Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
Resolution - 2012-R0436 - Purchase Stop Loss Insurance - HM Life Insurance Company - 11/08/2012
Resolution N0. 2012-80436 November 8, 2012 Item No. 5.28 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the City Manager of the City of Lubbock BE and is hereby authorized and directed to purchase for and on behalf of the City of Lubbock and its health benefits program, specific and aggregate stop loss insurance coverage, by and between the City of Lubbock and HM Life Insurance Company pursuant to the terms and conditions attached hereto as Exhibit "A"; offering the same benefits as set forth in Exhibit "A" hereto; for which the composite rate per member, per month shall not exceed $16.59; and in a final form and substance acceptable to the City Manager and City Attorney, as well as execute any related documents required in connection therewith; and THAT the City Manager or designee may execute any routine documents and forms associated with said insurance coverage. Passed by the City Council this November 8 4RU11KERTSON, MAYOR ATTEST: [teb ccaGarza—, City Secretary APPROVED AS TO CONTENT: APPRO Assistant City Manage City Attorney gs:ccdocs/High Mark Life Insurance Resolution. 12 10.22.12 Resolution No. 2012—RO436 EXHIBIT „A„ STOP LUSS PROPOSAL FOR fm� � City of Lubbock EIFF. INSURANCE Cc NWANY Sales Representative: J. Albert Lucio Effective Date: 01/0112013 Broker: No Writing Agent Through Date: 1213112013 TPA: HCSC - BCBS of Texas (Austin) Provider Network(s): HCSC - BCBS of Texas (Austin) Utilization Review Vendor(s): Blue Cross Blue Shield of Texas Specific: (Check one) Lives Current 0 Renewal 0 •. Option Specific Deductible (per Covered Individual) $350,000 $350,000 $375,000 $400,000 Policy Year Maximum Specific Benefit Inforce Unlimited Unlimited Unlimited Lifetime Maximum Specific Benefit Inforce Unlimited Unlimited Unlimited Covered Benefits Med, Rx Card Med, Rx Card Med, Rx Card Med, Rx Card Specific Premium Composite Rate 2,757 $14.17 $16.59 $1516 $14.09 Total Lives 2,757 Estimated Contract Specific Premium $468,800 $548,864 5501,553 $_466,154 Contract Basis 12/15 12115 12115 12115 Commission 0.00% 0.00% 0.00% 0.00% Note: This proposal is not complete unless accompanied by the proposal notes and the basis of offer noted on the following pages. Individual Special Requirements: Underwriter: BKS (October 17. 2012) 10174066891-2012-223719-6-4 Page 1 of 3 STOP LOSS PROPOSAL FOR. City of Lubbock PROPOSAL NOTES fm� I IFF ENSUKANU cOMRANY • The rates in this proposal are firm. Please provide a signed proposal. • Human Organ Transplant benefits are payable in accordance with the underlying plan and are subject to the proposed Lifetime Maximum Specific Benefit offered within this proposal. The above specific stop loss rates include the HM Stop Loss Bridge Renewal Option. PROPOSAL ACCEPTANCE Please acknowledge acceptance of the terms in this proposal by signing and returning within 30 days (no signed proposal will be accepted after the effective date). Please also indicate which option is chosen by checking the appropriate box on the previous page. Failure to remit the signed agreement within the same period will result in updated large claim disclosure (and claims) being required for our review. Signature: Accepted on the day of , 20 Title: Stop Loss coverage is underwritten by HM Life Insurance Company, Pittsburgh, PA, under policy form HL 601 (905) or similar; in certain states the requested coverage may not be available. As included herein, 'HMIG' refers to the Stop Loss carrier. Underwriter. BKS (October 17, 2012) 10174066891-2012-223719-6-4 Page 2 of 3 STOP LOSS PROPOSAL FOR City of Lubbock (m, initials: date: BASIS OF OFFER Assumptions • This proposal is subject to revision if there is a change in effective or renewal dates, or a change in the plan of benefits. • This proposal is based on the utilization of the Provider Network(s) and the Utilization Review Vendor(s) listed on this proposal • This proposal assumes a minimum participation level of 75% applies for all eligible enrollees under a contributory plan, and 100% under a non- contributory plan. • This proposal assumes the plan of benefits includes a pre -certification, utilization review and large case management program. • This proposal is based on a description of the employee benefit plan(s) provided and approved by HMIG, employee and dependent census data, submission of any requested claim information, plus any other information relevant to the underwriting risk. If any of the information was incorrect or changes the risk involved, the rates and factors will be modified, and the specific and aggregate claims will be adjusted accordingly. • The bad debt and charity surcharge portion of the New York Reform Act will be considered an eligible claim expense under the stop loss policy if services are rendered in New York State. Other surcharges, pool charges and/or covered lives assessments will not be covered under the stop loss. • All standard Policy provisions apply. The laws of the state where the policy is issued will apply. Certain exclusions and limitations may apply. • Retirees are included in the stop loss coverage. • This proposal will expire on the proposed effective date. • Unless otherwise limited or excluded by the stop loss policy or under the Individual Special Requirements, eligible claim expenses under the stop loss policy will follow the covered underlying plan, up to the proposed Lifetime Maximum Specific Benefit. • The Agent is properly licensed and appointed by HMIG. • The initial rates are guaranteed for the proposed policy period unless otherwise noted. • There are not more than 15% COBRA participants. Qualifications • The premium rates are subject to change should the number of employees change by 10% or more, either in total and/or by singlelfamily mix. • If the descriptions of the benefits or plan provisions differ from what was initially utilized to underwrite the risk, an updated Plan Document or other acceptable plan description is required within 30 days of the proposed effective date, and the premium rates may be subject to re -rating, retro- active to the effective date. • Quote assumes the Plan Document will include traditional industry provisions and definitions including, but not limited to the following: eligibility, HIPAA, termination provisions, extension for leave of absence or disability, FMLA, subrogation, transplants, COB, exclusions for job related injuries, experimental and cosmetic treatment, usual and customary charges, war, not medically necessary, traveling outside of the U.S. solely for the purpose of receiving medical care. In the event that a Plan Document is not available within 30 days from the proposed effective date, we reserve the right to issue the Policy assuming standard exclusions will apply. • HIPAA Privacy rules permit the release of Protected Health Information (PHI) for the purpose of evaluating and accepting risk associated with the Plan Sponsor as part of "Health care operations". HMIG will use this information solely for the purpose of evaluating and accepting the risk and will not disclose any PHI collected except to perform this risk evaluation. • The rates in this proposal are based on the disclosure of all individuals considered a special enrollee due to having previously satisfied the plan's lifetime maximum. Written acceptance by HM must be acknowledged before terms of coverage for such individuals are included u nder HM's stop loss policy. Underwriter BKS (October 17. 2012) 10174060$91-2012-223719-6-4 Page 3 of 3 STOP LOSS PROPOSAL FOR City of Lubbock Sales Representative: J. Albert Lucio Effective Date: 01/0112013 Broker: No Writing Agent Through Date: 1213112013 TPA: HCSC - BCBS of Texas (Austin) Provider Network(s): HCSC - BCBS of Texas (Austin) Utilization Review Vendor(s): Blue Cross Blue Shield of Texas Specific Deductible (per Covered Individual) $350,000 $350,000 $375,000 $400,000 Policy Year Maximum Specific Benefit Inforce Unlimited Unlimited Unlimited Lifetime Maximum Specific Benefit Inforce Unlimited Unlimited Unlimited Covered Benefits Med, Rx Card Med, Rx Card Med, Rx Card Med, Rx Card Specific Premium Single Rate 1,410 $7.52 $8.74 $7.91 $7.29 Family Rate 1,347 $21.14 $24.81 $22.76 $21.20 Total Lives 2,757 Estimated Contract Specific Premium $468,945 $548,910 $501,730 $466,024 Contract Basis 12115 12115 12115 12115 Commission 0.00% 0,00% 0.00% 0.00% Note: This proposal is not complete unless accompanied by the proposal notes and the basis of offer noted on the following pages. Individual Special Requirements: �1 LIFE INSURANCE COMPANY Underwriter: BKS (October 18, 2012) 10174066891-2012-223719-7-5 Page 1 of 3 STOP LOSS PROPOSAL FOR City of Lubbock PROPOSAL NOTES Rk LIFE INSURANCE CUMPANY • The rates in this proposal are firm. Please provide a signed proposal. • Human Organ Transplant benefits are payable in accordance with the underlying plan and are subject to the proposed Lifetime Maximum Specific Benefit offered within this proposal. • The above specific stop loss rates include the HM Stop Loss Bridge Renewal Option. PROPOSAL ACCEPTANCE Please acknowledge acceptance of the terms in this proposal by signing and returning within 30 days (no signed proposal will be accepted after the effective date). Please also indicate which option is chosen by checking the appropriate box on the previous page. Failure to remit the signed agreement within the same period will result in updated large claim disclosure (and claims) being required for our review. Signature: Accepted on the day of , 20 Title: Stop Loss coverage is underwritten by HM Life Insurance Company, Pittsburgh, PA, under policy form HL 601 (905) or similar, in certain states the requested coverage may not be available. As included herein, "HMIG' refers to the Stop Loss carrier. Underwriter: BKS (October 18, 2012) 10174066891-2012-223719-7-5 Page 2 of 3 STOP LOSS PROPOSAL FOR City of Lubbock BASIS OF OFFER Assumptions mn [IFF INSURANCE (OMPANY initials: date: • This proposal is subject to revision if there is a change in effective or renewal dates, or a change in the plan of benefits. • This proposal is based on the utilization of the Provider Network(s) and the Utilization Review Vendors) listed on this proposal. • This proposal assumes a minimum participation level of 75% applies for all eligible enrollees under a contributory plan, and 100% under a non- contributory plan. • This proposal assumes the plan of benefits includes a pre -certification, utilization review and large case management program. • This proposal is based on a description of the employee benefit plan(s) provided and approved by HMIG, employee and dependent census data, submission of any requested claim information, plus any other information relevant to the underwriting risk. If any of the information was incorrect or changes the risk involved, the rates and factors will be modified, and the specific and aggregate claims will be adjusted accordingly. • The bad debt and charity surcharge portion of the New York Reform Act will be considered an eligible claim expense under the stop loss policy if services are rendered in New York State. Other surcharges, pool charges and/or covered lives assessments will not be covered under the stop loss. • All standard Policy provisions apply. The laws of the state where the policy is issued will apply. Certain exclusions and limitations may apply. • Retirees are included in the stop loss coverage. • This proposal will expire on the proposed effective date. • Unless otherwise limited or excluded by the stop loss policy or under the Individual Special Requirements, eligible claim expenses under the stop loss policy will follow the covered underlying plan, up to the proposed Lifetime Maximum Specific Benefit. • The Agent is properly licensed and appointed by HMIG. • The initial rates are guaranteed for the proposed policy period unless otherwise noted. • There are not more than 15% COBRA participants. Qualifications • The premium rates are subject to change should the number of employees change by 10% or more, either in total andlor by single/family mix. • If the descriptions of the benefits or plan provisions differ from what was initially utilized to underwrite the risk, an updated Plan Document or other acceptable plan description is required within 30 days of the proposed effective date, and the premium rates may be subject to re -rating, retro- active to the effective date. • Quote assumes the Plan Document will include traditional industry provisions and definitions including, but not limited to the following: eligibility, HIPAA, termination provisions, extension for leave of absence or disability, FMLA, subrogation, transplants, COB, exclusions forjob related injuries, experimental and cosmetic treatment, usual and customary charges, war, not medically necessary, traveling outside of the U.S. solely for the purpose of receiving medical care. In the event that a Plan Document is not available within 30 days from the proposed effective date, we reserve the right to issue the Policy assuming standard exclusions will apply. • HIPAA Privacy rules permit the release of Protected Health Information (PHI) for the purpose of evaluating and accepting risk associated with the Plan Sponsor as part of "Health care operations". HMIG will use this information solely for the purpose of evaluating and accepting the risk and will not disclose any PHI collected except to perform this risk evaluation. • The rates in this proposal are based on the disclosure of all individuals considered a special enrollee due to having previously satisfied the plan's lifetime maximum. Written acceptance by HM must be acknowledged before terms of coverage for such individuals are included under HM's stop loss policy. Underwriter: BKS (October 18, 2012) 10174066891-2012-223719-7-5 Page 3 of 3 HM has been named to "Ward's 50" top -performing insurance companies for the past three years, indicating financiai stability and the ability to grow while maintaining strong capital positions and underwriting results.' Our Commitment In orderto meet our product guarantees, HM, as a regulated entity, sets aside reserves and capital, With each of the HM Insurance Group companies far exceeding the z00% company action level set by regulators, our capital base helps ensure we can meet our financial commitments to our clients. 2011 RBC for HM Insurance Group Companies HM Life Insurance Company -371% HM Life Insurance Company of New York — 43 t % Highmark Casualty Insurance Company -572% HM Casualty Insurance Company— 9,x17% ABOUT HM INSURANCE GROUP HM Insurance Group is a recognized leader in stop loss and reinsurance, offering employer stop loss, provider excess and HMO reinsurance. HM's diversified product portfolio also features workers' compensation (Pennsylvania only) and worksite/voluntary critical illness, accident, disability income and term life insurance as well as limited benefit medical plans. The companies of HM Insurance Group are rated A- (Excellent) by A.M. Best Company.' Through its insurance companies, HM Insurance Group holds insurance licenses in 50 states and the District of Columbia and maintains 23 regional sales offices across the country. Financial data gathered from HM Insurance Group internal financial reporting,2012. INSURANCE Ward Group, Top 5o Life and Health Companies, July 202.3. GROUP 'A.M. Best Insurance Repo rts,JUly 202u.Applies to HM Life Insurance Company, HM Life Insurance Company of New A 101--cO, 1*M1 York, High mark Casualty Insurance Camp any and HM Casualty Insurance Cam pany.A.M. Rest 1313.1 under review with negative implications IT'S OUR POLICY TO PROTECT. MTG-2315(R 4/12) 800.328.54331 Www.hrrinsurancegroupCom Ill 1 NRS. ,�., .."�.;)' I*„',t'I r , TiFui,_-...; 44ft' mo HCC HCC Life Insurance Company P Y Medical Stop Loss Proposal For City of Lubbock Presented by Mc a H Life Agency, [nc. Underwritten by Eric Hedin Nee Ufa I'nwranco Company 16415 Addison Rd, Suite 700, Addison Tower Addison, TX 75001 (972) 248-7130 :<<l1L'I.1121' Fil-mo, rolillti H CC Underwriter Hedire, Eric Group City of Lubbock INDIVIDUAL STOP LOSS COVERAGE Coverages 6.15 Contract Type 22.69 Annual Specific Deduefible per Individual 16.06 Lifetime Reimbursement Unlimited Maximum Contract Period Reimbursement 480,802 Inpatient Mental & Nervous 365 Days Quoted Rate Per Month Enrollment Single 1410 Family 1347 Composite 2757 Estimated Annual Premium Quoted Rate(s) includes Commissions of HCC Life Insurance Company 16415 Addiscn Rd, Suit-- 701, Addison, TX 75001 Tdephane (M) 246-1130 FamifmLe- (`172) 244-7157 Proposal No 1 Proposal 08!2912012 Valid Niru Date 01/1512013 Effective Date 0110112013 Expiration Date 12/3112013 Option t Option 2 Option 3 Medical, Rx Card Medical, Rx Card Medical, Rx Card 12115 12115 12115 350,000 375,000 400,000 1,650,000 1,625,000 1,600,000 7.37 &74 6.15 25.16 22.69 20.60 16.06 14.54 13-21 531,387 480,802 437,036 0.00% 0.00% 0.00% OVERALL COST SUMMARY Option 1 Option 2 Option 3 Total Annual Fixed Costs 531,387 480,802 437,036 Maximum Annual Liabdity 531,387 480,902 437,036 Group City of Lubbock proposal NO PROPOSAL QUALIFICATIONS AND CONTINGENCIES Quoted terms and conditions are subject to possible revision based upon receipt and review of the fallowing item: ■ Paid claims experience to the effective date including monthly enrollment figures. ■ Updated shock loss information to the date HCC life Insurance Company has been notified that the proposal has been accepted by the group. Shock loss information should include injuries, illnesses, diseases, diagnoses, or other losses of the type, which are reasonably likely to result in a significant medical expense claim or disability, regardless of current claim dollar amount. In addition, shock loss information should include any claimant that has incurred claim dollars in excess of S 175,000. regardless of diagnosis. Information is also needed on any claims processed and unpaid, pended or denied for any reason. Please refer to our Trigger Diagnosis Disclosure tAst, which provides examples of some, but not all, types of shock losses. ■ We will accept final shock loss disclosure no earlier than 30 days prior to the effective date. ■ Please see the attached exhibit for pian document assumptions and requirements. ■ Should a large claim(s), (non{eoccurrft and/or ongoing) become known and the initial date of service is prior to the date of wntten lk acceptance by HCC Life Insurance Company, we reserve the right to re -underwrite the case- ■ In the event there is a greater than 10% change in enrollment between the submitted initial enrollment data and the final enrollment data, rates and factors may be recaJcuiated- ■ Minimum participation level of 75% of all eligible employees is required. ■ Rates and Factors are based on no individuals being considered a covered participant under the stop loss policy who have previously satisfied their lifetime maximum until we have provided written approval of their acceptance under the stop loss policy. . Rates and Factors are calculated with the plan anniversary date and the Policy effective date as the same date, should the plan anniversary date and the stop loss policy effective date be different we reserve the right to modify our rates, factors and terms of coverage to accomrrwdate for additional liabiiilies incurred by the plan due to state and/or federal mandates during the stop loss contract period. ■ Quote rated with retirees not covered_ Quote rated with 3 COBRAs being covered based on the census information provided. ■ Quote Rated with the following UR Vendors: Blue Cross/Blue Shield of Texas, . ■ Quote Rated with the following Cost Containment Programs(s): Blue CrosslBlue Shield of Texa ■ All ongoing claimants must be reviewed by HCCL Medical Underwriting staff before coverage terms can be determined. Written approval from HCCL accepting all claimants at the group's specific deductible is required. Higher individual ecific Deductible (s) may apply. ■ Provide month by month paid claims and enrollment through the effective date. Al, Group City of Lubbock PROPOSAL 4UALINCATIONS AND CONTINGENCIES Initial the selected proposal option: Specific Aggregate The Premium and Aggregate Deductibles are based an the data submitted_ Any inaccurate or incomplete data submitted may require changes at final underwriting_ We will not be bound by any typographical errors or omissions contained herein. Date: BT This proposal expires if applications are not requested before the valid through date. Q11 lIV" H1 NRY Plan Document Assumptions This proposal for stop loss coverage assumes the Plan Sponsor's plan document includes certain standard clauses, exclusions and limitations. These exclusions and limitations include, but are not limited to the following: t. Eligibility, Effective Bate, anis HIPAA Enrollment Date provisions, which include definitions of employee (including definitions of full-time and part-time), dependent. and retim . if applicable. 2. Termination Provisions which clearly define when eligibility and benefits cease. The Termination Provisions should include specific wording regarding extension of coverage (also }mown as "extension of active service") during a period of inactive service due. to disability, layoff or leave of absence. The plan should include COBRA wording consistent with federal requirements. j. Transplant benefit wording that identifies any benefits applicable to the donor (particularly the non -participating donor), the recipient, organ procurement, and any, covered transportation, lodging and companion charges. 4. Industry standard right of recovery, subrogation andcoordination of benefits clauses. 5. Exclude expenses resulting from losses which are due to a riot, revolt, rear, or any' act of war, whether declared or not. 6. Exclude: expenses for any injury or illness arising out of or in the course of any occupation or employment for wage or profit �. Exclude expenses related to Alternative Treatment, except when deemed both medically necessary and cost effective when compared to a normal course of treatment. S. All 14CC Lfe policies contain an Experimental and Investigative definition and exclusion. All our policies also include, by endorsement, coverage for phase 11., III and IV clinical trials for Cancer care. The Definition of Experimental and Investigative along with the Clinical Trials Endorsement are available for review at www,°.lrcclife.com. E)MIBIT "Cn October 12, 2012 Mr. Travis L, Sartain, CBC Partner MTIBT 8144 Walnut Hill Lane, 16"' Floor Dallas, TX 75231 Re: City of Lubbock Renewal Evaluation for the 2013 Plan Year Dear Mr, Sartain: At your request, Milliman, Inc. (Milliman) has completed an evaluation of City of Lubbock's 2013 renewals. This letter includes the executive summary, detailed analysis, methodology, reliance, and limitations of our findings. Executive Summary City of Lubbock currently offers its eligible employees various medical, dental, life, disability, and other types of coverage. You engaged N illiman to evaluate the 2013 plan year Ganuary 1, 2013 - December 31, 2013) medical and dental renewals proposed by the insurance carriers. Our evaluation of the carriers' proposals is shown in the table below: Medical (Self -Insured) Expected Claims Cost 3.1% M I l' i m a n 1120Soulh 101"Street Claims Administration Suite 400 9.5% Omaha, NE 66124 Organ Transplant VSA (6.69/6) Tel +1 402 393 9400 Individual Stop -Loss Premium Fax +1 402 364 5776 17.0% milliman.com October 12, 2012 Mr. Travis L, Sartain, CBC Partner MTIBT 8144 Walnut Hill Lane, 16"' Floor Dallas, TX 75231 Re: City of Lubbock Renewal Evaluation for the 2013 Plan Year Dear Mr, Sartain: At your request, Milliman, Inc. (Milliman) has completed an evaluation of City of Lubbock's 2013 renewals. This letter includes the executive summary, detailed analysis, methodology, reliance, and limitations of our findings. Executive Summary City of Lubbock currently offers its eligible employees various medical, dental, life, disability, and other types of coverage. You engaged N illiman to evaluate the 2013 plan year Ganuary 1, 2013 - December 31, 2013) medical and dental renewals proposed by the insurance carriers. Our evaluation of the carriers' proposals is shown in the table below: Medical (Self -Insured) Expected Claims Cost 3.1% 3.1% 3.1% Claims Administration 9.5% 9.5% 3.0% Organ Transplant 8.0% (6.69/6) 0.0% Individual Stop -Loss Premium 21.9% 17.0% 15.0% Comparative Effectiveness Research Fee N/A 3.8% NZA 3.5% N/A 3.3% Total Medical Dental (Self -Insured) Expected Claims Cost (15.5°%ti) (15.5°4.) (15.5%) Claims Administration 0.011/0 1 00L. Total Dental (14.4%) (14.4%) (14.21'/0 Offices in Principal Cities Worldwide M Milliman October 12, 2012 We estimate that self-insured annual claims and expenses for the 2013 plan year will be approximately: • $27.11 million for medical and prescription drugs based on current enrollment levels of 2,699 employees and a projected premium of $836.94 per employee per month {PEPM}; and • $1.19 million for dental based on current enrollment levels of 2,104 employees and a projected premium of $47.15 PEPM. However, we recommend continuing to budget at the current $55.10 PEPM for $1.39 million with current enrollment. See Attachments #1-3 for more details. We will use these figures in our projection of budgets for the upcoming plan year. Note that these figures also depend on current plan designs, claims experience that was available to us, and proposed expenses. If enrollment levels, plan designs, vendors, or locations should change dramatically, this number should be updated with the new information. ■ M illi a n Detailed Analysis L Renewal Evaluation —Medical (self-insured) Projected Change in Premium - Claims & Expenses October 12, 2012 Attachment #4 shows our calculation of estimated claims costs and expenses for the medical and prescription drug plans. Using the carrier's proposed increases to expenses listed in the Executive Summary above and shown in Attachment #2, we estimate that City of Lubbock's claims and expenses will be $836.94 per employee per month (PEPM} which is 3.5% more than current premiums. Based on current enrollment, this amounts to $27.11 million in annual premium. If claims do not trend as much as our estimate, then this amount could be lower. Expenses -Administration and Or Transplant Fees City of Lubbock is entering the third year of their contract with BCBS. As such, the claims administration fee will increase by the agreed upon 9.5%. The organ transplant fee was originally quoted with an 8.0% increase. 'The renewal was negotiated down by MHBT to a 6.6% decrease in rates. This resulted in a savings of almost $49,000. Expenses - Stop -Loss Premiums Attachments #5-7 show our analysis of the risks of large claims and stop --loss coverage. Details of the risk associated with various levels of individual stop -loss can be found in Attachment #5 and are summarized in the table below: Individual Stop- Probability of a Claim Number of Loss Deductible over the Deductible Members $400,000 0.03% 1.6 $375,000 0.04% 2.0 $350,000 0.04% 2.4 Additionally, Attachment #6 shows expected stop -loss reimbursements at the various levels of individual stop -loss coverage. Since the current insurance carrier has provided preliminary quotes for various levels of stop -loss, we have compared the premium savings to the calculated additional liability using our proprietary pricing models. Generally, the guideline is that the appropriate deductible would be one where the additional claims liability is minimized compared to the corresponding premium savings. In this case, at all of the individual deductibles, we have calculated that the expected additional claims liability will be more than the corresponding premium savings. In light of this analysis, we recommend that City of Lubbock remain at the current individual stop- IS Milliman October 12, 2012 loss deductible of $350,000. Of course, this depends on the group's tolerance for risk. Attachment #7 compares recent years' paid stop -loss pret uums to reimbursements received and calculates a loss ratio over the time period. The combined loss ratio since 2009 has been 32.4%. Stop -loss carriers typically target paid loss ratios between 70% and 80%. The stop -loss carrier may wish to base the proposed premium more heavily on their risk pool and less on City of Lubbock's actual experience. City of Lubbock should take this into account when considering increasing the deductible level with this carrier or another one. HM Life proposed a preliminary 21.9% increase on the current premium levels for individual stop- loss. The renewal was negotiated down by MHBT to a 17.0% increase. This resulted in a savings of almost $22,000. In the pricing calculation, we used the proposed individual stop -loss premium rates from HM Life with the current deductible. Self-insured employers may also purchase aggregate stop -loss coverage to protect against aggregate claim fluctuation. Based on our analysis, we do not recommend aggregate stop -loss coverage for City of Lubbock. Groups with fewer employees will generally have a lower tolerance for risk than groups of a larger size. The following table highlights the inherent variability of aggregate medical claims displayed in Attachments #8-11. Individual Stop- Loss Deductible ProbabilityofAggregate Claims Exceeding 105% ofExpected 115% of Expected 125% of Expected No Deductible 16.3% 0.5% —0.0% $400,000 14.5% 0.2% —0.0% $375,000 14.3% 0.2% —0.0% $350,000 14.0% 0.2% —0.0% To assess the aggregate stop -loss risk, we performed a Monte Carlo simulation on the current enrollment. The spread of expected claims without and with individual stop -loss is shown in these attachments. The vertical axis shows the probability of exceeding a certain level of expected claims. The horizontal axis shows a range as a percent of expected average claims. Assuming that City of Lubbock's 2,699 enrollees in the census data correspond to 5,590 covered lives, we simulated 10,000 scenarios, or 10,000 years of claims experience. The results of our Monte Carlo analysis indicate that, with no individual stop -loss as displayed in Attachment #8, there is approximately a 0.5% probability that City of Lubbock will realize an aggregate claim total greater than 115% of the expected claims resulting from pure randomness. This probability drops to approximately 0.0% at a level of 125%. With individual stop -loss set at $350,000, as displayed in Attachment #11, the probability of aggregate claims greater than 115% of the expected claims drops to 0.2%, and the chance of having aggregate claims greater than 125% of the expected claims is still approximately 0.0%, Note that this assumes that the attachment point is set correctly. ■ Milliman October 12, 2012 Preliminary Budgeting — Premium Equivalencies for the 2013 Plan Year Attachment #12 contains our findings and recommendations for distributing the previously calculated total premium on a PEPM basis over the relevant plan options. Based on our actuarial cost model, Health Cost Guidelines, v.2010, the relative values of City of Lubbock's medical plan designs are 100.0% for the Actives/COBRA, 153% for the Non -Medicare Retirees, and 70.0%`a for the Medicare Retirees. That is, the cost of a Non -Medicare Retiree is 53% more than an Active/COBRA. City of Lubbock's current plan pricing levels have a greater spread than these relativides, and their tier factors vary from our expectation of the cost of coverage for each tier. For this analysis, we kept the current plan pricing levels and tier pricing levels in place. Based on the factors above, we "spread" the premiums over the plan options and tiers to reflect the assumed variances, while maintaining the same average total premium calculated in Attachment #4. Referring to Attachment #12, we arrive at the "C'Y 2013 Proposed" premiums. The variances between these and the current premiums are shown in the bottom rows of the attachment, and the total costs are shown in the far right column. Employer Subsidies and Employee Contributions At this time, we have assumed that City of Lubbock will keep the employer subsidy for 2013 at the same percentage as it was in 2012. As a result, City of Lubbock's portion of total medical costs is remaining flat at 73.6% of the total cost. Please refer to Attachment #13 for details. Trend Analysis - Claims Using a regression analysis of City of Lubbock's monthly paid claims and enrollment, we calculate the claims in the medical self-insured plans have been increasing at an annualized rate of 5.2% for medical and 16.3% for prescription drugs. The results are displayed in Attachments #14-15. Nationally, based on the Milliman Mid -Market Survey of employers, annual trend for medical and prescription drugs combined is approximately 6-9% for 2011 with expectations for 2012 at the same or slightly lower level. Regionally, trends are within this range at 7.2%. Additionally, the Milliman Medical Index (MMI), which examines the total cost to deliver healthcare, saw increases of 69% from 2011 to 2012. In order to mitigate variations due to the inherent variability in claims data on individual groups, we blended the calculated trends for City of Lubbock with national averages as appropriate to arrive at the trend levels used in the budget calculations. 2. Renewal Evaluation — Dental (self -iris ured) Projected Change in Premium — Claims & Expenses Attachment #16 shows our calculation of estimated claims costs and expenses for the dental plan. ■ Milliman October 12, 2012 Using proposed expenses, we estimate that City of Lubbock's claims and expenses will be $47.15 PEPM which is 14.4% o less than current premiums. Based on current enrollment, this amounts to $1.19 million in annual premium. However, we recommend continuing to budget at the current $55.10 PEPM for $1.39 million with current enrollment. If claims do not trend as much as our estimate or City of Lubbock is able to reduce expenses, then this amount could be lower. Expenses - Administration & Other Fees BCBS performs various services for the efficient administration and financial stability of the plan. As referenced earlier, Attachment #3 shows a summary of the current and proposed fees for 2013 with our assessment. BCBS is proposing a 0.0% increase to claims administration fees. This is lower than the range of the 3-5% increase we typically see. We recommend accepting this proposal. Preliminary Bud geting — Premium Equivalencies far the 2013 flan Year Attachment #17 contains our findings and recommendations for distributing the previously calculated total premium on a PEPM basis over the relevant tier options. While City of Lubbock's tier factors vary from our expectation of the cost of coverage for each tier, we have kept the current pricing levels in place in this analysis. Based on the factors above, we "spread" the premiums over the plan options and tiers to reflect the assumed variances, while maintaining the same average total premiums calculated in Attachment #16. Referring to Attachment #17, we arrive at the "CY 2013 Proposed" premiums. The variances between these and the current premiums are shown in the bottom rows of the attachment, and the total costs are shown in the far right column. Employer Subsidies and Empl yee Contributions City of Lubbock has decided to re-establish employer subsidies to the dental plan for 2013. As a result, City of Lubbock's portion of total dental cost is increasing from 0.0% to 73.2%. Please refer to Attachment #18 for details. Trend Analysis - Claims Using a regression analysis of City of Lubbock's monthly paid claims and enrollment, we calculate the claims in the self-insured dental plans have been increasing at an annualized rate of 3.0%. The results are displayed in Attachment #19. Nationally, based on the Milliman Mid -Market Survey of employers, annual trends are approximately 3-5% for 2011 with expectations for 2012 at the same or slightly lower level. In order to mitigate variations due to the inherent variability in claims data on individual groups, we blended the calculated trends for City of Lubbock with national averages as appropriate to arrive at the trend levels used in the budget calculations. ■ M i l l i m a n October 12, 2012 Assumptions and Methodology The steps we used to arrive at the results are outlined below: 1. We collected enrollment information from various vendors through MHBT. We assumed that those employees electing coverage would continue to elect that same coverage and that employees waiving coverage would continue to waive coverage. 2. Claims and expense information was also provided by various vendors through MHBT. 3. Our expected claims range encompasses the current plan designs offered to employees. Should plan designs change, the Benefit Plan Design Factor should be updated accordingly. 4. We calculated trends using a regression analysis and blended those results with national averages where appropriate. 5. For the specified plans, we calculated a manual rate on the group based on demographics and plan designs using our proprietary actuarial pricing model, Health Cost Guidelines, v.2010. 6. Using claims experience, the calculated manual rate where indicated, and assumed trend factors, we calculated a projected claims costs on a per employee per month basis. 7. Using plan pricing levels, tier pricing levels, and enrollment assumptions, we calculated premium equivalency rates by plan and coverage tier. 8. Using employer subsidy assumptions, we calculated employer subsidies and employee contributions by plan and coverage tier. 9. We performed an analysis of aggregate claim variability to determine an appropriate level of individual stop -loss coverage. Reliance and Limitations In performing our analysis for City of Lubbock, we relied on the data provided to us from various vendors through MHBT. We have not audited this data, but we performed a limited review for reasonableness and we found no material defects in the data used in this report. If the underlying data is inaccurate or incomplete, then the results of our review may be inaccurate or incomplete. Differences between our projections and actual amounts depend on the extent to which future experience conforms to the assumptions made for this analysis. It is likely that actual experience will not conform exactly to the assumptions used in this analysis. Actual amounts will differ from projected amounts to the extent that actual experience deviates from expected experience. 0Milliman October 12, 2012 This letter and its attachments have been prepared for the internal use of MHBT in their relationship with City of Lubbock and are only to be relied upon by these organizations. No portion may be provided to any other party without Milliman's prior written consent. Milliman does not intend to benefit any other recipient of this report, even if Milliman consents to the release of this report to that recipient. Please contact us if you have any questions. Sincerely, AUf - Sarah E. Coates, CEBS Senior Benefits Consultant Blaine A. Weber Senior Benefits Consultant — [Underwriter arta nrne, Milliman Calendar Year 2013 Renewal Summary -- City of Lubbock - CY 2012 Renewal I Enrollmmt/ Total Annual Employe( Date Volume Premium' Contrib.' CY 2013 Employer I Total Annual Employee Subsidv' Premlum' I Contrib,x 1. Milliman's Financial Monitoring Report (FMR) and IBNR calculation will provide additional detail on historical results. 2. See attached calculation for additional detail. 3. Refer to Milliman attachments Renewal Evaluation Summary Report for additional detail on proposals, carriers and final results. 4, Milliman's Comprehensive Assessment of Health Plans (CAMP) report will provide henchmarking information from Milliman Mrd -Market Survey (MMMS). Percent Amount Chan e3 Change' Milliman r Total Annual Total Annual Estimated Premium Premium Renewal' Prepared on. bw 1011=012 Milkman, Inc. 2013 Cay of Lubbock Pricing v4. lsm � Milliman Renewal Evaluation Summa - Medical City of Lubbock - 1. Enrollment I Volume is taken from BCBS for the month of July, 2. Current Rates represent the premium equivalencies based on current enrollment 3, See attachments for additional details on Milliman calculation. 4 Pricing calculations incorporate Milliman's expectation of daims in conjunction wrath the tamer's proposed expenses. 5. Aggressive and Conservative budgets are presenter) for illustrative purposes and should not be taken as Milliman's recommended budgeting levels 6. Please note that the HM Life quote used 2,757 employees with a slightly different Employee to Employee+Family ratio to get a composite rate of $16.59 PEPM. Anachment#t2 Prepared on: bw 1011220112 Milliman, Inc. 2013 city of Lubbock PRicing v4.xtsm Aggressive Budgets Conservative Budget' CY 2012 5798 CY 2013 Total Medical - Self -Insured $25.860.814 $28,352,650 Percent Increase Over Current -1% Milliman Milliman Milliman $2,167.319 Chance of Exceed ng Budget 75% 10 Claims & Claims & Claims & Carrier Carrier Milliman Enrollment/ Current Total Annual Initial Current Projected Coverage Basis Volume' Rates' Cost Expenses Expenses' Expenses° Medical - Self-insured Expected Claims Cost' lEmplayees 2,6991 $746.54 1 $24,179,065 769.371 $769.371---M 31 Percent Increase Over Current 3.11 3.1% 3.1% Total Annual Cost Over Current $739,291 5739,291 $739,291 Claims Administration lEmployees 2.6991 $37.531 $1,215,522 $41.48 $41 081 538.66 Percent Increase Over Current 9.5% 9.5% 3.0% Total Annual Cost Over Current $114,977 $114,977 $36,466 Organ Trans lant- EE Only 1.394 $6.33 $105,888 $6.84 -- $5,74 EE+Famil 1305 $14.56 $228010 $15.72 $13.79 $11.13 $10.31 Total 2.699 $10.31 $333,898 8.0% _$!9.631 (6.696) 0.0% Percent Increase Over Current Total Annual Cost Over Current $26,697 (521,928) $0 Individual Stop -Loss' Only 1.394 $7.52 $125,795 $9.10 $8,74 IEE EE + Family 1 1.305 $21.14 $331,052 $25.83 $24,81 $17.19 $16511 $16.22 Total 2.699 $14111 $456847 21.91% 17.0% 15.0% Percent Increase Over Current Total Annual Cost Over Current $99,876 577,860 $68,527 Comparative Effectiveness Research Fee lFmi 2,6991 NIA I NIA S0351 $0.351 50.35 Percent Increase Over Current NIA NIA NIA Total Annual Cost Over Current $11,180 $11,160 $11,180 Composite PEPM lEmployees 1 2,699 $308A91 $26,186,331 $839.121 $836.941 $834.90 Total Medical - Self-insured 1 2,6991 1 $26,165,331 $27,177,352 $27,106,732 $27,040,795 Percent Increase Over Current 3.8% 3,5°% i 3.3% Total Annual Cosf Over Current $992,021 $921,401 $855,464 Premium Reduction 1 $70,620 1. Enrollment I Volume is taken from BCBS for the month of July, 2. Current Rates represent the premium equivalencies based on current enrollment 3, See attachments for additional details on Milliman calculation. 4 Pricing calculations incorporate Milliman's expectation of daims in conjunction wrath the tamer's proposed expenses. 5. Aggressive and Conservative budgets are presenter) for illustrative purposes and should not be taken as Milliman's recommended budgeting levels 6. Please note that the HM Life quote used 2,757 employees with a slightly different Employee to Employee+Family ratio to get a composite rate of $16.59 PEPM. Anachment#t2 Prepared on: bw 1011220112 Milliman, Inc. 2013 city of Lubbock PRicing v4.xtsm Aggressive Budgets Conservative Budget' Composite PEPM 5798 $875 Total Medical - Self -Insured $25.860.814 $28,352,650 Percent Increase Over Current -1% 8"/ Total Annual Cost Over Current i5324,517Y $2,167.319 Chance of Exceed ng Budget 75% 10 1. Enrollment I Volume is taken from BCBS for the month of July, 2. Current Rates represent the premium equivalencies based on current enrollment 3, See attachments for additional details on Milliman calculation. 4 Pricing calculations incorporate Milliman's expectation of daims in conjunction wrath the tamer's proposed expenses. 5. Aggressive and Conservative budgets are presenter) for illustrative purposes and should not be taken as Milliman's recommended budgeting levels 6. Please note that the HM Life quote used 2,757 employees with a slightly different Employee to Employee+Family ratio to get a composite rate of $16.59 PEPM. Anachment#t2 Prepared on: bw 1011220112 Milliman, Inc. 2013 city of Lubbock PRicing v4.xtsm Attachment 113 Milliman Renewal Evaluation Summary - Dental - City of Lubbock -- 1. Enrollment 1 Volume is taken from BCBS for the month of July, 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction with the carrier's current expenses. Pmpwrcd on: bw 1 011 22 0 1 2 Miliiman. rnc. 2013 City of Wbbacic Pricing v4rlam Cv 2012 Cv 2013 Milliman Milliman Claims & Claims & Carrier Milliman Enrollment/ Current Total Annual Initial Projected Coverage Basis Volume' Rates' Cost Expenses Expenses" Dental Self-insured ExpectedClalms Cost' Em to ees 1 2.104 $5125 I $1,293,930 $43.301 43.30 Percent Increase Over Current (15.54x) (15.5%) Total Annual Cost Over Current (S200,691) (8200,691) Claims Administration ]Employees 2,104 $3.B5 647205 $3.851 $3.97 Percent Increase Over Current 0.0% 3.0% Total Annual Cast Over Current s0 $2,916 Composite PEPM lEmplayees 1 2,104 $55.101 $1,391,135 $47.151 $47.27 Total Dental - Self -Insured 1 2,1041 1 $1,391,135 $1,190,443 1 $1,193,399 Percent Increase Over Current (14.451) (14.2%) Total Annual Cost Over Current {$200,591) ($197,775) 1. Enrollment 1 Volume is taken from BCBS for the month of July, 2. Current Rates represent the premium equivalencies based on current enrollment. 3. See attachments for additional details on Milliman calculation. 4. Pricing calculations incorporate Milliman's expectation of claims in conjunction with the carrier's current expenses. Pmpwrcd on: bw 1 011 22 0 1 2 Miliiman. rnc. 2013 City of Wbbacic Pricing v4rlam 0Milliman Calendar Year 2013 Pricing Calculation - Medical Plans - City of Lubbock - - Attachment R4 1. Based on historical plan design changes provided by City of Lubbock, 2. City of Lubbock npted out of Mental Health Parity. Health Care Reform Adjustment accounts for change in plan design necessary to be consistent vith the most recent regulations. 3. Expenses used In this calculation are from the cardei s proposal. 4. Derived from premium equivalencies and current enrollment show in Attachment #12. Prepared on bw 10112)2012 Milkman. Inc. 2013 City of Lubbock Prong v4.dsm •t Medical 1110.12x10 Prescription -12110 1110 - 1!11.12111 _r I. Claims Experience (Paid Basis) 1109-12109 1111-12111 1 1112-7112 1 1109.12109 1 1112-7x12 $13,394,791 $16,168.079 $16,217,530 $9,288,269 $3,580,938 $4,219,928 $4,848778 $3,404,382 Total Paid Claims Tot Total Catastro hic Claims Claims realer than 350 000 9 063 $0 758 880 $368 939 NIA N/A NIA N/A Net Claims $12,945,728 $16,168,079 $15,458,650 $8,919,330 $3,580,938 $4,219,828 $4,848,778 $3,404,382 Enrollment (lagged for incurred basis) 2,504 2,561 2,606 2,673 2,509 2.564 2,612 2,682 Months of Experience 12 12 12 7 12 12 12 7 Incurred Claim Cost {PEPM) $430.89 5526.06 $494.25 $476.65 $118.92 $137.14 $154.68 $181.33 Il. Adjustments to Incurred Claim Cost 1. Trend Annual Trend Rate 5.6% 5.6% 5.6% 5.6% 14.6% 14.6% 14.6% 14.61A Number of Months (from midpt to micipt) 48.0 36.0 24.0 14.5 48.0 36.0 24.0 14.5 _ 1.242 1.177 1.115 1.068 1.725 L505 1.313 1.179 Trend Factor 2. Benefit Plan Design Factor' 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 3. Mental Health Parity Adjustment" 1.000 1.000 1.000 1.000 1.000 1,000 1.000 1.000 4. Health Care Reform Adjustment= 1.016 1.016 1.006 1.006 1.016 1.016 1.006 1.006 - 6. Provider Discount Factor 1.000 1.000 1.000 1.000 1.000 1,000 1.000 1.900 6. Matu Factor 1.coo 1000 1,000 1.000 1.000 1.000 1.000 1.000 Final Adjustment Factor 1.262 1.196 1.121 1.074 1.752 1.529 1.321 1.186 Expected Claims Cost after Adjustments $543.85 $628.90 $554.15 $511.96 $208.41 $209.70 $204.35 $215.06 Catastrophic Claims Amount below Deductible, PEPM $11.65 $0.00 $22.38 $10.91 WA NIA N/A NIA Total Expected Claims $555.50 $628.90 $576.53 $522.87 $208.41 $209.70 $204.35 $215.06 Credibility (Blending) Factor S. % 15% 35% 45% 5% 15% 35% 45% III. CY 2013 Experience Rated Claims Cost (PEPM) $659.19 $210.18 $769.37 rdtA Manual Rate from Milliman's Health Cast Guidelines v. 2010 Credibility to Manual Rate - - 0 c -A IV. CY 2013 Expected Claims Cost _ _ $769,37 V. Expenses3 Claims Administration $41.08 Organ Transplant $9,63 Individual Stop -Loss Premium (t5L Deductible at $350,000) $16.51 Com aratrve Effectiveness Research Fee $2.00 PMPY for plans ending after 30, 2013 $0,35 Total Expenses _September $67.57 $836.94 Vi. CY 2013 Projected Premium (PEPM) PY 2011-12 Budgeted Premium (PEPM)" $808.49 Calculated Actuarial Increasel(Decrease) 3.5% r•aIncreasel(Decrease) 3.5% 1. Based on historical plan design changes provided by City of Lubbock, 2. City of Lubbock npted out of Mental Health Parity. Health Care Reform Adjustment accounts for change in plan design necessary to be consistent vith the most recent regulations. 3. Expenses used In this calculation are from the cardei s proposal. 4. Derived from premium equivalencies and current enrollment show in Attachment #12. Prepared on bw 10112)2012 Milkman. Inc. 2013 City of Lubbock Prong v4.dsm N C Ifl E M U d E d 0 d 3 Z Milliman Attachment #5 Analysis of Individual Claim Variability Cit of Lubbock 4.0 3.6 3.5 2.9 3.0 2.4 2.5 i 2.0 2.0 1.5 1.0 0.5 0.0 t greater than greater than great $300,000 $325,000 $35 erthan greater than greater than greater than greater than greater than 0,000 $375,000 $400,000 $425,000 $450,000 $475,000 Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xlsm 1.3 1.0 erthan greater than greater than greater than greater than greater than 0,000 $375,000 $400,000 $425,000 $450,000 $475,000 Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xlsm ■ Miiiiman Stop -Loss Comparison Premium vs. Expected Reimbursements City of Lubbock - Attachment #6 "Note that while expected claimants and stop -loss reimbursements are based on Milliman's proprietary actuarial reinsurance model, each case will be evaluated on its own merit. As such, actual results may vary from what we have displayed here. 1. Based on premium quotes provided by HM Life for 2013. Please note that the HM Life quote uses 2,757 employees with a slightly different Employee to Employee+Family ratio, which results in slightly different composite rates. Also, the stop -loss contract is on a calendar year. Prepared on: bw 10/12/2012 Miiliman, Inc. 2013 City of Lubbock StopLoss.xlsm ProposedHM Life Individual Stop Loss Claimants Premium Savings Expected to Estimated Estimated Net Stop -Loss Annual Premium to Move to Higher Exceed ISL Stop -Loss Additional Claims Savings/(Cost) of ISL Deductible Premium (PEPM)' (2,699 Employees) Deductible Deductible Reimbursements Liability Higher Deductible $350,000 $16.51 $534,7271 2.4 $359,910 $375,000 $15.09 $488,740 $45,987 2.0 $304,579 $55,331 ($9,344) $400,000 $14.02 $453,939 $80,788 1 1.6 1 $260,111 1 $99,799 1 ($19,011) "Note that while expected claimants and stop -loss reimbursements are based on Milliman's proprietary actuarial reinsurance model, each case will be evaluated on its own merit. As such, actual results may vary from what we have displayed here. 1. Based on premium quotes provided by HM Life for 2013. Please note that the HM Life quote uses 2,757 employees with a slightly different Employee to Employee+Family ratio, which results in slightly different composite rates. Also, the stop -loss contract is on a calendar year. Prepared on: bw 10/12/2012 Miiliman, Inc. 2013 City of Lubbock StopLoss.xlsm Attachment #7 0Milliman Individual top -Loss Comparison Premium vs. Actual Reimbursements City of Lubbock Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xlsm. ISL ISL Paid Dollar Paid Loss Deductible Premiums Reimbursements Difference Ratio HIM Life 2009 $200,000 $453,219 $375,040 $78,179 82.8% 2010 $350,000 $273,658 $0 $273,658 0.0% 2011 $350,000 $403,439 $58,880 $344,559 14.6% 2012 through $350,000 $266,295 $18,939 $247,356 7.1% JulyTotal $1,396,611 $462,859 $943,762 32.4% Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xlsm. ■ Milkman 0.300 0.275 0.250 m 0.225 v c L 0.200 0.175 C•7 0 0.150 0.125 .Q 0 0.100 °' 0.075 0.050 0.025 Analysis of Aggregate Claim Variability No Individual Stop -Loss City of Lubbock 16.3% chance of exceeding 105% of the average 0.5% chance of exceeding 115% of the average --0.0% chance of exceeding 125% of the average Attachment #8 0.000 0°04° o\° 000_ o\° ©A° A. o\° o\° AQ a\° o`° off° off° ��° �o 'l+�1 ti� 'C tip Range (Percent of Avg Claim) Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xism Milliman 0.300 0.275 0.250 y 0.225 v c m 0.200 3 0.175 O 0 0.150 a Z 0.125 ra 0 0.100 °' 0.075 0.050 0.025 0.000 1©0 !2P51 �z Attachment #9 Analysis of Aggregate Claim Variability $400,000 Individual Stop -Loss City of Lubbock y ° e 1100 e e 4V,°�° ��°`° �°�° ��t° Q�° O'1° 01° �°jo �10 � �. �`� �`� ��` �h �`° +�'� tib' Range (Percent of Avg Claim) Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xlsm Attachment #10 'Milkman Analysis of Aggregate Claim Variability $375,000 Individual stop -Loss City of Lubbock 0.300 0.275 14.3% chance of 0.250 exceeding 105% of the average 0.225 v 0.200 0.2% chance of U 0.175 exceeding 115% of the O average 0 0.150 0.125 B -0.0% chance of © 0.100 exceeding 125% of the IL 0.075 average 0.050 0.025 0.000— o�e ol° off° off° off° off° o\° ©,\° o\° A.0 \0 o\° V10 o\° o\° Qt° 44yr�� h�,�. ��1°• ��1°��`°��4°, ,4�'1°, ���,°, �Y�1°���1°, ���ro, ~�•J1o, ����°���1°����°, ���`°, Range ('Percent of Avg Claim) Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xlsm Attachment #11 Milliman Analysis of Aggregate Claim Variability YY $350,000 Individual Stop -Loss City of Lubbock 0.300 0.275 14% chance of exceeding 105% of the 0.250 average 0.225 w 0.200 0.2% chance of 0.175 exceeding 115% of the 0 0.150 average 0.125 Z -0.0% chance of 0 0.100 exceeding 125% of the CL 0.075 average 0.050 0.025 0.000 - 1�'+ Iry 4l " 0 \O 01 O 4400, 10\0, Range (Percent of Avg Claim) Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock StopLoss.xlsm i Milliman Assumptions Projected Enrollment Active/COBRA 77,8% Non -Medicare Retirees 9.6% Medicare Retirees 12,4% Calendar Year 2013 Medical Plans - Premium Equivalencies uman rtt:v HCG Value + Value' Expenses 100.0% 100.0% 153.0% 148.7% 70.0°10 72.4% City of Lubbock Plan Pricing Leve12 Current Proposed 100.0% 100.0% 215.3% 215.3°10 70.6% 70 1, Mlliman HCG values are based on actual values of plan designs as determined by Health Cost Guidelines, v.2010 2. current plan pricing levels are based on current premium distributions across plans. Proposed plan pricing levels are based on recommended premium distributions across plans Premium Equivalency Calculations Anachmenf 1112 Tier Pricing Leve13 EE Only EE+Spouse EE+Child(ren) EE+f=amily Projected Enrollment .6% 1, Mlliman HCG values are based on actual values of plan designs as determined by Health Cost Guidelines, v.2010 2. current plan pricing levels are based on current premium distributions across plans. Proposed plan pricing levels are based on recommended premium distributions across plans Premium Equivalency Calculations Anachmenf 1112 Tier Pricing Leve13 EE Only EE+Spouse EE+Child(ren) EE+f=amily Projected Enrollment 51.6% 16.9% 12.3% 19.2% Milliman HOG 1.000 2.122 1.624 2.891 AcUve1C013RA Non -Medicare Retire Medicare Retirees 1.000 1.000 1.000 2.147 2.147 2.000 1.663 1.663 1.663 2.979 2.979 1 2.422 ,Proposed Equal to Current 3. Current tier pricing levels are based on current premium distributions across plans, Proposed liar pricing levels are based on recommended premium distributions across plans Prepared on: bw 10112f2012 Milliman, tnc. 2013 Cby of Lubbock Pricing v4.xlsm Monthly Premium Enrollment Total Annual Cost EE Only + pouse + I ren + amr y n y + pouse I EE+Child(ren)+ ami y CY 2012 CY 2012 CY 2012 ActivelCOBRA $455.27 $977.36 1 $757.04 $1,356.06 1.101 199 316 484 $19,095,655 Non -Medicare Retirees $980,03 $2,103.87 $1,629.51 $2,919.08 130 94 13 28 $5,137,042 Medicare Retirees Tota 1 $321.30 $642.61 1 $534.27 $778.20 163 164 2 5 $1,952,634 CY 2013 Proposed CY 2013 Estimated $26,185,331 CY 2013 Estimated AclivelCOBRA $471.29 $1,011.75 $783.68 $1.403.78 1,101 199 316 484 $19,767,587 Non -Medicare Retirees $1,014.51 $2,177.90 $1,686.95 $3.021.80 130 94 13 28 $5,317,803 Medicare Retirees $332 61 1 $665.22 $553.07 $805.58 163 164 2 5 $2,021,342 r. Variance VarlancaVariance ,732 ACtfvelCOSRA $16.02 $34,39 $26.64 $47.72 0 0 0 0 $671,932 Non -Medicare Retirees $34.48 $74.03 $57.34 $102.72 0 0 0 0 $180.761 Medicare Retirees Total $11.31 $22.61 $18.80 $27,38 0 0 0 0 $68,709 r Percent Change Percent Change Percent Change ActivelCOBRA 3.5% 3.5% 3.5% 3.5% C.D% 0.0% 4.0 % 0.0 % 3.5% Non -Medica re Retirees 3.5% 3.5% 3S% 3.5% 0.0% 0.0% 0.0A D.0% 3.5% Medicare Retirees 3.5% 3.5% 3.5% 3.5% 0.0% 0.0% 0.0% D.0% 3.5% Prepared on: bw 10112f2012 Milliman, tnc. 2013 Cby of Lubbock Pricing v4.xlsm E Miiliman Calendar Year 2013 Medical Plans - Employer Subsidies and Employee Contributions City of Lubbock - Assumptions Altachment 073 CY 2011' EE Only EE+Spouse EE+Child(ren) EE+Family Total Active/COBRA 100.0% 72.4% 71.9% 72.9%b 80.8% Non -Medicare Retirees 68.1% 72.3% 67.7% 76.7% 71.7%d Medicare Retirees 43.9% 42.3% 26.4% 29.6% 42.5%d Altachment 073 Employer Subsidies and Employee Contributions CY 2012 CY 2013 Proposed EE Only EE+Spouse EE+Child(ren) EE+Family Total EE Only EE+Spouse EE+Child(ren) EE+Family Total Active/COBRA 100.0% 693% 69.9% 69.6% 79.2% 100.0% 69.7% 69.9% 69.6% 79.2% Non -Medicare Retirees 63.1% 67.3% 62.7% 71.7% 66.6% 63.1% 67.3% 62.7% 71.7% 66.6%fl Medicare Retirees 38.9% 37.3% 21.4% 24.6% 37.4% 38.9%b 37.3% 21.4% 24.6% 37.4% Employer Subsidies and Employee Contributions 1. City of Lubbock intends to maintain Grandfathered Status under the Patient Protection and Affordable Care Act (PPACA) until 2914 when this benefit expires.. The 2011 Employer Subsidy Levels were added to this report as a baseline to show the change in subsidy levels from 2011 to 2012. Grandfathered Status under PPACA limits the amount the employer subsidy can decrease, by plan and tier, to 5 percentage points. Prepared on: bw 10l12f2012 Milliman, Inc. 2013 City of Lubbock Pricing v4.xIsm Employer Subsidy Annual Cost to Employee Contribution Annual Cost to Employer EE Only E59pouse + r ren + amt y Employees EE Only + pouse + t ren * amt y CY 2012 CY 2012 Active/COBRA $455.27 $681.13 5528.99 $943.52 $15,127,477 $D.DO $296.23 $228,05 $412,54 $3,968,178 No= Noo-Medicare Retirees $617.93 51.41545 $1.022.07 $2,092.53 $3,423,137 $362.10 $686.42 $607.54 $626.55 $9.713.905 Retirees Total $125.05 $239.42 $174.42 $191.61 $730,026 $19,280,640 $196,25 $403,19 $419.85 $586.59 $1,222,607 $6,904,691 CY 2013 Proposed CY 2013 Estimated Active/COBRA $471.29 $705.10 $547.61 $976.72 $15,659,778 $0.00 $306.66 $236.07 $427.05 $4."!07.809 Non -Medicare Retirees $639.67 $1,465.26 $1,058.04 $2,166.15 $3,543,589 $374.84 $712.64 $626.91 $855.63 $1,774,214 Medicare Retirees $129.45 $247.85 $118.44 $198.36 1 $755,714 $203.15_ 1417.38 $434.63 $607.23 $1.265.628 $7,147,GSI Total Variance $19,959,081 Variant* ACtiveICOBRA $16.D2 $23.97 $18.61 533.20 $532.301 $0.00 $10.42 $8.02 $14.52 $139,631 Noo-Medicare Retirees $21.74 $49.81 $35.96 573.63 $120,452 $12.74 $24.22 $21.38 $29,08 $60,308 Medicare Retirees Total $4A0 18.42 $4.03 $6-74 $25.688$6.91 $678,"l $14.19 $14.77 $20.64 $43,021 S242,960 Percent Change Percent Change Active! ,OBRA 3.5 % 3.5 % 3.5 % 3.5% 3.5% NIA 3.5% 3.5% 3.5% Non-Medicare Retirees 3.5°!a 3.5%a 3.5% 3.5% 3.5°k 3.5% 3.5°1 3.5% 3.5% Medicare Retirees 3.5% 3.5! 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% "3.5% 1. City of Lubbock intends to maintain Grandfathered Status under the Patient Protection and Affordable Care Act (PPACA) until 2914 when this benefit expires.. The 2011 Employer Subsidy Levels were added to this report as a baseline to show the change in subsidy levels from 2011 to 2012. Grandfathered Status under PPACA limits the amount the employer subsidy can decrease, by plan and tier, to 5 percentage points. Prepared on: bw 10l12f2012 Milliman, Inc. 2013 City of Lubbock Pricing v4.xIsm ■ Milliman Trend Analysis - Medical City of Lubbock $1,200 $1,000 Annualized Trend = 5.2% a $800 w a .. $600 E U $400 CL $201 $0 00 00 Og 00 00 O°� 00 Og 00 00 O°� 00 *Trend has been calculated based on a 6 -month rolling average Attachment #14 ♦ SII ♦ Actual Predicted J Prepared on: bw 10112/2012 Milliman, Inc. 2013 City of Lubbock Pricing v4.xlsm xMilliman Trend Analysis - Prescription Drugs City of Lubbock -- $250 $200 9 a LU $150 U) O U N E $100 $50 $0 ,QC11 �e P�cfia�' S�P� p 0G 9O`tG) *Trend has been calculated based on a 6 -month rolling average Attachment #15 I FAnnualized Trend = 16.3% Kp ,Zo '�) No N; �Q NS' NF) "� NF) "o N ,�� ,�� ��, ,�� N N N N N� ,�� �ti ,�� �ti ,�`i' ,�'1' �� tirL �I �r� ♦ Actual Predicted Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock Pricing v4.xlsm 0Milliman Calendar Year 2013 Pricing Calculation - Dental Plans - City of Lubbock 1. Based on histoncal plan design changes provided by City of Lubbock. 2. Expenses used in this calculation are from the carrier's proposal. 3. Derived from premium equivalencies and current enrollment shown in Attachment#17. Attachment#16 Prepared an 1 011 212 0 1 2 Milliman. Inc. 2013 City of Lubbock Pricing v4.xlsm Dental I. Claims Experience 1109-12109 1110-12110 1111.12'11 1 1112.7112 $1,063,741 $1,116,182 $1,173,234 $663,670 Total Paid Claims Enrollment (lagged for incurred basis) 2,385 2,456 2,515 2.167 Months of Experience 12 12 12 7 Incurred Claim Cost (PEPM] $37.17 $37.88 $38,88 $43.75 II. Adjustments to Incurred Claim Cost 1. Trend Annual Trend Rate 3.2% 3.2% 1.2% 3.2% Number of Months (from micipt to midpt) 48.0 36.0 24.0 14,5 1.134 1.099 1.065 1.039 Trend Factor 2. Benefit Plan Design Factor' 1.000 1.000 1.000 1.000 3. Provider Discount Factor 1.000 1.000 1.000 1.000 4. Maturity Factor 1.000 1.000 1.000 1.000 Final Adjustment Factor 1.134 1.099 1.065 1.039 Expected Claims Cost after Adjustments $42.16 $41.63 $41.40 $45,45 Credibility (Blending) Factor 1 5% 15% 35% 45% Ill. CY 2013 Experience Rated Claims Cost (PEPM) $43.30 Manual Rate from Milliman's Dental Cost Guidelines x2011 NIA Creclibil ily to Manual Rate 0% IV. CY 2013 Expected Claims Cast $43.30 V. Expensesz Claims Administration $3.85 Total Expenses $3.85 VI. CY 2013 Projected Premium (PEPM) $47.15 CY 2012 Budgeted Premium (PEPM) 3 $55.10 Calculated Actuarial Increasel(17ecrease) (14.4%) VII. Recommended Increasel(Decrease) 0.0% 1. Based on histoncal plan design changes provided by City of Lubbock. 2. Expenses used in this calculation are from the carrier's proposal. 3. Derived from premium equivalencies and current enrollment shown in Attachment#17. Attachment#16 Prepared an 1 011 212 0 1 2 Milliman. Inc. 2013 City of Lubbock Pricing v4.xlsm Milliman Assumptions Calendar Year 2013 Dental Plans - Premium Equivalencies -- City of Lubbock Plan Pricing Levi 1, Milliman OCG values are based on actual values of plan designs as determined by Dental Cosi Guidelines, v.2011 2. Current plan pricing levels are based on current premium distributions across plans. Proposed plan pricing levels are based an recommended premium distributions across plans Premium Equivalency Calculations Attachment 917 Tier Pricing Leve 13 Projected muuman ucL3 DCG Value + EE+Child(ren) EE+Family Projected Enrollment Enrollment Value' Expenses Current Proposed Active 79,1% 100.0% 100.0% 100.0% 100.0% Retirees 20.9% 100.0% 100.0% 100.0% 100.0% 1, Milliman OCG values are based on actual values of plan designs as determined by Dental Cosi Guidelines, v.2011 2. Current plan pricing levels are based on current premium distributions across plans. Proposed plan pricing levels are based an recommended premium distributions across plans Premium Equivalency Calculations Attachment 917 Tier Pricing Leve 13 EE Only EE Only EE+Spouse EE+Child(ren) EE+Family Projected Enrollment 47.0% 17.1% 13.6% 22.3% Milliman DC 1.000 2.043 2.254 3.585 Current Active Current Retiree 1.000 1.000 1.335 1 1.335 1.258 1 1.268 1.590 1.590 Proposed Equal to Current J. (:urrent tier pncmg levels are aasao on current premium arsir--ns across plansrruposeu uer pri, a reveu. are based on recommended premium distributions across plans Prepared on: bw 1011212012 MiWiman, Inc. 2013 City of Lubbock Pricing v4.xlsm EE Only Monthly Premium + pouse + I ren + ami y Only Enrollment + pouse + ren + amt y Total Annual Cast CY 2012 CY 2012 CY 2012 Active $44.97 560.04 $57.00 $71.48 784 171 273 437 $1,107,853 Retirees $44.97 560.44 $57.00 $71.46 204 189 14 32 $283,282 CY 2013 Proposed CY 203 Estimated CY 2013 Estimated Active $44.97 $60.04 $57.00 $71.48 784 171 273 437 $1,107,853 Retirees $44.97 $60.04 $57.00 $71.48 204 189 14 32 $283.282 $1,391,135 Total Variance Variance Variance Active $0.00 $0.00 $0.00 $0.00 0 0 0 0 $0 Retirees $0.00 $0.00 $0.00 $0.00 0 0 0 0 $0 r Percent Change Percent Change Percent Change Active 0.0% 0.0% 0.04/: 0.0% 0.0% 0.01A 0.0% 0.0V 0.0% Retirees 0.0% 0.0°/ 0.0! 0.0% 0.0/a 0.0% 0.0% 0.01 00°.4, Prepared on: bw 1011212012 MiWiman, Inc. 2013 City of Lubbock Pricing v4.xlsm Milliman 11 Calendar Year 2013 Dental Plans -Employer Subsidies and Employee Contributions - City of Lubbock Assumptions Attachment #18 Employer Subsidies and Employee Contributions Employer Su sidy Leve_ I CY 2012 CY 2013 Proposed EE Only EE+Spouse EE+Child(ren) EE+Family Total EE Only EE+Spouse EE+Child(ren) EE+Family Total Active Retirees Total 0.0% 0.0% 0.0%n 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 50.6% 0.0 74.9% 78.9% 62.9% 81.1% 37.9% 39.9% 31.9% 42.3% + ( ren + ami y Employer n y Employer Subsidies and Employee Contributions Prapared on: dw 1011212012 Milliman, Inc. 2013 City of Lubbock Prong v4.xlsm Employer Subsidy Annual Cost to Employee Contribution Annual Cost to n y +pause + ( ren + ami y Employer n y + pouse + i ren + ami y Employees CY 2012 CY 2012 Active $000 $0.00 $00.00 $0 $44.97 $60.04 $57.00 $71,48 $1,107,853 Retirees Total $0.00 $0.00 Si0.00 $0.00 $0 $0 $4.4,97 $60.04 $57,00 $71.48 $283,282 $1,391,135 CY 2013 Proposed. CY 2073 Estimated Active$44.97 S44.97 $44.97 $44.97 $898,501 $000 $15.07 $12.03 $26.51 $209,352 Retirees $22.77 522.77 $22.77 $22.77 $119,952 $22.20 $37.27 $34.23 $48.71 $163,329 Variance Variance Active $44.97 $44.97 $44.97 $44.97 $896.501 1$44.97) ($44..97) (S44.97i iS4497( ($896,501) Retirees Total $22.77 $2277 $22.77 $22.77 $119.952 $1,018,453 2"•- $22.771 522771 $22771 $119.9521 J$1,018,463) -]- Pei Change PercentGhange Active NIA NiA WA N -A NIA ?100.0°k) (74.9%) I78.9`��i (62.9%) (81.111 Retirees NIA NIA WA WA NIA 50.6%1 37.91 39.9'% 31.9"% 42.1 j Prapared on: dw 1011212012 Milliman, Inc. 2013 City of Lubbock Prong v4.xlsm ■ Milliman $70 $60 2 a LU .. $40 y O U 0 $30 U a- $20 $10 $0 Trend Analysis - Dental City of Lubbock ♦ ♦ • ♦ ♦ ♦ • Annualized Trend = 3.0% 00 O� ©O 00 00 00 00 O°� O� O� 00 00 SO z4qlol� 'Trend has been calculated based on a 6 -month rolling average Attachment #19 �����tP�t������ �`�PJ(��P��QG�O �R+Ci,?tt*(��,p�"�i'PQ��D•�'�J(: �,`�,�J ��Q'Q��� QvCi�� �e',q�,aj:�iQ��y''�J� Z`�\ ♦ Actual Predicted Prepared on: bw 10/12/2012 Milliman, Inc. 2013 City of Lubbock Pricing v4.xlsm