October 7, 2010

 Nationally, health care costs are expected to rise 8% or more. [  Nationally, workers are expected to pay average premiums of $2,209 in This is an increase of 12.4%.  Indiana employers are seeing premium increases of 10-13%.  Nationally, the average premiums that employers pay on behalf of each worker expected to rise nearly 9% to $7,612.  Employers are replacing co-pays with coinsurance for all services including prescriptions, office visits, and urgent care.  Major consulting firms expect costs to rise by 9% for 2011 after a 9.5% increase this year. Other state schools are making adjustments to benefits 2 One state school’s deductible increased 50% on their PPO plan. Coinsurance percent rose from 25% to 30%. Prescription drug deductible and insurance increased along with the maximum out-of-pocket on prescriptions increasing from $1,000 to $1,500.

 Health Plan Advisory Committee Discussions ◦ Strategies shared under consideration but not yet implemented:  Spousal surcharge if the spouse had access to other employer provided coverage  Surcharge for smokers  Charging for the number of dependent children covered  30-day waiting period for benefit eligibility  Merging the Purdue Incentive and Co-Pay Plans with corresponding plan changes  Incentives and disincentives for participation in health improvement programs  Multiple salary tiers for setting employee premiums  Possible new networks and programs through providers like Clarian, American Health Network, etc.  Blue Ribbon Healthcare Committee ◦ Established to recommend short-term and long-term changes to achieve both immediate and longer-term cost containment  Feasibility of an on-site pharmacy/medical clinic  Benefit plan design, including plan design strategies  Health improvement programs for Purdue faculty, staff, and families 3

 Pam Aaltonen, Nursing (Chair)  Steve Abel, Pharmacy Practice  John Beelke, Human Resources-Staff Benefits  Bart Collins, Health Communications  Mike Campion, Management  Jenny Coddington, Nursing; North Central Nursing Clinics  Jim Dworkin, Regional Representative, North Central  Joan Fulton, University Senate – Chair (Agricultural Economics)  Luis Lewin, Human Resources  Carol Sternberger, Nursing; Regional Representative, Ft. Wayne  Philip Troped, Health & Kinesiology  Susan White, Pharmacy  David Williams, Senate: Faculty Affairs Chair (Med Illust/Vet Med)  Steve Witz, Regenstrief Center 4 Charge: Focus on health care containment for the long term while continuing to provide high quality care to Purdue employees and eligible dependents. Recommendations Due by March 1, 2011

 All Purdue medical plans are self-insured and administered by CIGNA. There are 3 options: 1.Purdue Choice Fund is a consumer-driven health plan. Enrollment:1,023 employees 2.Incentive PPO plan is a preferred provider plan. Enrollment: 4,201 employees 3.Co-Pay plan is a plan with HMO benefits featuring co-pays for all services, including inpatient and outpatient hospital treatment. Enrollment: 6,113 employees Purdue has a total of 11,337 employees covered by these plans, including 14,663 dependents for a total of 26,000 lives. 5

 Expected cost for 2010 ◦ Total Cost = $132.3 million (3 rd largest budget) ◦ Purdue Contributions = $115 million (87%) ◦ Employee Contributions = $14.1 million (11%) [pre-tax basis] ◦ Other * Contributions = $3.2 million (2%) *disabled, former employees and pre-65 retirees  Claims expenses for medical and pharmacy for 2010 are expected to be at $127 million. Other plan expenses include vision claims, CIGNA fees, COBRA fees, and some staff costs. 6

Contributions2010 Budget 2011 Projected Budget Increase over 2010 Budget Percent Increase over 2010 Budget Purdue$115,000,000$121,500,000$6,500,0006% Employees14,100,00014,900,000800,000 6% Inactive Employees 3,200,000 3,450, ,000 6% Total$132,300,000$139,850,000$7,550,000 7

 Eliminate providing money in the form of an opt out credit to those who do not take Purdue’s medical benefits.  Part-time faculty and staff will have their premiums based on their full-time equivalent salaries beginning with  Purdue’s contribution will increase by 6% and employee premiums (overall) will increase by 6%.  Salary tier for faculty/staff premiums will go from $40,000 to $44,000.  Premiums based on salary will only change on January 1, and not with other salary changes during the year.  Dependents up to age 26 will be covered as required by law. 8

These services will be covered without limits at 100% when in-network providers are used for all three medical plans.  Annual Physical Examinations  Preventive imaging services: e.g., mammograms and osteoporosis screening  Immunizations for infant, child, adolescent, and adult  Preventive laboratory services: e.g., cholesterol, pap tests, and PSAs  Screening procedures: e.g., colonoscopies 9

Purdue Choice Fund: no changes  In-network deductible: $1,300 per person per year and $2,600 per family per year  Out-of-network deductible: $2,600 per person per year and $4,600 per family per year  Coinsurance after deductible: 20% in-network and 50% out-of-network  Preventive services: 100%, not subject to deductible  Purdue HSA contribution: $650/employee and $1,300/family 10

Incentive PPO plan changes to current benefits:  Deductible: Current is $400; Proposed is $500  Coinsurance for primary care: Current is 10%; Proposed is 15% (still not subject to deductible)  Maximum out of pocket: Current is $1,800; Proposed is $2,000 per person per year and $4,000 per family per year  Pharmacy maximum out of pocket: Current is $1,000; Proposed is $1,300 per person per year and $2,600 per family per year 11

Co-Pay plan changes to current benefits  Establish a $250 deductible  Establish a 15% coinsurance  Both deductible and coinsurance for inpatient and outpatient hospital services only  Maximum out of pocket of $1,200 per person per year and $2,400 per family per year  Pharmacy maximum out of pocket: Increased from $1,000 to $1,300 per person per year and $2,600 per family per year 12

Q & A’s 13 October 7, 2010