Page based on Title Slide from Slide Layout palette. Design is 1_Title with photo. PEB and K-12 Baseline Presented by Tim Barclay Principal & Consulting Actuary October 5, 2011 Title text for Title or Divider pages should be 36 pt titles/28 pt for subtitles. PRESENTER box text should be 22pt. DATE text box is not on master and can be deleted. The date should always be 18 pts.

2 Purpose of this PowerPoint and Exercise  The straw man proposal of moving K-12 into PEB was developed for discussion purposes only  Our goal, through review of this scenario, is to elicit feedback identifying critical issues that need to be considered in the formation of any new consolidated K-12 health benefits system 10/5/2011

3 Goals of the Discussion  Establish an accurate representation of the functionality of the K-12 system, particularly in comparison to PEB  Discuss a Mandatory K-12 move to PEB scenario Same rules as the current voluntary PEB participation Assume no opt-out in this initial scenario  Clearly identify the critical issues associated with this approach Fatal flaws Problems  Will establish the direction for the next phase of the design Subtitles are Part of Title Field, then Modified Manually (see next page) Page based on Title and Text from Slide Layout palette. Design is 01_Title with photo.

410/5/2011 Similarities  Active enrollee counts near 110,000 for each program  Expenditures relatively comparable ($1.2B)  Employee contributions similar 16% for K-12 from HayGroup study 15% prospectively for PEB (not entirely apples to apples, but in the same ballpark)  Core coverage offered is similar  Collective bargaining is an important part of the process Subtitles are Part of Title Field, then Modified Manually (see next page) Page based on Title and Text from Slide Layout palette. Design is 01_Title with photo.

5 Benefit Offerings  Range of Medical Benefits (defined by actuarial value) PEB has fairly narrow range of plan offerings (5%) K-12 has a much wider range (40%) Current K-12 open enrollment showing a shift to leaner plans  Vision Benefit A component of the medical plan in PEB Variety of stand-alone plan offerings in K-12  Dental, Life and LTD Benefits Greater variation in K-12  In K-12 non-medical benefits are mandatory, if offered to a particular bargaining unit 10/5/2011

6 Eligibility  PEB 0.5 FTE for active state employees For Political Subdivisions, employer defined –Policy change as of 1/1/10  K-12 Varies by district and bargaining group FTE may be 1440 hours or hours per week Many employees eligible with <0.5 FTE status 10/5/2011

7 Employee Contributions  PEB Active Employees Defined by collective bargaining as 15% as of 1/1/12 Does not vary by FTE status  PEB Political Subdivisions Defined by local district  K-12 Generally a function of FTE status (pro-rated) Non-medical benefits funded before medical Locally bargained with pooled funding Significant variance between bargaining units and subscriber tiers Subtitles are Part of Title Field, then Modified Manually (see next page) Page based on Title and Text from Slide Layout palette. Design is 01_Title with photo.

810/5/2011 Funding  PEB $850 state funding rate for state active employees For active employees, state funding and employee contributions are the only funding sources  K-12 $768 state funding rate for a formula driven FTE count A combination of employee contributions, local levy, federal and other sources make up the difference Subtitles are Part of Title Field, then Modified Manually (see next page) Page based on Title and Text from Slide Layout palette. Design is 01_Title with photo.