1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
KERR COUNTY COMMISSIONERS COURT
Monday, November 15, 2004
1:00 p.m.
Commissioners' Courtroom
Kerr County Courthouse
Kerrville, Texas
HEALTH INSURANCE WORKSHOP
~J
PRESENT: PAT TINLEY, Kerr County Judge ~.
H.A. "BUSTER" BALDWIN, Commissioner Pct. 1
WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2
JONATHAN LETZ, Commissioner Pct. 3
DAVE NICHOLSON, Commissioner Pct. 4
2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
On Monday, November 15, 2004, at 1:00 p.m., a workshop
of the Kerr County Commissioners Court was held in the
Commissioners' Courtroom, Kerr County Courthouse, Kerrville,
Texas, and the following proceedings were had in open court:
P R O C E E D I N G S
JUDGE TINLEY: Let me call to order the
Commissioners Court workshop scheduled for this time and
date, Monday, November 15, 2004, at 1 p.m. The agenda item
today is a workshop with Mr. Looney, our insurance
consultant specialist with Catto and Catto, with regard to
the employee health benefit matters and the bids which we
received a week ago, I guess.
MR. LOONEY: Week ago.
JUDGE TINLEY: Mm-hmm. I'll turn it over to
you, Mr. Looney.
MR. LOONEY: Well, thank you. I noticed
we're keeping the crowds away today, so -- lots of other
things to do than listen to insurance, I guess. What I want
to do today is kind of give you the Insurance 101. I want
to kind of start at the beginning and assume that -- that
you all have a little knowledge, but I'm going to try to
give you the basics of the things that we're going to be
looking at during this bid process and try to give you some
more in-depth explanation of what it's all about, and tell
you about some alternate funding methods that we're going to
11-15-04 wk
3
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
be looking at. Some of the first screens in here are just
kind of, you know, how we got to where we are today, so
they're -- I'll go through them pretty fast. Then I'm going
to spend some time on -- on the new employee directives, or
the employee consumer-directed health care plans. There's a
lot of information out in the industry about those today,
and we actually are going to take a look at a couple of
those for possible options for you all when we get into that
point.
So, that's me, and 37 years. The only thing
on there that you may not know is that I work pretty closely
with Texas Department of Insurance on a couple of
committees, and part of what I deal with, the TDI is on what
they call the Prompt Pay Act for the prompt-pay claims, so
they passed the bill in the last session, and I'm on a
committee to help set the rules and regulations for TPA's
and insurance companies on how to file claims on a timely
basis. So, I also do and have done work with the Attorney
General's office on investigations for fraud in the
insurance area, particularly with third-party
administrators. So, this is what I -- one of my favorite
cartoons, I guess. You know, health care -- the job comes
with an excellent health care package, but no salary, you
know. So --
25 ~ COMMISSIONER NICHOLSON: Not bad.
11-15-04 wk
4
1
'~ 2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
24
25
MR. LOONEY: Yeah. So we look at that quite
a bit. Actually, you know, this was the rise in -- in
percentage increase costs in the last -- oh, I guess 10
years or so. We've actually had a slight decrease going
forward into 2005 projected, over and above the increase
that we had last year. Part of that is a result of -- of
the election. In election years, we typically -- toward the
end of the year, we're -- we'll start seeing kind of a cost
fixing, and the insurance companies don't make a lot of
changes, and they've already done their renewals for next
year, so they kept it at a lower pace this year.
COMMISSIONER NICHOLSON: Gary, this would be
premium cost increases?
MR. LOONEY: Yes. That's overall premium
cost increases, estimated by most of the major insurance
companies. We get that out of -- I believe that report came
from Towers Perrin, I believe, but that has to do with large
number of insurance companies and what they gave us in
projections for their rate changes going forward on fully
insured plans. This -- this is a chart on what -- we did
a -- or Towers Perrin did a survey back in 2002. This is
hard to read, so I'm going to go to the next screen, really,
which kind of explains it. What did people do to control
costs? We know the that costs are going up, so what do the
people do, and what were they really planning on doing in
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
'"' 2 4
25
5
2002? And now we've got some -- some more results to
actually see what people actually did to try to manage the
health care costs. The majority of the plans did something
to change their plan design. They increased their
deductibles. They changed their maximum limitations. They
did something in plan design. 60 percent of the companies
did something along that route to -- to try to reduce their
costs to their corporate entity. Now, that doesn't
necessarily mean that it changed the overall costs of the
plan or the overall premiums or anything else. What it
actually is is a shift in the costs from the employer to the
employee. So, about 60 percent of the companies shifted
risk. They shifted back to the employee by having them pay
more out-of-pocket. The three-tier co-pay plans for -- for
prescription --
JUDGE TINLEY: Let me interrupt you, if I
might. The second figure of 18 percent, does that relate to
cost-sharing, or does that relate to a savings percentage?
MR. LOONEY: All that is is that percentage
of the people that actually -- when they made the projection
of what they were going to do, 60 percent of them said that
they were going to do that, and I believe that 18 percent is
what we see now has actually made significant changes in
those areas. Let me make -- make sure that that's right,
Judge.
11-15-09 wk
6
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
"` 2 4
25
JUDGE TINLEY: Okay. Okay, yeah, I see it
now on your key -- on your graph.
MR. LOONEY: Yeah. The --
COMMISSIONER WILLIAMS: No, this is a little
different than what you just said.
MR. LOONEY: Yeah, one -- I'm sorry. One of
them was -- that's what they did, and 59 percent actually
made the change, and 18 percent said they were going to make
the change in the next year.
JUDGE TINLEY: Okay.
MR. LOONEY: That's what that number was.
And, actually, the 18 percent number -- you had 59 percent
of the people that actually did it and 18 percent said they
were going to do it, and now what we're seeing is that
actually more than 18 percent actually did it. This -- this
report is about a year and a half old now. And so what's
happened from this point, from this report, the three-tier
drug program has now gone to four and five tiers, because
prescription drug costs are becoming such an impact on
health care plans. A three-tiered program -- or, actually,
you started with two-tier, generic and branded. And then we
went with generic, branded, and a third tier was for the
high-cost medications that were new on the market, so they
put in a third tier for those medications that were the real
high-premium medications that were still branded, but they
11-15-04 wk
7
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
were hard to get; you had to apply for them. They were
medications that were used for diabetic purposes, heart
problems, different things of that type. So, they put --
JUDGE TINLEY: Formulary?
MR. LOONEY: That's where the formulary --
the formulary now is either four or five tiers.
JUDGE TINLEY: Okay.
MR. LOONEY: Because what's happened with the
formulary is that the -- the generics are being forced into
the market as generics, and the generic prices are as high
as the premium prices. So, even though it's got a generic
title, the manufacturers are not reducing the price of the
medications. Since they're not reducing the price of the
medications, we had to put in another tier, which is a
generic -- you know, a more expensive generic medication.
So, one of the things that we're doing during this process
for the renewal process right now is, we're looking at the
prescription drug management company that's handling
your-all's prescription drug program, 'cause when you use a
third-party administrator, we have access to multiple
prescription drug managers. So, we're looking at -- we've
got proposals that are integrated into the -- what you've
seen here, from about six different prescription drug
management companies.
COMMISSIONER LETZ: Gary, are you going to
11-15-04 wk
8
1
2
3
4
5
6
7
8
9
10
11
12
.-- 13
14
15
16
17
18
19
20
21
22
23
24
25
spend a little bit of time on third-party administrators?
MR. LOONEY: Yes. So, this -- these other
changes -- the defined contribution plan was a real hot
topic item back in the early 2000's. First, the defined
contribution meant that the employer was going to give each
employee "X" number of dollars, and then they were going to
have a list of benefit programs over here that they could
choose from, and they could spend that money for anything
they wanted to in that program. They did that for a lot of
the bigger corporations where they actually put that into
place.
COMMISSIONER WILLIAMS: Gary, before you go
away from this one, on the first one there, where you talk
about change the plan design and cost sharing, 59 percent
actually did that, do you have anything -- any information
that tells us what -- what, if any, percentage of the change
might have been? Was it a 10 percent change? A 20 percent
change? Or --
MR. LOONEY: I don't have that with this
particular screen, no. This was more --
COMMISSIONER WILLIAMS: Okay.
MR. LOONEY: -- of a plan design change in an
effort to, like I said, shift costs. It was a shift cost
process. The things that they did to shift the costs were
-- you know, for one thing, HMO systems are going out of --
11-15-09 wk
1
2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
24
25
9
out of play. So, they would shift from an HMO. They
shifted away from the point of service plans to just basic
PPO plans. And y'all have just a basic PPO plan.
COMMISSIONER WILLIAMS: Right.
MR. LOONEY: So, managed competition was
another thing that -- that people were going to try to get
involved with, but that's really for major metropolitan
areas where you can get hospitals competing against each
other for negotiated fees and structures within that
hospital system. We get Baptist competing against Methodist
in San Antonio for -- for the larger carriers there in
town -- the larger companies there in town. Consumer-driven
health plan options are something -- this said 1 percent of
the people looked at it, a change to that, and then 13
percent. That was in 2002. That -- those numbers for
consumer-driven health plans now for 2005 are projected to
be somewhere in the 15, 20, 18 percent range where people
are going to shift into those types of plans. And I'll --
I'm going to go into that a lot more thoroughly. Most of
the five major problems is it costs too much, it increases
each year, no flexibility, employees don't appreciate the
plan, and they don't understand how much it costs.
COMMISSIONER WILLIAMS: Amen to all of them.
MR. LOONEY: I mean, they don't understand
how much it costs, because the concept is, with all the
11-15-04 wk
10
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
co-payments that we put into the health care plans,
everybody's under the -- the idea that it costs $10 or $20
or $25 to go to the doctor's office. Well, we know it
doesn't cost that much, so -- but they've got into that
mind-set that a prescription only costs $15, you know.
Doesn't work that way, you know. So, one of the things
about understanding the costs is, again, these
consumer-directed plans, and I'll tell you more about that.
Why has the cost gone up? Lawyers. Everybody blames
lawyers for it.
COMMISSIONER WILLIAMS: Yeah, top of the
list.
MR. LOONEY: 99.9 percent of lawyers give the
others a bad name. So, is it the hospital and doctor
charges? Yeah. Pharmaceutical companies? For sure.
Legislators? One of the biggest increases in costs we have
is on mandated benefits, legislative mandated benefits, a
lot of things that you avoid by being self-funded. Having
to cover grandchildren under a health care plan, having to
cover children up to age 25, whether they're attending
college or not. All of the maternity regulations,
prescription regulations, all that regulatory information
flows with fully insured plans, which you are avoiding a lot
of that right now. Insurance companies? Look at the
profits that they're making and what they're paying their --
11-15-04 wk
11
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
their directors and guys. They are causing a lot of this
cost increase too. And then just the consumers themselves.
Pharmacy costs, the aging population, over-utilization,
mandates. I'm going to go through some of those. Why?
Well, it requires us to properly design the plan and manage
it. So, should we be self-funded or fully insured? I'm
going to go through a general description of both so that
you'll get a feeling for what that does.
Fully insured means that each month, you pay
a premium for your health care in advance, based on the
estimations of insurance companies' costs for your program.
Fixed premium per each individual insured, full premiums due
one month in advance of the coverage being available.
Insurance carrier holds all the reserves, they hold all the
funds. You simply send them a check. You have a minimum
fluctuation in claim liability, because the insurance
company assumes all the risks. They assume all the risks of
claims. You know what your budgeted cost is going to be
based on your population as you go through the year. You
know how many insured you've got. You know what the rate
is, and that's the full cost of the plan for that time
frame. All state mandates apply. You have to pay all of
the premium taxes involved. The insurance company pretty
much provides everything on employee packets, all the
information for enrollments. They typically have web sites
11-15-04 wk
12
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
to access, and all kinds of new varieties of things that are
supposed to help you reduce costs. Summary plan
descriptions, all that's in your fully insured premium. The
premium is based on what you have as far as your incurred
claim cost is concerned and your required reserves.
Now, incurred claim is -- is the key word.
Incurred means that the individual has received service at a
certain point in time. That was incurred at that point.
Incurred versus paid. Paid claim means that the insurance
company has actually written a check for the services
rendered. Incurred, they had the service, but no claim has
been filed, or it hasn't been paid at that point. So, an
incurred claim is -- the required reserve is established for
those claims that are incurred, but not reported, the IBNR.
You also pay profit and risk charges. The insurance
companies have a profit motive. You pay state premium
taxes. The administration expense comes out of the fully
insured premium, which is claims, billing, operations, agent
commissions, all those items.
And this is something to take a look at.
This is a fully insured timeline. What this means is that
if you started your insurance program in January of '03, and
you went through 12-31-03, you had 12 months of a fully
insured contract based on incurred claims. The plan
document under a fully insured contract says that the
11-15-04 wk
13
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
employee can file a claim within 90 days of the date that
the claim has been incurred, and that the responsible
insurance company must pay that claim, and they have up to
12 months following the end of the termination date of that
contract to pay it. So, in terms of what I've just shown
you a few minutes ago, this becomes a 12/24 contract; 12
months of incurred claims, 24 months that you have the
ability to pay it over a period of time. The premium that
you pay during the 12 months -- the initial 12 months is the
total amount of premium required to meet all the obligations
of the 24-month runoff and payoff, because insurance
companies have established a reserve to do that. You start
in January for the next year, and you have the same type of
contract moving forward, 12/24, and it just dominoes from
that point forward; it's always 12/24.
In a self-funded plan, the employer -- you
guys -- assume a portion of the risk. The administrative
options. The administrative options are changing.
Insurance companies are trying to get out of the risk mode.
For them to get out of the risk mode, then what they do is
they become an administrative service only company. Blue
Cross, United Health Care, Humana, all these companies will
offer you their administrative services. Which means
they'll do claims administration and function as a
third-party administrator, and shift the claim liability
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
14
back to the employer, so that's what an ASO contract is.
Insurance company comes in and says, "We're not going to
accept the risk. You're going to accept the risk for claim
payment, but we'll provide all the other services, and
here's our fee for doing so." That's an administrative --
that's an insurance company functioning as a third-party
administrator. Those are called ASO contracts.
You can have a third-party administrator
which is independent, outside of an insurance company, as we
do now, or you could self-administer your claims. And if
you do that, you'll have to hire a new consultant, 'cause
I'm not -- I don't want to -- that is not recommended.
(Laughter.) You have some fixed costs, which are the
insurance premiums, and you have variable costs, which are
the claims costs. The fixed costs are included. Your
administrative service fees, and then the insurance items
that I'll tell you about. The administration fee is for
claims, billing, eligibility, customer service, plan
document maintenance. And TPA's -- when you're talking
about TPA's, plan document maintenance is one of the areas
that we find the TPA's are not as efficient as they should
be. We really get after the TPA's for trying to keep up
with all the regulations that we face from COBRA, HIPAA, all
those federal regulations that we're -- we're involved with,
and we have to really stay after the TPA's to keep up with
11-15-04 wk
15
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
those plan document changes that are required in
relationship to the actual law changes.
The administration fee typically has an
access charge to access a network that provides physician
and hospital services, the PPO network. PPO network, with a
third-party administrator, is typically a leased network.
They'll lease one from Texas True Choice, private health
care systems, Health Smart. You've got a local TPA over --
that's in the -- the Hill Country -- I can't remember the
full name of it. The Hill Country Physicians Network or
something like that. That is out of Fredericksburg. I
think they manage it out of Fredericksburg. The insurance
companies typically have their own networks that they --
they deal with. We look at a setup fee when we look at the
bid specifications, to see if there's an initial fee for the
initial contract enrollment, things of that sort. We also
look at expected claims. And this is what the underwriter
tells us that we -- they really feel that this is the amount
of claim volume you're going to have during the next 12
months. That claim volume is based on experience, and the
bids that we get in from the reinsurance companies will give
us an expected claim amount.
COMMISSIONER WILLIAMS: Is that experience
over one year, or weighted over a period of time?
MR. LOONEY: We gave them experience for a
11-15-04 wk
16
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
~"'' 2 4
25
three-year period.
COMMISSIONER WILLIAMS: Okay.
MR. LOONEY: So it should be weighed over
that three-year period of time. Two years is usually
sufficient. You all are pretty consistent in your
employee -- number of employees that are insured, so three
years, we felt, was a more accurate representation. And the
claims information we're getting in on the bids are
projecting that. One of the things that we -- we see, and
that you'll see in the insurance stuff, is specific stop
loss. A specific stop loss premium is purchased by -- by
you all. And what that does is it protects you against any
one individual that's insured against having a catastrophic
loss. So it is, in essence, your deductible for a given
individual. Once they exceed that deductible level, then
the insurance company pays 100 percent of the expenses over
and above that level for that calendar year. When you start
into a new plan year the next year, you have to satisfy that
deductible again. So, one of the things that -- and I'll go
over that again, the timeline, here in just a minute to show
you how these carry-forward numbers stack up. But your
individual specific right now is 60,000, is where it's set,
I believe, isn't it?
JUDGE TINLEY: Forty, I think.
MR. LOONEY: Forty? 40,000, okay. Sixty was
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
24
25
17
the other one I was looking at this morning. Forty. We had
bids that we asked for in addition above that, $5,000
increments above that, just to see if that would be
beneficial to go to a higher number or not. But the thing
that we looked at on this contract was the -- the
reimbursement process by the insurance company. The TPA is
supposed to notify the third-party administrator -- I'm
sorry, the TPA is supposed to notify the insurance company
when they exceed 50 percent of what that specific stop loss
number is. So, anything that goes over $20,000, there's a
report supposed to go to the insurance company. At that
point, they're supposed to start doing an auditing so that
if, in fact, it does go over the $40,000, they've done all
the audits; they've approved all the numbers for
reimbursement, and they should start reimbursing at 100
percent at that point. That's the type of contract that
we're looking for, something that you do not have to come
out of pocket once the specific is reached. So, that's the
type of contract that we're looking for, the aggregate
maximum.
JUDGE TINLEY: Excuse me. Once you hit the
specific -- if it's done in a manner that the auditing
process and everybody's on board early, once it hits that
specific, it's not a reimbursement process where the County
pays the amount over the specific and then gets reimbursed
11-15-09 wk
18
1
,"' 2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
"' 2 4
25
from the stop loss carrier, but rather paid direct by the
stop loss carrier?
MR. LOONEY: That's what we're looking for
right now.
JUDGE TINLEY: Okay. Well, that's different
from what's happened before.
MR. LOONEY: That's different from where
you've been in the past, because in the past you had to be
reimbursed. You had to put the money out first to be
reimbursed. Now we're looking at a clause in that specific
that says that once you exceed that number, that their
insurance company becomes liable for the payments at that
point, so that there's not any additional transfer of funds
necessary between you and the --
JUDGE TINLEY: Okay.
MR. LOONEY: -- insurance company. That --
that -- hopefully, that will protect cash flow and anyone
giving large claims and such, and you shouldn't have any
more auditing to be done at that point, if it's done
properly. There's two critical issues that you look at in
insurance. One is one individual having a huge loss, and
the other one is a high frequency of small losses. So, the
aggregate insurance coverage covers that high frequency, the
high utilization of coverage. 'Cause everything under that
$40,000 is aggregated during the year. It's accumulated.
11-15-04 wk
19
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
And if you exceed the actuarial determination, which is this
aggregate attachment factor; if you exceed that, then the
insurance company reimburses you 100 percent, anything in
excess of that. Now, a while ago we talked about expected
claims. Expected claims are determined by the actuary, and
let's assume they determine it's a million dollars in
expected claims. Then the aggregate insurance is a
percentage above that. So that if the -- it's typically
25 percent greater than that, so an aggregate insurance
point would be a million, 250. So, if your -- all of your
claims under 40,000 aggregated to more than a million, 250,
then the insurance company would start reimbursing at that
point. One is for the individual high loss; the other one
is for a whole lot of small losses on the aggregate.
Now, one of the things in the insurance
business that you look at is how much -- how much does the
premium -- how much does it cost? Aggregate premiums are
very inexpensive. Very inexpensive. So, they really don't
expect to have a lot of losses in that area. But aggregate
insurance for the County prevents the County from having an
open-ended budget. The aggregate fixes the maximum costs of
the health care plan for a given period of time so that the
budget doesn't have an open end on it where you would be
obligated for future expenses beyond the aggregate
limitation. And that's why we typically have aggregate
11-15-04 wk
20
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
coverage for y'all. Again, the aggregate stop loss, one of
the things that there's a -- we're going to look at -- I
don't know what the pricing might be. We're going to look
at what they call an accommodation agreement. An
accommodation agreement means that we take the maximum
aggregate limitation during the year, we divide it by 12, we
come up with what a monthly maximum would be. And if, in
fact, you start exceeding that monthly maximum, you start
bouncing up and down. This accommodation agreement has a
leveling effect, so that the maximum obligation you'll ever
have in any one given month is 1/12th of that total
aggregate stop loss. So, we're going to take a look at that
to see if it makes sense to put in the contract also the
stop loss, individual and aggregate.
Here's an example of how a $127,000 claim
would be handled. If, in fact, your stop loss deductible
was 25,000, the employer pays the $25,000 deductible. The
insurance company pays the excess over the deductible of
$102,000 on a $127,000 claim. I don't know where I came up
with $127,000; that's crazy. The amount funded, but not
reimbursed, in this particular example is 25,000. The
25,000 goes to satisfy the annual aggregate. The insurance
company pays 102,000 over and above what the deductible
level was of 25,000. So, 25 goes to satisfy the aggregate,
102 is reimbursed by the insurance company, and this is what
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
21
we're talking about on the self-funded timeline versus the
fully insured timeline. This contract that -- that is --
that's shown here is a claim and time frame from January of
'04 to 12-31-04. You have 12 months of incurred claims, and
then you have 15 months, or three additional months after
the end of the plan year, for those claims to be paid. That
will then apply against either the specific and/or aggregate
insurance coverage.
You all changed your plan last year. You had
a -- a 15/12 contract, I believe, that was changed to a
12/12 contract. A 12/12 contract means that 12 months of
incurred claims, and it must -- all claims must be paid
within that 12-month period to apply against your aggregate
or your specific insurance. It normally takes -- if you get
a TPA that's functioning -- or an insurance company that's
functioning properly, nowadays, with all the electronic
adjudication of claims, it takes about two and a half months
from the date that a claim is incurred until checks are
actually written, and that's because of the -- that's just
an average, and it's because of billing time frames, the
hospital getting, you know, whatever records are out there
necessary. So, we look at about two and a half months. If
somebody goes in on November the 1st, their claims should be
totally satisfied by the middle of January, end of January.
November 1st ought to be satisfied by the first week in
11-15-04 wk
22
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
-~ 2 4
25
February; 100 percent of them should be paid by that time.
If you have a 12-month incurred plan and you
don't have a 15-month paid contract attached to it, that
means that claims incurred in November and December may very
well not apply against your specific and/or aggregate
contract. And if your contract moving forward is also a
12/15 contract, that means that those claims will not apply
against that contract, so you end up with a gap. You end up
with an incurred claim gap, one that's not covered by the
insurance in any way. So, we try to be very careful about
these timelines when we renew your contracts. This is a --
same basic demonstration, but the bottom two lines here give
you the most coverage from January 4 -- January '04 to March
of '06. 24 months of incurred; that means anything incurred
from the beginning of your contract period to the end of the
contract period, and you've got 15 months to pay that
contract at the end of that period of time. So, you've got
an extension of 90 days or three months after that time
frame to pay those claims. Ninety days -- sometimes it
doesn't seem like enough in some cases, but 90 days after
the end of the plan year, then your obligation as -- as an
employer is stopped at that time.
So, in an effort to manage costs going
forward and not, again, have an open-ended liability, we set
that three-month carryover period, that 90-day period. When
11-15-09 wk
23
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
we get more into the actual bids that we're getting, I'll
give you a lot more information about 15/12's, 12/15's,
15/24's, 12/12's -- you know, paid contracts. That's where
the underwriters and the insurance people really try to --
to maneuver and manipulate, is in those numbers. The ideal
contract, again, starts at the beginning of the original
contract period, and it will either -- this one says 24
months incurred. It can also just simply say paid. And it
said paid from this time frame to this time frame, and then
that counts. Everything that's paid or written means that
it applies against your insurance program. You've got
flexibility in plan design. You've got a lot of things that
you can do from plan design.
COMMISSIONER LETZ: Gary, can you go back to
that -- 12/12's, 12/15's? Right now we have a 12/12 plan?
MR. LOONEY: I think that's what I --
JUDGE TINLEY: Yes.
COMMISSIONER LETZ: So, if a -- who doesn't
get paid if you get a claim in December?
MR. LOONEY: If you have a claim in December
and you've got a 12/12 contract?
COMMISSIONER LETZ: And it doesn't get
processed. Who holds the bag?
MR. LOONEY: The --
25 ~ COMMISSIONER LETZ: The County?
11-15-09 wk
24
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
MR. LOONEY: The County does. The County
holds the bag.
COMMISSIONER LETZ: And if it's --
MR. LOONEY: And the County does not have any
underlying insurance against that contract.
COMMISSIONER LETZ: As long as the -- it's
within the $40,000, it doesn't really make much difference,
but if you exceeded that, that's where you would have a
problem.
MR. LOONEY: Not only -- yeah. Well, if
you're over and above. But the concern is that if that plan
is terminated at that point in time and you don't have
another contract that's lapping over -- overlapping some
other way, that you have full liability, because all of your
underlying insurance is gone. It doesn't apply toward
specific, and it doesn't apply toward any aggregate, so you,
in essence, are the insurer. Your contract -- county
contract for delivery of benefits is with the employee. You
have a benefit booklet that you've given to the employee,
and it says we will provide you these benefits. The method
that we're using is through a self-funded program, but the
fiduciary liability for -- for providing that claim payment
under that contract is the County's fiduciary liability.
COMMISSIONER LETZ: All right. Thank you.
MR. LOONEY: Risk management effectiveness
it-i5-o9 Wk
25
1
2
3
4
5
6
7
8
9
10
11
12
,._. 13
14
15
16
17
18
19
20
21
22
23
°- 2 4
25
through stop loss insurance. Essentially, what that means
is we pay careful attention not to have those gaps. We want
to be sure that we don't have those gaps in coverage. Tax
savings. As I said, you know, this is an advantage -- an
advantage of the self-funded over and above the fully
insured plan. The average state premium tax in the state of
Texas is 2 percent. Assuming that your total premium would
be a million, five, that's $30,000 in taxes, and as a county
or any other, you don't have the ability to -- to not pay
that. That's a premium tax paid by the insurance company,
and it's part of the premium. It's built in, so you can't
defray the cost. It is -- it's a premium tax they have to
pay.
Retention, the administration of the plan.
This is one of the things that -- on the TPA function
that -- one of the problems that we run into in the fully
insured products is it seems like we invariably have to
change carriers every two years or every other year,
whenever the pricing just gets out of hand. So, you have to
go back to your full -- your employees. You have to go back
through the enrollment process. You change physician
networks. You disrupt the entire employment force by making
those changes on a regular basis. With the third-party
administrator, you can change the underlying insurance
company product, the stop loss insurance, without having to
11-15-04 wk
26
1
2
3
4
5
6
7
8
9
10
11
12
.-- 13
14
15
16
17
18
19
20
21
22
23
24
25
change the plan document. Anybody else that is providing a
service for the employee. You don't have to have them
change doctors. You can keep the same PPO networks. As far
as they're concerned, the transition from what they're being
delivered is consistent. We can under -- we can change the
underlying stop loss carriers and not have any impact on the
employee. So, from a retention standpoint, it costs money
to change plans when you move from one fully insured to
another fully insured plan. It's dollars spent based on
time lost and County time. It's a number that -- the number
of hours spent in relationship to the service rendered, and
it can get expensive sometimes.
The reserve. One of the things that the
insurance companies do, like I said, is they maintain that
reserve. They build it into your premium. As a self-funded
program, you don't have to maintain a cash reserve.
Assuming that you had a million, five in premium, again, the
reserves would be approximately $312,000. That's calculated
based on turn-around time, and this is just kind of an
actuarial rule of thumb. The million, five, divided by 12,
times 2.5, that's the approximate number of claims that
would be incurred over that period of time. That would be
your claim reserve. Now, in addition to the claim reserve,
you have a premium that you pay for administration of that
312, and that typically runs anywhere from 3 to 10 percent
11-15-04 wk
27
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
of that 312,000, so it could be anywhere from another
$30,000. But you don't have to accumulate the reserve.
We do try to -- if you've got to the budget
number -- fix a budget number. If we don't reach the budget
number, then those reserve dollars we do try to set aside
and protect against future fluctuations in premium. I don't
know whether you've had that ability to do that or not. I
don't know what the -- what your budget actually -- whether
you actually are funding toward a total budget projection,
or it's more -- fluctuates more than that. So, I haven't
had a chance to visit with you on that process, but -- but
informally we would -- normally we would recommend a funding
level for you, and we will recommend a funding level for
you. And then that -- if that funding level is not met,
then we'll carry those funds forward as a reserve against
future claim losses. The disadvantages of being
self-funded: One, again, is you take on the fiduciary
responsibility of the insurer. You have some asset exposure
in case an employee should sue the plan. You are the plan,
so they would sue the plan. And the risk assumption is that
risk between the normally anticipated claim level and the
stop loss premiums. You always face the possibility of a
roller coaster in the claims flows -- in the claim function.
We try to reduce that as much as we can. Those are the
disadvantages.
11-15-09 wk
28
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Now, I'm going to try to go through this one
pretty fast, 'cause this gets pretty complicated sometimes,
but I do want to give you an overview of these -- of these
accounts, because this is what the hot items in the industry
are today. This is where you read in the -- all the
magazines and Wall Street Journals and all this; they talk
about these types of programs, and these are
consumer-directed or consumer-driven health care plans. We
typically can get an idea of what the -- the federal
government would like for us to do, because when they want
us to do something, they give us a tax deduction for it.
You know, if they want you to stop smoking, then they build
in a tax deduction for stop smoking clinics. If they want
to you lose weight, then they put in a -- into the eligible
benefits under Section 213(d) of the Internal Revenue
Service Code, they build in something that says, okay, you
can now deduct medications for weight loss. If they -- so
whatever -- whatever kind of things they're throwing out
there as far as tax deductibility is kind of like the --
where they'd like for us to go.
So, these health reimbursement arrangements,
Section 105(h) -- I forgot I left this one in there.
Over-utilization of the health care plan. The employees
don't have any skin in the game. That's why we come up with
the -- the employee-directed health care plan. You know,
11-15-04 wk
29
1
2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
°' 2 4
25
we're going to put some skin in the game for them. They
think that the office visit co-pays are all it costs. They
think the prescription co-pays are all it costs. You know,
free Cokes and auto insurance. Yeah, sure. So, we've kind
of isolated the employees from what the true costs of the
health care plan is by giving them co-payments. All the
employees definitely want to go to the physician that's the
highest quality, highest profile, and most of them feel that
working for an organization, they're entitled to the
benefits on a co-pay basis. And so, "You're my mother;
you're supposed to take care of me in this process." So,
they've really lost, again, that concept of -- of, I guess,
buying health care protection, or negotiating with their
doctors, or even talking to the hospital about it.
78 percent of the individuals in the
organization will have $1,000 or less in claims. 35 percent
won't have any claims at all, and then 5 to 8 percent of the
employees will have about 50 percent of the total cost in
the plan, and it's just the kind of things that we see just
from drawing out of claims areas. You know, what happens
is, you get that 5 or 8 percent who have the real large
claims, and they end up having the big numbers, so they end
up eating up -- eating it up.
COMMISSIONER BALDWIN: Gary, is that a
national average, or is that related directly to us?
11-15-04 wk
30
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
MR. LOONEY: That number came out of a
national survey that was done by Hewett Company. They
pulled that out of -- of a survey that they had done. In
June of 2002, a letter was written by Internal Revenue
Service, under Section 105 of the Internal Revenue Code.
And what happened is that this -- this letter simply said
that under this Section 105 -- it's actually Section 105(h)
of the code. What it said was that if, in fact, you have a
health care plan that has an arrangement with your employee,
if you have an arrangement with that employee to reimburse
medical expenses, and if, in fact, you create an amount of
money that they can use -- and it becomes very hard not to
say "account," because account gives the indication that you
have vested interest. It has the -- "account" seems to mean
that, okay, that's my money. But it's not really; it's an
arrangement that you have with the employee, and that
arrangement says that we're going to reimburse you for
medical expenses that you incur, and this is the volume that
we're going to reimburse you at. Now, if you don't use all
of that volume during this calendar year or policy year,
then we will allow you to carry that forward to the next
year to use against the expenses you have in the following
year.
Well, the Internal Revenue Service made this
whole thing available simply by writing a letter. It was
11-15-09 wk
31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
about a page and a half. It says, okay, you can now do
this. Before that, the only things that were available were
the flexible spendable account-type things, which were
use-it or lose-it type programs. You couldn't carry forward
any kind of accumulation for employees going forward. It
was a 12-month -- here's your deduction; that's it. No
more. Well, they changed the rules, and they changed it in
2002 and said, okay, we'll let you create this arrangement
now. And the hope is, by the federal government -- again,
the hope is that now that an employee that's got this volume
of dollars that are given to them to use for reimbursement,
that they'll pay attention to how those dollars are being
spent. You know, when they've got an arrangement in front
of them that says we're going to provide $500 for you to use
for your expenses this year, that when that number starts
going down, when they start using it for these benefits,
that they're -- they're going to start paying attention to
how they're spending it.
So, the whole concept is to get -- here's the
money you've got to spend to reimburse you for your medical
expenses. Spend it wisely, you know. You know, spend it
wisely, and our health care plan is going to take care of
most of the major expenses that you have. We still have
major medical. We still have -- we can still build in a lot
of different plan design options that provide, you know,
11-15-04 wk
32
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
first-dollar coverage in a lot of ways. Or you can simply
create this arrangement over here and attach it to your
current plan and say, okay, if you want to use these funds
to pay your co-payments or pay your deductibles or whatever
else you want, fine, you can do so.
JUDGE TINLEY: Is that a cafeteria plan, in
essence?
MR. LOONEY: No.
JUDGE TINLEY: Okay.
MR. LOONEY: This is under your health care
plan.
JUDGE TINLEY: Okay.
MR. LOONEY: It's under -- Section 125 is the
employee's dollars or employer's dollars put into that
account. Section 105 is strictly employer dollars. The
employer controls the arrangement. The employee has no
vested interest in it. If the employee leaves, then they
leave whatever account balance that they had accumulated.
It stays with the employer.
COMMISSIONER BALDWIN: I tend to agree with
the federal government on that. That gives personal
responsibility to the individuals. I like it.
COMMISSIONER WILLIAMS: So, if you have -- if
you have that feature, and an employee uses maybe only
70 percent of that amount of money, whatever that is, that
11-15-04 wk
33
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
amount -- the base amount is restored in the next year, and
it carries over, 30 percent added to the base amount?
MR. LOONEY: You can -- you can do it any way
you want. That's one of the -- the advantages, I guess, of
this 105 arrangement; we can write the rules. We
essentially can write the rules as to what we want to carry
forward. You can keep an account that is maximized, and you
can reimburse or replenish that account each year. You can
have it cumulative. You can have it equal to whatever
maximum amount you want it to be, or no end to it. If you
put it at $500 a year, it can be $500, then $1,000, then
$1,500, and it just accumulates on that basis. A couple of
things you need to remember is that, under the insurance
plan itself, we have a maximum amount of out-of-pocket
exposure for an individual employee or dependent during the
year based on total claims that they incur. And I'm sorry;
I don't know what it is off the top of my head. Probably
$2,000 maximum out-of-pocket. It's either $1,000 or $2,000.
So, if an employee has exceptionally high claims, then
they -- on the benefit plan itself, they get into 100
percent coverage based on their maximum out-of-pocket.
Well, you can set the HRA accumulation to be
whatever that maximum out-of-pocket is, so that 78 percent
of those people that don't, you know, have much claim, or
the 35 percent that don't have any claim at all, over a year
11-15-04 wk
34
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
or two, they can actually accumulate enough to satisfy 100
percent of their costs under the plan, if they've not used
it before that. If they use it on a cumulative basis, then
they won't have the money there. What we're seeing, again,
is people are -- people are actually not using their account
for reimbursement purposes. They're actually paying
out-of-pocket some of the expenses that they have, doctor's
office visits or whatever; they're actually paying that so
that they can accumulate their funds in case of a
catastrophic incident. You know, I'm not sure why they're
doing it, but that's -- that's kind of what we're seeing in
some of the cases we've got.
The 105, what is it? It's a health
reimbursement arrangement. And I really do, like I said,
fight myself not to say "account," but it's an arrangement,
and you agree to reimburse medical expenses after they
occur. So, it's self-funded; it's not prefunded. You don't
have to prefund the account. And the primary reason is to
help the employer save money by changing the attitude of the
individual and their employee's behavior and how they
purchase -- excuse me -- a couple of things. Again, it's
100 percent employer money, not employee. You can't cash
out. Employee can't take the money out on a cash basis, and
they can't pay their health insurance premiums with it.
It's not money that they can then revert back in to pay
11-15-04 wk
35
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
premiums with. It has to be used for reimbursement under
eligible medical expenses, as defined in the Insurance Code
under Section 213(d) of the code.
COMMISSIONER BALDWIN: And what are some of
those? Just a daily -- I mean, a regular doctor visit,
co-pay?
MR. LOONEY: Anything that has to do with
medical expenses, treatment of any type of illness, injury.
It covers anything that you can take off your income tax.
If you were filing an itemized statement under income tax,
mileage, weight loss programs, a lot of different things
under 213(d), some cosmetic surgeries -- some things are
covered under that. You, though, do not have to accept
everything under 213(d) You decide what the HRA can be
used for. There's two types of plans. One is a plan that
we -- that we call -- it's tied into the medical plan. It's
directly tied to the medical plan, so when the medical plan
has either a co-payment or a co-insurance or something that
the employee is responsible for, then they can use their HRA
to reduce that expense. So, the claim is adjudicated by the
third-party administrator, and then the individual is given
the option to offset that expense if they want using their
HRA account.
COMMISSIONER BALDWIN: Gary, does this
include -- and you and I have talked about this before.
11-15-04 wk
36
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
I've always had this thought of -- of helping people --
preventive medicine, giving them the opportunity to be a
member of the health spa or something. Does it include
those kinds of things?
MR. LOONEY: If you want it to. If you
wanted -- if you want to put in a design that provides for
reimbursement of an expense for utilizing the health care
facilities, typically what we would -- what we would have
them do is do some sort of profile, some sort of physical
profile, so that they would qualify for using the facility.
COMMISSIONER BALDWIN: They're too fat, so
they need to go work out.
MR. LOONEY: Too fat; you need to work out.
We'll pay for it. You want to stop smoking? Here's a --
here's how you stop smoking, and you can use it under your
HRA account. You can -- it can pay for it. But -- but the
employee does not own the account. That's one of the
critical issues in this whole thing. They do not own the
account. HRA accumulation, the employer decides the amount.
The employee can accumulate the unused amount for the
previous years, or they can file for it. The employee now
has decision-making power. They have to decide. You know,
the plan design issue comes in here big-time, because you
can set up your plan to have a very high deductible. You
can set your plan up to have a $1,000 deductible before any
11-15-04 wk
37
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
benefits are paid at all out from under the plan. And then
you can give the employee an HRA arrangement that says,
okay, we will allow you to have this HRA arrangement of
$750, so they can have $750 to use for first-dollar coverage
on their account. After they've gone through that, then all
that applies to the deductible. After they've gone through
that, then they have a $250 deductible; then they have
benefits under the plan. That's just one off the top -- you
know, kind of benefit design. So, you can -- you can create
a situation where they have to use the HRA account for
reimbursement of expenses initially, and that really gets
them into the concept of how they're spending their dollars.
The other thing is that the -- probably what
we'll show you is we're going to show you two plans, an HRA
option and a regular option, so that the employee may choose
to go an HRA option versus wanting to stay in a standard PPO
contract. So, when we come back to getting down to the
actual proposal for the County employees, my guess is we're
going to show you side-by-side an option for an HRA account
and an option for just a standard PPO account. One of the
things that the employees complain about constantly is the
premium that they have to pay for their health insurance or
their dependent care insurance. What happens with an HRA
accumulation plan is, they start seeing what they feel is a
vested interest in the plan. Even though it's not vested
11-15-04 wk
38
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
totally to them, they're putting premium dollars into a
plan, and instead of saying, "Well, I didn't use the plan at
all last year and I got nothing out of it," well, they
didn't use the plan at all last year, so they accumulate an
asset going forward to the next year. And so that has a
tendency to change that attitude about making contribution
for the health care plan. Plan design options. Again, we
can accumulate it or not. We can cap the accumulated
amount. We can do HDHP. That's insurance for high
deductible health plan.
COMMISSIONER WILLIAMS: Say again?
MR. LOONEY: High deductible health plan.
That's -- that's -- the acronyms are starting to flow pretty
heavily along these lines now. It does not have to be
funded. It's a self-funded type of approach. You can have
it on a monthly accrual or an annual accrual. You can treat
it just like you treat an FSA account, which means that if
you give them an annual amount, the full amount is available
when they first enter the plan, or you can accumulate it on
a monthly basis so that they only have, you know, each
month's accumulation applied in case you've got short-term
employees. Again, the employee defines the eligible
expenses. Highly flexible, employer control, allows for
employee acceptance and participation under the plan.
JUDGE TINLEY: Why don't we take about five
11-15-04 wk
39
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
^ 24
25
minutes and give our reporter a little break here?
MR. LOONEY: I think I'm right at a point
where that would be a good deal.
JUDGE TINLEY: I kind of -- yep.
MR. LOONEY: There we are.
(Recess taken from 1:58 p.m. to 2:12 p.m.)
JUDGE TINLEY: Tell us about 223 now.
MR. LOONEY: I.R.S. -- Internal Revenue Code
Section 223. This is one of those very unusual animals. It
was actually a Medicare regulation that was passed in
November of last year, went into effect and went into law in
January of 2004. For the federal government to move that
quick, putting a law on the books and making it effective,
is somewhat of a miracle to begin with. But what they felt
that they did was they created a health savings account, but
they mirrored it after a couple of other previous laws. One
was the IRA regulations, independent retirement accounts --
individual retirement accounts, and the old Archer MSA's,
Archer medical savings accounts, which were restricted to
small employers and employers that had 50 or fewer
employees. So, they felt that they had enough law out there
that they could blend that together and create this health
savings account.
Now, the health savings account is truly an
11-15-09 wk
40
1
2
3
4
5
6
7
8
9
10
11
12
__ 13
14
15
16
17
18
19
20
21
22
23
"~ 2 4
25
account. It's an ability for an individual to establish, in
their own name, under their own assets, an account that's
very, very similar to an IRA. They put money into it; they
have total control over it. And once money is deposited
into the account, they have 100 percent vested ownership.
Now, what -- the health savings accounts have to be, you
know, connected to a high deductible health plan. And once
they're connected to a high deductible health plan, at the
end of the year, the employee will have -- and you'll see it
on 1040's this year, if you do your own tax return; there's
going to be a line entered in there that you can take a
deduction off the top for the expenses that you have
deposited -- or the moneys that you've deposited into your
account. It doesn't have to have been an expense. It
doesn't have to be expended out of the account. It just has
to be deposited into the account. And that becomes an
above-the-line deduction. The investment earnings are
tax-free. The employer, if they make contributions, receive
a deduction for making contributions into the HSA account.
But the difference that we talked a while ago
about the HRA being an employer-controlled account with
employee no-vesting, this is exactly the opposite. This is
an employee-controlled account, and they're 100 percent
vested from the very beginning. The amounts are excludable
from tax base. The distributions for any qualified medical
11-15-04 wk
41
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
expenses are not taxed, so you get above-the-line
qualification on the tax, and then you have no concept of
income tax upon the payment. Again, this law was passed in
November of 2003. It's similar to MSA's. Any qualified
high deductible health plan can be paired with an HSA
account, which means the employee controls the account. All
the employer has to do is provide access to a high
deductible health plan.
COMMISSIONER LETZ: Are you going to define
that in a minute?
MR. LOONEY: Yeah, I'm going to tell you all
about that. Specified disease coverage, hospital indemnity,
auto insurance, prepaid legal, a lot of those other optional
plans are -- they don't fall under the high deductible
health plan definition. Vision, dental, accidents, they do
not count as other coverage, so a high deductible health
plan doesn't -- is not restricted by that. The requirements
for a high deductible policy, the deductible must be at
least $1,000 for an individual, and it has to be a minimum
of $2,000 for families. The out-of-pocket maximum cannot be
greater than $5,000 for an individual, nor $10,000 for
families. Now, the deductible is a little bit different
setup under a health savings arrangement -- health savings
account. If you have an individual account and you have a
$1,000 deductible, then you're not supposed to have any
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
42
co-payments under that $1,000.
A high deductible health plan means that you
satisfy $1,000 first, and that $1,000 is not reimbursed from
any of these sources -- any other sources. You do not have
co-payments for physician office visits; you pay full fare.
Once you go over $1,000, then your health care benefit plan
kicks in at that point to pay whatever expenses and whatever
deductibles that you -- that you have -- or not deductible,
the co-payments. So, the way they're designing these plans
is to put the emphasis on the individual having $1,000
exposure under the plan. And the way they sell that -- the
way they satisfy that 1,000 is by setting up their own
$1,000 deductible health savings account, so that then they
can take the money from the health savings account, satisfy
the $1,000 deductible, then move into their health care
plan. So, it's the employee's responsibility to set up the
health savings account. It's not the employer's
responsibility; the employee does it.
Now, there's certain things that can be
provided under the high deductible health plan that do
not -- or the deductible's waived for, where you don't have
to satisfy the deductible. Again, these are some of those
things that I was telling you that the federal government
wants to encourage you to -- to do, so they have obesity and
weight loss programs don't have to go under the deductible.
11-15-09 wk
1
2
3
4
5
6
7
8
9
10
11
12
^ 13
14
15
16
17
18
19
20
21
22
23
24
43
Routine prenatal and well-child care don't have to go under
the deductible. Periodic health exams, including tests and
diagnostic tests, don't have to go under the deductible.
So, you can have your high deductible health plan that says,
yes, we will pay you for these areas initially, so that you
don't have to use your health savings account for these
purposes.
The other thing that -- that has come out
since the original rules, and it's noted later, you are not
supposed to have co-payments for prescription drugs under
the original rules. They put a special, I guess, amendment
out in June of this year that said that they were going to
allow prescription drug programs on a co-payment basis
through the end of 2005, but in 2006, you would have to have
those prescription drug co-payment plans out of the plan.
They have to remove them by then. Well, one of the big
controversies has come in as far as wellness. What is
preventive care? Well, one of the things that they've also
determined is that if you're taking medications on a regular
basis for various types of -- control of a disease or an
illness, such as, I guess, the medications you take for high
blood pressure, medications you take for diabetes, the
medications you take that are on a regular, ongoing
maintenance-type basis, those are considered to be
25 ~ preventive.
11-15-04 wk
44
1
2
3
4
5
6
7
8
9
10
11
12
,-. 13
14
15
16
17
18
19
20
21
22
23
24
25
COMMISSIONER BALDWIN: But not arthritis,
things like that?
MR. LOONEY: But they are authorizing them to
pay that under the health care plan. It's preventive
medication, and they set out special rules that allow to you
have the medications that are maintenance-type medications
not have to be satisfied by the deductible. So, you know,
trying to maintain health, trying to prevent something from
occurring. They were afraid that this high deductible --
that individuals would not buy their medications, and
therefore end up with problems with cholesterol and high
blood pressure and things of that sort, so they built it
back in to where the insurance companies can actually
reimburse for that. But it's an option that you, as -- as
an employer, can determine too, because the plan design
underneath this is -- you don't have to put these things in
there. You can put these things in there.
COMMISSIONER BALDWIN: Gary, I take a
medication to relieve pain and inflammation because of
arthritis; we're prolonging a knee replacement. Does that
come into this picture in any way?
MR. LOONEY: Now, there's -- I don't think
there's any source for us to go to right now on those types
of medications. We'd have to -- what happens, though, is
that -- that whoever the underlying carrier is makes that
11-15-04 wk
45
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
determination. Whoever the third-party administrator is.
COMMISSIONER BALDWIN: I see.
MR. LOONEY: And they make it based on a lot
of different methods. Now, one of the things we look at
when we look at the TPA is who they're using for their
medical advisory committee, beyond where they are as a TPA,
to find out where they're getting their information in order
to answer questions like that. Right now, it's almost a
monthly newsletter that comes out that says, okay, we're now
approving this. We're now approving this. And we go
through -- the Internal Revenue Service has actually got a
hotline where you can send information in and ask them about
those things. But the concept, again, is trying to prevent
an illness by allowing an individual to maintain a
medication that will prevent something from occurring.
The thing about the deductible -- one of the
things you have to watch out for in a deductible situation
is that it's a $1,000 deductible; $5,000 max out-of-pocket
for an individual, or $2,000 per family. Now, the
deductible is the aggregate deductible, which means that if
you have a $2,000 deductible for your family, that you have
to complete the $2,000 before any benefits are payable under
the high deductible health plan. It's not $1,000 for an
individual and $1,000 for another individual equals $2,000.
It's $2,000 total. So, one person potentially could satisfy
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
46
the $2,000, but you have to have $2,000 in total
deductibles. That's different from most health care plans.
Usually, once an individual exceeds the deductible, benefits
are payable. Under HSA's, it's an aggregating deductible,
so that you have to pay the entire amount. Office visits,
co-payments are not permitted under the plan, 'cause they're
not subject to the deductible. If you're in a network -- a
PPO network, the deductibles and maximum out-of-pocket
numbers apply to in-network services. What that means is
that, under the high deductible plan, if you have a -- a PPO
network, and they're paid benefits at a higher percentage,
then whatever that benefit is is what's applicable against
that plan.
These -- these rules and regulations, I'm
going to go through them a little faster, because it
really -- I'm going to get to the actual description of the
overall plan real quick, but contributions to the plan must
be made in cash. Individuals 55 and older can make extra
contributions in their account to help catch up years. The
amount for 2004 for an individual that's over 55 is an
additional $500. So, if you've got a $1,000 deductible
plan, you can put in $1,500 on your tax deductibility for
the next year. The contributions are only allowed for the
months in a year, so it's prorated if you change -- turn 55
or 65 in a year.
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
24
25
47
Employers and employees can contribute to
the -- the HSA accounts. The HSA rules for contributions by
an employer are a little different from what would fall
under the discrimination rules for most health care plans.
The contributions have to meet a compatibility test, which
is a little bit different than the ERISA tests that they use
for a nondiscrimination testing. The individual that owns
the health savings account is totally responsible for the
claim flows and tax deductibility issues with that account.
The employer has no liability or responsibility to the
employee to make certain that when they do their tax filings
at the end of the year, that they are making the appropriate
tax filings. So that once -- once you create a high
deductible health plan, if you, as an employer, do not want
to participate in the HSA plan benefit for the employees,
then that's fine. What you've done as an employer is
provide them with a high deductible plan. Here's the plan.
If you want to participate, that's great, and this is your
premium allocation or non-premium allocation, whatever --
however you want to do that. Here it is.
Now, you, as an individual -- if you want to
fund an HSA account on your behalf, then you have the
ability to do so, because we're providing you this high
deductible plan, and at that point, all you've -- you've
satisfied your responsibility to the employee. You do not
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
48
have to make contributions. If you do make a contribution
to the plan, then you have to be certain that they have an
account to fund the moneys into. They have to have an
account established for you to fund the money to it, because
the money has to be deposited in the form of cash into that
account. Same way an IRA functions; money has to be
traceable into that account. Now, the deductions out of it
and the moneys coming out of it, that's up to the individual
employee. Anybody can contribute to the HSA. If you've got
family members that you wanted to fund, a daughter or
son-in-law or, you know, whatever -- if you, as a
grandfather, wanted to fund your granddaughter's HSA
account, you could do so, because the funds can come from
any source. You don't get the deduction; they do, but
that's all right.
If a person already has an MSA -- which I
doubt any of your employees do. Those are those Archer
medical savings accounts; there are very few of those sold.
Actually, then they've got transferability to the HSA
account from the MSA account. If you have a participation
in the HSA account, your deductions are prorated based on
the number of months that you participated in the plan. So,
if you have a $1,200 deductible plan, and you're in the plan
for six months, then the taxable year -- at the end of the
year, you're only allowed to take $600, only half of that
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
49
amount, as your deduction for the next year. You're only
allowed to take the deduction up to and including the time
that you were actually insured under the high deductible
health plan. So, it's prorated on a monthly basis. And
that's why the activity in these accounts is going to
increase substantially during the next, you know, 30 days,
because if the plan is in effect January 1st, then they get
full credit for the entire year for tax-deductible purposes.
Contributions into the HSA account can be
made in one lump sum. They can be made monthly. They can
be made -- as long as they're made prior to filing your tax
return on April 15th of the following year, you're
completely open to making those contributions at that time,
in that time frame. Any accumulations in that account, if
you want to withdraw any of the money that's in that account
to use for something other than health care benefits
reimbursement, you can take the moneys out, take it as
ordinary income, and you have a 6 percent excise tax that
would be imposed on any excess with -- any excess that you
took out. One of the things about HSA accounts is that if
you reach age 65 and you have an accumulation in that
account, you can actually use the accumulations to purchase
Medicare insurance. Not Medicare supplement insurance, but
you can use it to pay your Medicare premiums, and/or you can
buy long-term care insurance with it, and you can use the
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
50
funds going forward to satisfy any deductions or any
contributions you have under Medicare.
What we're -- what we're seeing is that
organizations will offer a high deductible plan; not make it
the sole basis, obviously, of their entire plan, because
there are a number of people that want to take advantage of
the accumulations. And, rather than setting the deductions
at the minimum, we're setting the deductibility at the
maximum, because they want to put in the maximum
accumulations they can into their health savings account.
So, we're setting the family deductible at $5,000, and then
the individual themselves can contribute into their family's
health savings account up to $5,000 a year.
COMMISSIONER LETZ: $5,000 would be tax
deductible?
MR. LOONEY: Tax-deductible dollars. Any
moneys that come out to be used for medical expenses are not
includable as income. Any interest earned is not includable
as income. And it's cumulative to any amount, whatever
20 amount.
21
22 a down
23
24
25
COMMISSIONER LETZ: Is there a -- I don't see
MR. LOONEY: Down side for employees is
whether or not they have enough dollars to meet the -- the
actual out-of-pocket expenses that they're incurring for
11-15-04 wk
51
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
medical care. If they -- they're actually having dollars
that they're spending for medical care, where it would have
been covered under a co-payment in the past, or -- or a
co-insurance factor in the past, now they're -- again,
they're having to pay careful attention to the moneys that
they're spending, because it's going to come out of that
account. It's going to be deductible, but that $5,000 is
going to be reduced by whatever expenses they have. If
they're healthy, you know, they have minimal expenses during
the year, it's not going to take long to accumulate the
dollars necessary to satisfy that. It takes a year to
satisfy the total amount of dollars there that are necessary
to satisfy the deductible going forward in case of a
critical illness problem.
We were doing a presentation in conjunction
with Fulbright and Jawarski, and the attorney that I was
doing the presentation with is also a C.P.A. And he had
done his portion of it, and then I was going through and
doing my portion of it, and all of a sudden, he was sitting
at the table and said, "I got it." And I said, "You got
what?" You know, I turned around, 'cause I'm right in the
middle of talking to a group of about 40 people, and I turn
around and look. He said, "I get it." He said, "I
understand this now. I can put this amount of money aside.
This is my premium allocation currently; this is the amount
11-15-09 wk
52
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
of money I'm contributing to my health care plan." He was a
partner at Fulbright and Jawarski, so they were having to
pay full bore on their premiums. And so he's 42 years old;
he's married, got two kids, and he figured that it would
take him 18 months to be ahead of the game by taking the HSA
account. And he did their -- he's a C.P.A. He did their --
he had it figured out at retirement, you know, assuming his
kids were gone and all the -- I mean, he had a complete
chart all worked out there. And -- and he said, "This is
unbelievable." He said, "We're doing this right away," and
they put an HSA account effective in January for -- for
their options.
JUDGE TINLEY: The income and investment gain
remains tax-free?
MR. LOONEY: Remains tax-free.
JUDGE TINLEY: What if it's -- you leave
employment? You take the account with you?
MR. LOONEY: Mm-hmm.
JUDGE TINLEY: The only tax incidence you
have is to the actual contributions?
MR. LOONEY: Contributions that you've made
are tax-deductible under your April 15th, you know, filing
date.
JUDGE TINLEY: I understand that. But when
you then use them for some other purpose --
11-15-04 wk
53
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
MR. LOONEY: If you use it for some other
purpose, then you've got a 6 percent excise tax on the
withdrawal.
JUDGE TINLEY: Okay. But is that only as to
the principal? Does the investment and earnings that's
accumulated on those funds --
MR. LOONEY: It's characterized as total
assets.
JUDGE TINLEY: Okay.
MR. LOONEY: There's not any separation in
the interest-bearing or the other part of it.
JUDGE TINLEY: Okay.
MR. LOONEY: The --
COMMISSIONER NICHOLSON: I may be getting a
little bit ahead of the game, but it will help me to follow
your thought process here. I can -- I can see the
advantages to this to employees who are paid well, and --
and income tax is a concern. We've got a lot of employees
that are not paid well at all, and they probably don't pay a
lot of income taxes, and they're not paying anything for
their health insurance now.
MR. LOONEY: Right.
COMMISSIONER NICHOLSON: I'm beginning to get
a picture that this is going to be a cash flow issue for --
MR. LOONEY: Absolutely.
11-15-04 wk
54
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
COMMISSIONER NICHOLSON: Okay. I just -- I
wanted the to make sure I was thinking right. Go ahead.
MR. LOONEY: That's why I say that these
plans are quite often just an option. It isn't necessarily
equal to the plan sponsored by the employer. The plan that
you sponsor, the one that you're paying 100 percent of the
employee premium for, that's one that needs to be
identified, that plan. And then you may very well have an
HRA plan and an HSA plan that can be associated with those
as part of the plan design. The -- the standard PPO plan is
more expensive, typically, than the HRA account, because the
HRA has built-in deductibles into it. And, typically, when
we design the plan, we design the -- the basic plan as the
HRA plan, because it still gives employees some
first-dollar, up-front coverages for the minor illnesses
and -- and expenses. And then the PPO plan would typically
charge for -- and then the HSA plan is typically the option
of the employee. And that distribution of premium, with
what you're going to sponsor as a plan for employees, will
be a major part of the next meeting that we have. As we go
over those -- the plan design options, which one, as an
employer, do you want to sponsor and pay 100 percent of?
We're trying, using these plans -- using
these HRA plans and HSA plans, to require a change in
attitude by the employee and the way they spend their money.
11-15-04 wk
55
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Right now, you've got kind of an interesting, you know, plan
design, because you're paying 100 percent of the greater
plan, and then, you knew, employees then are allowed to take
that differential and buy supplemental insurance for it.
That's a little backwards from what most employers do.
Usually they'll pay for the lower benefit plan, and then
have the employees contribute toward the greater plan. So,
you know, I still don't have a good handle on where all the
optional benefit plans are being purchased, or whether --
whether that income is going to the employees. But if an
employee is required to make a contribution toward the plan,
and they can see an HSA or an HRA accumulation asset going
to it, then the attitude toward participation and making
premium payments is different. You see a better
participation. So --
COMMISSIONER NICHOLSON: Since we're in
Insurance 101, a basic precept I thought about employee
group insurance plans was that nobody gets in free; that
there has to be some skin in the game, typically 20 percent
of the premiums or something like that paid for by the
employee. Is that -- does that still hold true? Or is
that --
MR. LOONEY: It`s either in that manner, or
it's in the plan design where they have a greater risk
transfer. If you're paying 100 percent of the premium, then
11-15-04 wk
56
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
the benefit plan typically is -- is a lesser plan, so that
the skin comes from the people that are highly utilizing the
plan, or the greater utilization. We still see employers
that pay 100 percent of employee premium. Not nearly as
frequently as we've had in the past. City of San Antonio,
we just changed and moved to an employee contribution.
Bexar County moved to a higher employee contribution, simply
to meet the demands of the -- of the costs of the plan
themselves.
COMMISSIONER NICHOLSON: Do you know if our
current administration includes the coordination of benefits
feature?
MR. LOONEY: It is -- it is supposed to. It
is supposed to have a -- and going through the claims
information and record files, I don't see a lot of credit
for coordination of benefits. I assume that it is -- that
it is being done, but I don't have a good -- based on the
reports, I don't see it. I don't see a lot of it. The
contributions to the HSA can be made by anyone, again. The
accumulations you can take out. Any balances roll over to
the next year and continue to roll forward as long as the
individual makes contributions. Well, let's see; 10 percent
is the excise tax, not the 6 percent. The 10 percent excise
tax.
JUDGE TINLEY: Kind of like an IRA penalty.
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
57
MR. LOONEY: Right, that's what it is. IRA
penalty, it's the same thing exactly as an IRA penalty.
JUDGE TINLEY: Yeah.
MR. LOONEY: You can name beneficiaries with
an HSA account, so that if something happens to the original
individual -- if you have an HSA account for two years and
then you -- your employer does away with it or you leave,
you can maintain that account. It doesn't disappear, and
you can still use it for expenses when you reach the age of
65. But if you have expenses that are being reimbursed to
you under a non-high -- non-qualified plan, you cannot take
those as a deduction. So, if you move from one plan to
another -- the other thing is, if your spouse is covered
under a plan that's not a high deductible plan, and she has
you covered as a dependent under that plan, and your
employer has a high deductible plan, then you can't be under
her plan, 'cause you're receiving benefits under her plan.
So, you have to be totally insured, totally involved in the
high deductible plan,
There are a lot of these -- again, since the
law came out, we've had seven private letters come out with
examination of how the rules are supposed to work, and we
are expecting another one before the end of this month. So,
just clarification of the rules. Comparable contributions
for all comparable participating employees during the same
11-15-09 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
58
period. It -- it's the same dollar amount for the same
percentage of the deductible under the high deductible plan.
The comparability contribution is a little more stringent
than the ERISA requirements for nondiscrimination. So, it's
actually a dollar amount measured against the total
deductible in relationship to the people. One of the things
about the HSA's that we are trying to be very careful of is,
the third-party administrator that we hire to administer it
must be savvy on the administration of these plans. They
have to know how -- if we're going to put in an HSA plan,
the third-party administrator -- we want to make sure that
they have the compatibility to do it. And I'm not sure your
current administrator has that potential.
The employee does -- you know, contributions
are reported on a W-2. The employee then is responsible.
What's interesting is that we're finding combinations of HSA
accounts and other forms of accounts. You cannot have an
HSA and an HRA. That -- but you can have an HSA and a
flexible spendable account, the FSA plan under the cafeteria
125 plan. HSA plans are not ERISA plans, which means you
don't have a filing under the 5500's to make. HSA's are not
subject to COBRA, so that you don't have any responsibility
for funding an HSA account upon termination of employment.
Those are kind of critical issues on the HSA, as far as
being COBRA viable, because that means you don't have to
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
59
make any contributions to the employee after that. Under an
HRA account, it is subject to COBRA, and an HRA is required
to have contributions made. That's an employer-controlled
account, and it is required to meet COBRA responsibilities.
HSA employees, or employer, have to make the
contribution in the form of cash. Prescription drugs may be
provided through the co-payment up to 12-31-2005. After
that, no. COBRA premiums can be paid out of an HSA account.
Medicare Part A and Part B premiums can be paid out of an
HSA account. Qualified long-term care and long-term
insurance can be paid out of an HSA account. So, these
accounts do not have to be just totally used for
reimbursement of medical expenses. That's why we're seeing
more people looking at the higher deductible base, 'cause
they want these accounts to accumulate so they'll have
sufficient premiums to pay for some of the long-term care
insurance that they feel they may need at 65. The
custodians of the accounts are responsible for insuring that
the expenses are qualified medical expenses. An employer is
not responsible for that. Everything comes back to the
individual being able to qualify their own expenses on their
tax returns.
The account holder, the individual that has
the account itself, the HSA account, is responsible for the
recordkeeping, not the employer, so all you do as an
11-15-04 wk
60
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
employer is provide the account. From that point forward,
your employee is responsible if they want to participate.
Now, two differentials between the two accounts. The HRA
account is an employer-controlled arrangement where the
employee has no vested interest. Expenses can be used to
offset covered expenses or non-covered expenses under the
medical plan. The HSA account, the health savings account,
is an employee-controlled account. They're 100 percent
vested immediately upon making deposits into the account,
and it can be used for a wider variety of expenses than the
HRA account, but must be coupled to a high deductible health
plan. The HRA account can have any plan design you want.
Now, the flexibility of plan design under the HRA is open.
HSA is restricted.
The third type of account that becomes -- not
critical, but can -- can blend into these accounts, is the
flexible spending account, which is under the Section 125.
These are the cafeteria plans, the cafeteria accounts that
have been around for a long time. And you can have a health
flexible spendable account or a dependent care flexible
spendable account, or a premium only account. Premium only
means that any premium that the employee contributes toward
their health care, dental plan, anything that qualifies on a
deduction basis, that they can do a salary reduction on that
and have their benefits paid on a nontaxable basis to them.
11-15-04 wk
61
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
""~ 2 4
25
And I assume that -- you know, I -- I assume you're doing
that now. You've got the premiums -- any premium paid by an
employee is on a salary reduction basis. Or salary
deduction basis?
JUDGE TINLEY: Deduction.
MR. LOONEY: Salary deduction?
JUDGE TINLEY: Far as I know.
MR. LOONEY: By simple contract, we can
change that to salary reduction, which means any premiums
that they pay would come off the top before taxing. Save
y'all the FICA faxes and save them the taxes on it also.
And that -- we can do a premium-only plan very simply. That
-- that's simply a document that says that's the way you're
going to do it. The only difference is that your -- whoever
your payroll person is needs to know how to handle the
reduction versus deduction process. In addition to that,
then you can put in flexible spendable accounts or dependent
care accounts. The health flexible spendable account allows
you to put money aside -- individual employee to put money
into an account that is theirs from the very moment they put
it in till the end of the year. If you put in $100 a month,
you start in January, your account is credited and equal to
$1,200. The employee then contributes $100 a month to fund
that. The employer is responsible for the full amount from
the beginning, so if an individual has a claim against that
11-15-04 wk
62
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
account, they can claim up to the full $1,200 in January,
and then they continue to pay that off for the balance of
the year. That's salary reduction.
The moneys that the flexible spendable
account can be used for are the same deductions that are
used under the HRA program. They are -- you can pay
co-payments, you can pay premium using the premium-only
account, but anything that's not reimbursed by the insurance
policy can be paid out of that account. Now, I've got a
flexible spendable account. My wife goes in for a doctor
office visit and a lab test; our deductible is $500. She's
got $300 of expenses. We've got the $300, then, that comes
out of the flexible spendable account, and we -- we
accumulate that during the year for that purpose. The
flexible spendable account can be used for reimbursement of
over-the-counter medications that qualify under 213. The
other plans that we looked at, the HSA and the HRA plans
typically are tied to an insurance plan, and insurance plans
do not allow for payment of over-the-counter medications.
Flexible spendable account does.
There has to be uniform coverage. That's,
you know, use it or lose it. If the employee doesn't use
the amount of money that they've put into their account
during the 12 months that it's in there, then they lose that
money. It goes back to the employer. The employer then
11-15-09 wk
63
1
2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
" 24
25
retains that amount of money, and they can use it to offset
expenses going forward in the future years for all
employees. Typically, what we see is the expense of an
account, based on the FICA savings and the people that
participate in it, it usually ends up to be a washout for
the employer to put in a flexible spendable account. The
I.R.S. doesn't limit the amount that an individual can put
into the FSA, but we typically set that limit under the
policy design, 'cause we don't want an employee to put all
their income into one of these accounts, which they could
do.
Dependent care. If you have individuals that
have work-related dependent care expenses -- that means that
if they're working and they've got a day care that they're
sending their child to -- then they can take the deduction
under their flexible spendable account for day care for
dependent care. This becomes an individual decision by
the -- by the family members. We've actually got a form
that they can go through to determine whether or not it's
more beneficial for them to take the salary reduction off of
the FSA or to take the tax deduction that they get for child
care expenses under their personal I.R.S. Frankly, we don't
put these into very many plans, because the process for
claiming this is much more difficult. You have to show a
receipt from the child care provider before you can actually
11-15-09 wk
64
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
be reimbursed. And that process of actually showing a
receipt and being reimbursed, to get into the plan, that
means that you've got to pay the first time frame, whatever
it is; first week, first month, whatever it is for child
care, and you don't get reimbursed until you submit that, so
you get double-dipped up front. You have to pay before you
get reimbursed. Our percentage of participation in the
dependent care FSA's is typically less than 3 percent.
We've got an FSA program for dependent care in place in San
Antonio. City of San Antonio's got -- we figured we had
about 9,000 eligible people to participate, and we've got 13
people that participate in the plan. So, it's just --
JUDGE TINLEY: How many?
MR. LOONEY: Thirteen. And it's just -- it's
just not something that we really promote heavily. The
flexible spendable account, this is how it works for an
employee. Gross compensation is 2,000. You've got the
chart there in front of you. You can see what the
difference is between having a salary reduction and then
having a salary deduction. The total compensation, the --
that's your take-home pay when you have a salary deduction
base. When you take it off the top, we move it up to here.
That takes it down to taxable income base, and then the
take-home based on federal taxes. You know, $225 versus the
$300; $75 difference in the federal tax, Social Security.
11-15-09 wk
65
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Those taxes were where you're matching those taxes as an
employer, you don't have to match. So, that's $75 in FICA
savings. Same thing here for the employer. This is where
the FICA savings come in for the employer. The total
reduction for the employees. I've got my little zeros
flying across here.
Reimbursement process. This is what happens
when you get reimbursed under the FSA. You get an EOB from
your third-party administrator; they send it into the
flexible spendable area. They don't have to do any
adjudication on it. All they have to see is that the TPA
actually paid the claim that was outstanding. So, they
reimbursed them based on the outstanding amounts. The
differences in the HRA and the FSA, again, the HRA is -- and
you combine -- we're seeing a lot of companies combine the
two, the flexible spendable accounts. And what we're
finding is that under the -- the rules that we originally
set up, a flexible spendable account is not supposed to
reimburse an individual for any expenses that are due and
payable under a health care plan, so you set up a health
care plan where the individual has the decision capacity as
to whether or not they're going to allow the health care
plan to pay for an expense under their HRA account or their
FSA account.
So, we're actually having to establish the --
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
66
we have to establish the routine for the payment, and we do
that by plan document. Does the employee -- or was the
employee required to spend the money from their flexible
spendable account first? Or the HRA account -- you know,
which one -- what is the methodology? What we're seeing is
that most accounts are going HRA first, and then FSA second,
so that the -- the net of the HRA stays within the employer
control, and the FSA still stays under the employee control.
I don't know if that makes a whole lot of sense or not, but
-- but the way the regulations are written is that the FSA
cannot reimburse for a medical expense that's compensable by
a health care plan. So we just set up that rule of
transition so that it matches. What we're doing, we've
got -- I think y'all have got a list of the companies that
we received bids from.
JUDGE TINLEY: Mm-hmm.
MR. LOONEY: We've done an initial
examination. The only -- I guess the only negative so far
is that we received a request for some company that UPS had
delivered their bids to Laredo instead of to Kerrville, and
we told them that that was their fault, not ours.
COMMISSIONER WILLIAMS: That's numbers 12,
13, 14, 15?
MR. LOONEY: They actually sent the decline
25 ~ letters through --
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
-- 13
14
15
16
17
18
19
20
21
22
23
24
25
67
COMMISSIONER LETZ: 16, 17.
MR. LOONEY: 16 and 17. They -- Cigna called
and said that -- or sent us a letter requesting that we
accept their bid because UPS did not deliver it
appropriately, and we didn't accept it. Our bid
specification says it's not our responsibility to be certain
that they deliver their bids in a timely manner.
JUDGE TINLEY: Received -- it had to be
received here by a given time and date, and the
responsibility was that of the submitter or proposer.
MR. LOONEY: Right.
COMMISSIONER LETZ: So, same thing with
MR. LOONEY: Same thing. They were part of
that.
COMMISSIONER LETZ: Cigna?
MR. LOONEY: So we haven't seen it. We
didn't look at it. It went back to them. We didn't even
open it at that point.
JUDGE TINLEY: Essentially, what you got for
health are 1 through 7, looks like.
MR. LOONEY: We have, you know, complete
quotes with E.B.A. And it's kind of interesting, with
Benefit Planners -- Benefit Planners, if you'll note, their
stop loss carrier is Great West, and that's a very unusual
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
68
combination. That's the first time we've seen that
combination. So Great West didn't get their own bid in on a
timely basis, but they coupled in with Benefit Planners to
provide stop loss quotes. That was kind of interesting.
Group and Pension Administrators is out of Dallas. Benefit
Planners is out of San Antonio -- they're actually in
Boerne. Benesight is a new one. I've not -- I don't know
anything about Benesight, unless they've changed the name
recently. But they had a very comprehensive proposal. Don
Wallace is an agent that's out of -- Luling, I believe.
JUDGE TINLEY: Seguin.
MR. LOONEY: Luling or Seguin. He's on the
other side of Houston. I think his office is in Seguin,
yeah. And he got a number of -- of bids in, as did
Mr. Finley. And then Jerry Immelman in San Antonio with
Group and Pension Administrators. Mutual of Omaha's
proposal is about 2 inches thick. I'm -- I've been working
on that one just to find the right pages, just so I can get
the right pages in there. Standard Insurance was strictly
life insurance, as was Jefferson Pilot, Kansas City Life,
and Hartford. So, we really have probably five, you know,
bids that we're -- we're looking very hard at. Maybe six.
I haven't seen all of the information from the Texas
Association of Counties yet.
COMMISSIONER LETZ: On the -- I mean, the
11-15-04 wk
69
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
only one that -- Providence and Mutual of Omaha, that they
would not use third-party administrators, is that --
MR. LOONEY: Mutual of Omaha would be their
own administrator. They would be their own reinsurance
carrier, and they would be the administrator also.
COMMISSIONER LETZ: And Providence, the same?
Or is that a --
MR. LOONEY: No, Providence is a third-party
administrator.
COMMISSIONER LETZ: That's not the providence
Insurance Company?
MR. LOONEY: No. No, it's -- it's Providence
Third-Party Administrators, and I -- I don't remember where
they're out of. But --
JUDGE TINLEY: Are you going to be in a
position this next Monday to --
MR. LOONEY: Next Monday?
JUDGE TINLEY: -- make a recommendation to
this Court as to which of these proposers you would like to
have the ability to continue to negotiate with and seek a
final and best offer?
MR. LOONEY: Yeah, I can do that.
JUDGE TINLEY: Okay.
MR. LOONEY: I can't have -- I can't have the
final for you, but I --
11-15-04 wk
70
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
JUDGE TINLEY: Oh, no. No.
MR. LOONEY: -- I can definitely do that.
JUDGE TINLEY: Under the -- if I understand
the process on the -- on the professional services tab, once
the Court makes a determination that out of all the
proposers, these three or these five or these nine or
whatever --
MR. LOONEY: Right.
JUDGE TINLEY: -- are ones that there's a
reasonable possibility that it may result in a final deal,
very well could be, that allows us, or you on our behalf --
MR. LOONEY: To negotiate.
JUDGE TINLEY: -- to negotiate for a final
and best offer.
MR. LOONEY: Right.
JUDGE TINLEY: And, so, I would think come
MR. LOONEY: No, I can do that by Monday for
sure. No, I plan on having that done, actually --
COMMISSIONER WILLIAMS: Are we going to see
some of these plans stack up against our existing benefit
structure?
MR. LOONEY: Yeah.
COMMISSIONER WILLIAMS: And be able to weigh
11-15-04 wk
1
2
3
4
5
6
7
8
9
10
11
12
^_ 13
14
15
16
17
18
19
20
21
22
23
-- 2 4
25
71
MR. LOONEY: Very much so.
COMMISSIONER LETZ: I guess my -- do you --
we pick the companies we want to use, and then decide how we
want to design our plan?
MR. LOONEY: Well, one of the things is that
we have to be sure that whoever we pick or choose can -- can
do the plan designs, have the option to do some of the other
plan designs. And some of the organizations can't do HRA
administration; they can't do HSA administration. Most of
them can do FSA administration, but they may very well not
have the capacity to have multiple plans. So, that's
something that we --
COMMISSIONER LETZ: Seems that we need to --
COMMISSIONER WILLIAMS: I'm sorry, go ahead.
COMMISSIONER LETZ: Seems that we need to
discuss what we want ire our plan before we figure out who
you want to -- who the final ones to negotiate with.
COMMISSIONER WILLIAMS: That's kind of what
I'm getting at. Were each of these asked to bid or send a
proposal in based on the existing plan?
MR. LOONEY: Yes.
COMMISSIONER WILLIAMS: Okay.
MR. LOONEY: So the underlying insurance
coverages, the administration and expense over -- primarily
over all, is based on administering the plans you currently
11-15-09 wk
72
1
2
3
4
5
6
7
8
9
10
11
12
_. 13
14
15
16
17
18
19
20
21
22
23
24
25
have, which is three different options under the plan. The
stop loss insurance is based on experience generated from
your overall package of experience for the -- for the
organization. It's not based on each plan classification;
it's based on overall experience. So plan design, when we
look at the total participation of different plans, we get a
better idea of what the impact is on the claims by making
other options available. So, what we have to do is, we have
to take your current plans and then give an optional -- you
know, here are the options that you've got. Here are the
premium rates for these options. And, again, it's kind of
backwards. Now, the way you've got it now, as far as paying
100 percent for the higher -- higher-price plan, how long
has that been in place? How long has that --
COMMISSIONER BALDWIN: I can't answer that.
Long, long time. A good while.
COMMISSIONER LETZ: Yeah.
COMMISSIONER BALDWIN: I don't recall
changing anything like that, any kind of change.
COMMISSIONER LETZ: I think the -- the thing
about the different supplemental plans, that's only maybe
two years -- one or two years that that's been in there, and
we kind of added that on.
talking about?
JUDGE TINLEY: The B and C options, you're
11-15-04 wk
73
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
COMMISSIONER LETZ: Yeah. Added those on, I
think, two years ago.
MR. LOONEY: So that --
COMMISSIONER LETZ: And left the main plan
the same.
MR. LOONEY: And paying the individual -- if
they take B or C, then you pay the individual additional
funds, and they're not required to buy the supplemental
insurance plans, but they can use it to buy supplemental
insurance plans?
COMMISSIONER LETZ: I thought they had to. I
don't know. They can't take cash, I don't think.
MR. LOONEY: They can't take cash?
JUDGE TINLEY: I don't think so. I think
they can use it to -- to apply on spouse or dependent
coverage.
COMMISSIONER LETZ: Right.
JUDGE TINLEY: Or other -- or related
insurance products, maybe.
COMMISSIONER LETZ: Or dental or, you know,
different type things.
JUDGE TINLEY: Did you ask -- in your RFP,
you asked for options?
MR . LOOPdEY : Right .
JUDGE TINLEY: For --
11-15-04 wk
74
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
MR. LOONEY: I asked for them to give me
everything that they could do.
JUDGE TINLEY: Okay.
MR. LOONEY: Not anything specific. I said
tell me what you can do. Make a recommendation, if you've
got a recommendation.
JUDGE TINLEY: So, in some cases, as you
crunched these various plans, as it were, it won't be
strictly apples against apples. There may be some variables
in there, depending upon what the options are.
MR. LOONEY: The first thing we'll do is
apples to apples. The first thing we'll know is how they
match up with the plan design as it exists today, so that
we'll know from an administration cost standpoint, and from
a stop loss insurance standpoint, we'll know how those two
items match up.
JUDGE TINLEY: Mm-hmm.
MR. LOONEY: And, so, that'll -- that'll give
us a platform to work on to move toward the other optional
basis. It's still just -- you know, I'm still dealing with
this process of -- of moneys that are -- if you take a
lesser plan, having the differential of money going to
purchasing an individual policy by an independent agent.
That's just -- that's just kind of a -- that's very
extraordinary, you see.
11-15-04 wk
75
1
2
3
4
5
6
7
8
9
10
11
12
..... 13
14
15
16
17
18
19
20
21
22
23
°'-- 2 4
25
COMMISSIONER NICHOLSON: Needs to change.
MR. LOONEY: And I don't -- I'm not sure I
understand it at this point, other than --
COMMISSIONER LETZ: Not sure we do, either.
MR. LOONEY: Other than that there's a --
there's an agent that's very happy with that relationship; I
know that. So --
JUDGE TINLEY: We have a meeting scheduled
for Monday, and it's our last regular meeting for November.
MR. LOONEY: Okay.
JUDGE TINLEY: Are you going to be in a
position at that meeting to help us hopefully define what
the design of our plan is, and to give you direction on
which ones we think are viable that you can go forward with
on final and best offer?
MR. LOONEY: I need to get you that stuff
before Monday, because that's something that you need to
look at without me just presenting it to you blank. And
just -- you need to have time to look at that. But other
than my trying to come in just saying, "Okay," you know,
"this is -- this is my decision; this is what you need to
do," you need have that information by Thursday or Friday to
give you a chance to look at it.
JUDGE TINLEY: Well, I'm concerned about
posting an agenda item. I'd like to be in a position to --
11-15-04 wk
76
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
I guess, probably what -- well, I've already made my
decision; I'll post it as an agenda item. If we can get
there, fine. If we can't, why --
MR. LOONEY: Yeah, just post it, put it on
for now, and I will try to have you something by Thursday.
JUDGE TINLEY: Okay.
MR. LOONEY: By Thursday.
JUDGE TINLEY: That we can disseminate.
MR. LOONEY: That you can --
COMMISSIONER LETZ: If it's on the agenda, we
can also carry it over to Tuesday, think about it overnight,
and just have a -- just reset on this item.
JUDGE TINLEY: Sure.
COMMISSIONER LETZ: I mean, 'cause it's -- it
is something that we really need to get locked up.
JUDGE TINLEY: Or if we need to set a special
meeting, we can do that too.
COMMISSIONER BALDWIN: Yeah.
JUDGE TINLEY: Whatever we've got to do.
COMMISSIONER WILLIAMS: We need to make a
decision before the end of the year.
COMMISSIONER LETZ: The other thing, to me,
the -- I mean, I know we have to use the current plan as to
kind of the benchmark, and that's what's kind of in our
budget also. But, to me, this is a time that we need to
11-15-04 wk
77
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
make some pretty significant changes, offer different
things. And, I mean, I'd like to start going in that
direction.
MR. LOONEY: Yeah. And --
COMMISSIONER LETZ: I mean, I'm more
concerned about getting a plan that works that we can start
going toward. Even if we can't implement everything this
year, that we can start going down the path that will get us
where we need to be, rather than using the benchmark of what
we have.
MR. LOONEY: Well, that's -- one of the
things that has to change is the employees' attitude. And
by changing the plan design, we look at trying to make the
HRA plan look -- as far as benefit to the employee, the HRA
plan looks just like one of your current plans, you know.
And whichever one that we're funding, it's going to be
redistributed in the way the benefits come out of it. It'll
be a different methodology, but it'll end up so that if
somebody has a $1,000 claim that's payable over here, and
$800 of it's paid, it'll be the same thing over here. It'll
be $1,000 and $800 paid. But it's restructured and re --
and regenerated into something that gets more consumer, I
guess, oriented, and something that we've got more control
over as far as actual benefit plans on moving forward in the
future. HRA accounts are something, again, totally
11-15-09 wk
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
78
flexible. We can design anything we want to, which has
actually made it more difficult, because the options are --
are wide-open. You can do it a lot of different ways. But
you can also change it. Since there's not a vested
ownership in that account, you can make alterations in the
account going forward in the future, because it's not
vested. You can always adjust and change the plan, which
helps us a great deal from a planning standpoint. The HRA
concept is probably the one we're seeing the most movement
toward, and the reason is because of the -- one, not having
the huge out-of-pocket expense by an employee where it
becomes strictly a financial decision for the employee and
the vested ownership in the accounts. But the -- have you
talked about having an employee contribution in the past for
the benefit plan?
COMMISSIONER BALDWIN: No.
JUDGE TINLEY: I don't think -- no, it really
hasn't been strongly urged.
COMMISSIONER BALDWIN: No.
COMMISSIONER NICHOLSON: I -- I think we
should. But --
COMMISSIONER BALDWIN: I do too.
JUDGE TINLEY: We've got to get them
invested, I think.
COMMISSIONER NICHOLSON: We want to take care
11-15-09 wk
1
2
3
4
5
6
7
8
9
10
11
12
.~. 13
14
15
16
17
18
19
20
21
22
23
24
25
79
of our employees. All five of us agree with that. We
want -- I don't want to hurt them in any way. But I think
the benefits of -- for example, if we were going to start
charging for employee-only insurance, I'd want to give
people a pay raise to pay for it. But that's --
COMMISSIONER LETZ: Yeah.
MR. LOONEY: Well, the one --
COMMISSIONER NICHOLSON: You get there sooner
or later.
MR. LOONEY: The one down side to having the
employee contribute is that they have the right to waive out
of participation. That's the down side to it. So that the
base plan that you offer for all employees, and pay for for
all employees, that plan should be a lesser benefit plan.
And then the HRA account --
COMMISSIONER NICHOLSON: Yes.
MR. LOONEY: -- should be a greater benefit
plan. As they make contributions to it, they can see the
accumulation of the account going forward. And that's
probably the primary thing that I'm going to bring back to
you, is that, okay, here's the -- here's the base plan that
I feel that you should be contributing 100 percent to, and
here's a plan that I feel can, by employee contribution, get
them with some skin in the game again.
COMMISSIONER BALDWIN: That's what we want to
11-15-04 wk
80
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
see. That's what we want to see from you.
MR. LOONEY: Yeah. That's basically, you
know, what -- that's kind of where I'm headed at this point,
you know, with the whole process.
JUDGE TINLEY: I think the industry's headed
that way.
MR. LOONEY: Absolutely.
JUDGE TINLEY: And -- and we don't want to
unduly penalize our employees, but we want them invested in
their own health care system, because I think it stabilizes
the cost a little more.
MR. LOONEY: Okay. I will get -- I'll get as
much information as I can to you on Thursday. And --
COMMISSIONER BALDWIN: I just wanted to say
we meet on Monday, and we generally get our packets on
Thursday; that because of all that. information, we have a
couple of days to review and look things over. So --
MR. LOONEY: What time of the day do you
usually get it on Thursday? Thursday afternoon?
COMMISSIONER BALDWIN: Thursday afternoon.
COMMISSIONER LETZ: Thursday afternoon is
fine.
COMMISSIONER BALDWIN: That's fine.
MR. LOONEY: That would help, because we've
got our initial exam done now. You know, we've read through
11-15-04 wk
81
,~-~
.~-~
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
them all once. We're trying to pull out the ones that just
didn't -- didn't meet the qualifications in some way or
another.
COMMISSIONER BALDWIN: Would it be possible
that this thing could boil down to just one or two?
MR. LOONEY: Very easily.
COMMISSIONER BALDWIN: I can see that.
MR. LOONEY: Yeah, very easily. Because a
couple of them, I noticed, were pretty highly priced going
in as far as admin fees were concerned. They were pretty
substantially higher than everybody else. Which would --
you know, unless they were willing to negotiate and bring
them down in price.
COMMISSIONER BALDWIN: And if I remember
correctly, January 1 is D-day?
MR. LOONEY: Yeah.
JUDGE TINLEY: That's it.
COMMISSIONER BALDWIN: Yeah.
COMMISSIONER WILLIAMS: Got to be in place by
the end of this year.
MR. LOONEY: So we definitely -- we need to
have something on the agenda Monday for sure.
COMMISSIONER WILLIAMS: What about enrollment
periods, if we change?
MR. LOONEY: It would have to be in the first
11-15-04 wk
82
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
two-week period in December. When does your payroll -- when
is the first payroll for January?
COMMISSIONER WILLIAMS: 1st and 15th. Or --
COMMISSIONER LETZ: 15th and 30th.
MR. LOONEY: So, the first payroll would be
15th of January?
JUDGE TINLEY: Mm-hmm.
MR. LOONEY: Do you withdraw -- or withhold
for employees' medical in the December 31st pay check for
the month of January?
JUDGE TINLEY: No.
COMMISSIONER LETZ: No.
MR. LOONEY: December 15th --
COMMISSIONER WILLIAMS: I don't know.
COMMISSIONER LETZ: We both said no, and
then --
COMMISSIONER NICHOLSON: Ask your personnel
officer.
JUDGE TINLEY: Yeah.
COMMISSIONER LETZ: I don't think so, though.
COMMISSIONER WILLIAMS: Do we, Kathy?
MR. LOONEY: I don't know whether they submit
it or whether they take it all first or second. I don't
know. What -- you know, we'll have to be sure we match up
on the payroll deduction.
11-15-04 wk
83
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
COMMISSIONER BALDWIN: What about enrollment?
MR. LOONEY: One of the requirements that we
put on the bidders was that they provide enrollment
services.
COMMISSIONER BALDWIN: They come here -- a
human being comes here physically?
MR. LOONEY: They will be here, yes.
JUDGE TINLEY: Mm-hmm.
COMMISSIONER BALDWIN: That's always been the
plus of having a local agent, is that he's two blocks from
here, and I always felt like that that was a good thing,
anyway. But, I mean, really access.
MR. LOONEY: Well, your -- your Treasurer
feels like that's a major access, too. I think that she
depends a lot on him for that type of service.
COMMISSIONER WILLIAMS: Mm-hmm.
COMMISSIONER LETZ: Were you surprised at the
-- I mean, on the -- I guess the variety of agents was -- I
mean, there was three.
MR. LOONEY: Yeah, I was a little surprised
at that.
COMMISSIONER LETZ: Wouldn't you expect more
agents trying to get this business?
MR. LOONEY: Mm-	hmm. I	was -	- I was
expecting, you know, somewhere	between	12 --	maybe around 12
11-15-09 wk
84
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
proposals overall, so we're a little short on the number I
expected. It may be part of -- you know, it may be part of
the RFP process, because several of the people that called
in wanted to -- wanted to bid, and then reserved the right
to change the rates after the bid was set. They actually
asked if they could do that. I said no, you know.
COMMISSIONER BALDWIN: Seems like I've heard
that somewhere before.
JUDGE TINLEY: Yeah. Here?
COMMISSIONER WILLIAMS: Were the RFP's only
published in the local paper?
MR. LOONEY: Far as I know.
COMMISSIONER WILLIAMS: Might have a little
bit to do with it.
JUDGE TINLEY: Well, I think you also --
MR. LOONEY: We got the --
JUDGE TINLEY: -- indicate to some known
proposers?
MR. LOONEY: We sent it out to every known
insurance company.
COMMISSIONER WILLIAMS: Okay.
MR. LOONEY: Directly.
COMMISSIONER WILLIAMS: Okay.
MR. LOONEY: We also got a list of people
11-15-04 wk
85
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
that previously bid on it from the Treasurer, and we sent it
to them also.
COMMISSIONER WILLIAMS: Okay.
MR. LOONEY: So, we -- we contacted a fairly
large number of people. You know, it's not that you're an
undesirable case.
COMMISSIONER BALDWIN: Beginning to wonder
about that.
MR. LOONEY: Yes. That's not the problem.
Well, gentlemen, I thank you very much.
JUDGE TINLEY: We thank you.
COMMISSIONER LETZ: Thank you.
MR. LOONEY: I hope it hasn't been too
boring.
JUDGE TINLEY: Anythi~
COMMISSIONER BALDWIN:
question now about Monday's agenda.
specific time for him to be here?
COMMISSIONER LETZ: 1
COMMISSIONER BALDWIN:
9:00 and sit here till 1:30.
JUDGE TINLEY: He was
~g but .
Let me ask you a
Do you want to put a
o'clock.
Or he can come in at
having lots of fun last
time, he told me.
MR. LOONEY: Yeah, I was enjoying that visit
25 ~ on the Juvenile Detention Center.
11-15-04 wk
86
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
COMMISSIONER BALDWIN: Believe me, it gets
old after a while.
JUDGE TINLEY: There's going to be some more
of that on Monday.
COMMISSIONER WILLIAMS: You think 1 o'clock?
COMMISSIONER NICHOLSON: Also come back with
a solution to that, will you?
COMMISSIONER BALDWIN: Yeah.
JUDGE TINLEY: We were hoping by dragging you
through there, you'd -- you'd have it all figured out for
us.
MR. LOONEY: I thought we just threw money at
it.
COMMISSIONER BALDWIN: Yeah, that's what you
do.
JUDGE TINLEY: You want to just do it at 1
o'clock?
MR. LOONEY: Whatever's easiest. 1 o'clock's
fine.
JUDGE TINLEY: Okay.
COMMISSIONER WILLIAMS: Works for me.
COMMISSIONER BALDWIN: That's fine. I just
think it's wise to be -- be specific.
JUDGE TINLEY: Okay.
COMMISSIONER LETZ: Are we adjourned, Judge?
11-15-09 wk
87
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
JUDGE TINLEY: Well, we're fixing to be.
Anything else? We stand adjourned.
(Commissioners Court workshop adjourned at 3:30 p.m.)
STATE OF TEXAS
COUNTY OF KERR
The above and foregoing is a true and complete
transcription of my stenotype notes taken in my capacity as
County Clerk of the Commissioners Court of Kerr County,
Texas, at the time and place heretofore set forth.
DATED at Kerrville, Texas, this 19th day of November,
2004.
JANNETT PIEPER, Kerr County Clerk
B Y : __ _ ~6~~
Kathy B ik, Deputy County Clerk
Certified Shorthand Reporter
11-15-04 wk