1. Town of Arlington Public Employees 2011 Health Insurance Options October and November Meetings 2010 Version 4.0 10.19.10

2. 2 The Problem - Healthcare Costs are Increasing Leaner budgets are squeezing everyone – Reduced local aid – Lower revenues with bad economy – No real cost-reduction strategies – National Healthcare Reform

3. 3 Healthcare Discussion - Background Information Ongoing discussions date back several years – Rising healthcare costs impacting Town budget – Affects employees, retirees and the Town – Joint labor-management committee completed extensive review of health plan Group Insurance Commission – Town proposed to join GIC in 2009, Unions rejected proposal Municipal and State financial issues affect us – $4.5 million Town deficit and growing – FY12 looks worse both for Commonwealth and local towns – Budget woes impact our livelihood – Retiree coverage is vulnerable to changes

4. 4 Healthcare Discussion - Why Consider a Change Now? ● Estimated FY12 deficit is $6.3 million ● Status quo approach ● Means Town spends $1.4 million MORE on health insurance than currently ● Need to find cost savings elsewhere ● State contemplating changes ● Legislative proposals that may not be in our favor ● Legislature likely to take action in coming months ● On the political agenda for governor’s race

5. 5 Overview - Three Choices to Consider Option 1 – Do nothing, keep current plans and contribution splits – Town absorbs $1.4 million increase Option 2 – Total replacement with new HPHC plans – $1.5 million in Town savings; NO wage increases guaranteed; contract negotiations continue Option 3 – Go to GIC – $3.2 million in Town savings $1.8 million net savings for Town AFTER guaranteed wage increases and Medicare Part B $1.4 million to Employees/Retirees (Salary increases of $1,100,683 and Medicare Part B reimbursements of $332,160)

6. 6 Option 1 - No Changes Town Absorbs $1.4 million Additional Costs All plans will remain the same No protection for retirees – Town can increase cost sharing for retirees Premiums will increase – HMO Blue Rates will increase 11.6% Individual and10.8% Family – Blue Care Elect Rates will increase 19.3% Individual and 20.5% Family – Blue Choice Rates will increase 20.5% for both Individual and Family – HPHC HMO Rates will not increase

7. 7 Option 2 – Total Replacement with HPHC Town Saves $1.5 million ● Replace all BCBS plans with HPHC (HMO, PPO, POS) ● Higher copays ● New Retiree Plans ● HPHC “High” and “Low” options, national network ● Effective January 1, 2011 or when practical ● No retiree contribution changes for one year ● Town to pay $40 per month for Medicare Part B ● Each union must ratify, 1 year agreement ● Each union continues contract negotiations; no guaranteed wage increases

8. 8 Option 2 – HPHC Total Replacement Plan Design Changes Plan Feature Network Blue HMO (current) Harvard Pilgrim HMO (proposed) PCP, OB, GYN, MH, PT, Chiro $10 copay$20 copay* Specialist, O/P Specialty Care $10 copay$40 copay* Emergency Room$50 copay$75 copay Inpatient Hospital CareNo copay$250 copay Day SurgeryNo copay$100 copay Prescription Drugs Retail Mail Order (90 day) $10/$20/$35 $20/$40/$105 See HPHC Summary of Benefits for full description of tier 1 and tier 2 copays. Proposed plan has a $2,000 individual/$4,000 family yearly out-of-pocket maximum for inpatient hospitalization and outpatient surgical services.

9. 9 Option 2 – HPHC Total Replacement Cost for Members Current Plans Jan. 1, 2011 HPHC Consolidated Jan. 1, 2011 Monthly Estimated (Savings) or Cost Annual Estimated (Savings) or Cost PlanRenewal HMO Blue HPHC (new) Single15%$116.07$98.88($17.19)($206.28) Family15%$307.16$261.35($45.81)($549.72) PlanHPHC HMOHPHC (new) Single15%$94.17$98.88$4.71$56.52 Family15%$242.01$261.35$19.34$232.08 PlanMedex IIIHPHC (new) Single Retiree 25%$107.36$98.88($8.48)($101.76)

10. 10 Option 2: HPHC Total Replacement Plan Design Changes Continued Plan Feature Harvard Pilgrim HMO (current) Harvard Pilgrim HMO (proposed) PCP, OB, GYN, MH, PT, Chiro $10 copay$20 copay Specialist and O/P Specialty $10 copay$40 copay* Emergency Room$50 copay$75 copay Inpatient Hospital CareNo copay$250 copay Day SurgeryNo copay$100 copay Prescription Drugs Retail Mail Order (90 day) $10/$20/$35 $20/$40/$105 $10/$20/$35 $20/$40/$105 See HPHC Summary of Benefits for full description of tier 1 and tier 2 copays. Proposed plan has a $2,000 individual/$4,000 family yearly out-of-pocket maximum for inpatient hospitalization and outpatient surgical services.

11. 11 ● Effective July 1, 2011 ● Three year agreement ● Formal Section 19, Coalition Bargaining agreement ● Protects retirees, who gain bargaining rights ● Improved contribution splits ● HMOs @ 85/15 for all employees/retirees ● PPOs @ 85/15 for all employees/retirees ● Indemnity Plans @ 75/25 for all employees/retirees ● Town will protect members against future GIC increases ● Town to pay a higher contribution split if GIC rates increase more than 12% ● Town will pay a higher contribution split if GIC deductibles increase more than $100 Option 3 – Group Insurance Commission (GIC)

12. 12 ● Health Reimburse Accounts (HRA) ● Town to reimburse employees up to $500 for hospitalization and $150 for day surgery ● If HRA is not authorized by GIC, Town will improve the premium split from 85/15 to 86/14 for HMO and PPO plans ● Town to pay $40 per month for Medicare Part B ● Town committing contract raises ● ½% for 7/1/10 ● 1% for 7/1/11 ● 1% for 7/1/12 ● Raises are contingent on contract settlements Option 3 – GIC Continued

13. 13 ● Town savings projected to be $1.8 million AFTER money paid out for town-committed wage increases ● Town providing $1,000,683 in wage increases and $332,160 in Medicare Part B reimbursements, which is projected to be $1.4 million in total ● Most members will experience lower premiums Option 3 – GIC Continued

14. 14 Option 3 - GIC Health Insurance Plans GIC offers multiple plan options for active, retired Medicare and non-Medicare participants – PPO, HMO, Indemnity, Medicare Supplement Plans Non-Medicare plans include “tiered” copays for doctors and hospitals – Tier levels are based on cost and quality data Your out-of-pocket costs will depend on the doctors and hospitals you select Non-Medicare plans include up-front calendar year deductibles

15. 15 Option 3 – GIC Cost for Members Current Plans Jan. 1, 2011 % Split GIC July 1, 2011 Estimated % Split Monthly Estimated (Savings) or Cost Annual Estimated (Savings) or Cost PlanRenewal HMO Blue HPHC Independence PPO Single$116.0715%$94.8614%($21.21)($254.52) Family$307.1615%$231.7114%($75.45)($905.40) PlanRenewal HPHC HMO HPHC Independence PPO Single$94.1715%$94.8614% $0.69$8.28 Family$242.0115%$231.7114%($10.30)($123.60) PlanMedex IIIUniCare w/ CIC Single Retiree $107.3625%$101.7125%($5.65)($67.80) Note: July 1, 2011 GIC rates estimated at 12% above 2010 rates. PPO splits will be 15% if GIC allows HRAs.

16. 16 Option 3 - GIC Health Insurance Plans Continued Active Employees & Non-Medicare Eligible Retirees Four PPO Plans – Tufts, HPHC, UniCare (2) Two Limited Network HMO Plans (new in 2010) – HPHC Primary Choice – Tufts Health Plan Four Regional HMO Plans – Fallon Direct, Fallon Select, NHP, HNE One Indemnity Plan – UniCare Indemnity with CIC

17. 17 Option 3 - GIC Health Insurance Plans Continued Medicare Eligible Retirees – Retirees must enroll in Medicare if age 65 and eligible for Medicare (Self or Spouse) – Six Medicare Supplement Plans HPHC, Tufts, Fallon, HNE

18. 18 To date, 80% of municipal members have enrolled in a GIC PPO option Option 2 – GIC Health Insurance Plans 2009 Enrollment

19. 19 Option 3 – GIC Sample Plan Design Plan Feature HPHC Independence PPO In-NetworkOut-of-Network PCP Office Visit$20 copay20% after deductible Specialist Office Visit$25 Tier 1 $35 Tier 2 $45 Tier 3 20% after deductible Calendar Year Deductible$250/$750$400/$800 Emergency Room$100 Inpatient Hospital CareTier 1 $250 per admission Tier 2 $500 per admission Tier 3 $750 per admission Maximum of 4 per calendar year 20% after deductible Outpatient Surgery$150 per occurrence Maximum of 4 per calendar year 20% after deductible Prescription Drugs Retail Mail Order (90 day) $10/$25/$50 $20/$50/$110

20. 20 GIC – Sample HPHC Independence Hospital Tiers Sample of NetworkTier 1 - $250 4/yr Tier 2 - $500 4/yr Tier 3 - $750 4/yr WinchesterX Newton WellesleyX Children’sX Dana FaberX Beth IsraelX Mount AuburnX EmersonX Lahey ClinicX Mass GeneralX Brigham & Women’sX Note: The Town is offering an HRA reimbursement of $500/hospital admission if allowed by the GIC, or a reduction in the employee split from 15% to 14% for HMO and PPO plans.

21. 21 Option 3 – GIC Sample Plan Design Continued Plan Feature Tufts Health Plan Spirit Limited Provider Network, No PCP Referrals PCP Office Visit$20 copay Specialist Office Visit$25 Tier 1 $35 Tier 2 $45 Tier 3 Calendar Year Deductible$250/$750 Emergency Room$100 Inpatient Hospital CareTier 1 $300 per admission Tier 2 $700 per admission Maximum of 4 copays per calendar year Outpatient Hospital Care$150 per occurrence Maximum of 4 copays per calendar year Prescription Drugs Retail Mail Order (90 day) $10/$25/$50 $20/$50/$110

22. 22 Option 3 – GIC Continued Explanation of ‘up-front’ deductibles “Up-front deductibles” require the member to pay a stated amount up-front, before certain health insurance benefits are paid by the insurance carrier GIC deductibles are typically $250 per Individual and $750 per family per calendar year Care that is subject to a deductible: ER visits, inpatient hospitalization, surgery, lab and blood tests, bone density screenings, x-rays and high tech imaging, durable medical equipment Care that is exempt from a deductible: prescriptions, office visits, necessary immunizations, medically necessary wigs, hearing aids, mammograms, pap smears, EKGs, colonoscopies – Some of these services will be covered without a required co-pay under National Healthcare Reform

23. 23 Municipal employees are not eligible for the GIC dental, vision, life or disability programs Each plan participant must provide birth and marriage certificates to be covered New hires are eligible the first of the month after 60 days of employment Retirees over age 65 on Medicare with younger dependents have special enrollment rules Option 3 - GIC Continued Eligibility Rules

24. 24 Access carrier web sites and/or carrier (800) numbers – Review physicians – Review hospitals – Review drug formularies by plan Group Insurance Commission: www.mass.gov/gicwww.mass.gov/gic Harvard-Pilgrim HC: www.harvardpilgrim.org/gicwww.harvardpilgrim.org Tufts Health Plan: www.tuftshealthplan.com/gicwww.tuftshealthplan.com Fallon Community HP: www.fchp.orgwww.fchp.org UniCare: www.unicarestateplan.com and www.caremark.com/gicwww.unicarestateplan.com Option 3 – GIC Resources

25. 25 Summary – Health Plan Options Option 1 – No change in plans – Current contribution splits – No Medicare Part B reimbursement Option 2 – HPHC total replacement – Effective January 1, 2011, or as soon as practical – $40 Medicare Part B reimbursement for retirees – Current contribution splits stay in place – Retirees and survivor plans remain in place

26. 26 Summary – Health Plan Options Continued Option 3 – GIC – Effective July 1, 2011 – HMO/PPO contribution split @ 85/15% – Indemnity contribution split @ 75/25% – Town to protect members if GIC increases exceed 12% per plan year – Town to protect members if GIC deductible amounts increase more than $100 per plan year – HRA Up to $500/hospital admission and $150/day surgery – Agreement includes wage increases

27. 27 Health Plan Options – Index of Materials 1.Town Fiscal Projections 2.Letter from Town Manager 3.Memorandum regarding Harvard Pilgrim Consolidation w/plan changes 4.Memorandum regarding GIC 5.Comparison of various plans 6.Q & A about deductibles 7.No Change in Current Plans spreadsheet 8.Current Plans vs. HPHC Consolidation comparison spreadsheet 9.Current Plans vs. GIC Plans comparison spreadsheet 10.Proposed GIC plans showing costs/savings with possible wage increases

28. 28 Town of Arlington Health Insurance Options QUESTIONS & ANSWERS