2003 Open Enrollment Benefits Presentation

1. 2003 Open Enrollment Benefits Presentation Presented By: Mark G. Cauthen Effective: 1/1/2003

2. Topics of Discussion • Self Insured Plan • Overview of the Trust Fund • Factors Driving Increase in Cost of Health Care • 2003 Plan Changes • Private Health Care Systems (PHCS) • 2003 Rate Adjustments

3. What does it mean to be Self-Insured? • The employer assumes the role of the insurance company and assumes all of the risk.

4. Overview of the Trust Fund • Joint fund between City and Colorado Springs Utilities (CSU) • Where all of the premiums go • Where claims are paid from (similar to a checking account) • We need to bring in more revenue than what is spent on claims • Projected 2002 expenditures (City/CSU) • Medical: $16 million • Pharmacy: $3.8 million • Dental: $2.8 million

5. How is the Trust Fund Kept Viable? • Premium Rate Increases • Cost Sharing with Employees • Vendor Management • Audited Walgreen's • As a result, we are renegotiating for better rates • Performed a Medicare Audit • Collected funds from Memorial Hospital as a result of the Medicare Audit

6. Factors Driving Rising Costs in Healthcare Premiums (2001-2002) • Nationally • Litigation and Risk Management -- 7% • Fraud and Abuse -- 5% • General Inflation (CPI) -- 18% • Increased Consumer Demand -- 15% • Rising Provider Expenses -- 18% • Legislation/Regulations -- 15% • Rx, Medical Technology -- 22% Source: PricewaterhouseCoopers analysis, April 2002

7. Factors Driving Increase in Cost for City • Increasing Medical costs • Increase in our Claims Experience • Low Reserve Level because of Several Catastrophic Claims • Projected increase in cost of claims for 2003

8. 2003 Rate Increases • State Employees -- 39% • National -- 25% • City -- 14.3%

9. 2003 Plan Changes • Plans Affected: • Medical • Pharmacy • Dental • Vision

10. Medical Plans • We will have 3 Medical Plans Next Year • EPO • EPO Mid-Level • CORE • The Swing Plan will be Eliminated • There will be a new out-of-network option available under the EPO Mid-Level Plan

11. Terms • Out-of-Pocket Maximums • The maximum amount that you will spend annually for covered expenses, does not include co-pays. • After the out-of-pocket maximum is reached, the plan pays 100% for covered services • Annual Deductible • The amount that must be paid by the member before the plan pays anything • Co-Insurance • The portion of Eligible Medical Expenses for which the Covered individual has financial responsibility

12. Hospital Pre-Admission Diagnostic Testing • Subject to the Inpatient Hospital diagnostic coinsurance • EPO--Plan pays 90%, Employee pays10% up to the out-of-pocket maximum • EPO Mid-Level (In-Network)--Plan pays 80%, Employee pays 20% up to the out-of-pocket maximum • EPO Mid-Level [Out-of-Network] and CORE • Subject to deductible and co-insurance

13. EPO: Plan Change • Out-of-Pocket Maximums • 2003 • $750 per Individual per year • $2,250 per Family per year • 2002 • Individual -- $500 • Family-- $1,500

14. EPO: Plan Change • In-patient Hospital Stays • 2003 • 10% Co-insurance (applies to the out-of-pocket maximum) • 2002 • $100 co-pay per day of confinement, $500 maximum

15. EPO: Plan Change • Pharmacy Benefit • Increase to Maximum Co-Pay on Brand Named Prescriptions only • Retail: From $35.00 to $50.00 per RX (30 day supply) • Mail: From $40 to $60 for a 90 day supply • Generic Pricing Stays the Same

16. EPO Mid-Level: Plan Change • Plan Enhancement • Two Features: In and Out-of-Network Options (Replaces Swing Option) • In-Network option continues to function as it does today in that you have to use MHMN. • Out-of-Network: Separate Benefit Schedule, deductible, and coinsurance

17. EPO Mid-Level: Plan Change • Annual Deductible • Out-of-Network: • $1,000 per individual • $2,000 maximum for a family • Plan pays 70% for most services after the annual deductible is met • Plan pays 100% for eligible medical expenses once the out-of-pocket maximum is reached • In-Network: • No Annual Deductible

18. EPO Mid-Level: Plan Change • Out-of-Pocket Maximums • In Network • Individual--$1,000 • Family--$3,000 • 2002 • Individual--$750 • Family--$2,250

19. EPO Mid-Level: Plan Change • Out-of-Pocket Maximums • Out-of-Network • Individual--$3,250 • Family--$9,750 • These amounts are above the deductible • Plan pays 100% for covered services after out-of-pocket maximum is reached

20. EPO Mid-Level: Plan Change • Inpatient Hospital Stays • 2003 • In-Network • 20% Co-insurance (applies to the out-of-pocket maximum) • Out-Of-Network • 30% Co-insurance (applies to out-of-network out-of-pocket maximum • 2002 • $300 co-pay per day of confinement, $750 maximum

21. EPO Mid-Level: Plan Change • Pharmacy Benefit • Increase to Maximum Co-Pay on Brand Named Prescriptions only • Retail: From $35.00 to $60.00 per RX [30 day supply] • Mail: From $40 to $75 for a 90 day supply

22. Swing Medical Plan • Will be discontinued in 2003 • Enhancement of EPO Mid-Level Plan • Features an out-of-network benefit option

23. Core Medical: Plan Change • Out-of-Pocket Maximums • 2003 • Increased to $7,750 per individual • 2002 • $7500 per individual

24. Core Medical: • Annual Deductible • $1,500 per individual per year, no family limitation • No change from 2002

25. Private Healthcare Systems (PHCS) • New Option for 2003 • PHCS • New Wrap Around Network • Nearly 370,000 providers and 3,500 facilities • We have Pre-Negotiated Network Discounts • Eligibility • Members who are enrolled in a City Medical Plan (EPO, EPO Mid-Level, or CORE) can take advantage of the PHCS in Certain Circumstances

26. Private Healthcare Systems (PHCS) • National Network • Enables members to choose providers from within a national network • In-Network Benefit • All plan participants receive the in-network benefit for emergency situations • Discounts • All emergency situations, all plans • EPO Mid-Level plan participants who use the out-of-network benefit and use PHCS services

27. EPO Participants - PHCS • Can only be used for out-of-area emergency situations • As defined in the Medical Summary Plan Description (SPD) • Non Emergency out-of-area services will not be paid by the plan

28. EPO Mid-Level Participants - PHCS • PHCS enables EPO Mid-Level out-of-network participants to take advantage of discounts • Emergency and Non-Emergency situations

29. Core Participants - PHCS • PHCS enables CORE indemnity plan to take advantage of discounts

30. New Generic Medical Cards • To be distributed by January 1, 2003 • Will include PHCS information

31. Alternative Medicine • Pilot Program for 2003 • Applies to all Medical Plans • No additional premium • Must be enrolled in a medical plan • New Option for 2003

32. Alternative Medicine • Services must be provided by a licensed provider • Covers: • Acupuncture • Nutritionist • Chiropractic • Massage therapy • Homeopathic Services

33. Alternative Medicine • All plans pay 50% of each claim • Maximum amount paid by plan is $300 per family • 50% co-insurance does not apply to the plans out-of-pocket maximum or deductible

34. Dental Plans • Delta Hi-Option DPO Dental Plan • Formerly Delta Premier Dental Plan (Springs Dental) • Enhanced by including the DPO provider Network • When DPO provider is used, employee and plan receive discounts • DPO Providers will be shown in Red Lettering in the provider directory

35. Dental Plans • Delta Standard-Option DPO Dental Plan • Formerly Delta Preferred DPO Dental Plan • No change in deductible (In or Out-of-Network) • $50 per individual • $150 per family • DPO Providers will be shown in Red Lettering in the provider directory

36. Dental Plans - Calendar Year Deductibles • Delta Hi-Option DPO Dental Plan • $50 Per Individual • $100 Family • Delta Standard-Option DPO Dental Plan • $50 Per Individual • $150 Per Family • Core Dental • $75 Per Individual

37. Vision • Benefit Enhancement • Frames: In-Network Frame allowance increased to $130 retail ($50 Wholesale) • Service Enhancements • Contact Lenses: • Member Preferred Pricing • Direct delivery to your home • Other Incentives • Contact VSP at 1-800-877-7195 to learn more

38. Rate Increases • Medical • Prescription (RX) • Dental

39. Funding the Medical Plan • Due to an increase in medical plan costs and increased claims experience, there will be a 14.3% increase in overall funding for 2003

40. Rate Re-Structuring • The rate structure was realigned to more accurately reflect the claims experience and industry standards. • Creates greater equity for the participants

41. Rate Re-Structuring

42. Dental • Rate increase of 13.1%

43. Vision • Rate Increase is zero

44. After Hours Clinic • Effective Sept 30, Memorial Hospital After-Hours Clinic Moved • Location: 2502 E. Pikes Peak Ave (North side of building) • Open 7 days a week: 11 a.m. to 11 p.m. • Closed Holidays • Phone: 365-2888 • Call ahead to decrease waiting time

45. Benefit Enhancement Recap • Medical • PHCS Wrap Around Network • EPO Mid-Level, Out-of-Network Option • Alternative Medicine • Dental • DPO Provider Network Discount Added to Delta Hi-Option DPO Dental Plan • Vision • Frame Allowance Increase

46. Questions • Benefits Line: 385-5904, Press 2 at the Prompt.