REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
December 17, 2024
FROM
LEONARDO GONZALEZ, Director, Human Resources Department
SUBJECT
Title
Blue Shield Retiree Medical Plan Contract and 2025 Premium Rates
End
RECOMMENDATION(S)
Recommendation
1. Approve the contract, including non-standard terms, and proposed rates, as shown in Attachment A, with Blue Shield of California, to provide group medical plan benefits for retired employees, Consolidated Omnibus Budget Reconciliation Act participants, and all eligible dependents, for the period of January 1, 2025, through December 31, 2027, with the option to extend for one additional two-year term.
2. Approve retired employee medical premium rates for Blue Shield of California for plan year 2024-25, as shown in Attachment A.
(Presenter: Leonardo Gonzalez, Director, 387-5570)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
FINANCIAL IMPACT
Approval of this item will not result in the use of additional Discretionary General Funding (Net County Cost). There is no additional cost to the County associated with the approval of this item as the County does not contribute to the cost of premiums for retired employees, Consolidated Omnibus Budget Reconciliation Act (COBRA) participants, and their eligible dependents.
BACKGROUND INFORMATION
On May 21, 2024 (Item No. 35), the Board of Supervisors (Board) approved providers Blue Shield of California (Blue Shield) and Kaiser Foundation Health Plan, Inc. (Kaiser) as the group health plan providers for active employees, COBRA participants, and their eligible dependents for plan years 2024-25 through 2026-27, with the option to extend for one additional two-year term. The item also directed Human Resources Department (HR) staff to negotiate plan design, rates, and contracts with both carriers. Approval of this item accepts the terms of the contract between the County and Blue Shield for retired employees, COBRA participants, and all eligible dependents (Contract).
Key provisions of the Contract with Blue Shield include the following:
• Medicare and Non-Medicare Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans received no increase, Group Medicare Advantage Prescription Drug High and Low will increase 4.9%, averaging a total 1.5% increase for Retiree Medical Plans.
• Not-to-exceed rate caps of 6.9% and 8.9% for plan years 2025-26 and 2026-27, respectively.
The recommended Contract includes terms that differ from the standard County contract and omits certain County standard contract terms. Blue Shield is unwilling to negotiate these terms. The non-standard and missing terms include the following:
1. The Contract does not require Blue Shield to obtain the County’s written consent before entering into contracts with subcontractors that may supply parts of the services to the County. Further, this Contract does not require subcontractors to be subject to the provisions of the Contract applicable to Blue Shield’s personnel or require Blue Shield to include in subcontractor’s subcontract substantially the same terms as are provided in the Contract pertaining to Contractor Responsibilities and General Contract Requirements.
(c) The County’s standard contract language requires contractors to obtain the County’s written consent before entering into contracts with or engaging any subcontractors who may supply any part of the services to the County. Further, the County’s standard contract language requires that all approved subcontractors must be subject to the provisions of the contract applicable to contractor personnel and that the contractor will be responsible for subcontractor’s compliance with the contract and the subcontract terms and conditions; that contractor must ensure that the subcontractor follows County’s reporting formats and procedures as specified by the County; and that contractor must include in the subcontract substantially similar terms as are provided in Sections B. Contractor Responsibilities and C. General Contract Requirements of the contract.
(d) Potential Impact: Blue Shield will be able to contract with subcontractors without the County’s prior written consent and subcontractors are not expressly required to be subject to the provisions of the Contract between Blue Shield and the County.
2. The County may terminate the Contract for any reason with a 90-day written notice of termination. Further, Blue Shield may cancel coverage if the County does not pay the required premiums on time following a 60-day grace period and subsequent 30 day written notice of intent to terminate.
(c) The County standard contract gives the County the right to terminate the contract, for any reason, with a 30-day written notice of termination.
(d) Potential Impact: The County will need to be mindful of the additional notice period (i.e., 90 days) required to terminate the Contract. Further, because Blue Shield may cancel coverage, coverage may terminate prior to the end of the three-year Contract term.
3. In accordance with the requirements outlined in Attachments B-D of the Contract (Group Health Service Contracts), the County is required to indemnify, defend and hold Blue Shield harmless against any claims, causes of action or costs arising out of a breach by the County, its employees, agents or independent contractors of the terms of the Contract. The Contract also includes the following additional non-standard terms: the Contract does not require that counsel be reasonably approved by the County when Blue Shield is required to defend the County; and Blue Shield’s indemnity obligations to the County would extend only to authorized officers or employees of the County (and not other agents or volunteers) and to claims, actions, losses, damages or liability in proportion to and to the extent caused by any negligent act, omission, or willful misconduct of the Blue Shield or its employees with respect to the performance or non-performance of Blue Shield’s obligations under the Contract.
(c) The County’s standard contract does not include any indemnification or defense by the County of a contractor. The County’s standard contract indemnity provision requires contractors to defend the County with counsel reasonably approved by the County, and to indemnify, defend, and hold the County, its officers, employees, agents, and volunteers harmless from any and all claims arising out of the contract from any cause whatsoever, including the acts, errors or omissions of any person except where such indemnification would be prohibited by law. Further, the County’s standard contract language requires contractors’ indemnification obligations to apply regardless of the existence or degree of fault of the County/indemnitees, including the County’s active and passive negligence.
(d) Potential Impact: By agreeing to indemnify and hold Blue Shield harmless, the County could be contractually waiving the protection of sovereign immunity. Claims that may otherwise be barred against the County, time limited, or expense limited could be brought against Blue Shield without such limitations and the County would be responsible to defend, hold harmless, and reimburse the Blue Shield for costs, expenses, and damages, which could exceed the total Contract amount. If the County is sued for claims not caused by the negligent acts, omissions, or willful misconduct of the Blue Shield or its employees, the County may be solely liable for the costs of defense and damages, which could exceed the Contract amount. Finally, if Blue Shield is required to defend the County, the County’s approval of counsel may not be required.
4. The Contract does not require Blue Shield to meet all of the County’s insurance standards as required by County Policies 11-05, 11-07 and 11-07SP. More specifically, the Contract excludes Blue Shield’s Cyber Liability coverage from the following standard County insurance requirements: additional insured requirements, waiver of subrogation rights, requirement that the policies be primary and non-contributory, and severability of interest requirements.
(c) County policy requires contractors to carry appropriate insurance at limits and under conditions determined by the County’s Risk Management Department and as set forth in County policy and in the County standard contract.
(d) Potential Impact: By limiting or restricting Blue Shield’s Cyber Liability coverage as summarized above, the County has no assurances that Blue Shield will be financially responsible for all claims that may arise from the Contract, and which otherwise would be covered under the County’s standard insurance requirements for Cyber Liability insurance. This could result in expenses to the County that exceed the total Contract amount.
4. In the event of a breach, the Contract does not provide the County the right to discontinue reimbursement to Blue Shield for and during the period in which Blue Shield is in breach, and it does not provide the County the right to offset those amounts against monies billed by Blue Shield but yet unpaid by County.
• The County’s standard contract language allows the County to discontinue reimbursement to contractor for and during the period in which contractor is in breach (which reimbursement is not later recoverable) and to offset those amounts against moneys not yet paid by the County to contractor.
• Potential Impact: The remedies available to the County under the Contract in the event of a breach would be limited. This could require additional costs and expenses for the County to seek remedies available at law, which could exceed the Contract amount.
HR recommends approval of this Contract and proposed rates, including the non-standard terms, in order to continue providing retired employees, COBRA participants, and eligible dependents with medical plan benefits for the plan years of 2024-25 through 2026-27. Blue Shield plan rates for Plan Year 2024-25 and future plan year rate caps are listed in Attachment A. Future premium rates will be negotiated annually.
PROCUREMENT
On November 20, 2023, HR began the Request for Proposals (RFP) process and issued RFP No. HRD223-HR2-5185 to solicit vendor proposals for medical plan benefits by the deadline of December 22, 2023. All respondents (i.e., Blue Shield, United Health Care, Kaiser, and Anthem Blue Cross) met the minimum proposer requirements.
The proposals were evaluated according to the following criteria: proposed rates, benefits, provider access, network enhancement, quality of care, financial stability, customer service, and demonstrated experience with implementing innovative wellness and cost containment strategies. The County’s contracted benefits consultant, The Segal Company (Segal), conducted a comprehensive analysis of the proposals and provided its conclusions to HR and the Employee Benefits Advisory Committee (EBAC) for review and consideration.
After a thorough examination of the analysis provided by Segal, HR and the EBAC invited all four medical insurance proposers to interview. The carriers were also asked to submit a last, best, and final (LBF) proposal for premium rates, which were provided as follows:
Active Plans:
|
Medical Carrier |
Initial Proposal |
LBF Proposal |
LBF 2nd Year Rate Cap |
LBF 3rd Year Rate Cap |
|
Kaiser Foundation Health Plan, Inc. |
8.6% |
8.6% or 8.0% excluding $500,000 wellness allowance |
None |
None |
|
Blue Shield of California |
7.9% |
5.9% or 5.4% excluding $500,000 wellness allowance |
6.9% |
8.9% |
|
United Health Care |
5.8% |
3.3% or 2.8% excluding $500,000 wellness allowance |
Full HMO: 8.7% Harmony HMO: 6.0% PPO: 9.50% |
Full HMO: 9.8% Harmony HMO: 6.5% PPO: 9.90% |
|
Anthem Blue Cross |
5.2% |
5.2% or 4.8% excluding $500,000 wellness allowance |
9.9% |
9.9% |
Retiree Plans:
|
Medical Carrier |
Initial Proposal |
LBF Proposal |
LBF 2nd Year Rate Cap |
LBF 3rd Year Rate Cap |
|
Kaiser Foundation Health Plan, Inc. |
22.0% |
12.0% |
None |
None |
|
Blue Shield of California |
1.6% |
1.6% |
6.9% |
8.9% |
|
United Health Care |
50.4% |
27.8% |
Medicare plans: none COB plans: 9.5% and 8.7% |
Medicare plans: none COB plans: 9.9% and 9.8% |
|
Anthem Blue Cross |
37.1% |
8.2% |
None |
None |
Segal analyzed the LBF proposals, including provider access, network enhancement, and plan design and provided the final analysis to HR and the EBAC. HR and the EBAC evaluated the final proposals and recommended that the County contract with Blue Shield and Kaiser as these proposals were the most beneficial to County employees and retirees, producing the least disruption in plan benefits, prescription drug formulary and provider network. Additionally, Blue Shield provided the greatest premium stability through the term of the contract and the lowest retiree premium rates, while offering a generous allowance used to support the County employees’ wellness program. The recommendation for the County to contract with Kaiser is being presented to the Board on an accompanying item. The vendors not recommended for contract award were notified by email on March 28, 2024. No protests were received.
The Purchasing Department supports this competitive procurement based on the formal solicitation described above.
Enter procurement information here.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Daniella V. Hernandez, Deputy County Counsel, 387-5455) on November 20, 2024; Purchasing (Jessica Barajas, Supervising Buyer, 387-2065) on November 19, 2024; Finance (Abigail Grant, Administrative Analyst, 387-4603) on November 25, 2024; and County Finance and Administration (Paloma Hernandez-Barker, Deputy Executive Officer, 387-5423) on December 2, 2024.