Board of Supervisors Costa John Cullen, County Administrator From:*

The County contracts with, and is billed monthly by, healthcare plan administrators and insurance carriers on either an "individual" (employee or retiree only) or "family" (employee or retiree plus The County pays one monthly insurance premium amount per plan for dependents) basis. employees and retirees with no dependents ("individual") and another negotiated monthly rate for employees and retirees with dependents ("family"), regardless of the number of dependents reported per family. Response: Agree.

Based on representative monthly data (September 2006), the County pays healthcare insurance premiums averaging $8.8 million per month—over $105 million annually. Employee and retiree premiums average $1.37 million monthly – over $16.4 million annually. Response: Agree.

Based on representative monthly data (September 2006), the County maintains combined medical and/or dental plan eligibility records for approximately 7,800 employees, 4,200 retirees, 330 surviving spouses, and 16,000 reported dependent spouses, children and domestic partners. Response: Agree. The County contracts with its healthcare plan administrators and insurance carriers on a full-insured

basis. Under this financial arrangement, healthcare administrators and carriers are responsible for all costs in excess of the premiums collected from the County during a specified contract period. The negotiated premiums include anticipated costs for the benefits, administrative costs, and a profit for the administrators and carriers. Response: Partially Agree. Kaiser Permanente, Health Net, Contra Costa Health Plan and Delta PMI Dental Plan are fully insured; the County has an Administrative Services Agreement with Delta Dental for the self-insured Dental Plan.

Each year, healthcare plan administrators and insurance carriers audit premiums and benefits paid, and increase premiums for subsequent years if benefits in the prior year exceeded premiums received. Response: Partially Agree with clarification. Premium increases are based on projected claim costs for the upcoming period. This calculation involves using current claims data and projecting it forward based on trend and demographics to arrive at an expected claims cost. Then administration and special riders, profit and margin are added to that cost to arrive at the appropriate rate.

County healthcare plan participation is available to "eligible dependents." Eligible dependents are defined as legal spouses, qualified domestic partners, unmarried children under the age of 19 for whom the employee or retiree has legal responsibility, and children under the age of 25 that, according to IRS regulations, are more than 50% dependent on the employee or retiree, and who are anticipated to be claimed as dependent children on the employee's or retiree's income tax return. May 1, 2007 County Healthcare Plan Eligibility Loopholes County Response to Grand Jury Report No. 0703 Eligible dependents between the ages of 19-25 need not be full-time students to be eligible to participate in the healthcare plans. Disabled children over age 19 are also eligible provided their disability occurred prior to their reaching the age of 19, and that they also are dependents as defined by IRS regulations. Response: Agree with clarification. The County's requirement is that the dependent is an IRS regulations (IRS Publication 501) require (with some IRS qualifying dependent. exceptions) student status for dependents over age 19.

The HR department is responsible for the administration of healthcare plan eligibility policies, the maintenance of eligibility records, and the monthly reporting of eligibility information to healthcare plan administrators and insurance carriers. Response: Agree.

The HR department relies on employees and retirees to enroll dependents. This is accomplished through the use of either and "Open Enrollment Change Form" or "Health and Dental Plan Enrollment Form." The latter specifies that, outside of annual open enrollment periods, employees and retirees are responsible for timely notification regarding the addition of eligible dependents; i.e., within 60 days of a qualifying event such as marriage or childbirth. Response: Agree.

The "Open Enrollment Change Form" and "Health And Dental Plan Enrollment Form" also serve as the method by which employees and retirees are expected to report that dependents are no longer eligible. However, neither form obligates employees and retirees to report dependent deletions within any specified period. Response: Agree. However, the forms do reference the COBRA requirements including elections within 60 days of the qualifying event (such as losing dependent eligibility).

Neither the "Open Enrollment Change Form" nor the "Health And Dental Plan Enrollment Form" requires employees or retirees to attest, by means of a signature, and under penalty of perjury, to the accuracy of the enrollment or deletion information they provide to the HR department. Response: Agree.

The HR department does not verify that dependents reported during the enrollment process meet eligibility requirements for participation in the County's healthcare plans or that they remain eligible. Response: Agree with clarification. On a monthly basis, reports are generated based on dependent child birthdates, with follow up when the dependent is over 25. Staff also Carriers verify processes terminations and COBRA letters for affected dependents. dependent age and will not provide services if the dependent is over age. The carriers also require documentation of dependent status when claims are incurred.

The County's "2007 Employee Benefits Information and Open Enrollment guide" includes the following policy statement: "It is against County Policy for an employee to enroll ineligible persons May 1, 2007 County Healthcare Plan Eligibility Loopholes County Response to Grand Jury Report No. 0703 as dependents; to do so may subject the employee to disciplinary action as well as the obligation to reimburse the plan for all costs associated with the delivery of medical or dental services to an ineligible person." Response: Agree.

The HR department does not have a procedure to secure reimbursement from employees or retiree of all costs associated with the delivery of medical or dental services to an ineligible healthcare plan enrollee. Response: Agree with clarification. For the County's fully-insured plans, the various insurance carriers are at risk when claims are paid erroneously or for ineligible participants. Additionally, the fully insured plans include 'Right of Recovery' and 'Insurance Fraud' language.

The HR department does not require all of its healthcare plan administrators and insurance carriers to verify by means of quality assurance "self-audits" or external audits that all the County's healthcare plan contract provisions are being met; i.e., eligibility determination, plan coverage limits, customer service expectations, etc. Response: Partially agree. The County does have Performance Guarantee Agreements with Kaiser Permanente, Health Net and the Delta Dental insured PMI plan. The performance guarantees measure member services, member satisfaction, account management, quality of care, accreditation, physician turnover and re-credentialing and reporting. The Contra Costa Health Plan (a County Department) complies with and reports on results for performance standards in accordance with State and Federal requirements; however, this information is not specific to County employees and retirees.

The healthcare eligibility benefits administration computer system, installed in 1989, does not allow for automated, self-service inquiries and information updates by eligible employees, retirees, and dependents. The system's limited flexibility also does not allow the HR department to easily generate the ad hoc reports necessary to help analyze eligibility data. Response: Agree.

The HR department hopes to replace its aging healthcare benefits administration system. Qualified data processing system vendors will be given the opportunity to submit proposals for a new system to meet the County's requirements. Response: Agree with clarification. It is our intent to upgrade the current PeopleSoft Human Resources System to include the Benefits Administration module. It would not be a new system, but the inclusion of functions currently available through PeopleSoft/Oracle.