Office of Group Benefits Tommy D. Teague Chief Executive Officer

1. TODAY’S SMART CHOICES... TOMORROW’S HEALTHY SAVINGS Office of Group Benefits Tommy D. Teague Chief Executive Officer

2. Eligibility Full-time employees and retirees of… • state agencies • state colleges and universities • participating school boards …and legal dependents: • Legal spouse • Never-married child from birth to age 21 • Never-married child age 21-24 (if full time student) Effective date of coverage is first day of month after enrollment plus 30 days

3. OGB Plan Member Premiums • Plan member pays 25% of premium for self • Plan member pays 50% of premium for any dependents Aggregate contribution level is 29% by plan member

4. Retiree Health Coverage

5. OGB Health Plans 4 plans -- for all plan members • PPO(self-insured & administered by OGB) • HMO(self-insured; administered by Humana) • EPO(self-insured; administered by UnitedHealthcare) • Medical Home HMO(fully-insured & administered by Vantage)

6. OGB Medicare Advantage Health Plans 5 plans – only for retired plan members with Medicare Part A & Part B • 3 Medicare Advantage HMO plans • Humana HMO (only in certain areas of LA) • Peoples Health (only in certain areas of LA) • Vantage/POS Option (statewide) • 2 Private Fee-for-Service (PFFS) plans • Humana PFFS(nationwide) • SecureHorizons Medicare Direct(nationwide)

7. OGB Health Plan Enrollment Total Enrollment 132,305*** • Active employees 86,253 65% • Retired employees 46,052 35% *** figures don’t include LSU plans

8. OGB Budget FY 2010 $1.264 billion

9. Fiscal Year 2009-10 Fund Balance as of August 14, 2009 $484,176,551

10. MEDICAL BENEFITS DRUGS ADMINISTRATIVE MENTAL HEALTH OGB Administrative Costs MEDICAL BENEFITS Administrative costs are 3% of total costs

11. OGB Organization • 332 employees • 5 divisions • Benefit Services • Customer Services • Information Services • Quality Assurance & Administration • Legal & HIPAA

12. OGB Organization

13. OGB Organization

14. Enrollment Retired Employees 46,573 • With Medicare 27,854 (Medicare is primary) 59% • Without Medicare 18,719 (OGB is primary) 41%

15. Life Insurance • Group term life plan • Prudential • State pays 50% of premium for employees and retirees • Employee pays premium for dependent life • Reduced coverage and premiums, on July 1 after reaching age 65 and age 70

16. Life Insurance

17. Life Insurance

18. GASB 45 / OPEB Liability Historically, governments accounted for retiree health care benefits on pay-as-you-go (PAYGO) basis. • Cost of covering active employees was only a function of current year costs • Did not reflect total cost of employee health coverage …only included current year • Without projected future costs, governmental entities’ financial statements did not fully disclose all costs • GASB requires disclosure of future costs associated with current services • Those future costs are classified as OPEB

19. GASB 45 / OPEB Liability OPEB (other post-employment benefits) – a compilation of all non-pension benefits an employee receives after retirement Examples include: • Health benefits • Dental, vision and hearing coverage • Prescription drug coverage • Life insurance • Long-term care commitments • Long-term disability

20. GASB 45 / OPEB Liability Liability calculation assumptions: • Benefit composition • Medical inflation • Turnover rate • Mortality assumption • Will employee live to reach retirement? • How long will retiree live in retirement? • Discount rate • Other factors that affect number of dependents

21. GASB 45 / OPEB Liability • GASB 45 does not require funding of the calculated liability • Decision to fund or not is significant: • Funded plans have lower liabilities • Unfunded plans have larger liabilities • Rating agencies may consider funding • Funding requirements are strict; funds must be held in irrevocable trust • Depending on funding or not: State’s liability now stands at $13.7 billion over 30 years….and growing