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Minutes

Committee Hearing, March 8, 2001

Philadelphia City Council Committee HearingsMar 8, 2001

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COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON LAW AND GOVERNMENT - - - Room 401, City Hall Philadelphia, Pennsylvania March 8, 2001 1:40 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, Chairman COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN FRANK J. DI CICCO COUNCILMAN MICHAEL A. NUTTER COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 I N D E X RESOLUTION 00476 PAGE LINDA SEYDA, Personnel Director ............ JOYCE WILKERSON, Chief of Staff ............ 8 THOMAS PAINE CRONIN, Pres., DC 47 ........... 32 BOB MCALLISTER, Benefits Administrator DC 47 33 RICHARD COSTELLO, President Local 22 ........ 37 GEORGE CASEY, President Local 22 ............ 38 DAVID VILLELA, President ACMPE .............. 39 3 P R O C E E D I N G S

Councilman Cohen

May we have everyone's attention, please. Good afternoon, ladies and gentlemen. This is a second recessed hearing on Resolution 000476 which raises inquiries about the health care provided by the City for its employees which raises a number of issues. We've already had two hearings. One was back in June of last year and then it was a continued hearing in the middle of snowstorm on February 22, and I want to congratulate those of you who survived that snowstorm and are here again for your courage in attending that day. You may remember, while the flakes were falling that we were getting partial answers, sometimes no answers and occasionally, rare occasion, a real answer to questions that were being asked. We've got lots of questions and we're going to be joined today by the Personnel Director of the City Linda Seyda and the Chief of Staff Joyce Wilkerson. The Mayor was unable to make it today, but he's indicated his general availability to discuss the things at various times, and we may see about that at a later time. But today we have opened all the 4 3/8/01 - LAW AND GOVERNMENT - RES. 000476 questions we did before. We kind of want to know why it seems that the City's plan is the most extensive and offers the least benefits to the people it covers, and they are generally the 8700 non-represented employees. We want to know why is it that the City insists on the auditing of funds that go to the health and welfare plans of the four City unions but that the City itself does not have any audit. In fact, from what we're getting, and this may be advanced notice to Ms. Wilkerson and to Ms. Seyda of some of the questions, we want to know how the City plan gets decided upon. Is there a negotiation? Does the City rely on outside experts that most of the employee unions do? Who does the negotiating? Who makes the decision? To what extent are employees involved because we're concerned that most employees of the City, the so-called non-represented employees, seem to have nothing to say about the plans that the City decides upon. We'd like to know how that decision is made. We also don't understand why it is that if an employee in the City among the non-represented groups have a bad decision, as they see it, made by insurance company, why that employee has no employee 5 3/8/01 - LAW AND GOVERNMENT - RES. 000476 advocate among the non-represented employees. Most of the union plans seem to give protection to their people. These are just some of the issues. There will be others. For example, the issue that came after these hearings started about retirees suddenly being dumped by the City because it was too expensive for the City to pay for their prescription drugs. And we want to know if it's too expensive to the City how does the City expect the retirees to manage to pay? These are some questions that I think are legitimate questions. There are questions raised about should not employees and retirees be involved in the decision-making, at least have some input. These are the kinds of questions last time and we're going to begin to the best of our ability with where we left off last time and that is the questioning of witnesses. We're pleased that Ms. Wilkerson, the Chief of Staff -- and Ms. Wilkerson, we'd like to welcome you here to the hearing and we'd like you to come forward with Linda Seyda, the Personnel Director and so it will been the first panel. When the two of you come, I'm going to open the 6 3/8/01 - LAW AND GOVERNMENT - RES. 000476 questioning of witnesses to the Councilmembers. Incidentally, for those who are standing, there is room on the balcony. I see some folks are going there. Standing may get tiresome, so feel free to go up to the balcony. (Witnesses come forward.)

Councilman Cohen

We welcome you and I just wanted to ask one question and I'm recognize members who wish to ask questions. At the last hearing, Ms. Seyda, I understood that you said you were going to furnish City Council with information as to what the savings might be or the cost might be if the retirees who were being dumped from the City plan were incorporated with the 8700 other employees and what that cost would be. And we have not been able to get any information from that. I understand you may have some information today. Could you give us whatever information you have? We understand that Blue Cross has given to you several proposals for consideration by the Administration, but no one seems to have any information other than perhaps you and maybe Joyce Wilkerson, maybe the Mayor; I don't know. Ms. Seyda, could you respond to that? 7 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Ms. Seyda

Yes, I can. For the record, my name is Linda Seyda and I am the Personnel Director for the City of Philadelphia.

Councilman Cohen

Could you maybe pull it closer. We're having difficulty up here hearing, and we want everybody in the audience to be able to hear, too.

Ms. Seyda

We have been working with Blue Cross and I believe we are at the point now where we will be able to formally offer some options for the post four-year retirees, and I am able to review those options with you this afternoon. Blue Cross has agreed to add riders to the three Medicare plans that we offer for the retirees. These are plans that will supplement the Medicare program, and there are three options. One is the Keystone 65 option. One is the AmeriHealth 65 option which is available for retirees who live in New Jersey, and the other is the Security 65 plan. The Keystone 65 plan will be changed so that it will increase the prescription coverage by eliminating the $1600 cap and providing an unlimited prescription program for those who elect the 65 8 3/8/01 - LAW AND GOVERNMENT - RES. 000476 special. The same is true for the AmeriHealth option which is for those people who live in New Jersey. And we will also be able to offer a Security 65 plan, what they call a Plan H as opposed to a Plan C, and that provides a prescription coverage after a $250 deductible. It will pay for 50 percent of the cost of both brand and generic drugs up to a maximum of $1250 per year. For those retirees who are under 65, Blue Cross is offering a rider to the Keystone program. The Keystone program that's currently being offered as the Keystone 10, they are willing with the Keystone option to offer the 15 prescription rider. And that rider, for an additional sum of money, will include unlimited prescription coverage. They are also for those of our retirees who opt for a Personal Choice option that the Personal Choice high option which they normally offer to subscribers on a non-group basis will be available to our retirees through the pension program.

Councilman Cohen

Let the record note that although there is no need for a quorum for this committee in view of the fact that it's a continuing 9 3/8/01 - LAW AND GOVERNMENT - RES. 000476 quorum since this is a recessed hearing, nonetheless, Councilman Rizzo on my left and on my right our majority leader Councilwoman Blackwell and Councilman Nutter are present, and I'm the chairman David Cohen. So there's also -- (Applause.)

Councilman Cohen

And I believe that a good number of Councilmembers who are not members of the committee are in their offices listening intently to this testimony because this is a matter of tremendous interest. Just one follow-up question. Do you have any analysis of how this would compare with what the retirees had available to them before the abrupt termination by the City of their participation in the present plan? How would this affect them, one, as to the cost first?

Ms. Seyda

As to the cost for the Blue Cross Security 65 plan by moving from the Security Plan C to Plan H, the monthly cost increase will be $45.41 per individual. For the Keystone 65 plan, the increase is $45.02.

Councilman Cohen

Is that an increase per month? 10 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Ms. Seyda

Per month, that is correct.

Councilman Cohen

Over what was being paid before?

Ms. Seyda

That is correct. For the Personal Choice high option non-group plan, the increase is $33.38 per month. And for the Keystone HMO plan, the increase is $45.52 per month per person.

Councilman Cohen

That strikes me that the minimum increase in cost would be well over $600 per year for those who have already been retired?

Ms. Seyda

On an annual basis, that would be approximately close to $600, that's correct.

Councilman Cohen

My immediate question on that we'll leave alone for a moment. Has the City Controller notified you, Ms. Seyda, of the audit that's being undertaken by that office of the costs to the City of its provision for health care needs of its non-represented employees?

Ms. Seyda

I did receive communication from the City Controller's Office within the last couple of days. We will be meeting with the 11 3/8/01 - LAW AND GOVERNMENT - RES. 000476 Controller very soon.

Councilman Cohen

And you're going to be cooperating with the Controller?

Ms. Seyda

I believe that when I was here two weeks ago that I did testify that I had talked with the Controller and that we agreed that we would be working together to do this audit.

Councilman Cohen

Very good. I want to recognize those from the employee groups, the heads of the organizations that are currently here. I see Thomas Cronin, the President of District Council 47 is here. (Applause.)

Councilman Cohen

I also see Richard Costello, the head of the Fraternal Order of Police. (Applause.)

Councilman Cohen

I was told yesterday by George Joyce, the president of the Fireman Union that he would be here as soon as the City's continuing lawsuit against the fire fighters case is over today. There's a hearing ongoing beginning at o'clock, I believe, in Room 275. He said he would join us and I'm sure there are members of the firemen's union who are here. He said they would be 12 3/8/01 - LAW AND GOVERNMENT - RES. 000476 split between that courtroom and here today and he will join us as soon as he's available. And Peter Matthews, President of District Council 33 who is out of town said he would have representatives present at this meeting because one of the issues is the issue raised by the City Administration in which the City says it wants to have a single consolidated plan for the current four employee groups and the non-represented people on the theory that there might be an economy of scale savings to the City and all of the evidence to date -- before I introduce Joyce Wilkerson to testify -- all the evidence to date that we've been able to get was that the employee plans are run more efficiently, provide greater service -- (Applause.)

Councilman Cohen

And do it all at lower cost than the City does. So if anything, maybe the plan ought to be reversed and maybe the non-represented employees ought to be represented by the union plan. (Applause.)

Councilman Cohen

Ms. Wilkerson, please assume that some of that applause is for your 13 3/8/01 - LAW AND GOVERNMENT - RES. 000476 presence here today. Since you have not had an opportunity to make an opening statement, we would be pleased if you would go ahead and proceed. We welcome you here as an alumni of the City Council.

Ms. Wilkerson

Thank you very much. I don't have a comprehensive statement. I read over the testimony that was offered by the --

Councilman Cohen

Could you speak more directly into the microphone, please?

Ms. Wilkerson

I don't have a prepared statement. I've read over the testimony that has been offered at the previous hearings and I think it adequately reflects the position of the Administration. We're concerned about the quality of the benefits, the health and welfare benefits offered to current employees and also our retirees and at the same time are concerned about the cost of delivering those benefits. As we move forward in the coming months, the Administration will be studying and considering a host of alternatives as it attempts to provide better quality benefits to the work force and retirees and also manage the cost of those benefits. I believe it was testified at one of the earlier 14 3/8/01 - LAW AND GOVERNMENT - RES. 000476 hearings that we would be looking at the option you mentioned, bringing everybody under the same program, but that's just one of the alternatives that we'll be studying in the coming time period. We appreciate the investigation. I think, as you know, the cost associated with health and welfare benefits are some of largest single costs that the City confronts annually and it's important to everyone that we get quality benefits but also manage those costs.

Councilman Cohen

Let me ask you. Do you think it's a fair request of the employee groups that if their plans are being audited by outside accountants that the City's costs for the health plan also ought to be audited?

Ms. Wilkerson

I think that's why the City will be cooperating with the Controller in his conduct of the audit. It's important to everyone that those kinds of ancillary costs be managed and managed effectively, and so we will participate constructively in the audit and take to heart what it is that we learn from that process.

Councilman Cohen

From what information we have to date, the City has always maintained that 15 3/8/01 - LAW AND GOVERNMENT - RES. 000476 there are no administrative costs that the City bears with respect to the provision of health care for the non-represented employees. Does that mean that the City has had no brokers, has had no 6 advocates on behalf of the employees? Or does it mean that somehow or other there have been costs that have not been included officially in the record of costs by the City?

Ms. Wilkerson

I think the City is -- and Linda can testify more fully. I think the City has always had some administrative cost. As you know, there are members of the Personnel Department. Ms. Seyda testified at the last hearing about the budget for her department and has gotten additional information about the kind of overhead associated with administering the health and welfare programs. The City does retain some consultants in helping it put together health and welfare packages and solicit proposals from the various providers. And I believe Ms. Seyda can testify to that. We are monitoring on an ongoing basis those relationships as well. And as we begin putting together alternative proposals, the Administration will be considering those consulting 16 3/8/01 - LAW AND GOVERNMENT - RES. 000476 relationships in addition to the kinds of products that we buy from the various health care providers.

Councilman Cohen

Well, there are many issues we have to discuss, but let me raise the most urgent and immediate one because it involves the retirees who were abruptly terminated from prescription coverage at the time when it appeared that most of them needed it more than before. Could you tell me what the City is did doing to resolve that situation? Or do we tell the retirees, "Thanks for your work. We're the City that loves you back, but we've forgotten all about you." (Applause.)

Ms. Seyda

In a telephone conversation I had as recently as this morning with the executive director of the Pension Board, it is their intention to send out a mailing next week for a second open enrollment for that group of post four-year retirees that will begin effective March the 19th and the open enrollment will go through April the 2nd and the new coverages will be effective May the 1st. So the prescription coverages that I enumerated just a few minutes ago will be in place by the 1st of May and the pensioners can expect to receive a mailing 17 3/8/01 - LAW AND GOVERNMENT - RES. 000476 next week.

Councilman Cohen

Have the retirees, any of them been contacted as to their thoughts about the options? Who decided what they needed and whether these offers were the best offers that could be made?

Ms. Seyda

The options that we will be able to offer were options that we had been working with Blue Cross over the last couple of months. We did meet, as you know, with representatives of City Council at the beginning of this process. There were representatives, retirees who were there. We have taken into consideration the testimony of retirees in the course of these hearings and Blue Cross has been -- is very well aware of what the needs and interest of the employees are concerned, and I think the package that we have to put on the table now is one which does take into consideration the needs of the employees within the parameters of that --

Councilman Cohen

Ms. Wilkerson, who made the decision terminating the retirees' prescription benefits?

Ms. Wilkerson

I believe the 18 3/8/01 - LAW AND GOVERNMENT - RES. 000476 Administration receives input from the Personnel Director when the entire package is put together and, you know, so I'm involved in the decision-making process as one of the individuals who decides what it is that the City offers, what it is that the City can afford to offer. We solicit information from a number of sources. We're concerned about the cost, we're concerned about the quality of what it is that is being proposed. All of those considerations are taken into account.

Councilman Cohen

What does it say about an employer who says to employees who have labored hard during their working career when you're in retirement and need us most, need the benefits, need the rewards of a long hard service most, we cut you off cold? (Applause.)

Councilman Cohen

Doesn't the Mayor have to have responsibility for that kind of decision?

Ms. Seyda

I think it's important to note that this has been an ongoing process and that at the end of the last calendar year, the options that we have available to us now were simply not 19 3/8/01 - LAW AND GOVERNMENT - RES. 000476 available because we didn't have the same understanding with our providers that we have now. The IBC or Independence Blue Cross has been very helpful in terms of working with us over the course of the last several months and has put options on the table for us that were simply not available several months ago.

Councilman Cohen

Let me acknowledge the presence -- I know Councilman Mariano has been here; I'm sure he'll be back. Councilman Ortiz --

Councilman Mariano

Just getting some water, Councilman.

Councilman Cohen

You're here; very good. I want to commend them both for joining us this afternoon and I want to announce the presence of David Villela, the President of the Association of Professional and Management City Employees. (Applause.)

Councilman Cohen

So as far as I know, every group of employees of the City are fully represented. Councilman Rizzo.

Councilman Rizzo

Thank you. Ms. Seyda, from what I just heard about 20 3/8/01 - LAW AND GOVERNMENT - RES. 000476 the renewed working relationship with the carrier, it sounds to me like the carrier is driving the vote. (Applause.)

Councilman Rizzo

Why would we be put in a position where we would have to basically accept what the provider suggests? There's more than one provider in this world, and I just can't imagine why we would have allowed -- and again, I don't want to keep beating that to death -- to just cut these folks off because the provider wasn't providing the coverage that you deemed acceptable. What was your B Plan? When you knew that the provider and these folks were going to be cut off, what did you do to try to keep them with the coverage that they vitally need?

Councilman Cohen

Before you answer the question, I want to announce that George Casey, the President of the Fire Fighters has joined us. (Applause.)

Councilman Cohen

And we hope your battle with the City over fair medical benefits is successful, Mr. Casey. (Applause.) 21 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Councilman Cohen

The question has been asked by Councilman Rizzo; please proceed to answer.

Ms. Seyda

I think the Councilman is aware that for many years the City has made every effort and has worked with the carriers to provide as much choice as we possibly can with the plans that we have and we've worked with multiple providers over the course of the last several years. There have been a number of health care providers that have offered benefits to our employees and we have taken into consideration cost issues as well as issues of choice. We have had to make decisions in terms of what are the best packages that we can offer to our employees within the monetary constraints that the City has to live with.

Councilman Cohen

Ms. Seyda, one of our concerns is that while we find that the employee unions have used at various times professionals to help negotiate for them, the City has apparently never had anybody trained in the field to negotiate for them except representatives of the companies they were negotiating with, which is the issue that Councilman Rizzo is raising. (Applause.) 22 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Councilman Cohen

So we're very concerned as to whose interests were being protected when the insurance policies were handed out to the various groups.

Councilman Rizzo

Just to further comment, it's hard for me to believe that in the area of competition that no one would step forward. I'd be curious myself maybe to call around to some of these folks in the big leagues in providing this kind of coverage to see if they were seriously considered or contacted when in fact you were having difficulty coming up with an alternative. So what you're saying today for the record is that an effort was made to come up with an alternative before these folks were cut off? Because I'm going to check, you know I'm going to check. (Applause.)

Councilman Cohen

Could we have an answer to Councilman Rizzo's question?

Ms. Seyda

One of the options that we did look at last year when we were evaluating just what our options were was to offer prescription discount program for the employees who would be 23 3/8/01 - LAW AND GOVERNMENT - RES. 000476 affected by this change. And because the cost and the utilization of the benefit was approaching an almost -- was up to the level of the cost of the benefit itself, it was subsequent to that based upon some decisions that the Administration made in terms of looking at the overall medical program for employees that enabled us to get some very competitive quotes for adding prescription coverage for this group of employees.

Councilman Rizzo

Will you identify for the record the companies that were approached?

Ms. Seyda

Last year in our negotiations, we dealt with US Health Care and we dealt with Blue Cross; and on the prescription drug issue, also with PCS.

Councilman Rizzo

So there was communication with these folks. Could you provide the Chair those letters of communication because I'd like to see what exactly was asked of those providers. Could you do that, please?

Ms. Seyda

Yes, I can.

Councilman Rizzo

Thank you. Thank you Mr. Chairman.

Councilman Cohen

Before this year when 24 3/8/01 - LAW AND GOVERNMENT - RES. 000476 the City went all blue, that is dealt with Blue Cross for all of its employees, there was another company which represented some people. Do you remember that company's name?

Ms. Seyda

Yes, I do.

Councilman Cohen

Could you tell us what it was?

Ms. Seyda

Aetna US Health Care.

Councilman Cohen

Could you tell us what was the basis for the division of people into each of those companies? Was there a comparison between the rates? Were they the sure, were they different? Why were the two offered when the evidence was clear that by having one company, at least Blue Cross, it would have been cheaper from the City's point of view? What was the basis for the decision to go with both?

Ms. Seyda

As I think we've indicated at this table today and in the past, I mean, it's been important to the City and we felt to our employees to offer as much choice as we possibly could for our employees so that they would have the option to elect from or select a medical program from a multitude of options. And so over the course 25 3/8/01 - LAW AND GOVERNMENT - RES. 000476 of the last number of years, that has been our policy, to provide a multitude of options for our employees.

Councilman Cohen

Was that a decision made by a Mayor, by an administrative board, by the personnel director? Do you know who made that decision?

Ms. Seyda

Prior to this Administration, I worked with the previous Administration, with the Mayor's Office in looking at options and making recommendations much in the same way we work with the Street Administration.

Councilman Cohen

Councilman Nutter.

Councilman Nutter

Thank you. Thank you, Mr. Chairman. Good afternoon, Ms. Wilkerson and Ms. Seyda. I have just a few questions that I'd like to ask. Some may overlap or make reference to the last time we were together. I'm just trying to keep all my materials together and the keep a sense of continuity of these hearings. So let me go back a little bit to a few weeks ago. Now, Ms. Seyda, who actually negotiates the benefits plans for the non-represented 3/8/01 - LAW AND GOVERNMENT - RES. 000476 employees? Because all the other employees are represented by their respective unions; is that correct?

Ms. Seyda

That is correct.

Councilman Nutter

The retirees of the various unions, their benefits are negotiated as a part of the collective bargaining process, is that correct? Or did they get whatever the non-represented people get? How does that work?

Ms. Seyda

Under the terms of the City's agreements with the various employee organizations, the City funds retirement benefits, retire, health and welfare benefits, for up to a maximum of four years. That changed during the last round of negotiations and was increased from four to five years.

Councilman Nutter

That's for all employees?

Ms. Seyda

That's for all employees, that is correct.

Councilman Nutter

So let's go back to the original question. Tell us a little bit about this negotiation process; who does it, who is it with, who is involved? 27 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Ms. Seyda

A variety of different participants in the process. The City has used outside consultants to work with on some of our programs. When we have gone out with RFPs we've had a committee to review them. That included representation from a number of City departments and, in fact, also including City Council.

Councilman Nutter

For the purpose of my question, why don't we look at what took place in, I guess, in the last six-month period before and leading up to the open enrollment period that I guess for us takes place in he is December. Don't tell me so much about maybe what we were doing in '92 or '96, but in the most recent round, what was done, who was involved, if we hired people what did they hire them for; who were they negotiating with, if we hired other people to deal with people, just walk me through all of the steps and components that results in the document that we get in December that tells us basically what the plans are and what the deal is.

Ms. Seyda

In this past year, what we did was to go to our -- I'm going to have separate the medical providers from the dental and 28 3/8/01 - LAW AND GOVERNMENT - RES. 000476 prescription providers.

Councilman Nutter

That's fine.

Ms. Seyda

For the medical providers we went to the providers that we had been working with, the major providers in this area, US Health Care and Blue Cross, and asked them to provide us with rate information, renewal information for all of our employees. That process starts in the late summer, early fall.

Councilman Nutter

I'm sorry. I don't mean to interrupt you. Now, when you're going to do this, when you start making these contacts or solicitations or calls or whatever the process is, you were doing that on behalf of whom?

Ms. Seyda

On behalf of the Administration.

Councilman Nutter

All right. I got that part. What group of employees are you doing this on behalf of?

Ms. Seyda

For non-represented Civil Service employees, exempt employees in the government, employees of Common Pleas Court -- the non-represented employees in Common Pleas Court which is most of them, and also for those employees 29 3/8/01 - LAW AND GOVERNMENT - RES. 000476 who are represented by District Council 33 but for whatever reason are not members and therefore their medical coverage is provided through the City-administered plan. So it's a total of about 8,000 people.

Councilman Nutter

Well, I'm sure it was nervousness or oversight. I'm sure as a part of that group you're also talking about the entire complement of Councilmembers and Council staff.

Ms. Seyda

That is correct.

Councilman Nutter

Would we be included in that group of 8,000?

Councilman Nutter

And that would also be the -- are there non-represented retirees who get whatever happens out of that process as well? Would they be in that group?

Ms. Seyda

That is correct.

Councilman Nutter

So to some extent they round out the entire universe of people that -- and when does this process start?

Ms. Seyda

Generally, it's late summer, early fall -- I'm sorry. Yeah, late summer.

Councilman Nutter

So late summer comes 30 3/8/01 - LAW AND GOVERNMENT - RES. 000476 around and do you send a letter to these providers? Do you just call them because you've known them for a while and you've worked with them? Who starts this process?

Ms. Seyda

Generally, I would call them and ask them for their renewal for the next year.

Councilman Nutter

So you call them up and say, "Give me your rate next year. We have approximately 8,000 some odd people." They tell you what the rate is, and is that pretty much it? You kind of take it back to the shop and talk to whoever you have to talk to and that's pretty much the end of it?

Ms. Seyda

No. What generally happens is that the rate is generally higher than we would like it to be or that can afford, quite frankly, and so we often go back and ask for different alternatives.

Councilman Ortiz

Councilman, if I may. When you have these contacts or when you began these contacts, do you write each one of these providers a letter stating what it is that you were looking for? And if so, can you give copies of those letters that you wrote to them and communications? 31 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Ms. Seyda

Generally, what we've done in the last couple of years, I've simply called them and asked them for their renewal.

Councilman Ortiz

You picked up the phone?

Councilman Ortiz

No written communication stating what it is, an example, the population we have, the needs that we have? You stated all of that over the phone?

Ms. Seyda

Generally, unless they would ask for some more specific information.

Councilman Ortiz

Go ahead, Councilman. I'm sorry.

Councilman Nutter

Thank you, Councilman. Now, in the course of this most recent process, was it only yourself involved in this? Were there other parties outside the government that had the need to assist us in this effort?

Ms. Seyda

For the medical coverages, that's basically handled through the Personnel Department and staff within the Personnel Department who would assist in putting data together and 32 3/8/01 - LAW AND GOVERNMENT - RES. 000476 analyzing data and running various scenarios in terms of what the implications are of one plan over another.

Councilman Nutter

The groups that you mentioned, there were at least a half dozen of them, where are they in this whole process? Again, I start from a very small base of knowledge, but I would tend to think that the union negotiation with the various providers is -- and I don't know whether they pick up the phone, send a letter, fax machine or what, but they have some kind of contact. I don't know what it is. A counter-offer is made or they start with an offer and don't necessarily ask them what the current rates are, but this is what we're willing to pay, this is our population -- I'm not absolutely certainly about that, but they're negotiating on behalf of their members or their retirees with a very clear interest. What's the level of -- go ahead.

Ms. Seyda

I think that the interest that the employee organizations has is very similar to the interest that the City has in that they, like the City, want to offer their employees the best benefit that they can with the dollars that they 33 3/8/01 - LAW AND GOVERNMENT - RES. 000476 have available.

Councilman Nutter

Right. But within that, there's also an assumption, if not a belief, that they talk to those employees or they work through some hierarchy of person X has certain information, they share it with numerous Ys and then it eventually gets to Z and kind of start back around. Out of the groups that you mentioned that you're calling these organization on behalf of, what was the level of contact between your office or the people negotiating on behalf of these employees and the ultimate recipient of these benefits in terms of what's available, what's being offered what are some of the prices, what's the scope of service that's available? Or is there any contact with those half dozen constituencies that you mentioned?

Ms. Seyda

Well, I think we take into -- we certainly take into consideration the feedback that we get from our employees over the course of the year because we are dealing with our employees on an ongoing basis. And so when we deal with the health care providers, we make it known that our employees are -- what they're happy with and what they're not happy with. 34 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Councilman Nutter

I understand that. Let me be a little more specific or direct. Sometime in the late summer, early fall, for instance, with our shop, does somebody call here and say, "We're about to go into negotiations on health benefits. What do people in City Council think about what's going on with the plan, with the coverage, with your access to the system, whatever the issue may be?" And do you get any kind of formal response or reaction to the prospect of the upcoming open enrollment period that's going to be another four months from now? And then if you are or are not doing that with City Council, is that happening with some representative group of the court employees, the exempt employees, other Civil Service non-represented employees, the court people, or just this kind of unrepresented population that's out there? Again, in the realm of advocacy, who is looking out for the interest and concerns from a health care perspective for the 8,000 non-represented employees? 35 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Ms. Seyda

I think the work that we do in the Personnel Department, I truly believe that we do everything we can to reflect the interest of our employees in our discussions with the Finance Department. We certainly make that known as well. I think the Mayor's Office is sensitive to those issues as well. Overall, it's -- quite frankly, it's a balancing act.

Councilman Nutter

Ms. Seyda, I'm not questioning your sensitivity or your sense of humanitarian nature. What I'm asking you is from an operations standpoint, is anyone in touch with -- I'm not asking you necessarily to be in touch with 8,000 individual people and kind of serve them something on a silver platter, but, I mean, you wouldn't have to do that for the 200 or so people that work on the third, fourth, and fifth floor. That's kind of that group, and you've got a court group and you've got all of these groups. All I'm asking is -- because I know a little bit of what happens on the union side -- who is talking to this group and sharing information with them or explaining different things to them? I mean, at some point in time a decision 36 3/8/01 - LAW AND GOVERNMENT - RES. 000476 was made. I'm not griping about it. It was a decision I'm sure was for good reasons. But at some point in time someone made a decision, for instance, to drop Aetna US Health Care. I've read about their little situation. Maybe that was a good decision. But that was mentioned somewhere in the book that I got in December. Now, maybe I'm wrong, but I have to assume that sometime before December 12th or so last year that a decision may have been made to drop that company. All I'm saying is, in the realm sharing information and being in touch with this group of 8,000 people, some one of those folks may have wanted to know that that kind of decision was either being considered or was being made for whatever reason. It's in the realm of representing people and sharing information. All I'm asking you, is that kind of process either in place or has anyone thought about that?

Ms. Seyda

I would say that the process is an informal process. If your question is, is there a formal process, I would have to admit there is not a real formal process, but there is certainly an informal process.

Councilman Nutter

Ms. Seyda, we've 37 3/8/01 - LAW AND GOVERNMENT - RES. 000476 known each other for too long; I mean, health care is not an informal kind of thing. I mean, you know that. (Applause.)

Ms. Seyda

Councilman, I agree with you.

Councilman Nutter

Okay. The Chief the Staff looks like she wants to say something.

Ms. Wilkerson

I think Ms. Seyda is correct, there is no formal process. We don't use any survey instruments or questionnaires or have focus groups as a way of soliciting input from employees. I think we do pay a considerable amount of attention to looking at what it is that people opt to do when they are given an array of choices. And so we look at the utilization for Personal Choice versus an HMO program. We look at whether people have migrated to Blue Cross as opposed to participated in the Aetna programs. That ends up being an important part of the decision-making. The decision is not always to go with the cheapest provider in large part because when you survey the pattern that's been established over time, employees within the City have shown a clear preference for 38 3/8/01 - LAW AND GOVERNMENT - RES. 000476 certain programs and that plays a substantial role into the decision-making process, but we don't have a more formal instrument.

Councilman Nutter

I guess I would only say, while it's good data and information, I mean, it really is kind of more the horse already out of the barn kind of stuff. It is always reactionary as opposed to participatory or anticipatory of what we may do going forward as opposed to reviewing data a year or two later to see what people have done. There are reasons why people do what they do, either consciously or it's like, you know, I'll just switch to this. So I think a part of this is who's sitting down with folks and talking to them about what it is that's available to them? Is anyone trying to encourage folks to go a particular way, not for monetary reasons but for, quite honestly, good health care management purposes? And that's the component of this that I'm trying to figure out and understand, because I think that then leads you in a number of directions about quality of care, cost of care, how you drive costs down, and where people are going and getting information and in an environment where you kind of get a package -- I mean, I'm not 39 3/8/01 - LAW AND GOVERNMENT - RES. 000476 necessarily ashamed about it and fortunately nothing bad has happen. I have never read one of those big propaganda pieces from any of the health care companies. And fortunately so far I haven't needed to. But, I mean, I almost need another job to go through all of their stuff and really try to understand it. What I know is I'm in a plan, I got a card, I show up, I pay my money, I get service, good-bye. I mean, I don't need another thing to chase after, and certainly not in the health care environment. But in other places, it is someone's job to make sure that people understand what's available to them. They are driving the train in the process, not only to get to low cost, but high quality. And when we see some of the charts and the comparisons around, it does raise a whole host of questions, so that's why I go back to who's looking out for the 8,000 people. And if they were represented I guess with the same -- I want to zeal, but I don't want to say that you're not trying to do a good job over there. If it was the same, I guess, focus on this as we assume goes on in other places that people might have a lot more information and would be 40 3/8/01 - LAW AND GOVERNMENT - RES. 000476 participating in different ways. I have a bunch more questions, but this is more of an operational question so let me go on. Let's go back. Were there any consultants the last round? You said personnel took care of the medical side.

Ms. Seyda

That's correct.

Councilman Nutter

Then what's left, prescription, dental?

Ms. Seyda

The dental, optical, and prescription programs are the other pieces of that.

Councilman Nutter

Did we negotiate those ourselves?

Ms. Seyda

They represent about 16 percent of the cost of the programs. And the City 17 does use a consultant to assist us with those 18 programs, that is correct. 19

Councilman Nutter

And who is that? 20

Ms. Seyda

Currently, the consultant 21 that the City is using is Emmanuel Stamatakis. 22

Councilman Nutter

You know I don't do 23 this for a living, so we negotiate 75 percent of the 24 benefits ourselves on the health side and then we 25 use a consultant for -- I guess what's generally 41 3/8/01 - LAW AND GOVERNMENT - RES. 000476 called the DOP part?

Ms. Seyda

That's correct.

Councilman Nutter

Not to trying to take any money out of anybody's pocket, but why? We can't do the deal -- I mean, you've been at this for a while. I know you know how to do your job.

Ms. Seyda

At the time that Mr. Stamatakis was brought into this process was several years ago, and the City was looking at some very potentially serious problems, particularly from a cost point of view, and at that point in time the Administration thought that it was appropriate to bring somebody else in to help us take a look at those programs and to look at ways that we could maximize our --

Councilman Nutter

You're talking back in '92 though, right?

Ms. Seyda

That would be -- I believe that's when the current consultant came on board, that's correct.

Councilman Nutter

So what's been going on since that time? What all is involved? And again, if you're able to deal with US Health Care and Blue Cross and whoever else is involved in the 42 3/8/01 - LAW AND GOVERNMENT - RES. 000476 75 percent of operation, I mean, is there something tremendously unique or unusual about dental, optical, prescription?

Councilman Ortiz

Excuse me. Didn't that same individual also work for the other companies? Didn't he represent -- wasn't he a broker for some of the providers also? UNIDENTIFIED SPEAKER: (Inaudible.) (Applause.)

Councilman Ortiz

Wasn't he also representative of providers, prescription providers and so on?

Ms. Seyda

No, I don't believe -- not to the best of my knowledge.

Councilman Rizzo

Could I just ask you to provide the Chair if you know the number? This consultant has been with the Administration since 1992?

Ms. Seyda

I believe that's correct.

Councilman Rizzo

Could you provide the Chair how much money we've paid that consultant? (Applause.)

Councilman Rizzo

Or I understand that the company may have paid the commission for the 43 3/8/01 - LAW AND GOVERNMENT - RES. 000476 consultant. That's a strange arrangement. I never heard of a -- how does it work where a consultant, we hire a consultant and then the provider pays the consultant? Who's he working for? (Applause.)

Ms. Seyda

I have provided information concerning our consultant to City Council in the past and I will be pleased to resubmit that information and to update it.

Councilman Rizzo

I'm curious on the arrangement. Is that a norm where a consultant is hired by the Administration and then -- Ford will be buy Crown Victorias pays the consultant? Would you comment on that arrangement? Maybe it's just lack of knowledge. I just don't understand it.

Ms. Seyda

Well, there are a number of different ways that consultants can be compensated. I wasn't involved in the original negotiation on this. So exactly how this arrangement was set up, I don't know. I cannot comment on.

Councilman Rizzo

Do you believe you get the best representation when you hire a consultant and the consultant gets paid by the person who gets the business? It's hard for me, 44 3/8/01 - LAW AND GOVERNMENT - RES. 000476 again, to understand. (Applause.)

Ms. Seyda

We have looked at this issue in the past, and we have found that the arrangement that we have had has worked well for the City over the years. Our consultant has saved us many millions of dollars and so -- (Audience reacts.)

Councilman Ortiz

Let her answer the question.

Councilman Rizzo

Do you have an idea what we've spent? Not that that's important, it might not be a lot, it might be only a few thousand dollars.

Ms. Seyda

I think I would prefer to provide the information directly to Council. (Audience reacts.)

Ms. Seyda

Off the top of my head I just don't know.

Councilman Rizzo

That's fair enough.

Councilman Ortiz

Councilman, continue please.

Councilman Rizzo

Thank you, Councilman Nutter. 45 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Councilman Nutter

Sure. Ms. Seyda, with regard to the health care providers, whether on the medical side or DOP side, what's the length of the contract? I assume we have a contract with these various companies.

Ms. Seyda

Our programs have been for a year and then with renewals.

Councilman Nutter

So what's the current situation?

Ms. Seyda

So we generally go out with RFPs every three or four years.

Councilman Nutter

So is the current situation -- are they usually concurrent kind of the general cycle of our union negotiations? What's the current? The contract that we're in now, did it start July 1, 2000.

Ms. Seyda

It's a renewal from the previous year.

Councilman Nutter

Well, tell me when it started and what kind of renewals are there.

Ms. Seyda

I believe that we will be going out with -- we should be going out for an RFP for medical coverage in the course of the next year.

Councilman Nutter

Will that start 46 3/8/01 - LAW AND GOVERNMENT - RES. 000476 July 1, 2001?

Ms. Seyda

For January 1 of 2002.

Councilman Nutter

So around the calendar for --

Councilman Nutter

Because of the open enrollment.

Ms. Seyda

And I also expect that we will be going out with a dental RFP as well.

Councilman Nutter

Now, when you negotiate these contracts, I guess, one, why do you just do one year contracts with two or three -- what's the maximum number of renewals that has usually been a case?

Ms. Seyda

Well, generally it's three.

Councilman Nutter

So a one-year contract with three one-year renewals?

Ms. Seyda

At the discretion of the City.

Councilman Nutter

I understand that. Why do you do that?

Ms. Seyda

If I could back up for a minute. For example, on our prescription program, we had an arrangement where it was for one year with 47 3/8/01 - LAW AND GOVERNMENT - RES. 000476 caps on the succeeding years.

Councilman Nutter

Right.

Ms. Seyda

With the medical programs, that is an option that we have considered.

Councilman Nutter

But we don't currently utilize?

Ms. Seyda

We are not currently utilizing it, that's correct.

Councilman Nutter

So the current situation is we have a one-year contract with three one-year renewals which is in essence a four-year contract.

Councilman Ortiz

Councilman, that's one way of getting around coming to City Council for approval so that you don't have to scrutinize it every year. (Applause.)

Councilman Nutter

I do appreciate my colleague pointing that out to me. I actually wasn't aware of that. So it's a four-year contract, one year with three one-year renewals, but when you make that call in the late summer, in essence you are essentially subject to whatever the provider is 48 3/8/01 - LAW AND GOVERNMENT - RES. 000476 offering at that particular time, not that you necessarily have to take it and not that you can't negotiate about it, versus an environment where if you had longer term contract -- and I'm not saying that the Rite Aid contract is necessarily the model of contracts. But conceptionally, if you negotiated a longer term contract with caps in it, wouldn't you in fact not only cap but know what your limits were going to be for a four-year period of time as opposed to every year trying to negotiate and renegotiate with the providers?

Ms. Seyda

You are assuming that the providers would be willing to enter into that kind of agreement, and that's not necessarily the case.

Councilman Nutter

Do the providers, are all of their contracts with all of the various companies around the City, they're all only one year?

Ms. Seyda

I can't speak to that. I don't know.

Councilman Nutter

I mean, do you think a company might have any interest in trying to lock down in essence about 8,000 people for more than one year, guaranteed? 49 3/8/01 - LAW AND GOVERNMENT - RES. 000476

Ms. Seyda

That can be very attractive. I'm not disputing you.

Councilman Nutter

I know they have a lot of business with a lot of different companies, but 8,000 people is big business.

Ms. Wilkerson

I think one reason that the City also opted not to renew long-term was because we were interesting in taking a look at the kind of benefit package we were offering, you know, we want to take a look at whether or not opportunities available if we try to have more people into the pool, if we have greater leverage. We were migrating away from having multiple providers to just one and, you know, before committing long-term and possibly completely driving somebody out of the market, we wanted to do a more careful analysis.

Councilman Nutter

At least for today's discussion, I guess these things can always go either way, would you reject out of hand the concept or the notion that depending on how you do it and depending maybe how you negotiate, if not who's negotiating, is it possible that the City could in 50 3/8/01 - LAW AND GOVERNMENT - RES. 000476 fact drive a fairly hard bargain for about 8,000 people in a multi-year contract environment versus an every year contract negotiation even though we've given someone a one-year contract with three one-year renewals at our option? I mean, is it viable, is it legitimate, or is it just so bizarre and absurd to not even merit consideration?

Ms. Seyda

I think that the City is open to a variety of options. I think the City should be open to that option. As a matter of fact, at this point in time I think it would be very desirable for the City to be able to predict its increases over the years.

Councilman Nutter

Predict its increases and also attempt to limit them. I'll probably have to relinquish the microphone because the Chairman has come back and I've taken tremendous advantage of his absence. Councilman, if I could ask one last question and then I will relinquish.

Councilman Cohen

Sure, go ahead.

Councilman Nutter

Ms. Seyda, we've had an opportunity now -- there's a very large chart to my right, your left. It's been here for both 51 3/8/01 - LAW AND GOVERNMENT - RES. 000476 hearings. There's a smaller document around. I'd like to get your comments, your reaction to the chart that has about 10, categories, maybe a 5 dozen different categories of benefit service 6 offered in a comparison between the DC 47 7 administered plan and the City-administered plan. I 8 guess in the perfect world, all the answers would be 9 the same for both. But there are some -- most of 10 them, it's yes one, no for the other, and for some 11 of the others there's still some level of discrepancy. I guess I have two questions. One, between the last time and today -- I'm just going to assume you had some opportunity to review this. So is the chart correct?

Ms. Seyda

Well, it's certainly a chart that I guess would be developed by District Council 47.

Councilman Nutter

I didn't hear you.

Ms. Seyda

If I could make a few comments. In terms of administrative charges, I do I think that -- I did testify or the City has testified in various proceedings with the labor unions in terms of administrative charges, I believe that I did testified at this hearing last week on 52 3/8/01 - LAW AND GOVERNMENT - RES. 000476 the Personnel Department's administrative charges. In terms of employee assistance --

Councilman Nutter

So we can keep all the components together, my recollection -- I know I have it written down here somewhere, but I think my recollection was your testimony was that from the Personnel Department the administrative cost $300,000 based on the salaries of however many people are over there doing that work. I think the number was 9 to 10 range. That's my recollection.

Councilman Nutter

We also had some discussion, I think, back at that time about other parts of the government. I mean, seemingly, virtually every department seems to have their own smaller personnel complement. And I think one of the questions last time was whether or not those costs were being accounted for across the various sectors of the government, just kind of taking the 10 operating departments and going from there. There's obviously more components to the government. Now, has that figure been calculated in any way, shape, or form?

Ms. Seyda

I believe that the number 53 3/8/01 - LAW AND GOVERNMENT - RES. 000476 that I testified to when I was here earlier was the Personnel Department. The other department in the City government where there is, I think, some significant staff time devoted to the health and welfare programs would be the Board of Pensions, and their costs are approximately $130,000 a year and those costs could very appropriately be added onto the Personnel Department's costs as well.

Councilman Nutter

I mean, we've got at least a couple folks in the big room over here, our historically known big room, just on the side they do personnel stuff. Are they accounted for anywhere in this?