School District of School District of St. Croix CentralSt. Croix Central

Benefit Plan Recommendations

October 2011

Current Profile

Medical highlightsHigh medical loss ratio2008: 76%2009: 100.7%2010: 102.2%2011 YTD: 91.8%

Medical costs decreased in 2011Younger than average populationMembers are engaged in generic utilization and care management programs

Medical Plan

Difficulty obtaining competitive quotesHigh medical loss ratioLarge ongoing claimsCensus discrepanciesCash in lieu of medical is affecting enrollment – losing good risk. Carriers would be more comfortable with $200/month or less109 on the plan (per the census)76 waivers

Medical Plan - Challenges

Comparable vs. identical benefitsWaiver of Premium (3 on WOP)Inconsistent plan years

Renewal July 1 – benefit change effective date was 9/1Deductible runs Calendar YearFlex Plan runs Calendar Year

Medical Plan – Challenges - Retirees Retirees eligible for school district contribution stay on group health plan.Once eligible for Medicare, they convert to a Medicare Supplement, unless they are 65 and still eligible to take COBRA in conjunction with their retiree benefitWhen on Medicare, WEAIT does not provide coverage for prescription drugs. Participants must obtain Medicare Part D coverage elsewhere if they want coverage for RX.

Medical Plan – Challenges - Retirees

If they decline to participate in Medicare Part D, they are penalized for participating at a later date

Once school district contribution ends, retirees are able to stay on group health plan at their own cost (regardless of age). Claims incurred are credited to the active group’s claims experience. (16 direct bills)

District group health plan becomes less attractive to other vendors. Especially as retiree population increases.

Medical Plan - Opportunities

Quote from Medica with “comparable” benefits but not identical. Some plan differences include:

No waiver of premiumAssumption that Retirees that are Medicare eligible are enrolled in a group Medicare Supplement or enrolled elsewhereCopays are subject to the out-of-pocket (better)

Ancillary Plan Opportunities

Carriers with products specifically designed to mirror WEAIT

Expand ability to offer additional products for those who would like to participate

CONSUMER DRIVEN CONSUMER DRIVEN HEALTH PLANSHEALTH PLANS

Health Reimbursement AccountsHealth Savings Accounts

Understanding the “lingo”Health Reimbursement Account (HRA)- ER funded

VestedUnvested

Health Savings Account (HSA) – ER/EE funded

Flexible Spending Account (FSA) – typically EE funded

Pre-tax premiumPre-tax dependent carePre-tax uninsured medical expenses

HSA limits the uninsured medical account to dental and vision expenses only

Non-Vested HRA OverviewUsually works in conjunction with a high deductible

Take a portion of the premiums savings to help employees pay out of pocket expenses

Separate HRA amount recorded for each plan participant available only to reimburse actual expenses

Funds can be used tax free for medical expenses deemed eligible by the plan document

Funds may or may not be rolled over into next plan year

HEALTH REIMBURSEMENT ACCOUNT

Employee takes money out to help them with claims subject to the deductible

$

EMPLOYERCONTRIBUTIONS

Employer sets aside money to help employees with out of pocket expenses

Vested HRA OverviewEmployer makes deposits on behalf of the employee to be used tax-free for eligible medical expenses and premiums.

Can be individual interest bearing accounts for participants.The HRA, when vested, follows the participant and is “portable” (i.e., leave employment, retire)

HSA Overview

High deductible health insurance policy that covers large medical or hospital claims

Investment or savings account from which you can withdrawal money tax-free for qualified medical expenses

What is the HDHP?Health insurance plan with a minimum deductible of:

$1,200 (single)$2,400 (family)These amounts are indexed for inflation

Annual out-of-pocket (including deductibles and coinsurance) cannot exceed:

$6,050 (single)$12,100 (family)These amounts are indexed for inflation

What is the HSA?

Similar to an IRA

Triple Tax Advantaged!Contributions can be made with pre-tax or after-tax dollarsInterest earnings tax-deferredWithdrawals for qualified medical expenses are tax-free

Account is owned by employeeContributions are 100% vested

HSA Eligibility Requirements

Covered by a high deductible health plan (HDHP)

No other health plan (including regular flexible spending accounts and some HRAs)

Not enrolled in Medicare

May not be claimed as a dependent on someone else’s tax return

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How Does HSA & FLEX Work Together

FLEX PLAN ACCOUNT1. Premium Account

• Medical Premiums• Dental Premiums• HSA Contributions

2. Dependent Day Care Account3. Flexible Spending Account

• Limited to dental and vision expenses only

• Immediate availability on annualized dollar amount

• USE IT OR LOSELOSE IT

Withdrawals can be made for any section 213(d) qualified expense. Including:

• Expenses subject to your deductible

• Over the counter medicines

• Dental expenses

• Vision expensesHEALTH SAVINGS

ACCOUNT1. 2012 Contribution Limit

• $3100 single• $6250 family

2. Can only withdraw up to balance that is already in the account

3. USE IT OR KEEPKEEP IT

Go ToComparison Worksheet

Medical Plan - Recommendations

For Active Employees

Consider moving to Medica - comparable plansTotal annualized rate savings: $123,767

Savings quoted include support staff

Waiver of Premium is not available through Medica. This would need to be self-funded and administered by the district

Medical Plan - Recommendations

For RetireesLimit eligibility for the district health plan to employees and early retirees eligible for district contributions to health plan

Medicare supplement eligible employees would be able to move to Medica group Medicare supplement or individual Medicare supplement through WEA Trust or another vendorMedicare retirees claims experience no longer impact the district’s claims experience.If selected, there would be no employer contribution required to maintain this group option for employeesJA Counter staff would be available to help council affected retirees

Retiree – Plan options comparedCarrier WEA Trust MedPlus Medica Group Prime Solution Medica Individual Prime Solution

Monthly Premium $143.52 $170 $122

Medical Deductible $100 $500 $0

Preventative Health 100% 100% 100%

Doctor Visits 100% after deductible $20 Copay $0 Copay

Emergency Care 100% after deductible $75 Copay (waived if admit in 24h) $0 Copay

Ambulance Services 100% after deductible $75 Copay $0 Copay

Inpatient Hospital Care 100% after deductible $200 Copay $0 Copay

Eyewear No Coverage $250 every 2 years $125 every 2 years

Hearing Aids No Coverage $900 every 2 years $450 every year

Fitness Program No Coverage Free membership - network Free membership - network

Part D No Coverage Yes - $10 G, $34 PB, $74 NPB (no Donut Hole) No Coverage

Lifetime Maximum Unlimited Unlimited Unlimited

Network Yes Yes Yes

Medical Plan - RecommendationsOption 1:

Comparable plan designs for year one. This would give the district time to educate employees on alternate plan designs and employees time to get used to a new provider.

Estimated annualized savingsDistrict: $115,234 (including support staff)Employees: Single: $37 / Family: $84

ProsLimited change in plan designFinancial incentives for wellness built in to the product ($135/adult=$27,945)Lower net out of pocket to employeeBuilt in telephonic Employee Assistance Program (EAP) with onsite education

Cons Difference in drug formulary (not bad just different)

Medical Plan - RecommendationsOption 2:

Consider moving to a $2000/$4000 -100% plan with same RX copay but no other copays until deductible is met. Net deductible of $250 for single and $500 for family. Fund with a non-vested HRA.

Estimated annualized savings assuming 50% HRA utilizationDistrict: $228,075 (including support staff)Employees: Single: $130 / Family: $296

ProsSignificant premium Savings to district and employeesNet deductible the sameCopay obligation on OV, ER and UR go away

Cons To the district, the HRA risk is difficult to determineRequires employee involvement in claims reimbursement

Medical Plan - RecommendationsOption 3:

$1500/$3000 – 100% HSA plan design with $1250/$2500 district contributionAbility to offer dual choice between $250 traditional and HSA with HSA as “base plan”

Cost savings district: $153,444 (including support staff)Cost savings employees: Single: $128 / Family: $291 + HSA dollars

ProsIncreased deductible allows fixed premium cost to go downKeeps employees better than “whole”Offer flexibility for employees to choose which plan works best for them and their individual situationsEmployees keep what they don’t use

Cons Eligibility rules must be met to receive contribution

Coordination with flex and some HRAs

Base Plan and Buy-up

HDHP with HSA (Base) Traditional (Buy-Up)

Deductible $1500/$3000 $250/$500

HSA Contribution $1250/$2500 $0

Preventive Care 100% No Deductible 100% No Deductible

Office Visits Deductible then 100% $10 then 100%

RX Deductible then 100% $5/$20/$40

In/Out Patient Deductible then 100% Deductible then 100%

EE Annualized Premium

Single $464.75 $556.04 (diff: $91.29)

Family $1,053.76 $1,260.71 (diff: $206.95)

Medical Plan - RecommendationsFuture Consideration:

Move to MyPlan by MedicaAllows School District to move to a defined contribution approach

ProsDistrict determines flat contribution to health benefit – easier to budget from year to yearOffers flexibility for employees to choose which plan works best for them and their individual situations (up to 20 options)Employees keep the savings if they choose a plan where premiums are lower than the allotted amount.

Cons Potential increased deductible and out-of-pocket exposure for employeesEnrollment in this plan could be considered “complicated” by employees (too many options)Insurance cost is slightly higher due to increased administration

Flex Plan - Recommendations

Modify flex plan to allow availability of a limited flex plan for those that may be eligible to participate in an HSA health plan elsewhere

Dental Insurance - Recommendations

Delta Dental is offering a comparable plan design with approx. $1100 in savings to the district. Recommend staying with WEAIT.

Vision Insurance - RecommendationsAvesis is offering a comparable plan design with approx. $6,279 in savings to the district (28% lower than current)

ProsAnnual maximum would start over 1/1/12Lower rates

Cons Current carrier has a 4 year rate guarantee – Avesis is 2 years

Long-Term Disability - Recommendations

EPIC is offering a comparable plan design with approx. $4,191 in savings to the district (34% lower than current)

ProsLike plan designAbility to offer voluntary short-term disability

Cons ?

Life Insurance - Recommendations

Unless you want to give up the paid up benefit for retirees, we have no viable options for you (40 – 50% savings without this benefit). Recommendation to stay with WEAIT.

Consider offering employees the ability to purchase expanded optional life coverage through payroll deduction (Unum has exceptional worksite product availability including accident and cancer/critical illness policies)

Other Recommendations

Consider working with a wellness vendor or Medica’s wellness team to implement a formal wellness program customized to meet the needs of the district

Conduct ongoing education for employees with tips on saving money, utilizing plan benefits, helping them understand they are a partner in the long-term effort to control premium costs

Questions

Thank you for taking the time to learn about alternative

options.