Marin County increases worker pay to offset Kaiser rate hike

The health care network has announced that it plans to raise its rates by 17.1% in 2024.

Marin County supervisors have agreed to allocate more money to county employees so they can absorb a surge in Kaiser Permanente health care costs.

The county acted despite the fact that employee groups recently signed new multiyear contracts.

Christina Cramer, the county’s employment director, told supervisors that the spending increase is necessary to cushion the blow from Kaiser’s announcement that it plans to raise its rates by 17.1% in 2024.

Cramer said the increase is “pretty shocking,” given that Kaiser rate hikes over recent years have been in the 5% to 6% range.

“Given the challenges of recruitment and retention in today’s labor markets coupled with impending high rate increases,” Cramer wrote in her staff report to supervisors, “the county engaged in the unusual process of meeting with all of the counties unions to discuss how to enhance certain benefits even though the county has current collective bargaining agreements with all labor unions.”

Josh Swedberg, the county’s budget director, said the most recent data available show that about 10.4% of the county’s positions remain unfilled. Last year, the county realized about $10.8 million in savings because 13% of its salaried positions were vacant.

In August 2022, the county signed a new multiyear agreement with the Marin Association of Public Employees (MAPE), its largest union, and concluded new agreements with the rest of its employee unions and groups this year. The MAPE contract included increased fringe benefits for health care costs in 2022, 2023, 2024 and 2025.

The county provides a fringe benefit to help employees cover the cost of medical and dental care. The amount is set to cover the entire copay for a single employee but only a part of the copay if the employee chooses to include family coverage.

Increases are set to roughly approximate the increase in Kaiser rates. The new MAPE contract called for a 6% increase in the fringe benefit in 2022 and then a 5% increase each year after that through 2025.

The additional expenditure approved by supervisors on Tuesday will increase the fringe benefit to 9% for employees being paid $79,000 or more and 13% for employees earning less than $79,000 in the 2023-24 fiscal year.

As a result, employees who seek coverage only for themselves will receive a fringe benefit of about $515, regardless of their pay level. The amount provided to cover family copays will vary by pay level.

In addition, the supervisors approved a one-time lump sum payment of $1,025 for all regular-hire employees who don’t seek coverage for dependents or family members, and a $1,075 payment for all other employees.

Swedberg estimates the new allocations will cost $3.6 million in the 2023-24 fiscal year and $1.36 million on an ongoing basis. Swedberg said that $2.5 million reserved in the current budget for employee retention could be used to cover the cost of the one-time lump sum payment. He said the ongoing costs will be partially offset by property tax revenue, which has been slightly higher than expected.

“You’ve agreed to pay more than you were contractually obligated to do, and we certainly recognize that and appreciate it,” Rollie Katz, MAPE’s executive director, said Tuesday.

However, Katz said the county consistently underestimates revenue in budget projections and should use some of that money to increase employee pay and benefits.

During the public comment portion of Tuesday’s meeting, Clayton Smith said that generous health care fringe benefits such as these are unavailable to most private-sector employees.

“As a taxpaying member of the private sector, I think it’s time to stop granting these endless increases in compensation,” Smith said, “until the bulk of the country’s workforce has had a chance to catch up.”

The supervisors also approved an identical increase in fringe benefits and a lump sum payment to county employees who are not represented by a union. They include department heads and elected officials, including the supervisors themselves.

Swedberg said the additional cost of providing these allocations will amount to $409,284 in the 2023-24 fiscal year and $151,292 on an ongoing basis.

Swedberg said the unusually large size of the Kaiser rate hike could increase the unfunded liability of the county’s retiree health care trust.

However, Swedberg added in an email, “While the liabilities may increase, it will not be explicitly tied to the 17% hike in Kaiser premiums. Retiree health care costs are determined by when an employee retires, with most plans capped by formula.”

Regarding the large rate spike, Elissa Harrington, a Kaiser spokeswoman, wrote in an email that the “increases this year are larger than our previous low and stable increases primarily due to inflation, which has pushed up the cost of supplies and services.”

“This also has included assuming expenses for benefits previously covered elsewhere,” Harrington wrote, “such as COVID vaccine costs; increased costs due to new drugs and new uses of drugs; and overall higher utilization of services and higher patient acuity.”

Kaiser has not yet made the reformulated COVID-19 booster shot approved by the U.S. Food and Drug Administration on Sept. 11 available to its members in Marin County.

“We understand the frustration resulting from people wanting to get the updated vaccine when they’ve heard it will be available,” Harrington wrote. “Our challenge, shared by others of course, is that we have just started to receive our shipments of new vaccine from distributors over the last week.”

Harrington did not say when Kaiser would begin offering the shot to patients in Marin.