SCT Healthcare UPdates Partnership for Health and Welfare Benefits Management Big Spring School District SCT Healthcare UPdates August 2019 Robbi Ritter www.usi.com

Agenda South Central Trust Stop Loss Renewal Update Overview Marketing Summary Renewal and Renewal Cost Summary Renewal Recommendation South Central Trust Rx Executive Summary Pharmacy Benefit Optimization Rx Benefits Executive Summary Update and Results Rx Optimization – Implementation Considerations Plan Year to Calendar Year Benefit Period Coordination

2019 South Central Trust Stop Loss Renewal

Stop Loss Policy Details Overview While employers take on the financial risk of a plan when they self-insure, they are able to limit their risk through the purchase of medical stop-loss insurance policies. Stop Loss is a product that provides protection by serving as a reimbursement mechanism for catastrophic claims exceeding pre-determined levels Contract Basis: Big Spring School District currently is on a Paid contract, meaning that the district has protection for all claims incurred during the term of the stop loss policy that are paid during the twelve (12) month contract period; the most comprehensive form of stop loss renewal coverage Specific Stop Loss: This coverage provides protection against an abnormal severity of claims paid for the treatment of a single individual rather than abnormal frequency of claims in total The 2018/2019 Specific Deductible for Big Spring School District was $150,000; matching the rest of the South Central Trust Aggregate Specific Stop Loss Fund: This coverage provides an additional layer of liability assumed in exchange for lower premiums. The aggregating fund operates like an umbrella over the plan as a whole and is used to cover claims once a member exceeds the Specific Deductible The 2018/2019 Aggregating Fund for Big Spring School District was $100,000

Stop Loss Renewal Cost Summary The Avalon renewal for 2019/2020 included two options: 1) Using current Specific Deductible and Aggregating Fund thresholds that increased premium by 117%; and 2) Higher deductibles intended to mitigate premium increase impacts and access existing reserves Remaining with Avalon guarantees continuation of the $4.00 PEPM Avalon Stop Loss credit for CBC-administered LEAs and eliminates any impact from reporting fees associated with non-Avalon stop loss reporting; $3,500 per month minimum for reporting to a non-Avalon vendor USI Marketed to our USI Stop Loss Consortium partners and to a managing general agent without successful results: Sun Life – provided a quote at +172% over current with potential lasered claimants (those set at a higher deductible level versus the rest of the group) Symetra – provided a quote at +144% over current for the same terms HMIG – declined to quote – not competitive against renewal offer Partners MGU – declined to quote – required premium significantly higher than the renewal Berkshire Hathaway – declined to quote – unable to provide a competitive offer Voya – declined to quote – rates were not competitive with renewal alternatives

Stop Loss Renewal Cost Summary

Stop Loss Renewal Recommendation The USI recommendation was to increase the stop loss deductible from $150,00 to $300,000, using reserves to fund additional claims exposure

South Central Trust Rx Executive Summary

Pharmacy Benefit Manager Optimization Pharmacy costs represent nearly 40% of total health care dollars, and the trend is expected to continue. By contracting directly with a pharmacy benefit manager (PBM), organizations are gaining better control over their pharmacy benefit programs through the ability to negotiate drug prices and rebates coupled with the power to audit the claims and operations of the PBM and conduct annual market checks to ensure that rates are competitive and transparent. Another benefit is the ability to collaborate on improved outcomes to ensure that the PBM is using their clinical expertise to ensure that members with health challenges are getting the advantage of care optimization through drug therapy management, new therapies, ongoing clinical studies and custom clinical oversight. Although Americans don’t use more drugs per capita than other developed nations, the US spends more per capita on prescriptions than any other industrialized nation and the high cost of prescription drugs is a significant concern for patients, employers, physicians and policymakers. Brand name drugs make up the majority of drug spend, so generic use remains an important opportunity to reduce unnecessary cost. That said, however, we’re seeing an invasion of expensive fixed-dose combination products (two or more active pharmaceutical ingredients combined in a single dose form) that are made from medications available as lower-cost generics or over-the-counter drugs which are cheaper when bought separately. Why? Convenience; why take two or three pills when you can take just one. . . . . An example of avoidable ballooning drug costs, absolutely!

Paying too much for combination drugs. . . Duexis Approved in 2011, Duexis is a fixed combination drug for rheumatoid pain that contains an anti-inflammatory ibuprofen (Advil) and famotidine (Pepcid), a gastric acid agent. When prescribed separately, these two drugs together cost no more than $100 per month; while Duexis in a single pill form can average $3,000 per month Vimovo Vimovo is a fixed combination drug for rheumatoid pain that contains an anti-inflammatory Naproxen (Aleve) and esomeprazole (Nexium), a gastric acid agent. When purchased separately, Aleve and Nexium cost between $20 and $40; contrasted with a bottle of Vimovo that can cost up to $3,000 per month Treximet Treximet was approved in 2008 for the treatment of migraine headache and contains two active ingredients; sumatriptan (Imitrex, available in generic form) and naproxen sodium (Aleve). The average cost of Treximet is $750 , although sumatriptan and naproxen purchased separately can cost around $20

Rx Benefits Executive Summary Recognizing potential financial opportunity and potential for more transparency and control, SCT evaluated PBM carve-out options in 2018 Process generated significant market interest: improved contractual terms and financial opportunity Incumbent PBM/carrier combos also responded with significant, but market uncompetitive financial improvements only PBM carve-out timeline recommended staggered approach sensitive to out-of-pocket and qualified plan deductible accumulator restarts Since then Capital BlueCross announced decision to change PBM partner on 1/1/2020 to Prime Therapeutics (Prime), effectively forcing disruption on six LEAs irrespective of accumulator restarts USI solicited both Prime (CBC) and CVS (RxBenefits) to refresh 2018 bids for comparison sake CBC was unable to provide a full contract and so pricing may not be apples to apples Prime (CBC) pricing: $1,177,623 Trust savings CVS (RxBenefits) pricing: $1,637,000 Trust savings

Rx Benefits Executive Summary – 2020 Update In March 2019, Capital BlueCross announced that they had selected Prime Therapeutics as their new Pharmacy Benefit Manager, effective January 2020. Prime is one of the largest PBMs in the national, providing services to 23 BlueCross BlueShield plans, 18 of which are joint owners of Prime In May 2019, USI approached Capital BlueCross to assist in evaluating Prime Therapeutics and its effect on the current arrangement through CVS/Caremark; i.e., contract and pricing parameters, member disruption, service impacts Refresh 2018 SCT PBM RFP reflecting Prime SCT specific Prime Therapeutics contract 2020 pricing to include fees, discounts, rebates, guarantees Network and formulary disruption analyses Line by line repricing of claims used in 2018 RFP Any other relevant non-contractual terms USI Requested updated pricing from CVS (RxBenefits)

Rx Benefit Executive Summary - Results CBC provided 2020 updated pricing but no SCT specific prescription benefit contract. Only limited responses to contract questions that in some cases require further clarification. Email indicating that Prime retail network and formularies will generate zero disruption Summary repricing information but no detailed reprice file CVS provided 2020 updated pricing on original claims set and $100K at risk related to a successful implementation Impact Rx Optimization creates visibility and puts control in the hands of the South Central Trust with enhanced pricing negotiation, standalone contract, customized clinical programs with a significant financial incentive of over $500K annually

Rx Optimization - Implementation Considerations

Rx Optimization – Implementation Considerations Some or all below apply to ANY PBM change: Separate ID Card Medical / Rx cross-accumulation of OOP on all plans and deductible on qualified plans requires data synchronization between medical carrier and PBM Requires robust project management and data file testing which takes time USI suggests no fewer than 120 days implementation lead time to accommodate Member communication, timing of ID cards, member disruption analysis and notification, eligibility file loads and claim file testing is all critical to overall success

Implementation Timeline Overview

Plan Year to Calendar Year Benefit Period Coordination

What is the difference between a Plan Year and Calendar Year Deductible? A deductible limit is the maximum amount in any given period that a plan participant must pay before the plan coverage is required to satisfy the full amount of claims. A Plan Year deductible resets on the renewal date of the employee health plan; ex. if the health plan renews on July 1, then the deductible runs from July 1 to June 30 of the following year. A Calendar Year deductible, which is most common among health plans and most specifically among those with a QHDHP HSA, begins on January 1 and ends on December 31, with deductibles that reset every January 1.

Calendar Year Benefit Period Decisions The district has made the decision to implement a short Plan Year; July 1, 2019 to December 31, 2019, to better coordinate the benefit period with the annual minimum deductible and maximum contribution rules for the QHDHP HSA and the migration to the Rx Optimization through Rx Benefits. All Out-of-Pocket expenses; deductible, coinsurance and OOP Maximums, accumulated during the short Plan Year will be credited to participants effective with the new January 1 to December 31 benefit period. District funding into the HSA will be adjusted to facilitate the change so that all participants receive the appropriate level of financial support into their HSA accounts. The district and USI will ensure communication to participants as we approach the close of the year in order to address questions on the impact of the change.

Questions/Discussion?