¡›î› COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON LAW AND GOVERNMENT - - - Room 696, City Hall Philadelphia, Pennsylvania Wednesday, December 11, 2002 1:10 p.m. - - - RESOLUTION 000476 - Resolution authorizing the Committee on Law and Government to investigate whether the City-administered health plan currently and in the past has provided the most comprehensive and cost-efficient coverage to City employees for the premiums paid, and whether the City could provide more comprehensive and less costly coverage to the approximately 8000 employees and retirees currently covered by this plan, if other options were pursued. - - - PRESENT: COUNCILMAN DAVID COHEN, Chair COUNCILMAN DARRELL CLARKE COUNCILMAN ANGEL ORTIZ COUNCILMAN FRANK RIZZO - - - V A R A L L O, Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 ¡›î› I N D E X RESOLUTION 000476 PAGE LINDA BERKOWITZ ............................. GAIL KLEIN ................................. 68 3 12/11/02 - LAW AND GOVERNMENT - RES. 000476
Good afternoon, everyone. Is this is a continued hearing on Resolution 000476; therefore, there is a continuing quorum. The Chair would like the note the presence of Councilman Frank Rizzo and Councilman Darrell Clarke, who are members of the Committee and who are here together with the Chair David Cohen who is now talking. This is to update us, because the first issue relates to the fact that my office was deluged with calls from unrepresented employees beginning -- I think it was late last week with announcements that they had gotten information about the health plan and they had to answer it very quickly, with being given only a limited number of days, and what happened to my promise to them to see that they would have much more time given, which I had given based upon a recommendation or announcement or an answer in a letter -- I'm not sure exactly what it is -- by Ms. Berkowitz, Linda Berkowitz, who said that as soon as certain contracts were conformed, my office would be notified. We waited patiently, but we learned today as a result of her giving us documents prior to the beginning of the hearing that the contracts were conformed by October 9th is the 4 12/11/02 - LAW AND GOVERNMENT - RES. 000476 date we have noted. And we have not yet until this afternoon received notice that that happened. And that was why we had not been able to give any information to people that anything was prepared. We were waiting for that. So Ms. Berkowitz, after I have Mr. Kearney read the title of the resolution, I'm going to ask you to appear as a witness and we'll have some preliminary questions. Mr. Kearney, proceed as Clerk of the Committee.
Resolution 000476, resolution authorizing the Committee on Law and Government to investigate whether the City-administered health plan currently and in the past has provided the most comprehensive and cost-efficient coverage to City employees for the premiums paid, and whether the City could provide more comprehensive and less costly coverage to the approximately 8,000 employees and retirees currently covered by this plan, if other options were pursued.
Ms. Berkowitz, would you step forward to the desk? You heard, Ms. Berkowitz, in my brief 5 12/11/02 - LAW AND GOVERNMENT - RES. 000476 original statement that we had no information until you gave us the documents today about the contract settlement conformed two months ago. And I assume "conformed" means approved by the Administration; is that accurate?
Councilman Cohen, the copies of the two agreements that I gave you right before the hearing convened are not the agreements with the providers of the health coverage. Those two agreements are with our healthcare consultants. Our negotiations, as I indicated in the other handout that I gave you on the status of the City-administered health plan for 2003, we did not conclude negotiations with our healthcare providers until late November.
And there was no 18 indication until the final conclusion in late November that there would be any agreement at all, I take it?
We knew there would be agreements. What we were negotiating were the rates. And as you will see from the material that I gave you, we were successful in lowering, not significantly, but lowering the initial quotes that 6 12/11/02 - LAW AND GOVERNMENT - RES. 000476 we received both from Independence Blue Cross and AdvancePCS for prescription coverage.
Well, we hope you're going to be explaining that later on, but we did not know whether they were increased -- since the payments by covered employees is going to be higher, our understanding is that rates went up and not down.
The rates went up from last year, but the final negotiated rates were, in two instances, lower than the original quoted rates that we received from Independence Blue Cross and AdvancePCS for 2003.
Well, I'm going to be making a recommendation to President Bush that the former Governor Ridge employ you or somebody you direct to maintain a secrecy code because I think you do very, very well. You've managed to keep from your allies who are the people that are covered by this the necessary information so that if it's good news, they can appreciate what you've done. They don't know that. And if it's bad news, you don't give them any opportunity to participate in whatever takes place. We don't know whether to call it 7 12/11/02 - LAW AND GOVERNMENT - RES. 000476 negotiations or conferences or whether you have tea parties and just hand out goodies or whether the other side hands out goodies to the City people. We know nothing about that because the City's policy, apparently, is to maintain utmost secrecy. And if so, you've never given any explanations as to why that degree of secrecy is needed. You've created a situation which it's very likely that Council is going to have to begin negotiating on its own behalf and opt out of the City's plan and do what both the State and Federal Government do, where the legislative bodies -- in fact, each of them has their own separate plan, probably because of running into the same blocks by their executive authorities as we're running into and dealing with you. We don't understand how anybody justifies keeping City Council in the dark about details. We don't understand how you justify feeling that Council has no role to play in participating in either questions concerning the program itself. We're given no opportunity to participate in any meaningful way with respect to determining what areas should be covered. You've known for about a year, at least, 8 12/11/02 - LAW AND GOVERNMENT - RES. 000476 of the strange inconsistency that exists, that at certain times retirees -- and no offense meant to the retirees and this is not meant to indicate that in general they fair better, but in this crazy situation of coverage that you've developed over the years, you exclude from coverage families and dependents of the veteran employees who choose to remain on the job rather than to retire as soon as they become eligible for retirement. At least that's the facts as we seem to know it. And you've done nothing for this last year, knowing that there are many thousands of employees who are uncovered if anything happened to them while they continue their work for City, while any colleagues who had retired because they were eligible to and chose to do so do have their families covered. You've done nothing on that. You've kept you us in the dark so that we don't know any of the goodies, if there are any goodies involved in the health insurance, nor do we know the pitfalls except the ones we know about which are those that affect the pocketbook that people are going to have to pay more for whatever coverage they had in the past. I'd like to know, do we take that to 9 12/11/02 - LAW AND GOVERNMENT - RES. 000476 mean that is the firm policy of the City, the giving of no knowledge to the City Council or the Committee, that you've known for over a year, has been actively pursuing the area of health coverage, that the back of the hand is all we're going to get and, therefore, in our own interests we have to proceed, beginning with this forthcoming budget year, to consider the option of covering ours and opting out of the City Plan. What is your comment with respect to that lengthy question and comment that I made just now?
The Chair wants to acknowledge the presence of Councilman Ortiz who has come into the hearing at the appropriate time, as he always does.
Can you tell me one thing? When you say you have no comment, does that mean that you are powerless to do anything about it and we're addressing the wrong party? That may well be. If so, just say, "That's a matter outside of my 10 12/11/02 - LAW AND GOVERNMENT - RES. 000476 jurisdiction."
Councilman Cohen, that is a matter outside my jurisdiction, and I have expressed that before. My role is to make recommendations to the Administration on the City-administered health plan.
And you don't go beyond that and you have no power? Did you ever recommend or inform the Mayor -- who is your direct boss? Is it the Mayor directly? Or do you go through the Managing Director?
I go through the Mayor's Chief of Staff and the Finance Director.
And have you informed either or both of them of the dissatisfaction frequently expressed by Council as to a lack of information received?
I think that there is a general awareness of Council's dissatisfaction.
And you say the ability to satisfy those objections is outside your jurisdiction?
In terms of at what 11 12/11/02 - LAW AND GOVERNMENT - RES. 000476 point coordination should occur with Council is outside of my jurisdiction.
All right. Well, then we'll excuse you with respect to that aspect of the question from responsibility except as you indicate wherever you have it. That leads us to your explanation on why we are receiving the information just today on the ground that it just recently occurred at the end of November about these contracts. You say that there was no ability of your office prior to that point to inform the City Council because nothing had actually occurred until the contracts were conformed.
The contracts, Councilman Cohen, have not been conformed with the providers of a coverage yet because those -- the new coverages are not effective until January 1. The two documents that I gave you today, in terms of agreements, are with our healthcare consultants. They are not the coverage agreements.
That's the 12 12/11/02 - LAW AND GOVERNMENT - RES. 000476 relationship between the City Council and their own consultants? Who are the contracts with?
One is with Brokerage Concepts, Inc., and the other one is with Capital Management Enterprises.
Wasn't that the specific request made by the Council Committee, to learn about the people that we have representing us, advising us, consulting with? It's my understanding that's what we had requested before.
These are renewals of prior year agreements, and you have copies of those prior year agreements. These are renewals.
With our own people, not with the providers. Do these people that are mentioned in these contracts you showed us at the beginning of the meeting, are they providers or are they people who help the City?
They are people who help the City. Capital Management Enterprises assists the City with its dental prescription and vision plans. And Brokerage Concepts, Inc., for the second year has provided assistance to the City relative to 13 12/11/02 - LAW AND GOVERNMENT - RES. 000476 medical coverage.
These are renewals that -- these two renewals were conformed in October. Unfortunately, at the time they were conformed, I was not at work. So I take full responsibility for the fact that these were delayed in getting to you.
You had asked for them. Ms. Bricklin had asked that we ensure that you and the Committee receive copies of the agreements, of the most current agreements.
So does that mean that until these agreements were conformed -- does "conformed" mean approved by the City Administration? Is that the meaning of the word "conformed"?
Conformed is the Law Department's term for a fully executed contract.
Well, until then, nobody negotiates for coverage for the next year?
No. Again, they were 14 12/11/02 - LAW AND GOVERNMENT - RES. 000476 assisting the City all along. The problem was, there was a delay in getting them conformed and a delay in getting them to you because I was out of work for a fairly lengthy period, and I am responsible for the fact that there was a delay in them getting to you. But they were assisting the City under their prior agreement. This is simply a renewal.
Had you not asked anybody in your office -- isn't there anyone in your office that carries on when you're not there?
To be very candid with you, Councilman Cohen, for a period of time I was not thinking about any of this. So again, that's why I take full responsibility for the delay. But in no way was there an impact on our ability to negotiate with our health coverage providers.
Now I'm beginning to understand that you're telling me that it was probably a matter of health that kept you out of your office?
For which the Committee will and I personally will express full 15 12/11/02 - LAW AND GOVERNMENT - RES. 000476 regret. I can understand that aspect. But let me ask you this. Did you ever inform others that the City Council was very much concerned about the content of the contracts, not just the contracts with its own consultants, but with the whole scope of the health program with certain aspects of it that have been raised during hearings? And did the people you mentioned before know about that concern and took no action to see that those concerns were met? Is that right? You're taking responsibility --
For the delay in getting these documents to you, that is correct.
I think that there is general understanding about the fact that Council is concerned about the City-administered health plan. The ability to satisfy Council's concerns is another issue. I'm prepare to address some of that today.
Go ahead, address it now. Because we don't understand that at all, particularly since the Mayor is the former head of the City Council. It seems hard for us to understand the taking of a position by the Executive 16 12/11/02 - LAW AND GOVERNMENT - RES. 000476 Department that would tend to exclude rather than include City Council.
I'm not prepared to address that issue. I am prepared to address the contents of the City-administered health plan and why we are where we are in terms of what that's going to look like for 2003.
What are you not prepared to discuss within the framework of my question and your response to that question? What are you excluding?
As I thought we agreed just a few minutes ago, I am not prepared to address the question of at what point does the Administration involve Council in discussions about anything.
Are you saying that you would not feel at liberty on your own without approval by someone in a superior position than the one you hold, unless you get direct instructions from them, you do not feel free to include Council? For example, you were not able, you felt, apparently, to pick up a phone and call me and say, "We have started discussions. I'll tell you 17 12/11/02 - LAW AND GOVERNMENT - RES. 000476 where we are at this stage."
I do not believe that is my prerogative. I have never believed that was prerogative in any of the positions I've held in government. I think my --
Well, I understand that. But in your obligation to your direct superiors, don't you have an obligation to maintain good relations and to give them notice when relations are getting on rocky grounds for certain reasons?
It's my understanding that the Administration has had conversations. I don't know the extent of them. I don't know the total substance of them. But it's my understanding that there have been discussions between the Administration and Members of Council about the City-administered health plan. And I'm not prepared to go beyond that.
Well, have you ever 18 12/11/02 - LAW AND GOVERNMENT - RES. 000476 been told not to go beyond that?
I've never asked the question because I believe that Council is perfectly capable of speaking to the Administration at its discretion, and the Administration is perfectly capable of speaking to Council at its discretion. And I don't feel the need to get in between that. My obligation -- as I explained, my responsibility is to assist the Administration in negotiating its health coverage under the City-administered health plan and to make recommendations to the Administration for those plans.
Yes, just right after this. May I suggest that I believe you limit your job in a way that makes you much less effective. I've always believed when I've been in positions like your own that it was always part of my duty to inform my superiors what the situation was as it appeared to be with all the participants with whom I was working in order to prepare my superiors for problems that may occur if they didn't 19 12/11/02 - LAW AND GOVERNMENT - RES. 000476 handle certain phases of the problems.
But if you're going only on your understanding and you haven't discussed it with them --
I have not said that. What I've said is I am not prepared to discuss that issue here, and I certainly am not prepared to discuss my internal conversations with the people for whom I work.
Mr. Chairman, we've been through this for quite a few months and months now. And since the City, obviously, one, doesn't answer any question, doesn't give us any answers, it seems like this is a problem that maybe the Congressional Delegation should take a look into. It seems to be a problem that the City doesn't have any answers for.
If I could respectfully say, we have not yet -- there have been yet no 25 questions today about the substance of the 20 12/11/02 - LAW AND GOVERNMENT - RES. 000476 City-administered health plan for 2003. And I would be very happy to do my utmost to respond to any questions about the structure, the cost, the employee contributions, whatever I can do to provide some additional information about the City-administered health plan for 2003.
I understand that. And that's what I'm prepared to address.
What did you report to whoever you would have to report to on the question of these unrepresented employees whose dependents would -- whose insurance coverage would end at the end of the calendar year in which the employee died? Did you ever make a recommendation to your employers that that policy ought to be changed?
I have not had discussions with -- I have not had discussions with anyone about that particular issue.
Yes, I understand that 21 12/11/02 - LAW AND GOVERNMENT - RES. 000476 it has been raised. But I have not had discussions about that particular issue. That has really, for the most part, been outside of the responsibility that I've had to negotiate the City-administered health plan coverages.
Well, how do you know what to cover if you don't ask questions, if you don't inform your superiors that there's another question raised? "Apparently there is no coverage for so-and-so. This is being raised. Do you want us to find out what it would cost? The Council Committee has raised that question a number of times. Do you want us to find out if it would cost anything, would it cost a little, would it cost a lot?" But you apparently made a decision on your own not to even inquire about that?
I believe that the Administration is aware that Council has raised this as an issue.
And? And what? Or do our weighing of considerations mean absolutely nothing to you?
I have not said that, 22 12/11/02 - LAW AND GOVERNMENT - RES. 000476 Councilman Cohen.
Well, you have if you didn't transmit to your superiors that a problem has come up, has been Council's constant reiteration of the need to cover the situation; "Do you want me to look at it or not?"
How do you know? I don't know what "believe" means. We don't deal with the other worlds that exist outside of the real world, so we don't know on what basis you're believing that. How can you believe it if you haven't raised the question?
What position the Administration wants to take with that has not been a subject of my discussions with the Administration.
Well, how do you know that they did not want you to take that into consideration?
Because I have full 23 12/11/02 - LAW AND GOVERNMENT - RES. 000476 faith that if they want me to look at it, they will ask me to do so.
And so the only asked -- did you ask them what issues you should raise with whoever you were going to deal with?
That really would have very little to do in terms of our negotiating with our health coverage providers.
I don't understand why it would have an impact. I do not think it would have an impact.
I believe we're talking about the issue of parity for dependents of employees who die -- active employees who die in non-connected service.
You wouldn't think 24 12/11/02 - LAW AND GOVERNMENT - RES. 000476 it's part of your duty to raise that issue to let the City know, officially know, that you as the person charged by them with responsibility for determining health coverage policies and rates? Or do you believe you don't have any authorization with respect to determining policies, and unless you are separately informed, you just continue the same thing you did before?
My responsibility has been, as you know, since summer of 2001, to look at the City-administered health plan, to make recommendations for improving, and to negotiate with our health coverage providers. There are other issues of policy that have been raised by this Committee that have not been my purview.
How do you know that? How do you know what's in your purview and what's not in your purview?
Because I have complete trust in the people I work for. They know what I 25 12/11/02 - LAW AND GOVERNMENT - RES. 000476 do. And if they want me to expand my responsibilities, they will advise me so.
So you say there's been no change made in any provision of health insurance in the contracts since you've assumed duty that you see your duties as not advising the Administration of any requests for improvements or things to be changed unless you first hear from them? Is that what you're saying?
Councilman Cohen, I really think we're talking about two very separate issues. The health --
In terms of what coverage you should talk about with the carriers. Was it your understanding that this contract which exists in the current year that's ending at the end of this month is the official version of the health plan for the City of Philadelphia and must never be changed; unless you are given instructions, you must not raise any questions about any aspect of it?
The agreements with the 12/11/02 - LAW AND GOVERNMENT - RES. 000476 healthcare providers for coverage really -- that is an issue separate and apart from the parity issue that you are raising.
No, it's not any different from any other provision. Have benefits been extended in any way?
So the contract as far as what is covered is identical with what existed in the past?
In terms of covering active and retired employees enrolled in the City-administered health plan, that is correct.
And is it your understanding that the official policies of the 27 12/11/02 - LAW AND GOVERNMENT - RES. 000476 government is that there shall never be any change unless somebody tells you that there is to be a change, somebody in a position superior to yours and that you must not raise any question with them?
No, that's my understanding. I don't know what "never" means and I don't --
And I am free to raise questions with the people for whom I work. But I am not prepared to address my conversations with the people for whom I work in this forum. Those are my conversations with the people for whom I work.
So you're saying now that you don't believe you ought to discuss any changes in this program with anybody other than your own --
I'm happy to discuss issues, but I came here today to talk about the City-administered health plan, and I'm prepared to do that.
You always come prepared to discuss that which the City Executive Department has announced as its policy, but you are 28 12/11/02 - LAW AND GOVERNMENT - RES. 000476 never prepared to discuss anything beyond that?
So that if anybody wants to raise with you why -- well, let me try this way. Why do you choose to punish people who continue to work as against retirees once they're retirement age and other requirements for retirement have been met? What's the reason for the City policy which says the moment you are eligible to retire, you must, if you choose to keep your family protected with health insurance, you must immediately retire?
I am not prepared to address that issue today, Councilman Cohen.
Are you ever going to be prepared to discuss that issue?
I don't know that. But today I'm not prepared to discuss that.
Have you ever been prepared -- in any of your appearances before this Committee, have you ever been prepared to cover that question?
Well, in 2001, I don't 29 12/11/02 - LAW AND GOVERNMENT - RES. 000476 remember that being an issue that I was asked about in 2001.
You didn't have the answer first when the question was asked, when the question first came to light that this situation exists -- no, it was before you. It was with Linda Seyda.
Yes. I don't recall that question being posed to me in my previous appearances before the Committee.
I'm sorry. If it was, I apologize, but I don't recall that.
Well, tell me this: Do you believe that it's part of City policy to give extremely short notice -- and I define extremely short notice as the notice allowed this year for employees to choose which plan they're going to accept. Do you think that that's City policy in order to make sure employees don't have enough time 30 12/11/02 - LAW AND GOVERNMENT - RES. 000476 to consider all potential things?
That is not City policy. Unfortunately, we did not conclude negotiations with our coverage providers until late November. And in order to avoid, to the extent possible, payroll deductions having to be doubled up after January 1, the flex books went out in the first week of December.
That was the same answer given to us last year and the year before that.
Is it the intention of the City to always manage to conclude negotiations so late that they will not be able to give time? Do you assume that that's the policy --
How do you know that? Did you ever discuss that with your superiors as to whether there exists such a policy?
My superiors are not the ones who issue the rate quotes; it is the coverage providers who do that. And as a mater of fact, we 31 12/11/02 - LAW AND GOVERNMENT - RES. 000476 received our initial quote from Independence Blue Cross in September which they have made very clear to us is extremely unusual for them because they usually do not issue their rate quotes to their clients until November of every year. So we even get ours early. But in order to understand the basis for the quoted increases, we had to have numerous conversations with Independence Blue Cross and make several requests for data from them.
For data from them. Because rates, in part, are based on utilization; and we wanted utilization information. We simply did not want to take whatever they quoted us and say, "Sure, fine, we'll pay it, whatever." So, again, because of trying to keep our costs low, we had extended conversations with Independence Blue Cross and with AdvancePCS, both of whom finally reduced their initial quotes to us, not significantly, but enough to make a monetary difference.
When you received the information in September, it was sent by the companies? 32 12/11/02 - LAW AND GOVERNMENT - RES. 000476
Why did they reply at that time and to whom did they reply?
Well, how did it happen that they suddenly sent to you their information in September?
They don't suddenly send it to us. We requested, as we did last year, quotes from them on our 2003 rates.
We requested Capital Management Enterprises to get quotes for dental and prescription as early as possible. We made that request during the summer. And during the summer, we also had a RFP for vision prepared, for vision 33 12/11/02 - LAW AND GOVERNMENT - RES. 000476 coverage prepared because that was the only coverage for which we did not have an RFP last year.
I could not tell you that. I know there were conversations. Whether they formally asked in writing, I don't know. But I do know that we get our quoted rates earlier than most employers.
And do you know what it was they ask for? Did they ask for the same coverage? Was the Council efforts aborted back in the beginning of the summer when they first asked -- were the companies asked to supply rates only for the current coverage?
Do you know whether 34 12/11/02 - LAW AND GOVERNMENT - RES. 000476 there's ever been any --
I'm sorry. With one exception, and that's on vision. As you will note in the information that I've given you and was contained in the flex book, we did ask for a quote on enhanced vision coverage.
We received a quote from Vision Benefits of America for an enhancement that would allow for annual eye examinations and the provision of lenses annually for adults, as well as children. And that has been incorporated into the health plan of 2003. And that determination was made because it has a marginal impact on the General Fund, as you'll see in the information.
To the General Fund, 35 12/11/02 - LAW AND GOVERNMENT - RES. 000476 it's about -- we're projecting it at about $42,000 a year -- $46,000 a year.
It's about 58 cents a month to provide annual eye examinations and the provision of lenses.
Lenses. Glasses. Not the frames. The frames continue to be -- that coverage is still once every two years.
Who is the one that made the decision, if you know, about providing this enhanced vision coverage? How did that happen to be asked for?
The Administration knew that that was a concern. I knew it was a concern. The Personnel Director knew it was a concern. A number of people in the Administration understood 36 12/11/02 - LAW AND GOVERNMENT - RES. 000476 that this was a concern expressed by a fair number of enrollees in the City-administered health plan. And so we agreed that we would look at what the cost of that enhancement would be.
How did you find that out? How did you reach a conclusion on that? Who are the people that you spoke with that expressed --
I would like to know that process that you engaged in that resulted in the request for enhanced vision care. How did you learn that there was a demand and that you ought to include that in the insurance? And who made the decisions? And please don't use pronouns like "we" or "they." Identify who it was.
Well, who made the final decision? Let's start with that. Whose approval was required before somebody --
I made the decision that we would ask the provider of the coverage to give us a quote for what that enhancement would cost. 37 12/11/02 - LAW AND GOVERNMENT - RES. 000476