SAU 16 Medical Benefits Presentation October, 2010

SAU 16 Joint Board Committee Formed in April 2010 to review all aspects of compensation. Focused on Health Care due to rapidly rising costs. Members: P. Lovejoy, CoopC. Gargaly, Brentwood C. Ellis, StrathamP. O’Day, Exeter A. Mower, KensingtonC. Bellisio, Newfields P. Flynn, SAU 16M. Morgan, SAU16 B. Nigrello, E. Kingston, Chair 2

Health Care cost have risen on average 11.9% per year over the past 13 years. At this rate a family plan will be over $44,000 annually within 5 years. In 2010 the increase was 17.1%. Committee sought to analyze the data for health care options. Determined the best path was to engage a Health Care Consultant. 3 SAU 16 Joint Board Committee

Interviewed 3 highly recommended Health Care Consulting firms. Agreed to retain the services of IPG. IPG was committed to representing all stakeholders. Extensive history with NH SAU’s. Recently consulted with Concord School District. Successful in facilitating enhanced programs, additional provider options with greater discounts. Reducing overall costs to Concord School District. 4 SAU 16 Joint Board Committee

5 IPG Represents SAU 16: Labor School Board It is the intent of IPG to educate all parties as to the various plan designs and carriers available to SAU 16 when considering medical insurance.

Mission Of Consultants IPG has been charged with analyzing the claims utilization and plan designs for all of the participating districts within SAU 16. Our objective is to provide guidance on best practices to contain medical costs in the future while providing comprehensive medical benefits to employees. Lower claims = lower premiums = lower contributions for everyone. 6

7 There are Many Options LGC HealthTrust Primex SchoolCare Harvard Pilgrim HMO, POS, PPO, Indemnity Plan designs with multiple states In-Network

8 Health Insurance Carrier Options LGC HealthTrust SchoolCarePrimex Medical Carrier Partnership AnthemCIGNAHarvard Pilgrim Members78,000 All lines 56,917 All Groups Medical Only 15,109 All Groups Medical Only 9,944 All lines of coverage Revenue$367 Million All lines $341 Million All groups Medical Only $95 Million All Groups Medical Only $87 Million All lines of coverage $17.3 Million (SAU’s) Medical Benefits for SAU’s 56 (2010)27 (2009) 30 (2010) 8 (2010) Source: LGC: M. Briggs 9/22/10 and 9/24/10 SchoolCare: L. Duquette Primex: K. VanBuskirk 9/9/10. In NH there are three entities that offer health insurance to local governments and school districts.

9 Carrier Financial Health LGC HealthTrust: Overall Net operating loss for 2009: (- $14.2 Million) Medical Book of Business loss for 2009: (- $14.8 Million) SchoolCare: Net operating gain for 2009: + $4.12 Million Primex: Net operating Loss for 2009 (-$2.9 Million) for Primex Health Programs LGC and Primex report financials as a calendar year, above 1/1/09-12/31/09. SchoolCare reports as a fiscal year, above 7/1/09-6/30/10. Source: LGC 12/31/09 Financial Statement and from M. Briggs for Medical Loss. NH SchoolCare Coalition Financial Statement ending 6/30/10. K. VanBuskirk from Primex 9/9/10 breaking out financials for health portion of the business.

10 Carrier AVERAGE Increases Compared to SAU 16 All LGC HealthTrust SAU 16 LCG HealthTrust SchoolCarePrimex %7%2.5%10.97% %8.3%5.8%7.9% %17.1%2.2%14.9% Source: LGC 2/16/10 Memo from M. Briggs comparing CSD to LGC Overall LGC rate from from M. Briggs. SchoolCare 2/17/10 Overview Slide Presentation to CSD. Primex: K. VanBuskirk 9/9/10. Paul Flynn Memo to SAU Joint Chairs, undated. SAU 16 Stewardship report for 17.1% rate, 6/7/2010.

11 Relative Plan Design Claims Discounts Indemnity plans do not have traditional managed care negotiated discounts with medical providers. These plans have the highest claims costs in the medical industry. They have national provider access and freedom of choice. The JW and Comp Series fall into this category. PPO / Open Access + plans have negotiated claim discounts with national access to providers and freedom of choice. The claims cost of this type plan is less expensive than indemnity plans. POS plans have a deeper discount than the PPO plans with either PCP referral or freedom of provider choice depending on the carrier. HMO plans have the least claims costs.

12 Product Mix Overview LGC HealthTrust SchoolCarePrimexSAU 16 Indemnity10%14% PPO3% (Open Access+) 4% POS48%21%13%70% HMO42%76%83%16% Source: LGC Financial Statements ending 12/31/09, page 24. SchoolCare from L. Duquette 9/3/10. Primex from K. VanBuskirk 9/9/10.

13 Product Mix Comparison One Of NH’s Largest SAUs SAU of 1200 Employees Product Mix % Indemnity1.8% POS19.1% HMO79.1% This SAU has very low premiums, low claims, and has done an excellent job of educating employees as to the value of the HMO plan. 79% of employees are on the HMO compared to only 42% in the LGC Trust book of business and 16% for SAU 16. SAU 16Product Mix % Indemnity14% POS70% HMO16% Source: SAU 16 census from LGC Health Trust 6/8/10. Anthem Cost & Utilization for another NH SAU, reported SAU 16

Education on Benefit Design Differences It is important for each employee of SAU 16 to know the differences in their out of pocket potential costs with Indemnity, POS and HMO coverage. 14

15 A Teachable Moment BENEFITS JW Indemnity PlanCOMP 100 AND 200Matthew Thornton Blue HMO Plan Blue Choice 3-Tier POS Plan When Your PCP provides or arranges your care Option 1 - When your PCP provides or arranges your care Option 2 - When you seek care directly from a Blue Choice provider Option 3 - When you seek care from any out-of- network provider CALENDAR- YEAR DEDUCTIBLE $100 per person/$200 per family COMP 100: $100/$200 COMP 200: $200/$400 None OR $500 per person None $150/$450 CALENDAR- YEAR OUT-OF- POCKET MAXIMUM $500 per person/$1,400 per family COMP 100: $500/$1,000 COMP 200: $600/$1,200 None OR $1500 per family None$600/$1,800$1,050/$3,150 PREVENTIVE CARE, and OFFICE VISITS You pay for first two visits per person per calendar year. Next 10 visits per person per calendar year covered 100%. All other visits covered 80% after deductible. Preventive Care covered at 100% if network providers are used. Regular office visits 80% after deductible to Max Out-of-Pocket. 100% after $5 copy OR 100% after $15 copay 100% after $5, or $10, or $20 copay 100% after $15, or $30, or $50 copay 80% after deductible 100 $5 Office Visit Copays = COMP 100 or JW Plan Designs with $500 Max Out of Pocket

16 HMOs Result in Lower Overall Claims Costs Lower Overall Claims Costs Result in Lower Premium Increases and Employee Contribution Levels for SAU 16. POS 3 Tier $ pmpm, 1149 members HMO $ pmpm, 193 members Source: Anthem SAU 16 Cost & Utilization report 9/ page 2.A.4. Claims Costs Per Member Per Month 7/2009-6/2010.

17 JW & Comp Indemnity Plans Everyone is impacted by the cost of the JW and Comp Plans. Employees – more premium for less benefits than POS or HMO. You pay more out of pocket. SAU 16 - high claims cost with very little discounting. The same surgery could cost as much as 30% more when billed through a Comp or JW plan than when billed through an HMO or POS plan. Example: Inpatient Procedure: Same Hospital, Same Physician HMO/POS: $14,000 Comp or JW: $18,200 A $4,200 Difference!

18 Exeter Hospital Effective 12/31/10, Anthem will terminate its contract with Exeter Hospital and Exeter physician medical staff. Unless a new agreement is reached, Exeter Hospital will no longer be participating in the Anthem network as of 1/1/ % of All SAU 16 inpatient and outpatient claims are through Exeter Hospital. Source: Glenn Klink, VP Exeter Health Resources 9/8/10 Memo from Exeter Hospital. SAU 16 Anthem Claims & Utilization Report 9/29/10.

Exeter Hospital Exeter Hospital and Anthem Blue Cross Blue Shield are currently at an impasse with their provider negotiations. Exeter Hospital and physician affiliated group have recently sent correspondence to their patients concerning the situation at hand. Anthem Blue Cross Blue Shield has published a public website to access information on updates and a broad range of topics pertaining to Exeter Hospital. 19

20 SchoolCare Three (3) Plan Options Open Access (comparable to JW with LGC HealthTrust) Access to CIGNA’s National Network (50 states). Open Access Plans allow members to self-refer. POS (comparable to Blue Choice with LGC HealthTrust) Access to CIGNA New England Seamless Network (NH, ME, VT, MA and RI) No PCP referral necessary on any tier; members may self-refer. HMO (comparable to Matthew Thornton Plan with LGC HealthTrust) Access to CIGNA New England Seamless Network (NH, ME, VT, MA and RI). PCP referral required. Boston hospitals In-Network. HMO Guesting Privileges – Can enter a local HMO network anywhere in country that CIGNA has providers. All Plans available to retirees anywhere in the country.

21 Recommendations Side Bar Language to Allow Shopping of Coverage It is the recommendation of IPG that SAU 16 seek side bar language, where necessary, with each of the Labor Units. The side bar language would give SAU 16 the right to look at competitive pricing from SchoolCare and Primex. If it is determined that a given Labor Unit wishes to switch carriers or plan designs within the LGC HealthTrust, then such a change would be pursued in accordance with the terms or sidebar of the applicable Collective Bargaining Agreement.

22 SAU 16 Proposed Sidebar Language "For the plan year beginning 7/1/11 (Fill in name of district) may seek bids from alternative health insurance providers, or alternative plans within the LGC HealthTrust may be adopted in accordance with the terms of the Collective Bargaining Agreement of (Fill in the name of district). Sufficient time and resources shall be provided by (Fill in name of district) Labor and School Board to fully research and review the alternative plans with its members before implementing any identified changes. Should a decision be made to elect an alternative health insurance provider and plans, or alternative plans within the LGC HealthTrust, this decision will render the current contractual obligation to Anthem Blue Cross Blue Shield null and void for the period July 1, 2011 – June 30, 2013.”

23 Proposed Timeline October 2010: IPG to meet with Representatives from Labor, Administration & School Board. November 10, 2010: Goal is to secure contract language sidebar approval. November 16, 2010: IPG to issue full RFP to shop Medical coverage. January 2011: Carrier quotes back. IPG to analyze/spreadsheet. Before February Vacation 2011: IPG to meet with School Board, Labor, & interested parties regarding proposed plan design or carrier changes. By March 11, 2011: Approve plan design or carrier changes, if any. April/May 2011: Open Enrollment. IPG to present to employees either to maximize current LGC HealthTrust offerings – including Flex and Wellness - or to explain new plan/carrier offerings.

24 THANK YOU! QUESTIONS?