Paradise Valley Unified School District November 1, 2012

Discussion Points  Background/Overview  Review of Financial Statements  Executive Summary of VSIT/VSWCP Annual Report (handout)  Services Data (handout) 2

Background/Overview How are Insurance Services and Products Acquired?  Two Methods for Acquiring Insurance  Individual school district procurement  Join insurance pool and have pool acquire on your behalf 3

Background/Overview Overview of Individual School District Procurement  Issue Request For Proposal (“RFP”) for consultant services  Hire an Employee Benefits Consultant  Put out RFP for providers  Review proposals and evaluate  Committee review  Best and Final negotiations  Award contract  3+ months to do  Perform above at least every 5 years or when a change of vendors is needed  During 5 year award negotiate renewals with only current vendors 4

Background/Overview Overview of Pool (Valley Schools) Procurement Process  Solicit proposals from providers  Receive and evaluate proposals  Award contract  Perform the above at least each year  3+ weeks to do (more of less if necessary) 5

Background/Overview Pool Advantages  Lower administrative costs for acquisition  Reduce administrative work on appeals, claims, documents, legal, vendor management, committee work, etc.  Vendor other than current vendor can be negotiated with during annual rate renewals (continuous Best and Final)  More negotiating power due to aggregation of members  Eliminates formal bid protests and unintended bid rejections  Able to enter into longer term relationship  Investment Advantages 6

Background/Overview How is Valley Schools different from other Pools/Trusts in Arizona?  Surplus Reserves can be used to offset contribution increases, wellness program costs, or any other employee benefit or insurance related expense  Autonomy of plan design for all Employee Benefits (i.e. health, dental, life, etc.)  Portion of rate for fixed expenses broken out from medical/pharmacy claims expense  More transparency of management/administration operations 7

Background/Overview Valley Schools Formation and Governance  The Valley Schools Insurance Trust (“VSIT”), Valley Schools Workers’ Compensation Pool (“VSWCP”) and Valley Schools Employee Benefits Trust (“VSEBT”) are public entity pools created by an Intergovernmental Agreement pursuant to A.R.S. §  The Valley Schools Management Group (“VSMG”) was formed by an Intergovernmental Agreement pursuant to A.R.S. §  Annual audit by Certified Public Accountant  Monthly/Quarterly financial statements prepared by independent Certified Public Accounting firm  Oversight and regular periodic examinations by the Arizona Department of Insurance  Governing/Management structure  Assets  Twenty-three public entity pools in Arizona 8

Background/Overview Valley Schools Operations  VSMG fixed management fee is charged to VSIT, VSWCP and VSEBT  Management fee allocated to VSIT/VSWCP/VSEBT members  VSIT closed to new members; VSWCP and VSEBT open to new members  VSEBT is the largest of the eight employee benefits public entity pools in Arizona  VSEBT average annual growth:  25% in ADM  57% in members  22% in covered lives  VSEBT serves about 25% of all public school district employees  VSEBT had 100% retention this year 9

Background/Overview  How does a school district assure itself on an ongoing basis it is getting the best deal? 10

Self Insured Claims = Medical + Pharmacy 85% - 90% Fixed Expenses 10% - 15% Background/Overview VSEBT Contribution (Premium) Breakdown 11

 Fixed Expenses  Medical Claims Administration (TPA)  Network Usage  Prescription Drug Administration  Stop Loss Coverage  EAP/Managed Care  COBRA Services Background/Overview What are fixed expenses? 12

 Compare like programs to accurately evaluate fixed expenses  Self-Insured  School Districts  UnitedHealthcare Background/Overview How do you compare fixed expenses? 13

District 1 & 2 Average(PEPM)$ PVUSD Rate (PEPM)$ PEPM Difference$ 7.90 PVUSD Employee CountX 2,811 Total savings on Fixed Expenses$ 266,483 Interest earnings$ 380,134 TOTAL$ 646,617  The above rate include claims administration, network usage, stop loss coverage, EAP/managed care, COBRA administration  The above PEPM rates have not been adjusted for differences in stop loss levels or all contractual terms  The above do not include dental, vision and life insurance savings  The above information was obtained through Public Records Requests Background/Overview FY 2011/12 VSEBT Fixed Expense Comparison/Annual Savings 14

Review of Financial Statements Valley Schools Insurance Trust Valley Schools Workers’ Compensation Pool Valley Schools Employee Benefits Trust Valley Schools Management Group 15

VSIT Financial Statements 16

VSWCP Financial Statements 17

VSEBT Financial Statements 18

VSMG Financial Statements 19