Benefits Administration Update Presentation for 2013 Board of Education Spring Fiscal Workshop

1. Benefits Administration Update Presentation for 2013 Board of Education Spring Fiscal Workshop

2. Agenda • Plan Funding Process • 2014 Health Benefits • Estimated premium increase • Base premium/surcharges • Benefit changes • Partnership Promise • Health Reform – Accountable Care Act

3. Funding Levels and Benefit DesignOverview of Process Goal: Ensure fiscal integrity of the plans • Largest, primary portion of funding is premium comprised of employer, employee and retiree contributions • Premiums cover: • Claims • Reserves for claims incurred but not yet reported (IBNR) • Reserve for unanticipated fluctuations and catastrophic claims • Administrative fees to claims and program administrators • Clinic operation for State Insurance Plan • Benefits Administration overhead

4. Funding Levels and Benefit DesignOverview of Process • Factors considered in setting premiums • Prior years’ performance • Projected medical trend (cost and utilization) • Program goals (e.g., incentives, value-based benefit design, wellness) • Available state funding • Plan reserves and IBNR • Process • Evaluate detailed month-to-month revenue and expense information • Project current and future years’ expenses using historical information, market trend data and future regulatory requirements • Evaluate benefit design against market benchmarks and program goals • Project cost of proposed benefit design with changes (if any) • Balance benefit design changes with existing fund balances, available funding, funding required to support benefit, and target ending reserve levels

5. 2.1% Average Per Annum Increase 2009 - 2013 • 2009 – 0% • 2010 – 4% • 2011 – (2.9)% • 2012 – 0% • 2013 – 9.2% • Kept cost increases below trend • Use of reserve • Re-procurement • Benefit redesign

6. Estimated 2014 Premium Increase • FY 2014 BEP funding increase budgeted at 8.8% • Premium increase expected to be less than 8.8% • 2012 actual experience better than earlier forecast • Funding based on aggregate average of base premium • Base premium is based on lowest cost plan and lowest cost network (premium before network surcharge and Standard Plan surcharge) • East and Middle TN base premium = BCBST Partnership PPO • West TN base premium = Cigna Partnership PPO • Final premium increase will be approved by Local Education Committee in June

7. 2014 Benefit • Proposed benefit changes not finalized • Evaluating if there is a need for other benefit adjustments – only minor changes expected • Out of pocket max added to drug coverage • By 2015 health reform requires all combined out of pocket payments not to exceed certain $ threshold • Will phase in partially for 2014 • Specialty drug coverage – requirement that members who need a specialty drug for human growth hormone first try a preferred drug

8. Partnership Promise • Everyone must take action in 2013 • Builds on previous years’ requirements • Goal: to help healthy members stay healthy and to slow or stop the progression of disease among those with chronic illnesses • New Wellness Partner - Healthways now manages the Partnership Promise

9. Partnership Promise • 2014 Promise will continue to build on previous requirements* • Complete the Well-Being Assessment by March 15 • Keep contact information up to date • Everyone will complete a biometric screening through health screening event or personal physician visit • More choices for wellness activity (choose one) • At-risk members participate in health coaching/case management • Tobacco users must participate in a tobacco cessation program • New employees must complete Well-being Assessment (WBA) and biometric screening within 120 days of insurance coverage effective date * Pending approval from the Insurance Committees

10. Working for a Healthier Tennessee • Companion to the Governor’s wellness initiative, Healthier Tennessee • Focuses on improving health of our plan members • Three key areas: • Physical activity • Healthy eating • Tobacco cessation • Asking each school district to choose a Site Champion

11. Working for a Healthier Tennessee • Your Site Champion will: • Commit to one year of service, with an average monthly time commitment of three to five hours • Participate in monthly Site Champion conference calls • Promote wellness activities in your organization • Organize at least two healthy events for your worksite • Serve as screening site coordinator (if applicable) for the Partnership Promise • Regional kickoff meetings starting in mid-June

12. Affordable Care Act Implementation *Denotes group/insurance market reforms applicable to all group health plans.  **Denotes group/insurance market reforms not applicable to grandfathered health plans. *** This requirement applies to full time employees (e.g., working on avg. 30 hours per week) and will require coverage that is affordable and satisfies a certain actuarial value to avoid the penalty. Guidance forthcoming.

13. Concerns and Issues • Affordability • Full-time status • Equal or superior requirement

14. Federal Health Reform • Beginning in 2014, employers with over 50 employees will be subject to a penalty unless • Offer minimum essential coverage • Offer at least 1 plan with minimum 60% actuarial value • Offer affordable coverage • If any of its full-time employees seeks and receives a premium credit toward purchase of an Exchange plan, “free-rider” penalty is applied to employer • Penalty starts at $3K annual for each FT employee receiving a tax credit up to maximum of $2K times total number of employees minus 30

15. Affordability Test • FTE contribution for EE Only lowest cost cannot exceed 9.5% of Applicable Taxpayer’s household income • Determined based on self-coverage (EE Only), regardless of actual coverage election • IRS guidance for calculation on FTE’s W-2 wages expected • Penalty of $3,000/PY per FTE (30HRS) who enrolls in exchange and is eligible for premium tax credit or cost-sharing reduction • At least 30 hours a week and whose deduction for the lowest cost plan available is more than 9.5% of family income (measured on EE Only Coverage)

16. Roles and Responsibilities under PPACA • State of Tennessee Local Education Plan • Production and distribution of the Summary of Benefits Coverage (SBC) • Payment of Comparative Effectiveness Research fee • Payment of Transitional Reinsurance Fee • Employers • Notification about availability of the Health Care Exchange (HHS has not yet released guidelines) • Auto-enrolling new employees (Dept of Labor has not yet released guidelines) • Must offer health plan that meets essential benefits, actuarial value threshold and affordability • State plan exceeds minimum actuarial value for offering essential benefits • Affordability test is a combination of premium payment by employee and wages

17. PPACA Training • State-sponsored PPACA webinars • Two sessions for Fiscal Directors • One session for agency benefit coordinators and others • Dates in May - TBD