Review & Recommendations Mecklenburg Electric Cooperative Finance Committee 2012 Healthcare Benefits Review & Recommendations

2012 Healthcare Analysis Received Competitive Offer from Anthem MEC partnered with Dominion Benefits consultant effective September 1, 2011 Received 2012 Renewal from NRECA Continued to negotiate with NRECA & utilized online modeling tool to analyze plans for competitive costs After a review and RFP of recommended benefit consultants, Mecklenburg Electric partnered with Dominion Benefits out of Richmond, effective September 1st. We feel that Dominion has a solid background with value driven focus on evaluation, implementation and administration of employer benefit goals as well as ongoing strategic support and advanced analytics needed to continue our plans utilization throughout the year. We received renewal rates from NRECA and felt they were not acceptable based on our claims utilization and our plan design. Their renewal calculation does not refect savings for a consumer-driven healthcare strategy considering our decreased-level of claims and our implementation of a high deductible health plan. We continued to negotiate our numbers w/ NRECA to no avail, as well as utilized their online tool to model, analyze and tweek similar plans with little to no impact on premium increase. We worked with Dominion and sent out an request for proposal to several companies (included Optima, Southern Health, Anthem, & United Healthcare). We received an attractive offer of rates from Anthem, as well as a variety of plan options to choose. With Anthem’s nationwide networks and partnerships with providers, our employees will reap a larger provider discount than what they have seen in the past. They raise the perimeters when it comes to providers, so that our employees and families will have access to specialists for their needed care within a reasonable distance. RFP Sent Out Received Competitive Offer from Anthem

Healthcare Plan Recommendations Maintain a High Deductible Health Plan with Anthem Continue paying 100% Single Premium Continue offering health savings account (HSA) Pay 75% of Family Premium to maintain consistency Maintain a PPO Plan with Anthem Continue paying 95% Single Premium Continue offering flexible spending account (FSA) Continue paying 62% Family Premium Our recommendation is to maintain a HDHP w/ Anthem; continue paying 100% of the single premium we continue to offer the healthcare savings account to help offset the employees’ out-of-pocket expenses we pay 75% of the family premium to maintain the consistency of employees’ current premium we maintain a PPO plan w/ Anthem continue paying 95% of the single premium we continue to offer the Fleible Spending Accounts and continue paying 62% of the family premium READ THIS WHILE SWITCHING TO NEXT SLIDE….Glen takes from here. In summary, employees will realize about a 1.25% increase in their monthly premium -

2012 HDHP Premiums SINGLE PLAN FAMILY PLAN Total Employee MEC 2011 HDHP Premium Share 100% 419.94 0.00 72% 886.26 131.41 754.85 2012 HDHP 387.10 75% 921.30 133.02 788.28 Difference -32.84 35.04 1.61 33.43 The family plan employee share premium increase is about $1.61 per month or a 1.23% increase. A 75% MEC contribution toward the family HDHP Plan provides premium increase consistency between the PPO and HDHP Plans and further promotes the use of the HDHP Plan.

2012 PPO Premiums SINGLE PLAN FAMILY PLAN Total Employee MEC 2011 PPO Share 95% 519.14 25.96 493.18 62% 1,235.10 273.35 961.75 2012 525.24 26.26 498.98 1,250.07 276.74 973.33 Difference 6.10 .30 5.80 14.97 3.39 11.92 The single plan employee premium increases .30 cents per month or a 1.16% increase The family plan employee premium increases $3.39 or a 1.24% increase

HDHP Carrier Difference 2012 Anthem High Deductible Health Plan Single $3,000 Deductible 100% Coverage In-Network 70% Coverage Out-of-Network $1,000 Annual Out-of-Pocket (RX Only) Family $6,000 Deductible $2,000 Annual Out-of-Pocket (RX Only) 2011 NRECA High Deductible Health Plan Single $2,000 Deductible $2,000 Annual Out-of-Pocket 80% Coverage In-Network 60% Coverage Out-Network Family $4,000 Deductible $4,000 Annual Out-of-Pocket A look at the HDHP Plans: Single: the maximum OOP decreases from $4k to $3k unless prescription is included. Then participant must reach the maximum OOP of $4K Family: the max OOP decreases from $8K to $6K unless prescription is included. Then participant must reach the maximum OOP of $8K Coverage is paid at 100% in network; 70% out of network – with Anthem’s strong area networks that serve all of our service areas, and deep provider discounts, side-by-side, the participant has more purchasing power for each dollar contributed with Anthem vs. NRECA. These strong area networks will give little reason for participants to go out-of-network. Our discounts w/ NRECA averaged about 21%....we anticipate about 30% average with Anthem.

HDHP RX Difference 2012 Anthem HDHP RX Plan 2011 NRECA HDHP RX Plan Pay full price less discount of drugs up to deductible Generics - $10 Preferred Brand Drugs $30 – 30 days $60 – 90 days Non-Preferred Brand Drugs $50 or 20% - 30 days ($200 max) $150 or 20% - 90 days ($400 max) Pay RX Copay up to $1,000 (Single) Pay RX Copay up to $2,000 (Family) 2011 NRECA HDHP RX Plan Pay full price less discount of drugs up to deductible Generics - $5 - 30 day $12.50 - 90 days Preferred Brand Drugs Greater of $30/25% - 30 days Greater of $65/25% - 90 days Non-Preferred Brand Drugs Greater of $50/40% - 30 days Greater of $130/40% - 90 days RX Copay up to $2,000 (Single) RX Copay up to $5,000 (Family) Maintenance RX applied to annual-of-pocket only; these drugs do not have to meet deductible A Look at the RX Plans with the HDHP side by side…..almost identical RX plans. With Anthem’s $10 generic, there is encouragement to utilize the discounted plans such as the $4 plans and $5 retail plans…..(CVS, Walmart, Walgreens).

Traditional PPO Carrier Difference 2012 PPO Anthem Plan Single $25 Copays, unlimited $2,500 Deductible/Coinsurance 80% Coverage In-Network 60% Coverage Out-of-Network RX Copays up to $3,500 Maximum Family $5,000 Deductible/Coinsurance RX Copays up to $3,500 Max. per person 2011 PPO NRECA Plan Single $20 Copays, unlimited $3,000 Deductible/Coinsurance 80% Coverage In-Network 60% Coverage Out-of-Network RX Copays up to $2,000 Maximum Family $6,000 Deductible/Coinsurance RX Copays up to $5,000 Maximum A look at the PPO Plans: Copays increase $5 – these copays do not go towards the out-of-pocket amounts Deductibles/Annual Coinsurance decrease Coverage in/out of networks remain the same The RX bucket increases to $3,500 per person (single & family plans)

Traditional PPO RX Difference 2012 Anthem PPO RX Plan Generics - $10 Preferred Brand Drugs $30 – 30 days $60 – 90 days Non-Preferred Brand Drugs $50 or 20% - 30 days ($200 max) $150 or 20% - 90 days ($400 max) RX Copay up to $3,500 per person 2011 NRECA PPO RX Plan Generics - $5 - 30 day $12.50 - 90 days Preferred Brand Drugs Greater of $30/25% - 30 days Greater of $65/25% - 90 days Non-Preferred Brand Drugs Greater of $50/40% - 30 days Greater of $130/40% - 90 days RX Copay up to $2,000 (Single) RX Copay up to $5,000 (Family) A look at the RX plans with the PPO side by side….they are almost identical plans Again….with this $10 generic price, participants still can shop those $4 & $5 plans to compare for a cheaper price.

HSA Contribution Support Family HDHP Plan Amount Emp / Family Total Premium % Maximum Difference MEC Wellness Savings Annual Funded Out-of Funds Participation HSA Contribution H S A of Max   Pocket (OOP) Pocket Annually Bonus Funding Monthly OOP Employee 3,000.00 500.00 600.00 400.00 1,000.00 26.26 315.12 1,315.12 43.84% 263.02% Employee+Family 6,000.00 1,200.00 800.00 2,000.00 143.72 1,724.69 3,724.69 62.08% 372.47% Based on current HDHP participation and HSA full funding, MEC will continue to save $122,087 in 2012. Traditional   HDHP PPO Monthly Annual MEC COST Rate Difference Employee @ 100% 387.10 Employee @ 95% 498.98 111.88 1,342.54 Breakeven Dependent Coverage 75% / 62% 788.28 973.33 185.05 2,220.55

Healthcare Plan Comparison Single Scenario High Deductible Plan MEC HSA funds $ 600 Wellness bonus $ 400 Self HSA funds $ 0 Total HSA $1,000 Premium $ 0 2 Office Visits @ $80 $ 160 (Non-Preventative) Surgeon Fee $1,500 Anesthesia ($1,200) $1,200 Generic Antibiotic ($36) $ 36 Surgery ($9,700) $ 104 ($104 meets $3K Deductible – remaining pd @ 100%) Total Medical Costs $3,000 Minus HSA Reimbursed (MEC FUNDS) Total Out-of-Pocket Costs $2,000 PPO Plan MEC FSA Funds N/A Wellness bonus N/A Self FSA Funds $ 0 Total FSA $ 0 Premium $ 315.12 2 Office Visits @ $25 $ 50 (Non-Preventative) Surgeon Fee ($1,500) $ 700 ($500 ded. +20% of remaining total) Anesthesia ($1,200) (20%) $ 240 Generic Antibiotic $ 5 (Walmart) (RX applies toward RX bucket) Surgery ($9,700) (20%) $1,940 Total Medical Costs $2,935 Total Out-of-Pocket Costs $3,250.12 Let’s take a look at a scenario on each of the plans side-by-side…… Employees have the option to contribute pre-tax dollars into their tax advantage accounts, in this scenario, the employee chose not to contribute. Participant saves $1,250.12 on HDHP

Healthcare Plan Comparison Family Scenario High Deductible Plan MEC HSA funds $1,200 Wellness bonus $ 800 Self HSA funds $ 0 Total HSA $2,000 Premium $1,596.24 2 Office Visits @ $80 $ 160 (Non- Preventative) X-ray & Reading ($500) $ 500 Brand Drug @ 123.91 x4 $ 495.64 Surgery ($9,700) $4,844.36 ($6,000 Deductible is met) Anesthesia ($1200) $ 0 Total Medical Costs $6,000 Minus HSA Reimbursed (MEC FUNDS) Total Out-of-Pocket Costs $5,596.24 PPO Plan MEC FSA Funds N/A Wellness bonus N/A Self FSA Funds $ 0 Total FSA $ 0 Premium $3,320.88 2 Office Visits @ $25 $ 50 (Non-Preventative) X-ray & Reading ($500) $ 500 Brand Drug @ $60 x4 $ 240 (RX applies toward RX bucket) Surgery ($9,700) (20%) $1,940 Anesthesia ($1,200) (20%) $ 240 Total Medical Costs $2,970 Total Out-of-Pocket Costs $6,290.88 Employees have the option to contribute pre-tax dollars into their tax advantage accounts, in this scenario, the employee chose not to contribute. Participant Saves $694.64 Copyright 2010

Healthcare Long-Term Strategy Mitigates rising healthcare plan costs by promoting consumer driven health plans Increases wellness awareness and promote participation Continues commitment on benefit education and resources Provides quality healthcare benefits to keep employees healthy & productive Assists in retaining high quality workforce Our promotion of the HDHP mitigates the rising healthcare costs by involving the participants in their personal healthcare decisions and creating a consumer driven plan. This will take several years to develop such a culture, but we can do this by increasing our wellness awareness through continual education classes and promoting wellness resources to our employees and their families. We’ve seen a tremendous commitment by our employees already with over 50% moving to the HDHP this year and increased involvement in wellness activities, and we have no doubt our employees support this culture. With these efforts, our goal is to provide quality healthcare benefits to keep our employees healthy & productive and retain a high quality workforce.

Other Employee Benefits Short Term Disability – No Increase Business Travel Accident – No Increase Basic Life & AD&D – 3.1% Increase Long Term Disability – 3.8% Increase Director AD&D – 10% Decrease Net Annual Change = $5,236 Taking a look at other employee benefit adjustments for next year….Basic Life & AD&D will increase 3.1% & LTD will increase 3.8%... This gives us a net annual change of $5,236.

Financial Impact of Recommendation   Year End 2012 Benefit Changes Budget Estimate Staff 2006 2007 2008 2009 2010 2011 Proposal Medical 883,398 957,566 908,204 931,332 1,029,095 1,249,992 1,170,391 1,194,176 Life, Disability, Accident 134,296 146,907 148,124 145,013 138,860 144,243 136,149 143,738 HSA/FSA 2,500 4,000 2,604 TOTAL 1,017,694 1,104,472 1,056,328 1,076,345 1,170,455 1,398,235 1,309,144 1,340,517 Annual Difference 86,779 (48,144) 20,017 94,110 227,780 (89,091) (57,718) Annual Percentage Increase 8.53% -4.36% 1.89% 8.74% 19.46% -4.13% Budget to Budget Notes if brought to the table: HDHP employee enrollment was better than anticipated plus changes within the plan. Losses and gains due to employees leaving and one new hire $10,300 Not all of the employee HDHP wellness incentives have been earned. $5,500

Expense Impact of Recommendations Benefit Changes Income Statement Effects   Year End 2012 Budget Estimate Staff 2011 Proposal Capitalization ratio 32.50% 31.00% Medical 1,249,992 1,170,391 1,194,176 843,745 807,570 823,981 Life, Disability, Accident 144,243 136,149 143,738 97,364 93,943 99,179 HSA/FSA 4,000 2,604 2,700 1,797 TOTAL 1,398,235 1,309,144 1,340,517 943,809 904,116 924,957 Annual Difference -89,091 -57,718 -39,692 -18,852 Annual Percentage Increase -4.13% -2.00% Budget to Budget

Questions? Leilani Todd, VP Human Resources (434) 372-6191 Kristine Martin, Benefits Administrator (434) 372-6135

Follow-up Employee Benefit Meetings Enrollments due to Anthem Timeline of Events 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 31 Employee/Spouse Benefit Meetings Follow-up Employee Benefit Meetings Enrollment Deadline Enrollments due to Anthem