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Benefits Broker Must Fight for Bids

Laguna Beach’s City Council voted unanimously Tuesday to temporarily renew a contract with the city’s current medical benefits broker, bowing partly to earlier protests by unions representing police and firefighters over the lack of competitive bidding.

Laguna will open the insurance brokerage service contract to bids on Sept. 1 for a new contract effective Jan. 1.

City staff originally recommended renewing the contract with New York’s Willis Risk and Insurance Services for two years, through Dec. 31, 2014, by placing the item on the council’s consent calendar for non-controversial matters last month. The issue drew opposition from two union representatives at a time when labor negotiations over wages and benefits with city employees are underway.

John Latta, of the Orange County Professional Firefighters Association, and Larry Bammer, president of the Laguna Beach Police Employees’ Association, vehemently protested the renewal and the lack of consultation with employee labor unions.

“We’re in a negotiation year and this is a fundamental issue that we’ve negotiated in the past,” Bammer said at the time, questioning why city staff did not convene a so-called health care task force, comprised of union representatives from each of city’s three employee groups, before moving forward on a matter that so keenly affects their members.

Moreover, since medical insurance costs have been rising, other options might offer more savings, said Latta, equally disgruntled over firefighters’ exclusion from the decision-making process.

Scott Diederich, president of the Laguna Beach Municipal Employees’ Association, did not respond to calls asking for comment.

Council member Steve Dicterow also expressed dismay that competitive bidding would not routinely be sought. The council voted 4-1 earlier, with Mayor Kelly Boyd dissenting, to put the benefits brokerage contract out for bid.

Nevertheless, since the broker usually begins negotiating contracts with medical insurers in June, city staff asked the council Tuesday to postpone seeking broker bids until the fall and in the meantime renew their contract with Willis until the end of the year. That way Willis can smoothly negotiate contracts as well as provide the city assistance in navigating any Affordable Care Act mandates, personnel services manager Barbara Salvini said.

Salvini pointed out that Willis, which receives a capped $87,500 a year commission, was selected in a competitive bid in 2010, a move resulting in a $36,000 cost savings over the previous broker. The broker proved valuable in many ways, such as when Blue Shield quit Irvine’s physician group Monarch Health Care and Willis was able to preserve patient relationships with individual physicians, she said.

Neither Latta nor Bammer was present Tuesday due to conflicts, but Latta delivered his rebuke to the council by letter.

Reached by phone prior to Tuesday’s vote, Latta disagreed with the decision to delay the bidding process. By allowing Willis to negotiate contracts with insurers for the coming year’s premiums, employees will be locked in regardless of whether a new broker is assigned the task in January, Latta said. Moreover, if Willis loses the bid in the fall, it might erode their enthusiasm for ongoing contract negotiations through the year-end, he said.

The unions prefer exploring other options beyond a broker, such as a medical trust or benefits offered by Calpers, the California Public Employees’ Retirement System, Bammer said earlier. Brokers sometimes offer a fixed repertoire of insurance providers, which limits options available to employees, he said.

The Orange County Fire Authority, for example, administers their own medical trust to manage contracts with health care providers, rather than a broker, Latta said. “We believe there may be an opportunity to do some things that are a little more innovative and perhaps provide the same level of care, but at a reduced cost,” he said.

While Laguna’s employee contracts agree to task force conferences to review health plans, the city attorney felt the benefits broker was not subject to the meet and confer process, the staff report accompanying Tuesday’s agenda bill said. Other health-care insurer options, such as self-administered medical care and Calpers, had been discussed previously with the health care task force, the report said. It also noted that Laguna rejected relying on Calpers because of a mandatory subsidy for retiree medical coverage.

Even so, cities of Dana Point, Newport Beach and Laguna Niguel all tap Calpers for employee medical coverage. The latter turned to Calpers for employee health benefits in 1998 because of “more choices at a better value than using a brokerage,” said Pam Lawrence, Laguna Niguel’s deputy city manager.

Niguel’s staff shared Laguna’s concern for the risk of a mandated subsidy for retiree medical coverage, Lawrence said, but discovered a method to limit the city’s exposure.

“At the end of the day, this is part of the contract that every employee has with the city,” Latta said. “It behooves all of us to work cooperatively to find the best deal.”

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