that are reducing premiums but we're talking about deficits, they are increasing premiums. i guess the question for this board is, this problem is going to get worse. we know that. if you take the whole thing this year, it would be almost a percent more than you were dealing with. i'm trying to figure out is there some other way to thread this needle. president breslin provided an option in order to do it. i'm hearing you say we have to have more discussion.

this is where we'll have the authority to suspend the stabilization policy in order to make the changes being suggested. i don't know if that takes two readings or whatever. >> i think you have the right to approve this stabilization you want. the board policy are policies and they are guidelines. as long as there's a majority and you have a quorum you can make decision to violate any policy or governance rule you want. i think it's obviously something you need to be conscious of doing. you should consider what the implications of doing that are. in terms of this item, and your ability to decide how to apply a given stabilization that is part of the rates and benefits

process, i think this has been noticed and i think you can vote on it today if you want. if you believe you want more time to reconsider, you can push it off and we can renotice it for the next board meeting. >> president breslin: it might be wise to have more thorough -- we have to have another report on this to see what it looks like. we did that. i don't know if we should continue that. >> i would be happy to withdraw my motion if the person who seconded withdraw. we might be able to have the analysis done based on this discussion and then bring this back if you will, to have us suspend the policy to determine that's what we want to do.

that give us time and we'll see the real effect what we're talking about here. i withdraw my motion. >> commissioner lim: hard part is, we have a deficit of $351,000. we are spreading for three years. this is only $117,000. if you suspend the policy, we are kicking the $351,000 down the road. next year, instead of $351,000, it might be $600,000 or $500,000. if you start applying the policy, it might be enough to be $300,000. we're kicking the can down the road. only way we can do it unless you

do some plan changes and increase the copayments, all of those. >> president breslin: i wasn't saying not apply the deficit. just apply it to the actives. same amount of money but it will be applied to actives. >> commissioner lim: previous discussion was to expense the policy. >> president breslin: that will be to apply to one group. >> you can say you're spending it and you're making a one-time decision. >> president breslin: was it consistent last year when we applied it to the actives?

>> in june 2017 for the 2018 plan year, when the decision was made to apply the entire, $4,429,000, that was a suspension of policy that allowed h.s.b. to apply one third proportionately, remaining two thirds to active employees only. >> president breslin: i don't remember suspending that. >> for last june, the policy was suspended again to allow the entire $1,661,000 to be allocated rather than one third. that money was allocated

proportionately. that element was consistent with policy but the suspension still allowed for application of the entire balance rather than just one third. >> again, i withdraw my motion to accept the recommendation. >> second. >> with that, if i may, i recommended item be brought back to the board for an action based upon the discussion of applying the stabilization support or subsidy to deficit to the active members. >> president breslin: our

concern seems to be with this plan. how are we going to provide for people that are out of the area that do not have the another choice. generally that would be early retirees. although it might include other people that are still active in commuting some place. generally it will be the early retirees that we trying to keep afloat here and afford the plan. that's my thinking on this. >> last year's analysis was 7% active employees did not have access to kaiser blue shield plans conversely over half of early retirees did not have availability of another plan. you are correct that most of the individuals in city plan who do not have choice early plans are

retirees. >> president breslin: i'll second that motion. is there any public comment on this item? no public comment? all those i in favor. any opposed. it passes unanimously. >> thank you. >> president breslin: now we're going into the finance and budget committee matters. that will be item 9. >> approval of san francisco health service system fiscal year 2019-2020 and fiscal year 2020-2021 proposed general fund administration budget presented by the finance and budget committee chair rafael mandelman. mandelman i.d. financ --

>> supervisor mandelman: just to highlight, based on the recommended proposal, there's a reduction of $67,058,000 for the budget and $134,115 for 20-21 budget. also there's contingency proposal from the mayor's office 1% can is $33,529 reduction. on the procedure, there's no change in the number of procedures.

impact o of the reduction was enough to be big impact on the contracts. with that, that's the only line item that we got with the 12% budget. impact of that will be $101,196. additionally, we had services requesting additional funding. there's -- funding will be $354,000. the budget and finance committee approved the budget this morning and presented to the board for

full approval. do i hear a motion to approve the 2019-2020 and 2021 budget? >> president breslin: i move to approve the budget. >> second. >> supervisor mandelman: any questions from the board? if not, any public comment. budget unanimously approved. >> i like to thank commissioner lim for making this such a painless process. >> item 10. approval of the san francisco health service system fiscal year 2019-2020 and fiscal year

2020-2021 proposed healthcare sustainability fund budgets. presented by wilfredo lim. >> commissioner lim: for the budget, we have a surplus that will be getting forward for the following year. predicted revenue for 2019-20 is $2555 budget. it brings total revenue for 19-20 to $25,084.

our budget total expenditure is $4,596,000. it gives us a balance $687,000. getting the next year's budget, revenue will be $3.3 million and total expenditures would be $3 million giving us $332,000 surplus for 2020 budget.

one-time expenditures, replacement of the telephone system, primary payment -- [indiscernible]

any questions? i need a motion to approve? >> i move that we approve the sustainability budget as presented. >> second. >> commissioner lim: any discussions any public comment? seeing none. budget is approve unanimously. thank you. for the finance and budget committee. thank you. >> president breslin: thank you. now we're down to finance and budget we're on to our regular board meeting matters. item number 11.

>> it's the president's report. the report is given by president breslin. >> president breslin: i have nothing to report. is there any public comment? seeing none. item 12 please. >> it's the director's report. report given by executive director yant. >> thank you. good afternoon commissioners. i want to point out two pilots from my director's report. before i start, i was doing all the staff acknowledgements, i realized this is intense time of year for our finance division. i want call out pamela lebanon and her team who is putting together the budgets and audits and rates and benefits simultaneously. it's like magic. so thank you pamela and your team for the efforts that you have putting us all together here. as a reminder, we are still in the vendor blackout period.

we are having our renewal meetings now with our vendors. you will hear the annual report shortly and we already spoke to the website going live, which was really quite exciting for us. we're continuing to work towards the development of a risk management policy for the department. we have many components if place. i have met with the director risk management services for the city and we will be scheduling an assessment of our department in order to form a plan and any activities that we may need to undertake. we are very optimistic about actually gettin getting this new telephone system. we continue to have an outstanding relationship the department of technology and our scheduling meetings and ordering equipment. it really does look like it's going to happen. we will have the challenge of

identifying new telephone numbers. we do know that we can keep the main numbers the same for a period of time while we determine how best to transition to new phone numbers. it's very likely that we will have the new area code of 628, which is always difficult for people to adopt. we'll take our time getting there. i did want to point out that we mentioned during our strategic planning process, we were exploring with the treasure of tax collector office about financial well being. they've been excellent guiding us on some of the choices that we made going forward. one the ones we're looking at piloting later this year is working with all expansion of the services already in place for the general public. which is smart money coaching. we have the opportunity how we

can partner with the city agencies that are offering those services and add a piece of the contract to it that we can offer to our members to have symptom financial coaching and well-being. depending how that goes, we would consider expanding it. we have the physical capacity to do it within our offices. we think we could launch this later i this summer. the other area i didn't write about the report is how we approach the student loan challenges that are out there. it is true that many student loans for people that work in government, there's some distinct advantages for being able to get some of that loan forgiven. it's very complicated. there's a lot of vendors out there. we'll with the treasure tax

collector look how would consider about going about vetting these type of services. other area is government alliance that was kicked off by the human rights commission. our offices is participating in this. what this allows us to do as i wrote in the director's report, really have a framework for how we consider race and equity in our case of how it manifest days disparities amongst membership. this training will help us deepen our learning and understanding how we'll consider approaching recent equities and help disparities.

we do the board elections under way. applications -- nominations forms are due today by 4:00. we will be working with the department of elections shortly on proceeding with the next steps with the election. we do -- matters that are before the board, several of our health plans are here that will speak during their time to some of the follow-up questions from prior board meetings. i think the other thing that i wanted to point out here is that as you know we had very successful expansion of the self-service online e-benefits last october. we're working very closely with the controllers office to get the programming systems upgrades

in place rapidly. they have huge need to do a code freeze so they can fix of the things in the financial system. we're working super closely with them to see if we can get everything we need done before they freeze that code. it's a real aggressive timeline. i've been calling out michael several times here today. he really stepped up and helped the comptrollers office with the contract development. that cut is several weeks off the timeline that allow us to get this done. it's a really important goal for us to be able to go full on with self-service for new hires and qualifying events. that will complete this whole fleet of e-benefits. that's the highlights of my director's report.

>> president breslin: i wanted to -- second opinion report. i look back at the report, united healthcare -- blue shield did not do well. they need to step up as far as i'm concerned to get second opinion available. i think that needs to be looked at closely. i don't see why they're not doing it. kaiser i know does provide second opinions. but it's little harder than it is for united healthcare too. since we're talking about best doctors and lot of this should

be done with their own plans. i like to see emphasis on that with blue shield especially. also nutrition counts. same issue. i think we also have that with united healthcare and kaiser has it. blue shield does not. she should definitely step up and provide that. why it would be more economic to go to a primary care doctor than nutritionist, i don't know. it seem we save money and it would help people with their

health. >> we'll take that under advisement. >> president breslin: thank you. >> commissioner lim: i want to thank pamela and her team for the presentation this morning and the work you have done on the general fund budget and healthcare budget and working with the mayor's office. the past few years, she was able to restore all the costs. i'm hoping they'll do it again this year. so thank you to her team for the great work. >> president breslin: any public comment? seeing none. item number 13.

>> financial report as of december 31, 2018. presented by pamela levin, chief financial officer. >> thank you. pamela levin chief financial officer. the report provided to you summarizes the actual revenues and expenses of the employee benefit trust fund and general fund administration budget through december 31, 2018 as well as fiscal year age projections through june 30, 2019. i will briefly go through this report. in terms of the trust, the fund balance as of june 30, 2018 was $77.4 million based on activity through december 2018, the fund balance projected to be

$80.7 million. on june 30, 2019 which is $3.3 million increase. we're seeing unfavorable for city plan, blue shield. they continue to be favorable claim experience for the dental plan. why we haven't received any pharmacy rebate through december, the year to date amount received is $1.8 million we're still projecting $7.9 million. a year-end is project for the healthcare sustain the fund. knoll performance guaranteed have been received as of end of december. a total of $47,000 has been paid out for fiscal year and the adoption assistant plan and the amount of forfeitures for unused

won't be known until june. we have augmented, introduced new graph into the report. i wanted to spend couple of minutes going through those. there are several lines within the graphs and there's summary underneath the graphs that explain what the graph is saying. i wanted to point out it is expected the total expenses for the plan will be approximately equal to the revenues when you exclude the rate stabilization reserve. this is the could for city plan and trio.

thithis is the case with city pn and blue shield trio. as i mentioned before, the delta dental expenses continue to run

lower than expected. in terms of the general fund administration budget, based on the financial results for the first six months, we project balance of $300,000. the mayor's office has offered an hopefully are come through with sharing some of that savings in the current year for one-time items that we would have budgeted in the next fiscal year. these include radios for our continuation of operations plan, books for the e.a.p. training, the training that are provided by e.a.p. few other requests were submitted the status of that won't be known probably for another month or so.

i'm happy to respond to any questions. >> president breslin: any questions? thank you. any public comment on this item? good afternoon. >> i wanted -- i got here just in time. -- i went through the agenda yesterday. i noticed new charge in the financial report. i wanted to comment on that for minute. it's the first significant change in the financial report i've seen in the time i was here even before i became a commissioner.

it's easy to do same financial report every month. these particular charts really give a pretty good high-level view of all the actuarial work was done. there can be issues claims that might include high dollar amount claims or differences in the rate on pharmacy or inpatient claims. overall, it gives a pretty clear picture that the work that was done was quite good. i wanted to commend pamela for adding that. it's nice it see everyone and

nice to be down here. >> president breslin: thank you. any other public comment? seeing none. item number 14. >> item 14, presentation of audited financial statements from june 30, 2018 and year of 2017. presentation by lisa avis from kpmg and pamela levin as well as our chief financial officer. >> thank you. again, my name is lisa avis. i'm managing director with kpmg. i will be presenting the audit results today. i want to thank you for the opportunity. our audit standards require that

we present our audit results at the end of each audit either in writing or in a form of presentation like this. so we appreciate this opportunity to have a formal presentation to you. as you can see on slide 1, we issued two reports for this audit. the first one an audit over the financial statements on the numbers presented to us for the year ended june 30, 2018. happy to report that the financial statements received an unqualifiedtor clean opinion. we also issued a report on interim control over financial reporting. they are happy to report there are no deficiencies or noncompliance. if you have the financial statements, our opinion is wordy. it says a lot but ultimately it did get a clean bill of health. if there's ever a paragraph that's different from the clean

opinion, we call that out to you and the only difference we had in our opinion if we do make reference to the city a few times, this paragraph is saying we're opining on sfhss financial statement. users will see that once he look at the numbers. we are required to call that out. on slide 3, we had no corrected or incorrected audit misstatements. what happen that mean -- what that means, we come up with any significant differences. those are presented to management and management has the opportunity to correct them and the numbers they presented to us or they can pass on those. we disclose those to you as incorrected differences. in our audit we did not identify corrected or incorrected misstatements. in the financial statements, they discussed some significant

accounting policies. nothing unique or unusual. those policies are consistent what we see in the industry. there are some very largest mates if these financial statements. the reserves being the main estimate. because it's very subjective, there are procedures that we have to conduct to make sure there was no bias or misstatement relating to those estimates. blue shield being one of the larger carriers, they get a report on controls. we review that. and we test the detail. the estimates that h.h.s. came up was similar what we were able to confirm as well.

it next side, the nature of how it reads, it raises few eyebrows. the management present in every entity. there was nothing unique that came to our attention. because management has access to the books and records, lot of underlying detail, we are rared to consider if there's control. we do have audit procedures to address that risk. no reportable conditions there. on slide 7 here, as it relates to internal control because we report in with government auditing standard, we are required to report control. definitions here on slade 7 are of material weaknesses.

i'm going to read them here. as i stated earlier ands you can see on the next slide, there were no control deficiencies that rose to the level of significant or material weakness or no control deficiencies. slide 9 here, there's a lot of no matters to report. which is a very good thing. these are things that we are rared to communicate to you in these conversations here. we did not identify any issues if related party transaction. there was no instance of fraud, no subsequent events and no difficultieser disagreement with management. i say no difficulties, this was probably one of the most challenging years for audits. we're meeting a few months later than we typically could. we are here today thanks to

pamela and her team. there are rot -- there are lot of hours that went into this audit to get to the numbers. it was a true team effort. there's other entities to rely on h.h.s. to get their reports out. on slide 10 here, these responsibilities management signs representation letter to you outlining what they are

taking responsible for. those responsibilities are listed here and your board as well as management are also responsible for setting the tone at the top. these public meetings emphasizing the importance of these financial statements is part of that process. our responsibility is to audit these financials. we have standards that we follow. our responsibilities are outlined here to make sure that those numbers are fairly presented based on the bookses d record provided to us. on slide 12 here, last but not least, our responsibility is to you. we report to you. we work with management throughout the audit. we are required to communicate anything we find to you. no issues that rose to the level of reporting that needs to be reported.

i want to open it up to questions on the audit before i turn it over. >> i have one question, what have you learned out of the audit process this year? we normally the report earlier. you've acknowledged that. i know there was a major change iin the city. is there any learning or should we expect you to be back in the regular order next year. >> that's an excellent question. the plan is to be back in regular order next year. we knew that this was going to be a challenging year. we were able to plan around it. we could have pushed to tray to get this done earlier but the books and records needed to be accurate. we as auditors and management had to be comfortable that

everything came over from the gl system into the new g.l. system. the time that was taken to get to that process is what it took. not a day late or earlier. lot of lessons learned. there's a lot of lessons learned. there's a year of experience under everyone felt. the system still has kinks to work through. our goal is to be back here in october of next year. >> commissioner scott: i like to raise that same point with the c.f.o. sitting next it you. panel ratpamela you have anythiu like to add? >> i do want to recognize marina coleridge and her team for lot of hours helping the

calculations for the rest of the department so that ecan meet their covens. we need modify our process of renewing memberships with blue shield prior to the time that ann starts the calculations. i worked with ann about coming up with some way to do things little earlier and more often and hope that will mitigate some of the time and frustration that we had. all the other types of sampling went math -- smoothly. the financial system, we had a difficult time from the beginning and i reported lot of

steps that we're taking and continue to be taking. i anticipate that and hope that the budget will be here. >> commissioner scott: thank you. limb i.d >> commissioner lim: it's whole issue with the city, it is done by october. [indiscernible]

as far as the audit, it's all been audited. thank you. >> i also have a quick report that i do every year that looks at the financial statements.