June 12, 2008

REPORT OF THE FINANCE-AUDITING COMMITTEE

Honorable Board of Directors
Golden Gate Bridge, Highway
  and Transportation District

Honorable Members:

A meeting of the Finance-Auditing Committee was held in the Board Room, Administration Building, Toll Plaza, San Francisco, California, on Thursday, June 12, 2008, at 10:12 a.m., Chair Stroeh presiding.

Committee Members Present (7): Chair Stroeh; Vice Chair Pahre; Directors Boro, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)

Committee Members Absent (1): Director Cochran

Other Directors Present (3): Directors Hernández, Kerns and Newhouse Segal

Staff Present: General Manager Celia G. Kupersmith; District Engineer Denis J. Mulligan; Auditor-Controller Joseph M. Wire; Secretary of the District Janet S. Tarantino; Attorney David J. Miller; Deputy General Manager/Bridge Division Kary H. Witt; Deputy General Manager/Bus Division Teri W. Mantony; Public Affairs Director Mary C. Currie; Risk Management and Safety Director William Stafford; Director of Planning Alan R. Zahradnik; Human Resources Director Harvey Pye; Benefits Administrator Betti Conder; Assistant Clerk of the Board Karen B. Engbretson; Executive Assistant to the General Manager Amorette Ko

Visitors Present: Gregory J. Wessel, Marsh Risk and Insurance Services; Steve Ratto and Wilma Baldazo, Mercer, Inc.

     
1.

Approve Submission of a Grant Application to the National Science Foundation for Informal Science Education Funds Relative to the Golden Gate Bridge

In a memorandum to Committee, District Engineer Denis Mulligan, Public Affairs Director Mary Currie and General Manager Celia Kupersmith provided staff’s recommendation to submit a grant application to the National Science Foundation for Informal Science Education funds relative to the Golden Gate Bridge.

The report stated that in response to direction from the Board of Directors, staff has identified an unusual grant source that could result in additional funding for improvements to the visitor experience at the Golden Gate Bridge. The National Science Foundation has a grant program that allocates funds for educational exhibits of a scientific nature. Staff has developed a grant application, the submission of which is due June 19, 2008, that seeks funding for development of a master plan of what is known as the East Visitors Area. In addition, the grant seeks funding for development of science-oriented exhibits, exhibits explaining the original bridge construction and information about the Golden Gate Bridge.

The report also stated that seeking these funds is highly unusual for the District and the District’s request for these grant funds may not be successful. Staff has worked with neighboring educational agencies, such as the National Park Service and the Exploratorium, as well as the Consortium of Universities for Research in Earthquake Engineering, to develop what is hoped to be a competitive application.

It is recommended that the submission of this grant application to the National Science Foundation be approved. A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

Discussion ensued, including the following:

  • Director Reilly inquired as to the amount of grant funds being requested from the National Science Foundation. In response, Ms. Kupersmith stated that in its grant application, the District is asking for $3 million, which is the maximum amount allowed under the program.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/REILLY to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends the Board of Directors approve submission of a grant application to the National Science Foundation for Informal Science Education funds relative to the Golden Gate Bridge.

Action by the Board at its meeting of June 13, 2008 - Resolution
NON-CONSENT CALENDAR

AYES (6): Chair Stroeh; Vice Chair Pahre; Directors Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Directors Boro and Cochran

     
2.

Approve Renewal of the Liability Insurance Program

In a memorandum to Committee, Risk Management and Safety Director William L. Stafford, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the annual renewal of the District’s Liability Insurance Program, which renews on July 1, 2008. The report included recommended options for the following elements of the Liability Insurance Program:

  a.
Excess General and Automobile Liability Insurance Program;
  b.
Excess Workers’ Compensation and Employers’ Liability Insurance Program;
  c.
General Liability Insurance Program for the remaining Northwestern Pacific Railroad Right-of-Way under District control;
  d.
Public Officials’ Liability Insurance Program; and,
  e.
Public Employees’ Faithful Performance Bond and Comprehensive Dishonesty, Destruction and Disappearance Bond (Crime/Fidelity Bond).
     
 

The report included an attached Liability Insurance Program renewal presentation provided by the District’s Insurance Advisor, Marsh Risk and Insurance Services (Marsh). The report and the Marsh attachment contains detailed information relative to the renewal recommendations, alternative options, overall insurance market condition and specifics on the premium cost and coverage limits, as well as a description of the work provided by Marsh with respect to the renewal of the Liability Insurance Program. The report noted that this year’s renewal of the Liability Insurance Program resulted in a 14 percent decrease in the total premium over the expiring premium, primarily due to a softening of the overall casualty insurance market, as well as fewer liability claims resulting from reduced bus exposure and improved risk management practices. The report stated that all of the recommended renewals are for one year. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, William Stafford briefly summarized the staff report, noting that thanks to efficient work by Marsh, the renewal of the Liability Insurance Program was completed well in advance of the June 30, 2008, expiration date.

Staff recommended and the Committee concurred by motion made and seconded by Directors MOYLAN/REILLY to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors approve the Liability Insurance Program, as follows:

  a.
Renew the Excess General and Automobile Liability Insurance Program, with National Union Fire Insurance Company, Lexington, Arch, RSUI Indemnity and AXIS Surplus, for a one-year term, with a liability limit of $125 million each occurrence/annual aggregate in excess of a self-insured retention of $3 million each occurrence, for an annual premium of $1,141,368, effective July 1, 2008;
  b.
Renew the Excess Workers’ Compensation and Employers’ Liability Insurance Program, with American International Group, for a one-year term, in excess of a self-insured retention of $1 million each accident and with a liability limit of $25 million annual aggregate, for an annual premium of $267,020, effective July 1, 2008;
  c.
Renew the General Liability Insurance Program for the portions of the Northwestern Pacific Railroad Right-of-Way under District jurisdiction (several easements south of the Larkspur Ferry Terminal (LFT), an overflow parking lot north of the LFT, a plot north of the California Park Hill Tunnel and a 200-foot section running through the San Rafael Transit Center), with Steadfast Insurance Company, for a one-year term, with a liability limit of $1 million each occurrence/annual aggregate and a deductible of $10,000 per occurrence, for an annual premium of $13,354, effective July 1, 2008;
  d.
Renew the Public Officials’ Liability Insurance Program, with National Union Fire Insurance Company, for a one-year term, with a liability of $5 million each occurrence/annual aggregate and a self-insured retention of $100,000 each claim, for an annual premium of $77,320, effective July 1, 2008; and,
  e.
Renew the Public Employees’ Faithful Performance Bond and Comprehensive Dishonesty, Destruction and Disappearance Bond, with Fidelity and Deposit Company of Maryland, for a one-year term, with a liability limit of $1 million for employee dishonesty and computer fraud, subject to a $25,000 deductible and $5,000 deductible respectively, a liability limit of $500,000 for loss of money and securities at the Golden Gate Bridge Toll Plaza, subject to a $5,000 deductible and a liability limit of $15,000 for loss of money and securities at all other locations other than the Golden Gate Bridge, subject to a deductible of $5,000, for an annual premium of $11,320, effective July 1, 2008;
 

with the understanding that requisite funds are available in the FY 08/09 Operating Budgets for the Bridge, Bus, Ferry and District divisions.

Action by the Board at its meeting of June 13, 2008 - Resolution
NON-CONSENT CALENDAR

AYES (6): Chair Stroeh; Vice Chair Pahre; Directors Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Directors Boro and Cochran

     
3.

Approve Renewal of the Health and Benefit Insurance Plans

In a memorandum to Committee, Deputy General Manager/Administration & Development Teri W. Mantony, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided staff’s recommendation for renewal of the District’s Health and Benefit Insurance Plans for FY 08/09. The Health and Benefit Insurance Plans renew on July 1, 2008, and include the following policies:
a.   Medical Stop-Loss Coverage;
b.   Kaiser Foundation Health Plan;
c.   Blue Shield of California PPO Plan;
d.   Blue Shield of California HMO Plan;
e.   Caremark Prescription Drug Plan
f.   OptumHealth Behavioral Solutions
g.   Vision Service Plan of California
h.   Delta Dental Plan of California; and,
i.   Group Life, Accidental Death & Dismemberment and Dependent Life Plan.

The report stated that Mercer, Inc., who has provided these services to the District in the past, became the District’s new Health and Benefit Insurance broker on November 1, 2007. The report noted that the District continues to promote wellness initiatives with labor groups and recently completed the District’s Benefits Fair on May 14 and 15, 2008. The Benefits Fair, with a theme of “Driving Health for a Better Future” provided presentations on: 1) the District’s Wellness Programs;2) Blue Shield and Kaiser health plans; and, 3) free blood pressure screening and body mass index tests. In the coming year, staff will undertake enhanced communications to employees regarding other wellness services available to them, such as the 24-Hour Nurse Advice Line and Health Advocacy programs, with the goal of increasing participation and usage of these programs.

The report described the Medical Stop-Loss Coverage, which is used to guard against losses associated with claims made under the Blue Shield PPO health plan. The District continues to have quite a number of claims under the Blue Shield PPO health plan; and, as a result, Blue Shield increased its premium by 31.4%. The report noted that the District’s our new health benefits broker, Mercer, was successful in negotiating this rate down to 24.8%. Although this rate is still high, it falls within the general cost range of other Mercer clients.

The report included a chart that compared the percentage of increase in costs of the various plans from FY 07/08 to FY 08/09, showing that the overall cost of these benefits has increased by 10%. The report further stated that staff recommends approval of the above-described health and benefit insurance plans for FY 08/09, with an effective renewal date of July 1, 2008. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Celia Kupersmith introduced the item, noting that the Health and benefit Insurance plans ’costs increased by 10%, a rate of increase that is lower than it has been in recent years. Ms. Kupersmith also stated that staff has undertaken measures over the past few years, through union negotiations, to reduce the costs of benefits, and that these efforts have been more successful than staff had expected. Teri Mantony summarized the staff report, and introduced Steve Ratto and Wilma Baldazo of Mercer, as well as Benefits Administrator Betti Conder and Human Resources Director Harvey Pye, who were present to answer any questions from the Committee.

Ms. Mantony then presented a PowerPoint presentation providing an overview of the Health and Benefit Insurance plans. A copy of the presentation is available in the Office of the District Secretary and on the District’s web site. She stated that staff has been working diligently over the past several years to restructure the District’s Health and Benefit Insurance Plans and to implement cost containment strategies. She also stated that she was pleased to be able to share with the Committee the results of that hard work.


The presentation began with an overview of the District’s Health and Benefit Insurance Plans, as listed above. Ms. Mantony noted that three years ago, the District changed providers of the Life Insurance Benefit Plan from Signa to Minnesota Life, partly because of concerns expressed by employees that Signa’s rates for supplemental life insurance were too high. She stated that since the change in carriers, participation in the Life Insurance Benefit Plan has tripled. She also noted that in response to employees’ requests, the annual cap on medical reimbursements through the Flexible Spending Accounts increased from $2,500 to $3,500.

Ms. Mantony displayed a slide showing the total enrollment in the three health plans, Blue Shield PPO, Blue Shield HMO and Kaiser. She noted that currently, over 65% of active employees and retirees are enrolled in the Blue Shield PPO plan. She noted that the HMO plans continue to grow, partly due to a new requirement negotiated during the 2006 union bargaining cycle that requires new employees to use an HMO as their health plan for the first three years of employment. Ms. Mantony described the demographics of the District, which has an overall older population with an average age of 62-63, although these numbers are skewed by the high number of retirees enrolled in the health plans. By comparison, she stated that the average employee age of the rest of Mercer’s health benefits employee clients is 44-45.

Ms. Mantony presented the cost containment strategies undertaken for the Health and Benefit Insurance Plans, largely through lengthy negotiations with the Union Coalition that continued from June 2003 through January 2004, as well as through negotiations with the Amalgamated Transit Union in January 2005. She displayed a chart that depicted the District’s Health and Benefit Insurance Plans’ costs in FY 03/04, compared with the same costs in FY 06/07, after the benefits restructuring. She stated that through cost analysis, staff determined that the benefits restructuring resulted in a savings of $903 per employee, which when annualized, adds up to $1,400,000 savings in benefits costs. She noted that the baseline year of FY 03/04 happened to be a very catastrophic year for the Bus Operator group in terms of medical costs, which partly explains the dramatic difference in costs between Bus Operators and all other employee groups for that year. She noted that the proposed renewal for FY 08/09 will result in even greater savings of approximately $1,200 per employee.

Ms. Mantony displayed a pie chart that depicted how Blue Shield claim dollars are spent, noting that the focus is on outpatient services, with 40% of claims for facility outpatient services, and 20% of claims for professional outpatient services. She stated that use of facility inpatient services has dropped over the years. She also displayed a pie chart that compared the percentage of utilization of Blue Shield PPO network providers compared with non-network providers. She stated that this utilization was one of the negotiation points during the bargaining with the Union Coalition, and as a result of the negotiations, the District changed the way out-of-network medical providers were paid and required employees to pay more in order to go to providers outside the network. She further stated that this important bargaining change resulted in lower costs to the District.

Ms. Mantony described the prescription drug plan, and discussed the use of generic drugs versus name-brand prescription drugs. She stated that although there is a generic substitute for 92% of all the name-brand prescription drugs written for employees, only 51% of prescriptions actually dispensed are generics. She noted that promoting the use of generics is another opportunity for cost savings that staff will undertake in the coming fiscal year.

Ms. Mantony also described the Wellness Programs in place at the District, noting that although this is a growing market throughout the healthcare industry, utilization of these benefits by District employees has been lower than expected. She stated that the District offers four Wellness Programs through Blue Shield, as follows: (1) Health Advocacy; (2) Complex Case Management; (3) Disease Management; and, (4) 24-Hour Nurse Advice Line. She stated that although this is an area of the Health and Benefit Insurance Plans in which costs have increased, Mercer was able to negotiate favorable prices for these plans and costs through Blue Shield, and keep the increase to only 7.2%.

Ms. Mantony presented the next steps for the Health and Benefit Insurance Plans, with the renewal proposed for Board action in June 2008, prior to the renewal date of July 1, 2008. She described the Health and Benefit Insurance Plans’ cost containment audits that have been recently completed or are currently underway for Blue Shield medical costs and Caremark pharmacy costs, as well as other pricing studies. She noted that later in the year, staff will be issuing a Request for Proposals for Employee Assistance Program (EAP) providers, since the District has had the same EAP provider since 1981. She also stated that after the prescription drug audit is completed, staff will be bringing forward a recommendation later in 2008 regarding the District’s prescription drug benefit plan. She further noted that the next bargaining cycle with the Union Coalition will begin in spring 2009.

Discussion ensued, including the following:

  • Chair Stroeh commended Ms. Mantony and staff involved in the renewal of the Health and Benefit Insurance Plans, remarking that the cost savings was significantly higher than had been anticipated. He also emphasized the importance of the Wellness Programs, stating that if employees took advantage of these programs, overall medical costs could decrease.
  • Director Newhouse Segal made the following inquiries:
    • She expressed her appreciation for the hard work of staff regarding the Health and Benefit Insurance Plans.
    • She inquired as the reasons why the District was more successful than anticipated with respect to the cost containment strategies. In response, Ms. Mantony explained that one of the reasons was that the baseline year, FY 03/04, had been an extraordinarily expensive year for medical costs. Another reason is that the benefit restructuring required for the first time, co-pays and co-insurance for some of the medical plans, which caused employees to reconsider how they use medical services.
    • She inquired as to whether the District requires employees that reach the age of 65 to use Medicare. In response, Ms. Mantony explained that when a District retiree turns 65, he/she is required to enroll in the Medicare program, and that for this employee group, the District’s medical insurance becomes secondary to Medicare. She stated that active employees that are over 65 remain enrolled in the District’s medical plans until they retire, at which point they are covered by Medicare. She noted that retired employees, between the ages of 50 and 65, are covered by the District, until they reach the age of 65 and are eligible for Medicare.
  • Director Boro thanked Ms. Mantony for her excellent presentation, as well as thanked staff for their hard work in their efforts to contain costs for the Health and Benefit Insurance Plan by realizing savings in the amount of $1,400,000. He noted that in a climate of rising healthcare costs, this is a significant accomplishment. In response, Ms. Mantony acknowledged the efforts of the employees and the labor unions who were all committed to reducing the District’s healthcare costs.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/PAHRE to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors approves the renewal of the Health and Benefit Plans, for a one-year term, effective July 1, 2008, through June 30, 2009, as follows:

  a.
Medical Stop-Loss Coverage with Blue Shield of California, including a deductible of $175,000, in the amount of $334,000;
  b.
Kaiser Foundation Health Plan, in the amount of $4,626,000;
  c.
Blue Shield of California PPO Plan, on a self-funded basis, at an estimated cost of $9,975,000;
  d.
Blue Shield of California HMO Plan, in the estimated amount of $1,410,000;
  e.
Caremark Prescription Drug Plan, on a self-funded basis, at an estimated cost of $4,422,000;
  f.
OptumHealth Behavioral Solutions Plan, in the amount of $32,000;
  g.
Vision Service Plan of California, on a self-funded basis, in the amount of $251,000;
  h.
Delta Dental Plan of California, on a self-funded basis, in the amount of $2,857,000; and,
  i.

Group Life, Accidental Death & Dismemberment and Dependent Life Plan with Minnesota Life, in the amount of $104,000.

 

with the understanding that requisite funds in the amount of $24,011,000 are available in the FY 08/09 Operating Budget.

Action by the Board at its meeting of June 13, 2008 - Resolution
NON-CONSENT CALENDAR

   
 
AYES (7): Chair Stroeh; Vice Chair Pahre; Directors Boro, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (1): Director Cochran
     
4.

Public Comment

There was no public comment.

     
5.

Adjournment

All business having been concluded, the meeting was adjourned at 10:40 a.m.

     

Respectfully submitted,

/s/ J. Dietrich Stroeh, Chair
Finance-Auditing Committee