School District of St. Croix Central

1. School District of St. Croix Central Benefit Plan Recommendations October 2011

2. Current Profile Medical highlights High medical loss ratio 2008: 76% 2009: 100.7% 2010: 102.2% 2011 YTD: 91.8% Medical costs decreased in 2011 Younger than average population Members are engaged in generic utilization and care management programs

3. Medical Plan Difficulty obtaining competitive quotes High medical loss ratio Large ongoing claims Census discrepancies Cash in lieu of medical is affecting enrollment – losing good risk. Carriers would be more comfortable with $200/month or less 109 on the plan (per the census) 76 waivers

4. Medical Plan - Challenges Comparable vs. identical benefits Waiver of Premium (3 on WOP) Inconsistent plan years Renewal July 1 – benefit change effective date was 9/1 Deductible runs Calendar Year Flex Plan runs Calendar Year

5. 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 benefit When on Medicare, WEAIT does not provide coverage for prescription drugs. Participants must obtain Medicare Part D coverage elsewhere if they want coverage for RX.

6. 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.

7. Medical Plan - Opportunities Quote from Medica with “comparable” benefits but not identical. Some plan differences include: No waiver of premium Assumption that Retirees that are Medicare eligible are enrolled in a group Medicare Supplement or enrolled elsewhere Copays are subject to the out-of-pocket (better)

8. Ancillary Plan Opportunities • Carriers with products specifically designed to mirror WEAIT • Expand ability to offer additional products for those who would like to participate

9. Consumer Driven Health Plans Health Reimbursement Accounts Health Savings Accounts

10. Understanding the “lingo” Health Reimbursement Account (HRA)- ER funded Vested Unvested Health Savings Account (HSA) – ER/EE funded Flexible Spending Account (FSA) – typically EE funded Pre-tax premium Pre-tax dependent care Pre-tax uninsured medical expenses HSA limits the uninsured medical account to dental and vision expenses only

11. Non-Vested HRA Overview • Usually 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

12. EMPLOYER CONTRIBUTIONS Employer sets aside money to help employees with out of pocket expenses $ HEALTH REIMBURSEMENT ACCOUNT Employee takes money out to help them with claims subject to the deductible

13. Vested HRA Overview • Employer 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)

14. 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

15. 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

16. What is the HSA? • Similar to an IRA • Triple Tax Advantaged! • Contributions can be made with pre-tax or after-tax dollars • Interest earnings tax-deferred • Withdrawals for qualified medical expenses are tax-free • Account is owned by employee • Contributions are 100% vested

17. 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

18. How Does HSA & FLEX Work Together • FLEX PLAN ACCOUNT • Premium Account • Medical Premiums • Dental Premiums • HSA Contributions • Dependent Day Care Account • Flexible Spending Account • Limited to dental and vision expenses only • Immediate availability on annualized dollar amount • USE IT OR LOSE 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 expenses $ • HEALTH SAVINGS ACCOUNT • 2012 Contribution Limit • $3100 single • $6250 family • Can only withdraw up to balance that is already in the account • USE IT OR KEEP IT

19. Go ToComparison Worksheet

20. Medical Plan - Recommendations For Active Employees Consider moving to Medica - comparable plans Total 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

21. Medical Plan - Recommendations For Retirees Limit 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 vendor Medicare 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 employees JA Counter staff would be available to help council affected retirees

22. Retiree – Plan options compared

23. Medical Plan - Recommendations Option 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 savings District: $115,234 (including support staff) Employees: Single: $37 / Family: $84 Pros Limited change in plan design Financial incentives for wellness built in to the product ($135/adult=$27,945) Lower net out of pocket to employee Built in telephonic Employee Assistance Program (EAP) with onsite education Cons Difference in drug formulary (not bad just different)

24. Medical Plan - Recommendations Option 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 utilization District: $228,075 (including support staff) Employees: Single: $130 / Family: $296 Pros Significant premium Savings to district and employees Net deductible the same Copay obligation on OV, ER and UR go away Cons To the district, the HRA risk is difficult to determine Requires employee involvement in claims reimbursement

25. Medical Plan - Recommendations Option 3: $1500/$3000 – 100% HSA plan design with $1250/$2500 district contribution Ability 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 Pros Increased deductible allows fixed premium cost to go down Keeps employees better than “whole” Offer flexibility for employees to choose which plan works best for them and their individual situations Employees keep what they don’t use Cons Eligibility rules must be met to receive contribution Coordination with flex and some HRAs

26. Base Plan and Buy-up

27. Medical Plan - Recommendations Future Consideration: Move to MyPlan by Medica Allows School District to move to a defined contribution approach Pros District determines flat contribution to health benefit – easier to budget from year to year Offers 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 employees Enrollment in this plan could be considered “complicated” by employees (too many options) Insurance cost is slightly higher due to increased administration

28. 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

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

30. Vision Insurance - Recommendations Avesis is offering a comparable plan design with approx. $6,279 in savings to the district (28% lower than current) Pros Annual maximum would start over 1/1/12 Lower rates Cons Current carrier has a 4 year rate guarantee – Avesis is 2 years

31. Long-Term Disability - Recommendations EPIC is offering a comparable plan design with approx. $4,191 in savings to the district (34% lower than current) Pros Like plan design Ability to offer voluntary short-term disability Cons ?

32. 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)

33. 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

34. Questions Thank you for taking the time to learn about alternative options.