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HomeMy WebLinkAbout08/19/2004 B A K E R S F I E L D Harold Hanson, Chair Irma Carson Mark Salvaggio Staff: Carroll Hayden SPECIAL MEETING NOTICE PERSONNEL COMMrn'EE of the City Council - City of Bakersfield Thursday, August 19, 2004 4:15 p.m. City Manager's Conference Room, Suite 201 Second Floor, City Hall, 1501 Truxtun Avenue, Bakersfield, CA AGEND'A 1. ROLL CALL 2. ADOPT JUNE 18, 2004 AGENDA SUMMARY REPORT 3. PUBLIC STATEMENTS 4. NEW BUSINESS A. Review of 2005 health insurance plan rate quotes - Hayden 5. ADJOURNMENT S:~C\O4PersonnelCommittee\PO4Aug 19.doc · DRAFT BAKERSFIELD Staff: Carroll Hayden Irma Carson Mark Salvaggio AGENDA SUMMARY REPORT SPECIAL MEETING · PERSONNEL COMMITTEE Friday, June 18, 2004- 12:30 p.m. City Manager's ConferenceRoom, Suite 201 Second Floor, City Hall, 1501 Truxtun Avenue, Bakersfield, CA 1. ROLL CALL Called to Order at 12:30 p.m. Present: Councilmembers Harold Hanson, Chair; Mark Salvaggio and Irma Carson 2. ADOPT SEPTEMBER 18, 2003 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. NEW BUSINESS A. Overview of health insurance plans status; 2005 projections Committee Chair Hanson explained the purpose of the meeting was informational and not to negotiate health insurance costs. The Committee wanted to invite the consultants to provide information and answer questions, so the employee representatives would be informed when meeting with the various groups. Human Resources Manager Hayden stated the City's health insurance consultants were requested to put together an analysis and provide an overview on how the health plans are doing to date and what trends might be expected. The information for 2004 was estimated on the first four months of 2004, as those were the only figures available at the time the report was prepared. Human Resources Manager Hayden introduced consultants Michael Schionning and Tim Beck from Mellon. Agenda'Summary Report Personnel Committee Meeting DRAFT Friday, June 18, 2004 ' Page - 2 - Consultant Michael Schionning explained the report information was provided by Blue Cross of California and covered Blue Cross medical/Rx, dental indemnity benefit plans, medical PPO plan utilization and a brief .prescription drug analysis for actives and retirees. .Financial information for the HMO plans was not included, but will be available at a later date. Consultant Michael Schionning provided an overview on the financial results and utilization analysis for year-end 2003, and based on the first four months of 2004 experience, preliminary comparisons on how 2004 is doing compared to 2003, and preliminary projections for 2005. The Blue Cross utilization analysis showed 2003 did fairly well and finished with a slight surplus of $26,784. In addition, the plan was credited with $6,973 in interest on the existing reserve. Together, this increased the accumulated reserve/surplus to $462,835 through December 31, 2003, of which about $200,000 could be available to return back to the plan with Blue Cross holding the 'balance in reserve. The total premiums for 2003 were $6,594,401. The report included information on how 2003 compared with 2002. Active inpatient hospital claims increased substantially for 2003 with longer hosPital stays compared with 2002. Also, prescription drug costs increased due to an increase in the amount of prescriptions per employee per year. The provider network discount for actives was about 5% more in 2003 compared with 2002. The consultant felt this was a direct benefit of the City's changing the provider network for handling of claim payments for PPO and Blue Cross dental plans from the Kern Foundation to-Prudent Buyer, which has a larger network and a bigger discount. Total 2004 claims for active and retiree medical and dental (based on the first four months of 2004) overall are running about as expected. The active medical is running about 6% higher than premium rates. The retiree claims are running. about -22% lower. Overall dental is running about 12% .higher than expected. Preliminary projections for 2005 indicate an increased renewal adjustment for actives of-approximately 21.3% and a decrease for the retirees of approximately -14.1% for an overall average increase .of 11.7%. A 23.6% increase is projected 'for dental. The total overall average increase for medical and dental is projected at 12.9%. City Manager Tandy explained the overall average percent of increase does not reflect the true impact on the City's budget. The projected 21.3% increase for active medical and the increase in dental will have an impact. Currently, the City is picking up 80% of active employee premiums. Agenda Summary Report DRAFT Personnel Committee Meeting Friday, June 18, 2004 Page - 3- The consultants will be negotiating for insurance premium rates in July with information available in August. The information will include updated projections for 2004 and the renewal rates for 2005. Committee Member Salvaggio expressed he would like to have a Committee meeting in early August when more information is available. In response to questions, Human Resources Manager HaYden stated the current health consultant contract expires in August 2004; however, staff has been considering requesting the current contract be ~renewed rather than going out with a .Request for Proposals. Committee Member Salvaggio said he found it surprising that none of the employee organizations have a .provision in their MOUs that clearly states if a retiree passes, the spouse will continue to 'have the same health benefits. He requested it be put in writing. Human Resources Manager Hayden confirmed the City currently continues health plan benefits for spouses when a retired employee passes, but there is nothing in writing. Committee Chair Hanson requested the Agenda Summary Report be sent out within the next 30 days and encouraged the Insurance Committee to meet with the consultants. Chuck Waide, CCAPE, spoke regarding a retiree savings account, which may exist to .assist the retirees with 'health insurance costs and he plans to check to see if such an account exists and its purpose. 5. ADJOURNMENT The meeting was adjourned at 1:30 p.m. Attendees: City Manager Alan Tandy; Deputy City Attorney Bob Sherry; Human Resources Manager Carroll Hayden; Ginger Rueben, Human Resources Benefits; John Patterson,. Craft Worker II (CCAPE/Miscellaneous); Scott Monroe, Fire Department; Brian West, Police Department; Chuck Waide,' (;CAPE; Tim Beck and Michael Schionning from Mellon S:~,C~04PersonnelCommitteeP04jun 18summary ~~ < 0 © © ~ D © D City of Bakersfield Table of Contents Pa,qe Section I: History of the Relationship 2 Section I1: Calendar Year 2005 Renewal 13 Section II1' Benefit Comparison against Key Employers 17 Section IV: Recommended Benefit Changes 21 Section V: Additional Benefit Options 23 Section VI: Discussion, Questions, Next Steps 36 Mellon City of Bakersfield History of the Relationship Mellon was retained by the City of Bakersfield and the Insurance Committee in August 1998 to provide health and welfare consulting services · This section provides a review of the results of the negotiations on behalf of the City and the Insurance Committee · This includes the performance of the refunding coverages - the Blue Cross PPO and Dental plans This section also shows the benefit changes that have occurred between calendar year 1999 and calendar year 2004 Mellon City of Bakersfield Blue Cross PPO and Dental Plans Historical Plan Performance Blue Cross PPO and Dental Plans Calendar Year Premium Total Costs Gai n/( Loss) Surplus 1997 3,255,264 3,640,537 -385,273 0 1'9983,156,180 3,495,874 -339,694 0 1999 4,090,635 4,122,683 -32,048 0 2000 4,653,028 4,331,629 321,399 0 2001 5,244,407 4,547,973 696,434 408,474 2002 5,663,401 5,656,798 6,603 429,078 2003 6,594,401 6,567,617 26,784 462,835 Est'd 2004 76,082 538,917 ' ~ ~) Mellon City of Bakersfield Historical Plan Performance- Comments · Mellon started to work with the City of Bakersfield in August 1998 for the calendar year 1999 renewal. · The plans experienced a small loss in 1999 after two years of significant losses. Them were large gains in 2000 and 2001, which have completely offset all prior losses. All prior losses have been recouped and the plan has been in a positive position since 2001. · The surplus growth since 2002 has been small. This shows that the actual rates were adequate and not overly conservative. 4 ~1 Mellon City of Bakersfield Plan Benefit Rate Increases Comparison of Actual Rate Increases Average Annual 99/98 00/99 01/00 02/01 03/02 04/03 Increase Dental-2.54% 10.92% 3.18% -6.10% 9.76% 8.87% 4.02% Vision0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Medical 25.74% 15.23% 8.89% 9.06% 15.86% 13.77% 14.76% PBH 0.00% 0.00% 19.02% 0.00% 0.00% 5.05% 4.01% Total 20:57% 13.98% 8.48% 7.21% 14.64% 12.98% 12.98% Mellon c ~ ~ o ®____ 0 ~ o o o o o o o o o o ~ © © © © © © © © © © C'J © 0 ~ ~ ~ o ~ 8 8 8 ~ o o o o o o o 0 0 0 0 0 0 0 0 0 0 0 m m m m m mm m mm m m mm m m m m m m mm City of Bakersfield Plan Benefit Rate Increases - Comments ® Dental rate increases have varied around average dental increase, which is expected. · There has been no rate increase for the vision plan since 1998. The overall medical plan rate increases dropped from 1999 to 2001. The medical plan rate increases have been below 16% since 1999. There were only 2 rate increases for PBH: one in 2001 and one in 2004, · Overall, the percentage increase was just under 13% compared to industry an area average of 15%. 11 ~ Mellon City of Bakersfield Historical Benefit Changes 2003' - Switched PPO and Dental networks from Kern to Prudent Buyer. - Increased Dental annual maximum to $2,500. 2004: - PPO Medical: increased deductible to $200. - HMO Medical: copay increased to $10. - Prescription drugs: copay increased to $10 generic ~520 brand - MH/SA: copay increased to $10 · Fairly minimal benefit changes over the six year period, particularly when compared to what Mellon has seen for other governmental employers Mellon City of Bakersfield Calendar Year 2005 Renewal Projections Medical Current Total Projected Dollar Increase Initial Carrier Negotiated CY 2005 over CY 2004 Increase Increase Premium Premium BC PPO Active 17.59% 8.60% $5,418,728 $429,107 Retiree 0.00% 0.00% $1,817,896 $0 BC HMO Active 21.30% 10.50% $4,053,835 $385,206 Retiree 21.30% 10.50% $846,943 $80,479 Kaiser Active 1.60% 1.60% $809,736 $12,701 Pre 65 Retiree 1.60% 1.60% $182,180 $2,864 senior adv retiree -13.50% -13.50% $48,030 -$7,499 Total 14.91% 7.36% $13,177,347 $902,859 Mellon City of Bakersfield Calendar Year 2005 Renewal Projections PHB, Dental, Current Total Projected Dollar Increase Initial Carrier Negotiated CY 2005 over CY 2004 Vision Increase Increase Premium Premium PBH Active 2.00% 2.00% $245,437 $4,823 Retiree 2.00% 2.00% $36,851 $719 EAP 2.00% 2.00% $63,400 $1,363 Dental PPO Dental 30.68% 10.00% $771,206 $70,110 Pacific Union Dental 4.00% 4.00% $208,759 $8,024 Dedicated Dental 5.00% 5.00% $128,628 $6,162 Vision 0.00% 0.00% $158,889 $0 Total 15.51% 5.98% 1,613,170 91,202 ~4 ~} Mellon City of Bakersfield Calendar Year 2005 ReneWal Projections Medical Dental Vision PHB Total Initial Carrier Increase: 14.91% 22.38% 0.00% 2.00% 14.98% Current Negotiated Increase: 7.36% 8.23% 0.00% 2.00% 7.20% Total Projected CY 2005 Premium: - Based on Initial Carrier Increase $14,104,904 $1,253,581 $158,889 $345,688 $15,863,061 - Based on Current Negotiated Increase $13,177,347 $1,108,594 $158,889 $345,688 $14,790,518 Dollar Increase over CY 2004 Premium: ~ - Based on Initial Carrier Increase $1,830,416 $229,282 $0 $6,906 $2,066,604 - Based on Current Negotiated Increase $902,859 $84,296 $0 $6,906 $994,060 Savings from Negotiation: $927,557 $144,987 $0 $0 $1,072,544 Mellon m m m m m m m m m m m m m m m m m m m City of Bakersfield Calendar Year 2005 Renewal Projections - Comments · All proposed rate increases were reasonable except the initial proposal from Blue Cross. · The result of the Blue Cross negotiations was a significant decrease to the requested rate increase. · The negotiated Blue Cross rates are consistent with the performance of the plan. The rate increases do not jeopardize the long-term stability of the the plan. The negotiations to date for 2005 have produced over one million dollars in savings to the plans. 16 ~) Mellon BENEFIT COMPARISON WORKSHEET ~:~,, :'~; :~,~ ....... , , CITY OF BAKERSFIELD (ACTIVE Ees) COUNTY OF KERN SCHOOL DISTRICT Annual Deductible Individual None None $200 None $200 $200 $200 Two Party None None $400 None n/a n/a n/a Family None None $600 None $600 $500 $500 Out-of-Pocket Maximum Individual . $500 $1,500 $1,600 per individual ' $0 $2,000 $500 $500 Two Party $1,000 n/a n/a n/a n/a n/a Family $1,500 $3,000 $0 $4,000 $1,500 $1,500 Lifetime Maximum None None $5,000,000 $2,000,000 $2,000,000 $2,000,000 ' $2,000,000 Physician Services Office Visits $10.00 copay $10.00 per visit PPO: 80% of negotiated fee $15 PCP/S25 Spec 70% $10.00 copay ' 80% Preventive Services Well Child Care (incl immunizations) up to age 19 $10.00 copay $10.00 per visit PPO: 100%/Non-PPO: 80% 80% 80% Wellness (for Ee and spouse on~y) - phys exam $10.00 copay $10.00 per visit $50 copay, no deductible $10.00 copay Not Covered 80% 80% - pap smear, etc $10.00 copay $10.00 per visit $50 copay, no deductible $0 copay 70% 80% 80% Immunization-lnflenza No charge (approved Medical Group) No charge PPO: 100%INon-PPO: 80% 80% 80% $0 copay 70% AIlery Testing/Treatment No charge No charge 80% $0 copay 70% 80% 80% Vision Exams $10.00 per visit n/a nla n/a n/a Headng Exams $10.00 per visit n/a n/a n/a n/a Eyeglasses n/a. n/a Surgical ServicesI No charge No charge PPO: 100%/Non-PPO: 80% $0 copay 70% 80% 80% .Physical Therapy No charge Inpatient; no charge/Outpatient: $10 per visit PPO: 90%/Non-PPO: 70% 80% 80% $0 copay 70% Speech Therapy covered up to $25 per visit for outpatient 80% 80% Hospital Services2 services $0 copay 70% Inpatient Care3 No charge No charge PPO: 100%/Non-PPO: 80% $150 per day 70% 80% 80% Outpatient Care No charge $10.00 per visit PPO: 100%/Non-PPO: 80% $100 per day 70% 80% 80% Blood No charge No charge 80% No Charge No Charge n/a n/a Outpatient X-Ray & Lab No charge No charge PPO: 90%/Non-PPO: 70% $0 copay 70% 80% 80% 17 BENEFIT COMPARISON WORKSHEET CITY OF BAKERSFIELD (ACTIVE Ees) COUNTY OF KERN SCHOOL DISTRICT Mental Health Services Inpatient Care 100% No charge; up to 30 days per year $150 per day 70% Outpatient Care 1-20 visits: $10.00 Individual: $20 / Group: $10; up to 20 visits per $20 Max benefit per visit $20 Max benefit per visit Alcohol & Drug Treatment inpatient Care 100% No charge; detox only $150 per day 70% · $20 Max benefit per visit $20 Max benefit per visit Outpatient Care Individual: $5 / Group: $2 per visit Transitional residential recovery services: $100 per admission; up to 60 days per calendar year Prescription Drugs Retail 30-day supply $10 copay; up to 100-day supply 30-day supply 30-day supply 30-day supply 30-day supply 30-day supply ~ genedc $10 $10 $5 $5 $5 $5 - brand $20 $20 $15/530 pref/non-pref $151530 pref/n'on-pref $20 $20. Mail Order 90-day supply Same as above 90~day supply 90-day supply 90-day'suppiy 90-day supply 90-day supply - genedc $10 $10 $10 $10 $10 $10 - brand $20 $20 $30/$60 preflnon-pref $30/$60 pref/non-pref $50 $50 Non-Participating Pharmacies 50% based on drug limited fee schedule n/a' n/a Emergency Care/Services ' Hospital $25 copay (waived if admitted) Any copayment applied if services where PPO: 100%fNon-PPO: 80% $75 copay $75 copay 80% 80% rendered by Plan Provider Ambulance No charge Same as above 80% n/a n/a 80% 80% Family Planning Voluntary Sterilization $50 copay: Vasectomy PPO: 100%/Non-PPO: 80% n/a n/a n/a n/a $150 copay: Tubal Ligation Infertility Services 50% copay Office visit: $10 per visit; Inpatient care: no 'Not covered charge n/a n/a n/a n/a Home Health Care No charge No charge PPO: 90%/Non-PPO: 70% n/a n/a 80% 80% Limited to 100 visits per year . 40 visits per year 40 visits per year 100 visits per year 100 visits per year Skilled Nursing No charge No charge 100% n/a r~a 80% 80% (up to 100 days/year) (up to 100 days/year) (up to 120 days/year) (up to 120 days/year) Durable Medical Equipment No charge No charge 80% $0 copay 70% 80% 80% $2,000 .max per year Orthotic & Prosthetic Devices No charge No charge· .80% $0 copay 70% 80% 80% $20 Max benefit per visit $20 Max benefit per visit Chiropratic Services Not covered Not covered PPO: 90%/Non-PPO: 70% 80% 80% $50 max benefit/visit; $750/year max. (30 visit maximum) (30 visit maximum) (26 visits per year) (26 visits per year) Acupuncture covered up to a maximum of $500 per cetendar year Not Covered Not Covered 80% 80% Notes 1. There is an ambulatory surgical center deductible'of $500 if you use a non-participating provider 2. There is a non-contracting hospital penalty of covered expenses being reduced by 25% for services and supplies provided by a non-contacting hospital 3. There is an inpatient deductible of $500 f you use a non-participating provider 18 City of Bakersfield Benefit Comparison against Key Employers 2005 rate Rate Benefit Composite PEPM Differential Differential Differential Bakersfield Blue Cross Medical Plan 710.51 1.00 1.00 1.00 County of Kern Medical Plan 864.43 1.22 0.94 1.30 School District Medical Plan N/A N/A 0.96 N/A Mellon City of Bakersfield Benefit Comparison against Key Employers - Comments The current medical benefits for the City of Bakersfield are richer than those provided to the County of Kern and School District employees. · The rates for the medical benefits for the City are lower than the rates for Kern County. Overall, the value of the benefits provided by the City are 30% better than those provided by Kern County · We did not have the rates for the School District. However, the current City benefit offering is 4% better than those offered by the School District. Mellon m m m m m m m m m m~ m m~m m City of Bakersfield Recommended Benefit Changes Medical Plan Chan§os Estimated Annualized Rate Impact Cost Savings PPO Plan Change coinsurance to 90% in-network and 60% out-of-network -4.1% ($300,000) Increase out-of-network out-of-pocket to $5,000 -0.4% ($29,000) Add $250 per admission hospital copayment -0.9% ($62,000) Add $75 emergency room copayment -0.7% ($47,000) HMO Plans Increase office visit copay to $15 - 1.7% ($98,000) Add $250 per admission hospital copayment -0.8% ($43,000) Add $75 emergency room copayment -0.6% ($32,000) Total Recommended Medical Changes -4.7% ($611,000) 2~ {~} Mellon City of Bakersfield Recommended Benefit Changes Dental Plan Changes Estimated Annualized Rate Impact. Cost Savings Blue Cross Dental Plan Change Prosthodontic Sevices to 60% -5.1% ($39,000) 22 ~ Mellon City of Bakersfield Additional Benefit Options Consumer Directed Health Care · Consumer directed healthcare plans can provide: - Medical coverage - Prescription drug coverage - Dental coverage - Vision coverage Consumer directed healthcare plans typically include: - A high deductible medical plan for financial incentive in seeking care - A flexible spending account funded by the employer - Web tools and information to support informed consumer decision- making behaviors ("e-health") Mellon City of Bakersfield Consumer Directed Health Care (cont'd) · Patients pay actual cost of care (rather than $10 copays) with money from a personal care account (for example, $1,000) funded by the employer · Employer then provides catastrophic (high-deductible) insurance (in the form of a PPO plan with coinsurance) for when the personal care account runs out · There is a corridor deductible (paid by employee with employee money) between the personal care account and the PPO plan. The personal care account plus the corridor deductible make up the deductible on the PPO plan Cost transparency encourages prudent decisions while Internet tools and information support informed consumer decision-making behaviors Preventive care is often covered at 100% to discourage employees from building their personal care accounts by not getting regular check-ups Mellon City of Bakersfield Components of a Typical CDHC Plan Personal Health Mana. g,ement Toolg Online health care provider information Online prescription drug cost information Preventive care is carved Health risk appraisals- 24 hrnurseline Prescription drugs would be Wellness program covered on a coinsurance basis out of the program and covered at 100% Employee uses these City funds first. Unused funds this balance carries over to portion n~ ext plan year  When the PCA is exhausted, the The employee employee is funds this responsible for 100% portion ,~rid~;e,- F2mployee Deductible of charges up to the $2,000 employee only deductible amount $'~ 000 employee ~ I dependent City and $4,000 cmplo~cc ~ 2 ~)r m,r~ dependents I I employee share the ~-.~/¥ A traditional PPO premium cost for v plan covers the this traditional amount over the PPO plan deductible 25 ~ Mellon City of Bakersfield Consumer Directed Health Care (cont'd) Support Provided to Employees · Disease/care management · Provider pricing and quality data programs; 24-hour nurse lines · Nurse coaches; patient advoCacy; · Wellness programs and health risk referral services assessments ® Rx information · EAP services ® Quiz on the "true" cost of services ® Assistance in choosing a health ® Member services numbers and plan; information about what the other resource numbers/Web plans cover addresses · Information on how to choose a · Wallet cards doctor; questions to ask during your doctor visit ®' Meetings and seminars ® Web links and other health · Help in deciding where to get care services decision support tools Mellon City of Bakersfield Additional Benefit Options (cont'd) Health Savings Accounts · Tax-exempt trust/savings vehiCle - Similarto Archer MSA and IRA - Trustee is bank, insurer, or entity approved by IRS Employer/employee cash contributions - Must be funded Account belongs to individual - Non-forfeitable - Portable 27 ~1 Mellon City of Bakersfield Health Savings Accounts (cont'd) Eligibility for HSA · Must be covered under high-deductible health plan (HDHP) Must not be covered by non-HDHP - Spouse plan - FSA - HRA - Individual plan Cannot be claimed as dependent on tax return · Cannot be entitled to Medicare Mellon City of Bakersfield Health Savings Accounts (cont'd) High Deductible Plans Defined 2004 minimum deductible: - $1,000 individual - $2,000 family Amounts indexed for inflation · Family deductible any coverage level that is not individual - No "embedded deductibles" Preventive care can have no deductible Mellon City of Bakersfield Health Savings Accounts (cont'd) High Deductible Plans Defined · 2004 out-of-pocket maximum: - $5,000 individual - $10,000 family Amounts indexed for inflation · "Out-of-pocket" includes: - Deductible - Copays - Coinsurance 30 ~ Mellon City of Bakersfield Health Savings Accounts (cont'd) Limits on Contributions · Contributions can be made by: - Employee - Employer - Family member Maximum annual contribution is lesser of: - Annual deductible (for in-network services) - $2,600/$5,150 individual/family--indexed All contributions aggregated · Contribution limit applies monthly Mellon City of Bakersfield Health Savings Accounts (cont'd) Qualified Medical Expenses · Distributions at any time Excluded from gross income if: - For qualified medicalcare - For beneficiary, spouse, dependents Included in income for purposes of other distributions - Additional 10% tax, except for: · Death or disability · Age 65 or older Mellon City of Bakersfield Health Savings Accounts (cont'd) Qualified Medical Expenses Out-of-pocket medical (Sec. 213(d)) COBRA premiums Long-term care insurance For individuals age 65 or older: - Medicare premiums - Employer retiree medical premiums - Individual health policies (notMediGap) (~) Mellon City of Bakersfield Health Savings' Accounts (cont'd) HSA Advantages The employer is not required to contribute to the account The account belongs to the employee, and to his beneficiaries at his death Reimbursement may be made at any time at the request of the employee, and is not limited to health care expenses, which reduces the administrative cost of validating health care expenses Mellon City of Bakersfield Health Savings Accounts (cont'd) HSA Disadvantages · The employee must also be covered under a high- deductible health plan--and by no plan other than a high-deductible health plan · The account must be funded · Amounts that are not claimed do not revert to the employer · Dollar limits on contributions require additional administrative effort Mellon City of Bakersfield Discussion, Questions, Next Steps Discussion 3~ ~ ~) Mellon