MINUTES OF THE MEETING OF THE BOARD OF COUNTY COMMISSIONERS

BREVARD COUNTY, FLORIDA

August 19, 2004

The Board of County Commissioners of Brevard County, Florida, met in special session on August 19, 2004 at 9:00 a.m. in the Government Center Florida Room, Building C, 2725 Judge Fran Jamieson Way, Viera, Florida. Present were: Chair Nancy Higgs, Commissioners Truman Scarborough, Ron Pritchard, Susan Carlson, and Jackie Colon, County Manager Tom Jenkins, and County Attorney Scott Knox.

Commissioner Scarborough stated Brevard County was very fortunate with Hurricane Charley, but North Brevard did get some effects of it; he did not have power at his house for four days; the street in front of his house was blocked with oak trees; and County employees, including Road and Bridge, were dispatched to North Brevard. He noted at 2:00 a.m. on Saturday morning, Road and Bridge employees were working; the mulch facility was open; employees left their families at a time of crisis in the dark; and they are dedicated County employees. He requested a resolution be prepared for the Chair?s signature commending County employees for their efforts for the August 24, 2004 meeting.

Chair Higgs stated that is fine; there was a great response; Commissioner Pritchard was on duty and she appreciates it; and the County Manager and staff did a great job. She noted she appreciates everybody?s efforts; the County was very lucky; it is moving to the central and south parts of the State to help out; and it would get the same kind of response if it was in a much worse condition. She stated Brevard County is lucky to be part of the State of Florida and part of the response; and it is a time of seeing good neighbors helping out neighbors.

Commissioner Pritchard stated the response from the emergency response team was phenomenal; the employees that were at the EOC were attentive to every detail as it occurred; he thought the professionalism that was exhibited was extraordinary; and the County has sent teams to the other counties that were less fortunate. He noted Brevard County is well represented; and it should be proud of its employees.

Commissioner Pritchard stated one County employee has achieved a significant milestone today; and Rick Enos is celebrating the 21^st anniversary of his 29^th birthday.

REPORT, RE: HURRICANE CHARLEY (CONTINUED)

Commissioner Carlson stated she does not want people to get complacent about putting their shutters up or doing whatever they need to do to protect themselves because hurricanes can be

REPORT, RE: HURRICANE CHARLEY (CONTINUED)

so unpredictable; the EOC did a fabulous job; updates were there all the time; and staff was available when needed. She noted she appreciates it; and the Board will have a resolution for those individuals who assisted during the hurricane.

Chair Higgs stated hurricanes are not predictable and Hurricane Charley showed Brevard County that; residents thought Charley was going to stay to the west; citizens have to expect the unexpected and continue to monitor; and the hurricane season has not reached its peak and the County may still see storms. She noted at least Charley was on the west side; those that come from the Atlantic look a lot bigger and scarier; and urged everybody to be aware. She stated what is difficult in this particular area is the residents are always dependent on the Orlando television stations; they are covering it from a little bit different perspective; there is a great website that the National Hurricane Center has for people to watch; and people need to be aware that hurricanes can make changes. Commissioner Carlson stated when a hurricane is coming from the west, even though it may be better or worse, it leaves residents with no other recourse than to batten down the hatches and stay put, because the roads are full and hotels are full; it was a very confusing time; and things went very well.

Commissioner Colon stated she was at the Orlando Airport yesterday for the Florida Economic Summit at the Marriott Hotel; she did not know what to expect as the Airport was hit by Charley pretty badly; there were a lot of people there from Orlando and she asked them how Brevard County could help; and she was in touch with some of the pastors and leaders in the area. She noted on Tuesday she will be able to have more of a plan of attack as far as Brevard County and citizen-to-citizen; what has been happening has been awesome; County staff, the EOC, and others have been working with other governmental officials; and there will be more people- to-people assistance. She stated a list is being compiled for her of all the things needed in Orange County; on Tuesday she will announce it and see who else would like to help out in the community; and suggested the Commission Offices be the sites for items to be dropped off. She noted food for the animal shelters and adoption centers is also needed; Brevard County was definitely blessed; it does not have a clue what is happening miles away from it; and the community can come together on Tuesday as she knows Orange County would have done the same thing for Brevard County.

Historical Overview

Human Resources Director Frank Abbate stated joining him this morning are Insurance Director Jerry Visco, and John Robinson, and Jan Bush with Robinson & Bush, the County?s Employee Benefits Consultant; and expressed appreciation to Mr. Robinson and Ms. Bush, who came on board on July 15, 2004, and had 30 days to work with the County. He noted they worked very hard; they are from the Orlando area and College Park; they lost power, etc. for three or four days; and staff is thankful for what they have done to help it prepare for today?s meeting. He stated during prior budget workshops this year, staff shared with the Board that most analysts and consultants project the current rate of medical inflation to continue in double digits for the next several years; staff advised the Board that its current health care program, like

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

those of many other employers, is not sustainable in the long term; the graph, using the information provided by the Kiser Foundation and Bureau of Labor Statistics, illustrates why this

is the case; and the 2003 bar shows that the cost of health care on the national average is $9,000 for a family. He noted the bottom portion of the graph represents the average employer contribution and the top portion is the average employee contribution; in 2003, it makes up about 19% of the total compensation package; the information makes a few assumptions; and there is a 12% average increase over time in the cost of health care in terms of premiums that are being charged by plans, etc. Mr. Abbate stated the growth is fairly dramatic; one line shows the average household income on a national level; an assumption was made in the statistics that the average increase was 4.7% over time; and if the trends continue, based on the assumptions made, by 2009, the increase will be 28% for the total compensation package, costing almost $18,000. He noted it becomes unsustainable; if things do not change and adjustments are not made, that is what will be faced over time on a national level; it becomes catastrophic 15 years from now; and this is part of the backdrop of what the County is facing and the challenges in trying to address some of the health care issues.

Commissioner Pritchard stated there is going to be a limitation on attorney awards, especially in malpractice; and inquired is it going to help drive down the cost of insurance. Mr. Abbate responded it is one of many factors and will have some impact; there are a number of driving forces that are involved here; and staff will review it in detail with the Board this morning.

Mr. Abbate stated in March 2004, staff highlighted to the Board three internal/external issues and trends relating to employee benefits; health care program costs continue to increase 12% to 14% annually; budgetary constraints will require additional shifts of these program costs to employees and retirees; and the Board may want to consider a comprehensive long-term strategy that addresses the impact of further cost shifting on employee and retiree disposable income. He noted the meeting this morning presents the opportunity to discuss and address many important issues relating to the group health insurance program; and topics include historical overview, retiree issues, health plan initiatives, health plan comparisons, contribution strategies, current strategic thinking, future plan management, and discussion of issues. He provided an overview of the County demographics; stated the Board has slightly less than 50% of the active employee dependent members in the plan, which is about 4,400 out of a total of 9,040; the next biggest employer participating is the Sheriff; and the third largest group is retirees with 670 members. He noted on retiree demographics, there has been an increase in participation from 1992 of 284 members to 670 members in 2004, which is about an average increase every year of 7?%; 200 retirees are under age 65 and 29 of them reside outside of Brevard County; and 470 retirees are over age 65 and 78 of them reside outside of the County. Mr. Abbate stated in terms of the health plan membership distribution there are five options available to employees; Aetna HMO represents about 45% of the population; Health First HMO represents 31.6%; the costs in those two plans are very comparable in terms of the most cost-effective; and Cigna EPO operates identical to the HMO?s. He noted there are also the Cigna PPO and Health First Medicare options; and explained the history of health plan expense and membership slide over the last 12 years. He stated the medical expenses were about $11.3 million; in 1992, there was a membership of 3,200; over the 12-year period, the membership has increased by about 1,000; and they are distributed evenly between retirees, and additional employees and their dependents from all the employers he previously mentioned. He noted in

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

looking at the costs per employee/per member basis, if today?s membership of 4,272 is compared to the cost in 1992, the total medical expense would be about $15 million; over the

12-year period, the costs, based on the same population, have doubled; and it is about a 6% increase annually over time. Mr. Abbate stated over time when comparing it to the national average, the County is below the national average in terms of comparable costs; and in discussion and review of short-term and long-term strategic planning in the area of employee and retiree health care, it is critically important to understand the historical backdrop surrounding group health care and its evolution over time.

John Robinson, Robinson & Bush, stated he will discuss health care from a national perspective and looking at it as a major economic problem that continues to get worse; some issues under discussion will be comparison to the Consumer Price Index (CPI) and Gross Domestic Product (GDP), uninsured population, additional issues, cost drivers, pro-active strategies, and retiree issues; and Commissioner Pritchard is correct that litigation is one of the factors increasing the cost of health care. He explained a graph showing the CPI and medical inflation over time from 1998 to present; stated there is a dramatic difference between the increase in health plan premiums over the time period and the CPI; the CPI has been in the 2% and 3% range; and it is now 5% through May 2004, where the health plan increases have been in double digits for the last four years. He noted it is not expected to change over the next few years and double-digit inflation is expected in this particular area; another marker for health plan expenditures is looking at the gross domestic product and what percent of spending in the United States is going toward health care-related expenses; in 1970 it was 7% of the GDP; and in 30 years it doubled to 14% in 2000. He stated the most current statistic shows it at 14.9%; it is estimated to be 18.4% of the GDP spent on health care expenditures by the year 2013 if nothing changes; another sad commentary in the United States is the uninsured population; and 14.7% of Americans, looking at a three-year average, are without health insurance. Mr. Robinson noted 17.5% of Floridians are without health insurance; it is significantly higher in Florida than it is in the United States as a whole; and the uninsured population is over 40 million and estimated to be over 50 million by the year 2006.

Commissioner Scarborough stated he attended a meeting in the Orlando area; the Central Florida area, because of the tourist industry is almost an anomaly in the entire country; there are many people employed in the hotel industry; and 65% of fully-employed Hispanics have no employer paid health care. He noted it is sitting out there to destroy the health care system of Central Florida and the County feeds on the same system because it is part of those types of things; there are discussions going on that the Board needs to be part of; it is a frightening scenario to think that many people cannot get employer-paid health care; and it leads to collapse of the system.

Mr. Robinson stated this is not the poor population; Medicaid takes care of the poor population; this is the medically indigent; and these are the individuals that work for small companies in most cases and tourist industries. He noted almost 80 million people are without health insurance at some point during a year; out of that, half of them make over $37,000 a year; a lot of them cannot afford the premiums anymore; and they are dropping off for that particular care. He stated the cost of the uninsured is a staggering amount; he cannot imagine $100 billion being spent because of the uninsured population, but that is what the numbers are showing

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

from the OIM; there are also some additional things happening within health care, including cost shifting from federal programs; and when Medicare sets its rates, other hospitals and physicians set their rates around that. He stated a lot of times it is the commercial carrier or the third-party administrators that are getting hit with the additional costs; people are seeing a much higher incidence of uncollected debt of participants in health plans with co-pays and co-insurance levels; when individuals have to pay $1,000 to a hospital for admission, a number of times they are not paying it; and it is going uncollected, so the hospitals have to write off that particular amount of money. He noted as those continue to increase, that particular problem will get worse; when his Company is trying to negotiate those particular hospital arrangements, that is a significant factor that hospitals look at when giving discounts as it has an impact on their collections.

Commissioner Pritchard stated someone can have a procedure done by a physician which may cost $1,000, but if he or she is insured, the insurance company pays $600; that is all the doctor receives; there is a $400 difference; and if one has no insurance, he or she would be subject for payment. He inquired what if all of the fees were reduced to whatever the insurance companies would pay instead of having the sliding scale. Mr. Robinson responded that would mean no out-of-pocket expense; this is the out-of-pocket expenses the employee would have to pay for that particular coverage; when one goes to the hospital now it costs $100 for that particular co-payment; and in some groups, employers are having employees pay $200 a day for five days of services, which is $1,000. He stated hospitals are not getting the collections on that particular $1,000, so the bill is reduced basically by that amount of money because of the co-payment that would be collected; but the hospitals are not collecting it. Commissioner Pritchard inquired what about the line item he would get as the recipient of medical care; stated it says on it whatever the cost is, whatever the 20% would be, and what the insurance company paid; and it is always much under whatever the total billing was. Mr. Robinson stated it is the 20% part that is many times going uncollected. Commissioner Pritchard inquired why have the excess cost if it is not going to be collected and why have different billings for individuals and those with insurance. Mr. Robinson responded the Board will see later the significant impact it has on the health plan; staff did an out-of-pocket cost comparison to show exactly what is part of that particular piece; and it will answer the question at that point in time.

County Manager Tom Jenkins stated it is just what the industry chooses to charge for a particular procedure; they feel the procedure is worth $1,000 and the insurance company says it is going to pay $400; they settle for the difference; and Commissioner Pritchard is asking why they do not bill the $400 to start with. Commissioner Pritchard stated he is paying an insurance premium in order to have insurance; he is paying someone to tell a doctor he or she is only going to pay $400 instead of $1,000; and inquired why is he paying the premium to begin with and why does he not just tell the doctor he will pay him or her $400.

Mr. Robinson stated his Company went to a Central Florida Health Care Coalition Symposium a year or so ago and heard from Dr. Greer; he wrote a book Waking Up in America, which is on the uninsured population; there are copies available for the Board; and it is fascinating what this compassionate physician has done in the South Florida area in trying to deal with the uninsured issue. He noted the population in Dr. Greer?s area is a little different; it consists of street and homeless people who are not getting care; and his commentary is it is a sad state of affairs when the United States has people running around without appropriate care.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Commissioner Scarborough stated Dr. Greer is one of the most compelling speakers he has ever heard; he is fantastic; the Commissioners will find that Dr. Greer?s book is great; and he wishes Dr. Greer could come to Brevard County and speak.

Mr. Robinson reviewed the cost drivers and differences between inflation and the CPI; stated staff listed several areas they see as cost drivers; one is general inflation; and it is going to happen in any type of plan or cost. He noted another area that is growing significantly is the medical and prescription drug advances; many more illnesses can be treated effectively now, including cancers and other diseases; those medical advances are costing a tremendous amount of money; and the pharmacy area is booming. He stated there are rising provider expenses; government mandates is another area that is paid for through health insurance; the cost is borne by those individuals that have that particular insurance; and there is an increased consumer demand. He noted there is good and bad to it; the good part is there are more screenings and more diagnostic procedures that are being done today than ever before, catching things earlier; the costs are not necessarily a negative and there are some positives; and litigation and risk management is another factor that is included. He stated physicians in many cases are looking at the patient coming in as a potential liability as opposed to a patient; it is a sad state of affairs when that happens; other significant factors are age and unhealthy lifestyles; and 31% of the American population is obese. Mr. Robinson noted a recent Rand study indicated the treatment for an obese person costs 36% higher in medical coverage and 77% in pharmacy coverage; the obese person is costing a plan 44% more than a person who has a BMI under 25; some strategies being implemented by companies and public sector groups to come up with changes in health plan issues include financial arrangements, self-funding versus fully-insured, and experience-rated; and there are groups looking at health plan carve-outs for pharmacy and behavior health. He stated there is more emphasis on trying to manage claims, getting reports, reviewing such reports, and trying to do something; one example is where a certain treatment is tried first and then an individual is stepped-up to get to a particular prescription that is going to best meet his or her needs, instead of going for the most expensive drug to begin with; another area is looking at health plan coalitions, similar to what Brevard County has done with the School Board; and the Central Florida Health Care Coalition types of activities deal with quality initiatives and look at patient safety and leapfrog-types of arrangements to bring a better product. Mr. Robinson stated consumer impact issues is another area that groups are looking at and having a more informed consumer and one that will attempt to modify people?s behaviors when it comes to unhealthy lifestyles; there are no easy answers in this particular area; and a multi-facet approach is a much better approach than just shifting all the costs to employees. He noted another issue that needs to be addressed is Medicare for retirees; one of the questions is who is eligible for Medicare; a person has to work at least 40 quarters or over a 10-year period to be eligible for Medicare; and Medicare is normally looked at as the age 65 individual as it is the age that someone would be eligible for it. He stated there are others that are eligible for Medicare who are under 65 years of age, which are those who are disabled; there are two parts to the coverage currently--the hospital insurance coverage, which covers inpatient and related issues, and medical insurance that covers outpatient and physician charges; listed in the documentation are the premiums for the current 2004 year, which the Medicare participant pay for Part B coverage; and pharmacy coverage is going to be added in 2006.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Commissioner Pritchard inquired if someone has Medicare coverage, is it necessary to have a supplemental policy. Mr. Robinson responded it is an individual idea as to whether or not one would want that particular policy; there are certain things that are covered or not covered; what is covered by Part A is inpatient; but there is a $876 deductible for the visit in a particular hospital. He noted a Medicare patient is going to pay $876 for the first 60 days; then there is the step; so it is going to be a responsibility of that particular Medicare recipient; and in Part B, for any doctor and outpatient services provided, there is a $100 deductible and the patient is going to pay 20% of the difference for Medicare. He stated the supplements cover those particular areas; there are also supplements that would cover the pharmacy that is not covered in these particular plans, routine physicals, and other things; but the pharmacy is a big issue with retirees; and pharmacy coverage is $186 per retiree per month.

Mr. Jenkins inquired what is the $100 deductible; with Mr. Robinson responding it is an annual deductible. Mr. Robinson stated the pharmacy program that comes in 2006 will add another $35 to the premium; there is a separate annual deductible for the pharmacy coverage of $250; the first $250 is paid for by the retiree; and after that, 75% of the coverage would be in effect from that $250 up to the $2,250. He noted retirees on their own are up to $3,600 and 95% after that through Medicare; employers can still continue to offer the health plan and get reimbursed for services provided to retirees; and it will be up to $1,330 per person per year if someone remains in the plan. He stated retirees are grouped into two categories because of Medicare eligibility--under age 65 and over age 65; the over age 65 are those that are eligible for Medicare; it is easier to use the actual 65 age for that; and retirees under age 65 can continue with the County health plan or purchase an individual plan. He noted his Company did a study on 67 school districts in Florida and found out that the person who is retired and between the age of 55 and 65 has health care costs at 65% to 70% higher than what the health care costs are of an active employee; so for every $100 that is spent on an active employee, the retiree under the particular plan would be $165 to $170; and some retirees join their spouses? plan if the option is available. Mr. Robinson stated retirees over age 65 have different options; they can continue the plan or take Medicare only, pay the deductibles and co-insurance, or get some supplement to go with Medicare; there are certain issues that can change; some things can be done with retirees and some things cannot be done; and Florida Statutes provide requirements that the County can and cannot do as a governmental entity. He noted retirees under age 65 particular claims? experience cannot be broken out and must be co-mingled with the active employees; it is the same plan the County has and offers to the actual employees; there are other options for retirees over age 65; the County can have a similar plan, but it has to be similar to the plans it currently offers to active employees; and it cannot be any more than the premiums charged to active employees, even though their costs may be significantly higher. He stated the County does not have any choice when it comes to that particular part when looking at health plans; the Governmental Accounting and Standards Board (GASB) established new accounting standards for governmental entities; the unfunded liabilities for future health plan coverages for retirees has to be included in the income statements; when the County is subsidizing retiree coverage, either through the co-mingling of funds or actively funding it, it has to be shown on the income statement as an accounting practice, beginning the first fiscal year after December 2006; so it will see it coming in 2007.

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Mr. Jenkins inquired what is the significance of it; with Mr. Robinson responding it could be in the millions of dollars. Mr. Robinson stated it is looking at the current liability for future retirees, so it is all employees and considering what will happen when they retire; and in some states it has been $10 million and $12 million impact to different groups. Mr. Jenkins stated the County already has the liability; and inquired what is the difference. Mr. Abbate responded it is going to impact because when the County goes out to the bond market it is going to be a significant issue and impact its bond ratings; and it is critical.

Chair Higgs inquired is it shown as an expense; with Mr. Abbate responding as an unfunded liability on the financial statement.

Commissioner Scarborough stated the County does not have to set aside the funds from operating revenue. Chair Higgs stated it is a long-term unfunded liability; it is shown in the budget every year because it is paid every year; but it has to be shown in a separate category as an unfunded liability that annually has to be allocated. Mr. Robinson stated that is correct; and it is the present value for future retirees. Mr. Jenkins stated the County understands there is a cost associated with it, but it does not understand how it is going to affect it day to day; Mr. Abbate is saying it is an unfunded liability; when looking at the balance of the assets and liabilities, it is unfunded liability; and it has always been there. Chair Higgs stated it is going to be shown like a long-term debt. Mr. Jenkins noted it will be shown as a long-term liability. Commissioner Scarborough stated it is one thing to show it; another thing is to mandate that the Board take from its general revenue fund and set aside in an escrow account those funds for future potential liabilities; and inquired does the Board have to allocate from the annual budget. Mr. Abbate responded he is not saying it has to do that, but the financial auditor in an audit statement is going to make a comment about it. Commissioner Scarborough stated it is honest accounting; and it has always been there and always will be there. Commissioner Pritchard stated it would be the same representation as the County would have with its retirement system; and if it has an unfunded liability it may carry out 30 years. Mr. Jenkins noted that is correct.

Mr. Abbate gave a historical overview from a local perspective on the decision-making process the County has utilized for a number of years relative to group health insurance, the health plan history, and cost containment and cost shifting strategies that have been utilized. He stated the Board has always retained decision-making authority for all issues related to the group health insurance program; during 1990, the Board established an Employee Benefits Insurance Advisory Committee; the Committee has served and continues to serve multiple purposes, including providing a formalized all inclusive process for all stakeholders to serve as a selection committee for Board RFP?s relating to the Group Employees Benefit Program, periodically review the plan performance including membership satisfaction and financial status of plans, and provide the Board input and recommendations about health plan issues. He noted the Committee annually receives funding targets that are established by the County Manager?s part of the tentative budget process; it annually recommends benefit design changes and employee/dependent retiree premium structures needed to maintain the financial integrity of the program; and the Board itself as an employer is a major stakeholder. Mr. Abbate stated the Committee formed in 1990 included three Board representatives--the County Manager representative, Human Resources Director, and the Budget Director; the remaining

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stakeholders who were appointed as Committee members were representatives from each Constitutional Officer participating in the Board?s program and one outside agency; these members included representatives from the Sheriff?s Office, Property Appraiser, Tax Collector, Clerk of Court, Supervisor of Elections, and Canaveral Port, which has participated in the Board?s plan since the 1980?s. He advised by Board action in 1995, the Board expanded Committee membership to 15 members; each Commissioner was authorized to make an additional appointment to the Committee; the Board authorized an employee representative that was selected by the Employee Advisory Committee; and subsequently through collective bargaining negotiations, a representative from the IAFF Bargaining Unit was added, so today the Committee has 16 members. Mr. Abbate stated the Employee Benefits Insurance Advisory Committee provides both employees and designated representatives from each Commissioner and each Charter Office participating in the Board?s health care programs the opportunity to provide input to the Board about health plan issues and offer recommendations that are aimed at maintaining an affordable and stable health care program for all stakeholders; the Board enjoys very favorable language in the collective bargaining agreements in terms of giving leeway that is not typically enjoyed by many employers with unions; and one of the reasons this is the case is due to the active participation of union leadership, being informed about the plan, and having the opportunity to provide input to the Board through the process.

Mr. Jenkins stated this is an Advisory Committee; he, as County Manager, does not feel bound by its recommendations; historically, they have worked jointly; and as staff was preparing next year?s budget, he established some financial parameters. He noted there were some tentative ways to achieve those financial parameters; the issues were presented to the Committee and it came back with a series of recommendations, which he found acceptable to propose to the Board; reiterated he is not bound by this and a situation could occur where he could present the Board with a recommendation which is different from the Committee; and the Board would have to weigh both of those recommendations. Chair Higgs stated the Board is not bound by either recommendation.

Mr. Abbate stated the Board always retains all decision-making and policy-making authority for group health insurance issues; the County Manager identifies employee funding targets annually as part of the tentative budget; the Committee provides the Board input from all the stakeholders annually, which the Board can either accept or reject; and the Board also receives input from the Citizens Budget Review Committee annually. He noted this year such Committee has provided the Board several recommendations relating to the Board?s employee retiree health care program; as an organization, the County has aggressively shopped and marketed through a RFP process over the last decade; as marketplace conditions have changed over time, so did the design of health plans and response to those conditions; and consultants caution employers not to shop group health insurance too frequently. He stated many carriers will negatively rate an employer for frequent marketing and the associated instability of the plan; long-term strategic partnerships provide advantages to carriers, employers, and plan members in many cases; the County has aggressively marketed RFP?s over the last 10 years on at least four or five separate occasions; from 1979 to 1994, the County had a traditional indemnity plan, which meant it was self-funded and provided open access to providers; there were no provider networks or any accompanying discounts; and when there is a limited network, providers will give discounts. Mr. Abbate stated the County had a general plan; it paid reasonable and

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customary charges within the community; plan participants had deductibles of about $150 per person and $300 per family; co-insurance was 80%/20%, the plan paid 80% and a member paid 20%; and out-of-pocket expenses were $800 per person and $2,400 for a family. He noted by 1994, there was a prescription card program in place where a member paid $5.00 for generic drugs and $10.00 for brand drugs; it was a common approach during that time period that many employers had; but as costs continued to increase and there was a health care debate in the early 1990?s, the horizon did not look good and the County had to look at other alternatives to contain costs. He stated the next key time period was 1995 for the County, where it was introduced to managed care; it was a fully-insured HMO and PPO product through Humana; when the County went to it, it went to significantly limited restricted physician and hospital networks; and the plans themselves received very substantial pricing discounts from the providers who were in those networks. Mr. Abbate noted it was a gatekeeper model where there were cost containment strategies; members had to go to primary care physicians and have referrals before they could get to a specialist, etc.; the limited network, as well as these other cost-containment strategies, were not well received by providers who were not participating in the networks or by plan participants; so what was very typical in the HMO as a marketing strategy during that time was to have very low co-payments and it moved away from the deductibles and co-insurance to a flat low charge or no charge to go to a primary care physician. He stated the co-pays were $5.00/$10.00 co-pays; if someone went to a hospital in network, he or she would have zero co-pay; it was very common; and as the County put that type of program into place in 1995, the Board recognized very substantial savings. He noted its 1995 costs were 17% for the Board as an employer lower than what it actually paid in 1994; it was a $2.2 million reduction in plan costs; at the same time while employees and members were concerned about the restricted networks and everything he has discussed, they have also benefited from lower co-payments that they made of $5.00/$10.00; and that is the history of the County moving into that type of managed care. Mr. Abbate stated unfortunately during 1996, the County saw the collapse of the Humana plan; Humana was very aggressive in its pricing and by the middle of 1996, it realized it was a big loss situation for it; and it approached the County and said it would like to pull out midway through the Contract and give the County $1.5 million if it would let Humana out. He noted there was no other similar option available for the County at that kind of cost at that period of time; Humana stayed until the end of the year; the County went out for RFP when it found this out in 1996 and looked for an alternative strategy; and by the end of 1996, Humana left the commercial market in Brevard County because it could not make it. He stated in 1997, staff received Board direction that it wanted to see a cost competitive plan put into place that provided in-network access to all local hospitals; it was a challenge for staff; during 1997-1999 timeframe, there were managed care wars; and basically, plan members ended up being the casualties of what was going on, as well as the County, with dissatisfaction from its members. He noted the County had unstable provider contracts; it put in place Aetna and United Health Care; providers were coming to the Board complaining that they were dropping out of the plan; and United Health Care dropped half of Brevard County?s hospitals, even though it was Board directed that it wanted to keep hospitals in the networks. Mr. Abbate stated it was a very trying time; the County learned very tough lessons about provider-hospital contracting, and what was going on; during 1999, it became very clear that there was no one plan that could deliver all of the hospitals in a single network with the substantial discounts that were available by going to more limited networks; and in 1999, under Board direction, the approach changed from reacting to the market conditions to

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

somewhat taking charge and trying to leave market change. He noted the County undertook a groundbreaking initiative to create a plan option per the Board?s direction that would have a lot of hospitals participating in a single plan; it was not available in that time frame under the commercial market; while staff began that initiative and dialogue with providers, the School Board joined in partnership with the County; and it still enjoys that partnership today. He stated staff began going out to all the major providers within the community, using the leverage it gained by partnering with the School Board; it had an all inclusive process; it had discussions with the Medical Society, all the major hospital systems and physician groups, the Brevard Partnership network, and all the major insurance carriers to evaluate where the County was, where it could go, and try to meet what the Board?s established objectives were; and during that timeframe, the County was involved in some rather out-of-the-box thinking and initiated a joint RFP process with the School Board. Mr. Abbate stated staff began direct contract negotiations with different hospital systems and major position groups, including Brevard Professional Network, to develop a competitive model; such model included a network the County established through the Brevard Partnership plans; staff put it side by side with two other networks--the Aetna national network, which was a more limited network, and the County?s local HMO through Health First; and the three plans were put side by side, with the objective that over time, the County would evaluate what was occurring in the plans, and make adjustments, recommendations for adjustments, and pricing strategies to accomplish a variety of Board objectives. He noted staff evaluated membership satisfaction over time; during the first couple of years of the plan, as the County took this innovative approach, it reduced costs compared to the national average rather significantly; it continued to evaluate it; and unfortunately, while it went back to the various plans it had in place and shared information of where the County was and where the plans were relative to one another to keep the competitive plan and model in place, staff noticed a couple of things, including that the Brevard Partnership Plans by the middle of 2003-2004 were substantially higher cost plans. Mr. Abbate stated the County had to look at alternatives; it looked for improvements before 2004 and last year went out in an additional RFP process; in part of the initiatives staff was involved in, market conditions changed; and he hopes the County played at least a small role in seeing those changes. He noted this past year, Cigna became a plan that was able to offer the County an alternative to where it was and appeared to be a better pricing than it was enjoying; staff came back to the Board and recommended a change; that is where the County is today; and it added the Cigna EPO and PPO, which are part of the competitive model still in place.

Health Plan Initiatives

Mr. Abbate stated in terms of cost containment issues and strategies, the County has implemented utilization review and pre-certification; it has also implemented drug formulary implementation where there is a three-tier program with a $10.00 co-pay for generics, $20.00 for preferred drugs, and $35.00 for non-preferred drugs; the County has implemented step therapy; it is dealing with issues in terms of carving out the prescription program and behavioral health; and there is a capitated rate on it.

Mr. Jenkins inquired what does "carving out" mean. Mr. Abbate responded it is not just part of the overall group health insurance program with the three carriers; staff looked at alternatives to just the three carriers and what other options were out there; a determination was made that

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was the best course of action to pursue; and the County has been very aggressive this year through the Florida Health Care Coalition and has partnered with it in sharing information in an RFP the Coalition went out with to further reduce costs. He stated the County was able to leverage very significant savings from the current pharmacy benefit manager; staff will be

bringing something back to the Board next month in terms of reducing the County?s costs further for next year; and staff continues aggressive cost containment efforts. He stated another big cost containment effort is health and wellness; staff has tried to be very active in that area as well in terms of onsite education programs, weight loss, cholesterol, diabetes programs, and smoking cessation programs; it conducts five health fairs annually; and the County has three employee fitness centers that it does in partnership with the School Board in Viera and in Titusville. He stated it also has flu shots and health monitoring; there is also an advanced registered nurse on board; during 1999, the County looked at whether or not to establish health and wellness clinics; and during that time period, because of the pricing that was involved both from Health First and Aetna where it had capitation, the type of program the County had in place when it did the analysis showed it was not affordable and did not make sense at that time for it to go forward with the health and wellness clinics as annual physicals were already covered as part of the cost structure. Mr. Abbate stated capitation has very significantly changed in the market over the last several years; this year, the Employee Benefits Insurance Advisory Committee wanted to review whether or not the County should re-look at health and wellness clinics; it is something that is ongoing; and a subcommittee has been formed and is looking at the issue as an alternative and whether it is cost-effective. He noted the Committee is also going to Polk County to review its health and wellness initiatives; Aetna?s Book of Business indicates 61% of its population that has coverage through Aetna only make up 4% of the costs, the well population; for acute care, which is short-term visits, 26% of the population makes up 37% of the cost; and 13% of the population makes up 59% of the costs in major areas, such as cardiopulmonary, diabetes, and asthma, as well as catastrophic claims. He stated the focus has changed and HMO?s are changing how they are doing business; they are starting to focus more attention in the area of disease management; and the County is trying to join them in that effort.

Commissioner Scarborough stated he has always been told that the purpose of insurance is for catastrophic events; if there were no such events, the County would not insure and individuals would self-insure; it is the disastrous thing where insurance gets to be beneficial; and Mr. Abbate is approaching the issue like it is an anomaly and unusual, but it is the essence of insurance itself. Mr. Abbate stated that is correct; what he is trying to focus on is any discretionary dollars the County may have to try and contain costs where they are best spent; there is a shift; and rather than trying to oversee the care that every individual receives when he or she goes to a primary care physician, the shift is to put those dollars where the biggest cost is. He noted the County has a pilot project with Pfizer Pharmaceutical where it is going to be doing some disease management; 10,000 Steps a Day is a Program and first step in the direction of trying to address issues of weight management and more active walking; Knowing Your Numbers is with the Florida Health Care Coalition; and biometrics is looking at cholesterol and taking those readings, including blood pressure as well. He stated Well Work Place is having publications and newsletters to share with employees on health-related issues; and Carrier Partnerships will include Aetna, Health First, and Cigna in the area specifically of predictive modeling and trying to focus on where the County?s large claims may come from to

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

gain some insight into identifying those individuals and intervene at an early level. Mr. Abbate noted the County has spoken to Health First on its Tri-fit Program, which is an obesity program; when all cost-containment strategies have been exhausted and costs are not affordable from

the employer, there is only one option left of cost-sharing, which means shifting more of the costs to plan participants; when the County does that and looks at a plan member, it has to look at it from the perspective that he or she has two pockets; and the one pocket is to increase the premiums that he or she pays. He stated it is going to be a real dollar cost to the plan member; the other cost is what the County does on the front end; when it increases co-payments and co-insurance, it is money coming out; it is going to show it as a savings to the plan in terms of what the plan is paying out; but those are still dollars that are going to be paid by the plan member, just not in terms of premium so it will show as a reduction. Mr. Abbate stated if the County shifts costs by going to a model, that says the plan is only going to pay 80% of the costs and the employee has to pay 20%; currently, an employee pays $100 for hospital stay, which is a very significant amount of money; it is going to show as though the County is saving money in the plan overall as it is not an employer cost or something the employee is paying as a premium; but those are real dollars coming out of the employee?s pocket; and sometimes employees cannot afford to pay that and can be part of an uncollected debt that sometimes hospitals and others may face. Mr. Abbate noted the County has done cost shifting and is continuing to look at it as something that has to be done in terms of premium increases over time and benefit design changes; when premiums are increased over time, part of the strategic strategy is to try to encourage people through cost shifting into lower cost plan options; Aetna HMO has 45% of the population, Health First has 32%, and Cigna HMO has 14%; and that is 90% of the County?s membership that are in those types of fairly cost-effective alternatives as opposed to where it was in the traditional model years ago.

Mr. Abbate explained the overall benefits and compensation package, including the areas of recruitment and retention; stated a recent survey from Stoneybrook University called The Healths of America indicated that two-thirds of working Americans think that retirement benefits are very important to them; while a young individual may not think that the day he or she comes in, he has had the opportunity to speak with many people; and as time goes by in his or her career, it becomes a more important issue. He noted one of the toughest areas for some of the key players that have left the County recently and made their decisions difficult is the fact that it has a good retirement system through the Florida Retirement System and the benefits package; it primarily is the group health insurance that is offered to employees, their dependents, and retirees; one of the major common themes that has been out there is that the public sector cannot compete with the private sector in terms of salary often times; and the response has been what are advantages to the public sector. He stated the typical ones are job stability over the long term and the benefits packages typically are better; it is important for the County to compare itself to other comparable jurisdictions; staff has done that; it is equally important to look where the County is in the salary perspective; and those two issues make up the total package. Mr. Abbate stated staff has conducted a salary survey that looks at some key benchmark positions so the Board can see where the County is from a minimum salary level and an average salary level organizationally compared to other jurisdictions; and staff wants to give the Board all the information it needs to look at a complete employee overall compensation package and indicate where it wants to provide policy direction to staff.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Health Plan Comparisons

Mr. Robinson stated there was discussion earlier about what happened to medical inflation over the last several years; staff is going to show the Board what happened in Brevard County; it has looked at some comparables; and he will explain how it came up with the numbers. He noted it did not just want to come up with gross numbers but tie it to a unit, so it tied it to the actual contracts; it will also be looking at the total cost of care; and in an earlier slide, staff indicated the cost of medical inflation in health plan increases from 1998 to 2004 was dramatic and going in the double digits in the last four years. He depicted the annual trend increases nationally and for Brevard County; stated in 1998 and 1999, the County was a little higher than the national average when it came to those particular increases; it was the time Mr. Abbate referred to as the managed care wars; and in 2000, the Brevard Health Partnership Plan was formed with a competitive model, which was a leader in the industry. He noted there were no networks that included all of the local hospitals, but it was accomplished in 2000 with the Partnership Plan; it not only accomplished putting the Plan together, but beat the national inflation rates for two years; in 2002, additional data was available to see that something else had to be done and had to be reviewed; and nothing could be done before that particular period as the data was not available to make any effective decisions on what was happening with the plans. Mr. Robinson stated several things took place during that particular time, including looking at pharmacy benefits, and the EPO and PPO plans this past year; and the County can see what has happened in 2003 and 2004 due to the action that was taken during that time. He outlined comparisons of different counties, schools, and the City of Orlando; stated there are several differences the Board is going to see; it is not an apples to apples comparison; and staff did the best it could in trying to make the particular comparisons, but there are several issues that come up and are looked upon differently in all areas. He noted there are differences in geography; what happens in Orange County is not what happens in Brevard County; costs are different; if Brevard County moved everybody to one hospital in Orlando, it would be cheaper than having care provided here; but it is not practical and is not going to work.

Mr. Robinson stated plans that are self-funded have reserve requirements; it is money that is above and beyond what is spent on claims; those reserve requirements are for two things, to pay for run-out claims and if some catastrophic case would happen; and there are also some differences one year to the next. He noted staff compared 2004 at this particular point in time; it would like to continue this exercise as it moves forward so the Board can see what happens over time; and there is also a difference in some of the plans including administrative costs in their particular premiums, which the County and School Board have. He stated it is not seen in other areas because where it is fully insured they are paying a premium; with self-funded, some of those additional costs can be built in and it gives the total costs for the program versus just the costs for the premiums for the health insurance; there are also differences sometimes where a group may be self-funded and have to infuse that particular plan with additional monies; and monies would have to be transferred in. He noted it is not considered in these particular ideas; there is also a difference in contract size; Mr. Abbate showed a slide earlier of approximately 4,370 employees and retirees that are covered under the plan, representing 9,040 members; and the contract size is the 4,370 employees and retirees. Mr. Robinson stated there is a difference in size when looking at Brevard County, which is 2.1 people in each contract; the

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

School Board is 1.4 people; and it does not have the participation for dependents that the County does.

Mr. Robinson stated staff looked at the employer monthly contributions and what is being funded by counties for coverage that would include employees, dependents, and retirees if any funding is available for those particular areas. He noted there are some different funding methodologies that take place; the County funds the employee amount at approximately $587; Orange County funds at the single rate and 80% of the family rate; and staff wanted to find a way to equalize those particular numbers. He stated it included all of the employer contributions for all employees and retirees that have coverage; it took the total amount that was paid in the premiums for all the plans; for the particular groups staff looked at, it got the different plans they had offered, took the County contribution levels times those particular numbers for each of the plans, and came up with a total; and it divided that by the total number of contracts for all the groups. He noted the counties staff looked at were Brevard, Orange, Osceola, Polk, and Seminole Counties, and the City of Orlando.

Commissioner Scarborough noted this does not address the second pocket that Mr. Abbate talked about. Mr. Robinson stated it will.

Commissioner Colon inquired is Mr. Robinson going to discuss the fact that the employees get paid less than the employees in other counties; with Mr. Robinson responding yes.

Mr. Robinson stated the County has a strategy to fund for dependents and retirees; employer monthly cost comparisons show Polk County at $464, Brevard County at $533, and Orange County at $535; staff also looked at the school boards as a separate comparison as they have a different makeup of contracts; and the School Board?s employer monthly cost comparison is $471. He noted out-of-pocket expenses were also reviewed; such expenses are defined as the co-payments, deductibles, co-insurance, and anything the participant has to pay when he or she goes to the doctor, hospital, and pharmacy; all of those out-of-pocket expenses that one has to pay are included on the graph; and staff looked at relative values of different plans, and reviewed every plan particular groups offered, including HMO, PPO, etc. and participation levels. He stated out-of-pocket expenses that would have to be paid by individuals within those plan were also reviewed; there was a difference in co-payments; there would be a difference in hospital co-payments of $100 to $200 a day times five days; and there would be a difference in PPO costs as there would be a co-insurance level as opposed to the co-payment level. Mr. Robinson noted he looked at County government as a relative value of 1.0; he has the out-of-pocket expenses for Orange County and has been tracking it; he took Orange County?s number as the base number; he put the relative values that were actuarially determined for Brevard, Osceola, Polk, and Seminole Counties, and the City of Orlando; and those actuarial values were used with the actual dollar amounts in Orange County to come up with the particular factors as to what employees were spending out-of-pocket. He stated it factored in the differences in co-payments, co-insurance, and all the monies that were spent out-of-pocket; and explained the graphs showing the premiums that are deducted from employees or paid by retirees for the particular groups.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Mr. Robinson stated the employee portion is broken out into two areas, what it is paying as an out-of-pocket expense for employees and retirees, and what it is paying for premiums.

Chair Higgs stated an employee is paying $142 per month when out-of-pocket expenses and premiums are included; and a Polk County employee pays $206. Mr. Robinson noted that is correct.

Mr. Robinson stated he looked at the School Board in comparison to Brevard County; there is a little difference in the out-of-pocket expenses as some co-payments have been changed; the School Board has a different population in PPO than what the County has; and the premiums for School Board employees are significantly higher.

Commissioner Pritchard inquired does Mr. Robinson have a comparison as a percent of employees? salaries; with Mr. Robinson responding no. Commissioner Pritchard inquired would it be a fair way to look at it if a County employee is making less money than other employees. Mr. Robinson responded potentially, as it could be viewed as a total compensation package; and it is an area that may be of interest in future studies. Commissioner Pritchard stated it is obvious if one receives less in income, that could be a valid comparison as to the amount of premium that is being paid. Mr. Robinson noted that is a very good point.

Chair Higgs inquired are retiree benefits calculated in; with Mr. Robinson responding yes. Chair Higgs stated other counties handle their retirees in a similar manner as the County. Mr. Robinson noted not exactly and the issue will be discussed later in the workshop.

Mr. Robinson explained the monthly total cost comparison between Brevard, Orange, Osceola, Polk, and Seminole Counties, the City of Orlando, and School Board, including the employer contribution numbers, a combination of the employee and retiree premium, and out-of-pocket expenses; stated the numbers are pretty even when everything is included, and it is the way the monies are distributed; Osceola and Seminole Counties are somewhat lower; but the numbers are pretty equalized.

Retiree Issues

Mr. Robinson stated the strategy used for retiree premiums was to ask the different groups what the most popular plan was for retirees, take the most popular plan, and graph the retiree only monthly premium; in Brevard County, the PPO is the most popular plan for retirees under age 65; the current monthly premium is $239; and the premium for a retiree in Polk County is $182. He noted Polk County subsidizes its retirees differently; it offers 3% a year in coverage for the retiree or the number of years of experience; and that is taken off the plan. He stated the City of Orlando?s premium is very low because it pays for experience; 15 years was used as the benchmark; and the same exercise was done for retirees over age 65.

Commissioner Pritchard inquired why would PPO be popular with County employees and is a lesser amount than HMO. Mr. Robinson responded the PPO is a much better plan for the retirees if they are out of the area as they would have coverage.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Chair Higgs inquired is it previous to the County having the Cigna HMO or Aetna Options; with Mr. Abbate responding it was very similar and not much change in terms of where the distribution was.

Commissioner Pritchard inquired why is the County?s PPO premium usually less than the other counties? HMO?s; with Mr. Robinson responding it is due to the funding methodology and strategy the County used up to this particular point in time. Mr. Robinson stated the Board has funded the employee contract only; and it helps pay for retiree coverage. Commissioner Pritchard inquired is Polk County?s contribution 3% per year of employee service; with Mr. Robinson responding yes. Commissioner Pritchard stated if there is $100 premium and a 20-year employee, Polk County would pay 60%. Mr. Robinson noted that is correct. Mr. Robinson stated he did the same comparison for the School Board; and it does not subsidize its coverage for retirees.

The meeting recessed at 10:30 a.m. and reconvened at 10:45 a.m.

Mr. Robinson stated initiatives include wellness and disease management; Mr. Abbate touched on a number of different initiatives that are currently in place; just shifting costs is not the answer; and it is trying to be proactive in these particular areas. He noted Commissioner Scarborough asked about catastrophic cases and some of the chronic cases; that is what insurance is for and why there is protection; the idea behind disease management is to try and make sure a person is receiving effective and efficient care; and there could be some cost savings. He stated there are initiatives that need to take place so that one does not have those risk factors to get to the chronic and catastrophic event; the disease management portion is something that is immediate and the County is going to see more return on investment now; the wellness programs are a long-term strategy because risk factors are changing and not necessarily costs; and there are consumer-driven options. He noted there is currently a proposal for consideration by the Board in the legislative packet to look at a Statewide retiree plan; it is something similar to what school districts have looked at in the past; it would provide better options for retirees and help with some of the issues discussed earlier; and another issue is continuing the coordination with the School Board. Mr. Robinson stated it is a very valuable partnership and has worked well within the community to try and come up with the networks and RFP?s; another issue is coordination with Florida Health Care Coalition; Mr. Abbate mentioned some of the projects that have taken place and some of the leverages used, particularly in the pharmacy benefit area; and it will continue, along with some other quality initiative types of activities. He noted another issue is looking at the plans and adjusting them for risk; there may be sicker people in one plan than another; the County would like to level that playing field so it can see which plans are performing the best; and the risk adjusted model could come up with those areas where there is catastrophic care to control some of those particular issues versus where there is no opportunity to do so. He stated these are the types of things that can save significant dollars over time; and it is in coordination with some of the cost shifting and cost containment matters.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Commissioner Pritchard inquired is there opportunity to coordinate with other major employers besides the School Board. Chair Higgs inquired if Commissioner Pritchard means non-governmental. Mr. Abbate responded that is what the Florida Health Care Coalition is about; and the County is an active participant in it, along with many other major employers.

Commissioner Scarborough inquired about municipalities in the County and their insurance; with Mr. Abbate responding it is very difficult for municipalities to participate with the County in this kind of program as most of them are not large enough. Mr. Abbate stated the County has invited them and done presentations; but because of their size, they cannot take risks in terms of self-insurance. Commissioner Scarborough noted he is interested in Orlando, Melbourne, Palm Bay, and Titusville; the County is concerned about people in the cities as well; and if there are ways to make it work better for them, then it is of importance to the County.

Mr. Abbate stated staff has remained sensitive based on Board direction in the past to make sure employees and retirees have the options to go in one or more of the plans the County offers to all local hospitals; there is value in doing that; one of the problems it learned when it had all the eggs in one basket in the mid 1990?s is if one carrier has all the employees, it can put more pressure on hospital and physicians; and it is not in the long term going to be to the County?s advantage. He noted the County provides access to all hospitals through two separate networks; the third network includes all in one network and the Cigna alternative; and the competitive model in offering multiple options is very advantageous.

Commissioner Scarborough stated he was concerned at one point because of the options to physicians; it was in North Brevard and shifted to South Brevard; there were problems in people being able to get quality physicians within their locations; and it has not been mentioned. He noted it is critical because if there is not enough access to a quality physician, the County basically has not given the employees quality insurance.

Mr. Abbate stated the competitive model is good to continue and is part of the current strategic thinking; the Board has always been sensitive to the relationship to salary increases; it has asked for information in the past and what the impact will be of premium increases to employees and retirees. He noted the partnership with the School Board and Florida Health Care Coalition are also included in the current strategic thinking; current funding ideas include employer funding for employees, dependents of employees, retired employees, and dependents of retirees; annually the employer portion is determined as part of the budget process and the tentative budget submittal of the County Manager; and staff has to make up those differences in recommendations to the Board. Mr. Abbate outlined the 2004 vested premium rates; stated currently in the HMO plans employees are paying $5.00 per month; the vested rate, which is someone who leaves County service, is $298 per month, the employer portion is $293, the family rate is $745; and the 2004 premium an employee has to pay is $88.86 per month. He noted based on Florida Statute, the maximum the County can charge to retirees is the rate it charges employees or families, which is the vested rate; and explained the current contribution strategy chart. He stated for 2004, the employer total contribution is approximately $27.6 million; what was submitted in a tentative budget would be about a 6.6% increase or another

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

$1.8 million, making next year?s tentative budget $29.45 million; the employees and retirees this year combined payments are $3.7 million in premiums; and it is projected next year to increase $1 million, which is a 26.91% overall increase for a total of $4.71 million. Mr. Abbate stated the benefit changes that are going to be necessary in order to make sure the County has adequate funding has to be made some way, either the employer paying the premiums, employees paying it, or a cost shift; the cost shift is $759,000; the money is increasing the co-payment for specialists visits, increasing the payment for hospital visits from $100 per visit to $200 a day for the first three days, and outpatient services as well; and it would generate a $759,000 reduction in costs by employees and retirees paying it on the front end. He noted the County?s plan would be growing at a 12% projected rate; and it is how the currently proposed contribution strategy has been submitted.

Commissioner Pritchard inquired are these pretax payments for the employee; with Mr. Abbate responding premium contributions are pretax. Mr. Abbate stated employees have the opportunity to put money away in medical spending accounts so that co-payments can be made with pretax dollars also. Commissioner Pritchard noted if the employee contribution was increased by $10 per month, it would be a $10 net savings to the employer. Mr. Abbate stated that is correct; and it would not be for retirees and only applies to the active employees.

Chair Higgs stated the subsidy of the PPO for a retiree less than age 65 is $223; if somebody opted into the HMO it is only a $98 subsidy; some employees are making less than some of the averages; but inquired when adding in the costs from somebody who retires at age 55, is it $300 per month or $3,600 a year. Mr. Abbate advised the numbers are based on the current rate structure that exists. Chair Higgs stated she understands that; and inquired would a younger employee be more motivated to come to Brevard County to work by the $3,600 a year figure. She noted if there is a subsidy of $200 a month for the retiree, over a lifetime of perhaps 30 years after retirement, that is a significant dollar figure; and if the County looked at incentives for people to work for it, it might think about where those dollars go and make a decision based on that.

Mr. Abbate reviewed the 2004 and 2005 rate comparison; stated part of the strategy that has been submitted to the Board was having to come up with $1 million; one way to do that is to increase every plan?s participants from $5.00 to $20.00; and 90% of the members are in the three HMO plans. He noted such increase generates about $650,000 of the $1 million; a $5.00 to $20.00 increase is a $15.00 per month increase or $180 per year; on the retiree population, staff made sure dependent rates were no lower than what the retiree rate was; but in some instances they were. He stated as the adjustment is made, there are significant increases in retiree/dependent rates; this year when the County went to Benefits America, it was able to get very good information on demographics; the structure that has always been utilized and is still in place for retirees is retiree premium and retiree/dependent premium; and the assumption is that the retiree/dependent premium is one person, who is typically the spouse. Mr. Abbate noted there are multiple situations where there are anywhere between two and six dependents that a retiree has on a plan; if the Board was to make an adjustment in the rate structure to accommodate that as a move to not subsidize retiree/dependent as much, the first step would be to create the second tier; it is a very significant increase; and for retirees in the HMO, the increase would be from $341 to $608 or over $3,000 per year.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Mr. Abbate provided information to the Board on the annual life salaries for lower paid employees, including Office Assistant and Library Aide; stated such salaries are $16,000 per year; the Countywide average salary is $34,000; and the average retiree in Brevard County has 15 years of service and is receiving $9,597. He noted retirees receive a $5.00 per month subsidy from the Florida Retirement System for group health insurance; since the average retiree has 15 years of service that equates to $75.00 per month or $900 per year; the projected annualized increase for COLA for the lower paid employee is $490 and the Countywide average is $1,036; and retirees would receive $287. He stated the annual impact of the Employee Benefits Advisory Committee?s recommendations would be an average of $180 for employees in all of the health plans, $232 in the EPO for family members, $509 in the PPO, and impact for retirees would be from $180 to over $3,300 per year for two more dependents; for retirees that have more than two dependents, the income by making the adjustment is minimal as there are 20 or so contracts involved; it would equate to about $60,000 in additional premium revenue; and if the County wants to subsidize retiree/dependents less, that is a way to do it.

Commissioner Carlson inquired what is the percentage increase in the numbers. Mr. Abbate provided a chart to the Board showing the percentage increases.

Commissioner Scarborough stated the worst case scenario is the retiree under age 65; and the average is $10,000 with about a 30% hit on the total wage in additional cost for health care.

Chair Higgs inquired about the way the County deals with its retirees in terms of health care versus other similar jurisdictions. Mr. Robinson responded the County subsidizes the premiums for retirees and dependents. Mr. Abbate stated some jurisdictions subsidize the premiums, but on a scale of 0 to 100, the County is in the 80% plus range; it subsidizes retirees more than 80% of other jurisdictions; and the only jurisdiction that perhaps subsidizes greater than the County is the City of Orlando. Chair Higgs noted staff showed the Board a comparison of wages; but to look at benefits over time, one has to look at the whole package; and the County is only having people stay 15 years on the average. Mr. Abbate stated it is the actual average that was obtained from FRS. Chair Higgs stated she is trying to get a handle on the County?s wage issue versus its long-term benefits issue and how it plays in terms of its attractiveness as an employer, and if it wants to have a different strategy to continue to attract good people to work for it. Mr. Abbate stated he spoke to several individuals in exit interviews; it is common to hear that it is not the salary structure as much as the benefits through the FRS and advantages individuals have by participating in the County?s Group Health Insurance Program as employees and when they retire; it is a consideration; and in many cases, there are County employees who receive very substantial salary increases. Chair Higgs stated she is sure individuals weigh that factor; if today?s younger worker is raising a family, he or she is going to be concerned with much more immediate concerns as opposed to the longer term; there is a balance there; and she is trying to get a grasp on where that is.

Commissioner Pritchard stated he is not too sure that balance is going to be that definitive; usually the younger folks are busy working and raising children; they do not tend to think about retiring until they hit their 40?s; and that is when they realize they better get into deferred compensation or other options so they can insure they have a retirement they can live on.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Commissioner Pritchard stated some people exist on $9,000 a year, but do not live on that income; he would assume there would be some sort of supplemental income if someone is under age 65; and he or she may retire from the County, but is probably working elsewhere. Mr. Abbate noted an individual may have a second retirement.

Chair Higgs stated the worker who retires at age 55 is not going to draw social security; he or she may have another income and the $9,000 is not the incentive; she is concerned about how the County continues to attract good quality younger workers; and the younger worker right now is not going to look at what is going to happen to him or her at age 55.

Mr. Jenkins stated what is equally important is retaining the knowledgeable experienced 40-year old worker. Chair Higgs noted the same holds true for the 55-year old worker; it is very important; but the County also has to have that other segment of people.

Commissioner Scarborough stated one time the School Board did something where it had a net reduction in the salaries for employees as the increase in insurance costs negatively impacted individuals; a lower-paid County employee is at risk 50% that he or she is going to have a net reduction in income this next year under the scenario of combining the health costs and the wage increase; and it is why he has suggested the Board review going to a dollar amount at the bottom end in addition to percentages; and the County can handle the insurance more logically. He noted if the Board does not do that, it is going to have some profound problems; and under the present scenario, 50% of the County?s employees at the bottom end will walk away with a net loss of income next year.

Chair Higgs inquired which scenario or is it all scenarios. Mr. Abbate responded the analysis he provided to the Board shows the average salary, projected COLA, and increase in the premiums; it does not have the dollars associated with the out-of-cost shift of the $759,000; and in dividing that number by 4,300, the net impact is $176.00 per year per contract. Chair Higgs inquired what is the total. Mr. Abbate responded it is $180.00 for the premium shift plus $176.00 for the cost shift, for total of $356.00 for an employee in HMO; and it would have to be done to get to $1.8 million. Chair Higgs inquired is there a dollar number that motivates the people that are in the well and acute categories to take care of health problems at those levels before they become catastrophic or chronic. Mr. Robinson responded it is very difficult to change behavior of employees and participants, outside of having a catastrophic event that changes someone where he or she stops smoking, loses weight, and does something that is more healthy; it is a real challenge and one that the County is going to continue to work on to come up with ways to motivate individuals; money itself is a short-term motivator; and it will help for a while, but it does not help after that. He stated incentives, programs, and working together on things as a group and unit have worked in a lot of cases; Orange County has a very good wellness program and challenges for different groups; it is hard work; and one of the real challenges is to try and find ways to have individuals change their behavior. Chair Higgs stated if the County cannot get people to do some things, then they move into the chronic and acute; it gets into the position where it cannot afford reasonable health insurance it wants to provide; and inquired is there anybody who has figured out how to motivate people.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Mr. Jenkins responded that is one of the reasons the County adjusts the out-of-pocket expenses; the person who goes to the hospital is the one who is going to be paying more money as opposed to the person who is healthy and does not go to the hospital; that individual is not paying $600 for the first three days to be in the hospital; and one of the reasons the County has distributed the cost increases between premiums and out-of-pocket expenses is because it is the users of the system that are going to be paying the out-of-pocket expenses.

Chair Higgs stated the County is hoping that motivates people, but it is not so sure it does. Commissioner Scarborough stated it is not the money that is going to motivate the person, it is the potential that if he or she has early prevention, he or she is not going to suffer; it is not the dollar amount, it is who wants to suffer with cancer and who wants to find it early; and early detection means less. He noted the horrendous thing of going through cancer is much more onerous than a couple more dollars; education of health issues and utilizing early prevention saves individuals and their families a lot of torment and is the way to go; and it seems the way to be proactive.

Mr. Jenkins stated what is driving the most is overweight, high blood pressure, and diabetes. Commissioner Scarborough noted that goes back to education because those factors cause other problems; and maybe there are groups and private industry that have a very proactive health information program to educate employees on preventive medicine and how they and their families can be healthier and live happier lives.

Chair Higgs stated she believes there are some aggressive wellness and education programs, but nobody is real sure how well they work; there are some that have been reported in the literature; and staff has distributed those and they are exciting potentials. Mr. Jenkins stated the County does some of the programs and is looking at expanding them; the Reedy Creek Development District sent a brochure to County building inspectors trying to recruit them to Orange County; the inspectors are mostly mature people and are mostly 50, 60 and 70 years old; and that is why health insurance is an issue.

Commissioner Carlson stated the newspaper recently indicated obesity is becoming a disease; staff told her obesity has not really been defined as a disease, but once it does, then there is no alternative from the health care perspective to cover issues like this; she is not sure what it does to wellness because obesity drives the costs up; if the County is looking at wellness programs it might circumvent those positive things it tries to do because they now have an excuse and get it covered; and it is a big concern. She inquired what is the potential timing on the legislative initiatives and Statewide insurance retiree plans; with Mr. Robinson responding years in order for it to get into place. Mr. Robinson stated the actual recommendation is to look at an actuarial study to find out the feasibility of moving forward with a Statewide retiree plan; that is the idea behind the program, where monies would be shifted to the health insurance subsidies to have a Statewide program for all FRS retirees. Commissioner Carlson inquired where would the County?s cost reductions be if it could be successfully legislated. Mr. Robinson responded the cost of the retiree would be shifted to the State; and the savings would be in the economies of scale in dealing with the retiree population from a Statewide perspective versus dealing with it here. Commissioner Carlson inquired is there any reason to get out of the self-insured

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

category; with Mr. Robinson responding no. Mr. Robinson stated the self-funded program has worked very well for the County in the past; its network discounts would be very similar to what it is getting right now; claims management would be the same; it is now with carriers that have networks that are nationwide that could be used in several circumstances; and he does not see any advantage to going fully-insured. Commissioner Carlson noted she assumes there are not any models that have been defined based on how much one uses insurance; it used to be if someone was a big user of insurance from a small company perspective, the more he or she used it every year, the premium would increase; and inquired has there been any modeling for the big self-insured entities like the County. Mr. Robinson responded no, the County cannot differentiate.

Mr. Jenkins stated the County has been increasing out-of-pocket expenses, which means employees are going to be paying more.

Commissioner Pritchard stated the under age 65 retiree pays more of a premium than the over age 65 retiree. Mr. Abbate noted the County is the secondary plan to the over age 65 retiree. Mr. Robinson advised Medicare pays first; and the plan pays $876 for the hospital deductible, the $100 annual physician deductible in Part B, the 20%, and prescription drugs.

Chair Higgs stated the prescription drug program picks up all of that and it is not covered under Medicare. Mr. Robinson noted that is correct; and the cost is $186 per month for a retiree.

Commissioner Carlson stated Orange County does not cover HMO?s in terms of subsidizing. Mr. Robinson stated Orange County uses the health insurance subsidy methodology through FRS; but it subsidizes it at $3.00 per month; and the individual gets $5.00 per month from FRS. Commissioner Carlson inquired about employer contribution to the HMO by Orange County; with Mr. Robinson responding there is no employer contribution, it subsidizes the individual based on his or her years of experience, and it is a 10-year minimum. Commissioner Carlson inquired does it bring the overall costs down; with Mr. Robinson responding no. Mr. Robinson stated Orange County is charging the same premium as it charges for active employees; it brings the retiree premium down; and if it is 15 years, it would bring the premium down by $45.00 per month.

Commissioner Pritchard stated in 2005, the County is projecting a premium for an employee with one or two dependents of $238 a month; when the person retires, if he or she still has the one dependent and he or she is under the age of 65, the premium would increase to $560 a month; the employee makes "x" amount of money; and the retiree makes less amount of money, but he or she is getting hit with better than a doubling of the insurance premium. Mr. Abbate noted that is one of the issues that is out there. Commissioner Carlson stated over age 65 with one dependent is an increase of only $70.00, which is more appropriate and in line for individuals over age 65 than those that are less than age 65 as they have other options they can address. Commissioner Pritchard stated not everyone takes that option; even though the under age 65 might be physically more capable or desirous to seek additional employment and not ready to fully retire, they are being hit with a higher premium; they may also have less of a history of medical costs because of being younger; so it is the benefit of Medicare that is being used to offset costs.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Chair Higgs stated 9% of the County?s total population membership is in PPO; and inquired have any jurisdictions in the area totally eliminated the PPO option. She stated PPO is the most costly option to the citizens. Mr. Abbate noted PPO is the most costly option; staff reviewed the co-payment structure; and information from Witner Consultants indicated the out-of-pocket expenses associated with the PPO option and shifting the current population into the HMO option would add costs to the plan because individuals are already paying high co-payments and co-insurance. Chair Higgs inquired does Mr. Robinson believe the recommendation is valid; with Mr. Robinson responding yes. Mr. Robinson stated the claims would be similar; the out-of-pocket expenses would be different; and when claims are moved to the HMO network, the out-of-pocket expenses for those individuals will decrease.

Jan Bush stated several companies have a point-of-service plan; they have gone to a plan that has a HMO look alike component with an out-of-network benefit; the companies do not technically call it a PPO, but a point-of-service; and it provides the out-of-network benefit, which is a little more expensive than the HMO option.

Future Plan Management

Mr. Robinson stated he and staff have attempted to provide the Board with information on the health plan; such plan is one that has been beating the national inflation numbers and has been looked upon as a valuable benefit to employees; the plan does not come by accident; and there are certain strategic thinking models and ideas that have been used to deal with the issue of health insurance and health plans for the last number of years, including access to all the hospitals and broad networks. He noted that is what has built and fueled how the plan has worked; there is an organized process in place to make particular decisions; the Board is the decision maker in what happens with the health plans; and the Employee Benefits Insurance Committee provides recommendations to the County. He stated the process has worked well; it is a process that is used in other districts and counties to come up with recommendations on plans; he and staff would like to get feedback on the process to see if the Board likes it, thinks it is the best way to go, and if it is of value to it in making its decisions; and if the strategic thinking currently being used is the direction the Board wants the Committee to continue to work on if the process is the best one to use. Mr. Robinson stated it is necessary to have an organized approach to move forward and a direction from the Board to the process and committees or groups to come up with recommendations for decisions by the Board.

Chair Higgs stated staff and Mr. Robinson have given the Board a huge amount of information; and the citizens can feel good that the County has done well up to this point and is using the best information it can get.

Don Hawthorne stated he is a retired employee of the County and worked for it about 10 or 12 years ago; the reason for employment there was not due to hourly rate of pay; his health insurance costs as a contractor and business man prior to working for the County were getting extremely expensive; and he decided the best thing for him to do was try to find a benefit program that would cover his future. He noted he is very proud to be a retired employee of the County; the summation Mr. Abbate and his associates presented this morning was very good;

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

but sometimes comparing numbers, graphs, and percentages does not give a total view; and he is facing the potential of a 300% increase of what he is paying now for his insurance over the next few years. He stated he is going to get about a 20% to 30% reduction in his actual pay from the County for his retirement; these are potential things that might happen; the County needs to think out-of-the-box instead of the out-of-the pocket and think about whose pocket it is reaching in; and it has to look at the costs associated with doctors, drug makers, and the insurance company. He noted the County may not be able to do anything about it this year or next year; everyone is worried about health costs over the next few years; as most retirees, he figured he could live on his income, do volunteer work, and enjoy being part of the community; and he is a volunteer with several organizations in the North Brevard area. Mr. Hawthorne stated he is very happy he was able to work as long as he did with the County until he had to retire due to a medical condition; he is worried about drug costs and co-payments; his net increase is really a decrease when he gets his COLA each year from the State of Florida; and some statistics he has seen show that 98% of medical costs to the average person are in the last two years of his or her life when he or she is retired. He noted he is the caregiver for his father who is 88 years old; and he knows what he is going to be facing in the near future.

Commissioner Pritchard inquired is Mr. Hawthorne under age 65 or older; with Mr. Hawthorne responding he is 65 years old. Commissioner Pritchard inquired does Mr. Hawthorne have PPO or HMO. Mr. Hawthorne responded at the present time he is with Cigna; his wife is an employee of the County and he is under her plan; when she retires it is going to be a dependent plus one; and the costs are going to be quite a bit compared to what they are paying now. He noted looking at the potential increases over the next few years is scary; there are a few retirees that are worried now; and everyone will be a retiree hopefully some day.

Commissioner Carlson stated based on what Mr. Hawthorne is saying, it is a 17% increase on the premium; with Mr. Abbate responding yes, over what this year?s cost is for those groups. Commissioner Carlson noted so Mr. Hawthorne may be looking at 300% at some point over many years. Mr. Hawthorne stated he was basing the 300% on the 2006 or 2008 graph when insurance costs reach a critical point and bankruptcy is an issue; the costs are going to be turned over to someone, which means there are going to be no pockets to reach in; he will be looking at that time into at least a 300% increase because he will have to fully bear the expense since the County will no longer be able to do it; but he has not had a chance to analyze the numbers.

Chair Higgs inquired what would a retiree over age 65 pay. Mr. Abbate responded PPO would increase from $135.08 to $158.04; and with one dependent it would increase from $270.16 to $316.04, which is a 17% increase.

Jack Callinan, representing Citizens Budget Review Committee, stated staff did a great job with the presentation and should be commended; the first graph showed 4% a year increase on salaries; the situation is worse because the median income from 2000 and 2002 was down; so the 4% increase does not mean a lot and it is harder for the people and the Board to address that issue. He noted staff has done a very good job of having everybody understand the problems the County has to deal with to address the insurance problem today and next year,

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

but he has not heard anything about the ramifications five years down the pike; those decisions have to be addressed now; and if the Board does not make the right choices now, then it is going to find itself in trouble. He stated the comparisons are made throughout the United States, which is not too valid; staff should be comparing to surrounding communities; the United States comparisons are meaningless and not significant; and any time intermediate numbers are used they can shift the ratios and significance, so a per person cost is usually a better number and more accurate. He noted he will review the material from today; and the CBRC believes the Board needs to address the insurance issues not only for next year, but years down the road or there is going to be a real problem.

Mr. Callinan stated Mr. Jenkins indicated he was independent and did not have to go by the recommendations of the group; and inquired how many times in the last 10 years has he come up with a different recommendation of the group. Mr. Jenkins responded as staff prepared the budget this year he, in conjunction with staff?s input, put together a series of premium proposals, out-of-pocket proposals, etc.; that in turn was going to come to the Board; but when it went to the Advisory Committee, it came up with a different set of recommendations and those were compatible enough with what he had initially proposed and they were accepted. Mr. Callinan noted Mr. Jenkins has never really had a difference of opinion between him and the group.

Commissioner Colon inquired is Mr. Callinan talking about projected numbers in five years; with Mr. Callinan responding yes. Commissioner Colon stated insurance companies determine how much they are going to charge; usually everyone else has to figure out who is going to pay what; and the County does not know what the insurance companies are going to be paying. Mr. Callinan stated it is based on the same 12% projections; the County has the five-year projections that were put out by the last group; there were a number of different recommendations and approaches to be taken; and it could be improved and made better. He noted shifting everybody to the PPO option and not subsidizing retirees was reviewed by the group; a lot of different scenarios were produced; he wrote a summary of the scenarios and presented them to the Board for its review; and such summary included all of the different proposals that had been recommended. Mr. Callinan reiterated the County should get five-year projections.

Commissioner Colon stated she is very sensitive to those folks who have worked so many years in the County and have a certain perception of what is going to happen to them in the future; there has been a lot of discussion about retirees today; and inquired what are the CBRC feelings about retirees. Mr. Callinan responded the CBRC supports a five to ten-year phase out; and none of the CBRC members are employees of the County. Commissioner Colon inquired what happens to the retirees after ten years. Mr. Callinan stated the retirees would absorb more costs and the County would not take them off the plans; the subsidies were one issue; and the other issue is moving everybody into a PPO because it is 16% cheaper. Commissioner Colon stated the people who have retired in the past also retired at a lower amount of money; their paycheck is not what is here in 2004; the folks who are retiring now have a nice little cushion; but those individuals who retired years ago had salaries that were not as high as the folks now; and it is not so simple. Mr. Callinan stated that is a good point and something the Board should review; the total scope of dollars the County is going to have to come up with to support that brings a different set of questions; and inquired is it going to start cutting departments back or increase the revenue to the majority of the rest of the

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

community, which is going to have to subsidize this. He noted Chair Higgs mentioned $3,600 per month is a good motivator for people to work for the County; that is not a motivator as far as he knows; he learned about motivation years back; money motivates somebody 20 years old; however, it is a motivator for somebody who is thinking of retiring, getting a second job, and using the County?s health insurance. He stated he does not begrudge that person as it is the American way to shift and make more money; having early retirees get as much of a subsidy as they do is acting as a motivator to get them to leave early; and if they did not have that net, they might not leave early. Commissioner Colon stated that is how the real world works, including the Fortune 500 companies and federal government; and the County is not unique. Mr. Callinan stated the County is very different in that regard; the Fortune 500 companies have gotten to a point where they are much more callous than the County should be; when Mr. Abbate mentioned 80%, he checked to see who is still subsidizing retirees; and he found out it is only people who have unions and somebody like Brevard County that continues retiree subsidies. Commissioner Colon stated Mr. Callinan mentioned the County should not compare nationwide as it is not a fair comparison; she agrees with Mr. Callinan to a certain degree; but the comparisons that have been given included Indian River, Osceola, Orange, and Polk Counties, and the City of Orlando. Mr. Callinan stated those comparisons are very good; but everything should have been done on that basis. Commissioner Colon stated Brevard County does not pay as good as everybody else; that is where the balance is; it may sound like the County is being able to subsidize; but it is almost embarrassing to see what it is paying in salaries compared to Orange, Polk, and Seminole Counties; and that is where it is not so cut and dry. Mr. Callinan noted maybe it would be less embarrassing to give employees more money and cut back their health care. Commissioner Colon stated not everybody gets paid $58,000 like the County Commissioners; the average person is getting paid $17,000 and $20,000; those are the ones she is concerned about; and the person who is driving the bus or digging the holes does not make $58,000. She noted that is where the difficult part comes in, to make sure which pocket the County is hitting; that person still needs to pay the mortgage and put food on the table; and inquired who does the Board hurt when it makes these decisions. Mr. Callinan stated if it was his choice, he would rather give employees more money in their pockets and cut back on health insurance since it is so high; and he is not sure the County is going to be able to afford health insurance five years from now.

Chair Higgs stated the County has a challenging situation in terms of five and ten-year pictures; it has obligations to people under the conditions under which they were hired; it has to meet those obligations; and what it does in the future is what is being discussed today.

Commissioner Carlson stated Mr. Callinan addressed long-term strategy and Mr. Abbate addressed the strategy the County re-addressed in 1999-2000, and what it has been using; the third slide mentioned the Board may want to consider a comprehensive long-term strategy that addresses the impact of further cost shifting on employees? disposable income and the 80% issue, and try to extrapolate the given conditions in the industry; and the whole gamut of variables discussed need to be considered when looking long-range. She noted the County has been looking long-range and has been able to make some very positive adjustments to keep things under wraps, but it is obvious through the comments and charts that a lot of people are going to feel very uncomfortable if things do not change; the County does not have that much

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

control over all the variables; and what control it has it needs to at least put it in the strategic perspective and say to the best of its knowledge this is what it can do. She inquired how long will it take to address something like that and if the County dealt with the current suggestions of the Committee for 2005, when can it look at the strategic plan and address it. She noted staff talked about not redoing plans, etc. as it could be detrimental to the overall costs; and inquired what does staff foresee. Mr. Abbate responded staff has looked at it constantly over time; it may be coming back to the Board next year to go out for RFP in several areas; it is about time for the County to do that in different areas; and the Employee Benefits Insurance Advisory Committee developed all of the five-year plan options from March through July 2004. He noted those recommendations were submitted to the Board so it would have the information; the Committee is definitely looking at that perspective; in terms of moving to an option, which goes to a PPO, it gets paid by somebody; and it is not lowering plan costs, but is changing who pays those dollars and going to the other pocket of an employee to do it. He stated maybe that is the way to go and maybe it is not; but that is what that option is.

Commissioner Pritchard stated he mentioned earlier about litigation and how ridiculous some awards have been; the attorney gets 40% or more; the individual does not get it; and the doctor will give one an MRI if he or she has a hangnail and will do multiple tests. He noted it is all because the doctor is trying to make sure he or she is not going to be sued and his or her malpractice insurance is not going to increase to a point it will drive him or her out of business; OB-GYN?s have left the area; and other medical doctors have joined the services as they are young enough that they still like to practice, but cannot afford what the cost of practice has become because they cannot pass it down to their patients. He inquired can Mr. Robinson forecast what the results of limitations on attorney awards are going to do to the cost of health insurance premiums over the next five years to show it is something the County can use as a model for what might happen to its insurance premiums. Mr. Robinson stated he will provide the information to the Board. Commissioner Pritchard stated he believes it is going to have a significant impact; and if there can be a limit on the amount of award that is passed out, then the trickle down is going to be that the overall costs of medical insurance and medical treatment are going to drop.

Diane Hawthorne stated her husband, who is under her insurance, has pre-existing conditions and will not be allowed to get insurance anywhere if the County no longer covers her when she retirees; and inquired is there any way her husband can go back as a County retiree and have his own insurance.

Chair Higgs stated Ms. Hawthorne needs to get into specific issues in a different form other than here because she may have particular situations. Ms. Hawthorne inquired if the County eliminates insurance for retirees, is it going to force them to be on welfare. Chair Higgs stated nobody is talking about eliminating current retirees? insurance; the County is reviewing the costs; it has obligations to those retirees who were hired and worked; and it is looking into the future and where the costs go. She noted she is not talking about elimination of health insurance; it is not an option; and how the costs are allocated is another issue.

Commissioner Carlson stated employees and retirees always have the ability to have health care; but how much the County pays as it subsidizes retirees is what it has been conversing

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

about; and it is a matter of how much those individuals will have to pay for health insurance compared to what they are paying now.

Commissioner Pritchard stated many people seek employment with the County or municipalities because there is an opportunity for continuous employment and they are not subject to what tends to go on in the private sector; he is a retiree from a municipality; people accept certain things at certain ages; and when they are younger, they accept it because of the job, maybe it is exciting, and maybe the salary is enough to get by on. He noted as people get older they tend to look toward other things; when they are in their 40?s they begin to realize maybe they need deferred compensation or something else; then one day they are retired; and hopefully they have set themselves up to that point. He stated then what happens is they have retired at a lesser salary; their premiums have increased because they are not part of the group; their medical insurance and other things tend to increase; and it all cuts into their disposal income. He noted his goal is not to have retirees? disposable income continuously etched away until everyone is living near poverty level, looking to food stamps to supplement their quality of life, and having to make decisions as to whether they should either buy prescription drugs or eat that week; and under the plan with the former municipality, his insurance premiums were $1,000 per month for retiree and one dependent for PPO.

Chair Higgs stated it is $560 for a retiree with one dependent under the County?s insurance. Commissioner Pritchard stated it is a chunk of change; he made more money working for the municipality than he does for the County; and he wants to make sure the people who have retired from the County are not being forced into a lesser lifestyle than they are entitled to. Chair Higgs suggested Ms. Hawthorne contact Risk Management in regard to her specific questions.

Commissioner Scarborough stated he is not comfortable with the conversation; it is putting a lot of people at risk; the County is touching people?s lives; and the people it is touching are the very people that touch everybody in the community. He noted he started the meeting talking about County employees being asked to leave their homes at 2:00 a.m. during the hurricane; employees left their families in the dark, winds blowing, and damage around their homes, but they still went out; every day County employees are touching other people; and all the Board needs to do is send a wrong signal. He stated it is not just costs; it is the essence of the County?s existence of how the employees feel about the Board; if the Board sends the wrong signal of even indicating it is going to take any benefits away to the level of 30%, it is making a fundamental mistake; every employee is going to hear it and the Board is going to be very sorry for it; and he is not supporting the 30% cut. Commissioner Scarborough noted a lot of things included in the information are going too far.

Commissioner Pritchard inquired is Commissioner Scarborough supporting what the Benefits Committee is recommending. Commissioner Scarborough responded no, it is unconscionable. Commissioner Scarborough stated the County would only be saving $60,000 and it has a huge budget; and it is like seeing how nasty the Board can be. Chair Higgs noted that is not true. Commissioner Scarborough stated he believes it; and inquired would the Board take 30% of anybody?s income. He reiterated 30% is unconscionable. Chair Higgs stated the County has had discussions about health care costs, long-term and short-term; it is not a point at which it

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

needs to scare people or coddle it either; the County has long-term costs; and if it does not review the situation now as to how it is allocating costs, it is going to be in much worse shape five or ten years down the road. She noted the Board has made commitments in the past to people and it lives by those commitments; how it manages this is a different issue; the Board needs to look at the short-term and long-term; and that is what it is doing today. She noted it is not a point of anybody not caring; the Board cares about the whole segment, not just one segment; and it has to manage it for the greatest good for all people.

Commissioner Scarborough stated $60,000 does not do anything for the program, but it sends a signal that there is a certain classification of employees that can have a 30% reduction; it is the signal the County gives; there are some things that can be done to make more sense of what the County is doing; and it is more than dollars, it is what people who work for the County think of the Board. He noted if the Board does not send the right signals, it will not have a County with people that feel like they are cared about; when somebody makes sacrifices they are doing it basically because he or she likes helping others; but the Board has to say it cares enough that it is not going to come back and hit the employees over some silly thing like $60,000. He stated the total impact of the 30% to the one classification is only a few people, but it indicates the Board has a callousness that it does not have; and if Chair Higgs says the Board cares, then it needs to show it cares.

Chair Higgs stated the Board cannot say in some emotional way it cares about something without saying it cares about the whole; caring about one group has got to be caring about the whole; and it is a caring about all the taxpayers and employees and being sure the County has a program that it can sustain over time. She noted that is real caring, not some misplaced emotional caring; and the Board needs to care about the whole and keeping it intact. Commissioner Scarborough stated he plans on keeping the whole intact, but there are some things included in the information that are not keeping the whole intact; and they are basically more disruptive than they are keeping the whole intact. Chair Higgs stated she and Commissioner Scarborough may have a disagreement of opinion.

Commissioner Carlson stated the one point Commissioner Scarborough brings up is indicative of the problem as a whole and it is only going to further exacerbate the problem by increasing one category greater than other categories in terms of the balance issue; and she understands Commissioner Scarborough?s perspective.

Commissioner Scarborough stated the County can look at all the dollar amounts, but it also needs to look at the statement that is made by the Board of does it care about its employees as human beings; the employees are touching other human beings, including 500,000 people in Brevard County; if the Board does not send the right signal, then employees are not going to send the right signal; and the constituents are going to suffer in the bottom line. He noted it can be worked much easier than the County believes; it has more money coming in, including $3 million here or $3 million there; and inquired why not put in another $500,000 and a base additional increase to every employee so there is no loss at the bottom end. He stated $60,000 is not going to break the bank or touch the system?s integrity in the long run; and there are ways the Board can make sense, send good signals, and keep the boat afloat rather than sinking it over some silliness today.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Commissioner Pritchard inquired what is the total amount of savings to the County if the Board adopted the Benefits Insurance Advisory Committee?s proposed plan. Mr. Abbate responded approximately $1.8 million. Commissioner Pritchard stated it would cost employees $1.8 million more and would save the taxpayers $1.8 million. Mr. Abbate noted that is correct. Commissioner Pritchard stated the salaries on the spreadsheet indicate a difference between Brevard County and the average of all the other counties, and inquired has staff added in what the County and other counties charge for insurance premiums to show what a comparable package is; with Mr. Abbate responding no. Commissioner Pritchard stated it is pre-tax premium dollars and a lesser amount; if someone is in the 20% tax bracket and he or she has a $15.00 increase in premium, he or she pays $12.00 more; if a person is retired, he or she pays the full amount; and he would like to see more number-crunching so people have a clearer understanding what the County is talking about. He noted retirees? incomes diminish and the COLA?s are meaningless; cost of living takes the COLA; individuals are taxed on top of it; so they are not getting anything or improving their quality of life. He stated some folks are blessed and have a very good retirement; others are just getting by; he knows people that retired 20 years before he did; and the amount of money they retired on would not pay rent today. Commissioner Pritchard stated he has a lot more questions that need to be addressed, but in particular, he is very concerned about the retirees.

Commissioner Carlson stated the Board will have to make a decision prior to the budget hearings; and staff needs to come back with all the information and the Board has to make a decision on whether it is going to increase, how much it is going to increase, and whether it is on the County?s side or the employees? side, etc.

Mr. Jenkins stated that is true, but the Board has other issues that are out there that can affect the decision; and it needs to do it holistically, put it all together, and then make a decision. He inquired when does the plan start; with Mr. Abbate responding open enrollment is during October 2004 and during September 2004 staff is preparing the materials. Mr. Jenkins stated some time in September 2004 the Board needs to work through the issues.

Chair Higgs stated on Tuesday the Board will talk about the communications tax issue and inquired does staff have anything concerning the Florida Power & Light (FPL) Company agreement at this point. Mr. Jenkins responded no; he has been in frequent contact with FP&L Company; unfortunately, in the last week its employees have been distracted taking care of emergencies; FP&L knows he is waiting for the agreement; it will be hand-delivered to him when it is available; and he will expedite it through the County Attorney?s office and get it on the Board?s agenda as fast as he can.

Motion by Commissioner Scarborough, seconded by Commissioner Colon, to direct the County Manager to report back to the Board with budget impact scenarios and not negatively impact County employees; review perhaps an additional $500,000 and add a bottom line across-the-board dollar amount to everybody?s paycheck for the purpose of covering employees at risk of getting zero gain; and look at a series of numbers for discussion purposes by the Board.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Commissioner Colon stated it always bothers her when people try to make it so simple in regard to what the Board is dealing with here; she is not going to be supporting anything that is going to be hurting folks who have retired with Brevard County; she agrees with Commissioner Scarborough on that issue; and she wants to make sure she is on the record. She noted it is an emotional issue; she is not a cold fish; and inquired how can the Board not care about what is going to happen to individuals. She noted the Board needs additional feedback.

Chair Higgs requested Commissioner Scarborough clarify what information he wants.

Commissioner Scarborough stated he would like Mr. Jenkins to give the Board budgetary impacts and not negatively impact retirees on health insurance; and at the bottom end, one of the choices would be to readjust the whole thing and add some more money to the paycheck of all employees, and the dollar amount balance off some of the additional health costs. He noted Chair Higgs indicated she would prefer to have employees take their paychecks home, then they do not walk away with a negative; and he is willing to review it. Chair Higgs inquired did she say that; with Commissioner Scarborough responding she said she would prefer to see people with more money in their paychecks. Chair Higgs noted she did not say that and said that might be a motivational factor. Commissioner Scarborough requested the numbers be reviewed and integrated into some methodology with the insurance policies.

Commissioner Pritchard stated he would like to know about the whole compensation package, including the salaries, benefits, and why people work for Brevard County; comparisons with other counties; and what is in the County?s compensation package that encourages people to stay.

Commissioner Scarborough stated an employee may be staying with the County until he or she gets a better job at Reedy Creek; there are other people who say they like working for Brevard County because it cares about them; he would like to have that feeling out there; and it is an intangible. He noted there are signals people get and do not get; and he would like to give the right signals.

Commissioner Pritchard stated he would like to know what the signals are; some people are here because they live here and want to be part of here; other people are here because of the benefits the County has; and he would like to know what brings people to work for the County.

Commissioner Colon inquired how is the County supposed to find that out, and should it interview thousands of people. Commissioner Pritchard responded no; it could be done through exit interviews and through a variety of other methods; it is the compensation package that he is very interested in; and in particular, whether it is pre or post tax dollars that people are losing. He stated quality of life is very important.

Commissioner Scarborough stated that is a good point; the motion reads that way to look at it both ways; and the pre-tax sometimes has greater benefits than paying it to them.

DISCUSSION, RE: EMPLOYEE/RETIREE HEALTHCARE OVERVIEW (CONTINUED)

Commissioner Pritchard stated Commissioner Scarborough mentioned earlier that employees have gotten a pay raise and lost money; it happened to him a couple of times in previous employment; but that was the federal government.

Commissioner Carlson requested the motion include the five-year projection using the 12% increase the Board was shown to see what it is going to cost the County if it continues down this road, and if there are any variables. Mr. Jenkins stated staff has done that. Commissioner Carlson stated the Board did not vote on anything, so she wants to make sure it is not lost in conversation; she would like to see some sort of forecast of how much it is going to cost because each year 12% compounded is going to be a lot of money; if the County does not impact its bottom line and the employees? bottom line, it is not going to have anything; and it is a zero sum gain.

Chair Higgs stated if the Board cares about the people five years from now like it cares about the people today, it needs to be able to look at those costs and know it can cover health care, salary increases, and other things in the future. Commissioner Carlson stated what the Board does this year does not make five years from now more complex when it comes to retirees and everything else because it could be digging itself a hole it cannot get out of; and she wants to be real clear. Chair Higgs stated that is a very caring attitude.

Chair Higgs called for a vote on the motion. Motion carried and ordered unanimously.

Upon motion and vote, the meeting adjourned at 12:20 p.m.

ATTEST:

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NANCY HIGGS, CHAIR

BOARD OF COUNTY COMMISSIONERS

BREVARD COUNTY, FLORIDA

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SCOTT ELLIS, CLERK

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