San Francisco health board declines to consider Sutter Health HMO for 2017 after actuary warns of disruption

The Health Service System Board voted this afternoon not to consider Sutter Health Plus as a City and County of San Francisco employee health plan for the 2017 plan year after an Aon Hewitt actuary recommended postponing action until more market information is available.

Aon Hewitt actuary Anil (identified in the record as Neil/Anil) Kosher told the board Sutter submitted three plan options and that, while the raw premium submissions were in some cases below current combined costs, the city faces substantial operational questions if it adds a Sutter-sponsored HMO. Kosher said roughly 23,182 active and early‑retiree members are affiliated with Sutter medical groups and about 13,442 members would be affected if a Sutter plan were offered; he warned those members could face higher out‑of‑network exposures and said the city risks creating a “bifurcation” of low and high premium pools that would complicate rate‑setting and contribution formulas. "Aon recognizes the commitment by Sutter Health Plus to bring affordable health care to the membership served by HSS," Kosher read from his analysis, "but it is premature to engage this proposal for 2017 for the following reasons."

After the presentation Commissioner Lim moved that the board "not consider the Sutter Health Plus plan for the 2017 plan year." The motion was seconded and passed on a roll‑call vote recorded as 5–1. The board later clarified the intent was to postpone any adoption until the 2018 rate and benefits cycle.

Labor groups and public commenters urged the board to reject Sutter outright. Robert Muscat, executive director of Local 21 and chair of the Public Employee Committee, told the board Sutter is "a very anti union company" and asked the board not to increase business with the system. Other speakers from SEIU and building trades echoed concerns that Sutter’s market conduct could lead to higher prices and diminished competition.

Sutter representative Rob Carnaroli told the board the company has longstanding local relationships and said the submission was intended to introduce competition, not to immediately replace existing carriers. "Sutter Health is very interested in being part of your employee benefit offering going forward," Carnaroli said, adding Sutter proposed two‑ and three‑year rate commitments.

Board members split on whether to entirely reject future Sutter submissions. Several said the actuary’s concerns about migration, claim targets tied to ACO arrangements, and potential cost shifting made near‑term adoption risky. The board instructed staff and Aon Hewitt to return with additional analysis in the 2018 cycle before considering Sutter again.

Next steps: the board deferred substantive action on Sutter until the 2018 rate cycle and directed staff to continue vetting network and migration scenarios and to report back.