1. HayGroup ® Pennsylvania Association of School Business Officials HR 159 Actuarial Report to the Pennsylvania Legislative Budget and Finance Committee March 11, 2004

2. HayGroup ® Slide - 1 HR 159 Purpose Scope Process Timeline

3. HayGroup ® Slide - 2 HR 159 Purpose Study the Feasibility and Cost Effectiveness of Placing Public School Employees under the Commonwealth’s Jurisdiction for the purposes of providing Health Benefits.

4. HayGroup ® Slide - 3 HR 159 Scope Health benefits program Medical, Dental, Vision, Prescription Drugs Analyze the pattern of growth in these costs Public School employees Active employees Retired employees Comparison to Pennsylvania State workers

5. HayGroup ® Slide - 4 HR 159 Scope Potential cost reductions For Commonwealth For LEAs

6. HayGroup ® Slide - 5 HR 159 Scope Seek input from Department of Education Pennsylvania Association of School Business Officials Pennsylvania School Boards Association Pennsylvania State Education Association Pennsylvania Federation of Teachers Governor’s Office of Administration Group Insurance Providers

7. HayGroup ® Slide - 6 HR 159 Process LFBC tasked with conducting the study RFP Competitive bids HayGroup awarded the contract

8. HayGroup ® Slide - 7 HR 159 Timeline July 2003 -- contract awarded January 2004 -- final report issued February 4, 2004 -- LBFC released the report Report can be printed from - http://lbfc.legis.state.pa.us

9. HayGroup ® Slide - 8 HR 159 -- Health Benefits for Public School Employees HayGroup One of the largest international consulting firms Oldest actuarial firm in the US Actuary to PA State Employees Retirement System Extensive healthcare expertise Hay’s healthcare models used by Congressional Research Service to evaluate legislative proposals Hay Benefits Report Key Staff

10. HayGroup ® Slide - 9 HR 159 -- Health Benefits for Public School Employees Discovery & Data Capture Customized surveys One for School Districts One of IUs Responses 146 completed surveys received in time to be included in the study -- statistically representative of all LEAs Population data PSERS SERS

11. HayGroup ® Slide - 10 HR 159 -- Health Benefits for Public School Employees Discovery & Data Capture Meetings with interested parties PA DoEdPSBA PSEAPFT Governor’s OoAPASBO PSERSSERS PAHUPEBTF Insurance providers Capital BlueCrossBlueCross of NE PA HighmarkIndependence BC

12. HayGroup ® Slide - 11 HR 159 -- Health Benefits for Public School Employees Discovery & Data Capture State information Web searches Discussions with State officials

13. HayGroup ® Slide - 12 HR 159 -- Health Benefits for Public School Employees Data Analysis Employee contributions Medical plan deductibles, copays, out-of-pocket limits Prescription drug benefits Dental benefits Vision benefits

14. HayGroup ® Slide - 13 HR 159 -- Health Benefits for Public School Employees Data Analysis Employee contributions

15. HayGroup ® Slide - 14 HR 159 -- Health Benefits for Public School Employees Data Analysis Medical plan deductibles -- single coverage

16. HayGroup ® Slide - 15 HR 159 -- Health Benefits for Public School Employees Data Analysis Medical plan deductibles -- family coverage

17. HayGroup ® Slide - 16 HR 159 -- Health Benefits for Public School Employees Data Analysis Out-of-pocket limit -- single coverage

18. HayGroup ® Slide - 17 HR 159 -- Health Benefits for Public School Employees Data Analysis Prescription Drug Coverage -- generic copay

19. HayGroup ® Slide - 18 HR 159 -- Health Benefits for Public School Employees Data Analysis Dental benefits Coverage Cost-sharing Plan design

20. HayGroup ® Slide - 19 HR 159 -- Health Benefits for Public School Employees Data Analysis Dental benefits Orthodontia lifetime maximum benefit

21. HayGroup ® Slide - 20 HR 159 -- Health Benefits for Public School Employees Data Analysis Vision benefits Coverage Cost-sharing Retiree benefits Coverage Pre-65 Post-65 Cost-sharing

22. HayGroup ® Slide - 21 HR 159 -- Health Benefits for Public School Employees Actuarial Analysis Compare the LEA plans to the PEBTF plans Compare: plans premiums, funding arrangements, plan management, demographics of covered population

23. HayGroup ® Slide - 22 HR 159 -- Health Benefits for Public School Employees Actuarial Analysis Demographic differences Covered population differences Plan design differences Funding arrangements Other factors

24. HayGroup ® Slide - 23 HR 159 -- Health Benefits for Public School Employees Actuarial Analysis Demographic differences Females Males

25. HayGroup ® Slide - 24 HR 159 -- Health Benefits for Public School Employees Actuarial Analysis Covered population differences

26. HayGroup ® Slide - 25 HR 159 -- Health Benefits for Public School Employees Actuarial Analysis Plan design differences medical prescription drug dental vision Benefit Value Comparison (BVC) Actuarial model that measures the value of a benefit plan, based on detailed plan design information, standard employee population

27. HayGroup ® Slide - 26 HR 159 -- Health Benefits for Public School Employees

28. HayGroup ® Slide - 27 HR 159 -- Health Benefits for Public School Employees

29. HayGroup ® Slide - 28 HR 159 -- Health Benefits for Public School Employees

30. HayGroup ® Slide - 29 HR 159 -- Health Benefits for Public School Employees

31. HayGroup ® Slide - 30 HR 159 -- Health Benefits for Public School Employees

32. HayGroup ® Slide - 31 HR 159 -- Health Benefits for Public School Employees Actuarial Analysis Funding arrangements Other factors

33. HayGroup ® Slide - 32 HR 159 -- Health Benefits for Public School Employees Estimated Savings per Employee

34. HayGroup ® Slide - 33 HR 159 -- Health Benefits for Public School Employees Total Statewide Savings

35. HayGroup ® Slide - 34 HR 159 -- Health Benefits for Public School Employees Implementation Approaches Mandatory or Voluntary Administration Plan design options Retirees

36. HayGroup ® Slide - 35 HR 159 -- Health Benefits for Public School Employees Administration Approaches Service contract with PEBTF Expand PSERS HOP program New administrative unit

37. HayGroup ® Slide - 36 HR 159 -- Health Benefits for Public School Employees Proposed Structure For Commonwealth Wide Health Plan for Education Employees Proposed Structure For Commonwealth Wide Health Plan for Education Employees Commonwealth State Employee Contributions State Employee Contributions Employee Contributions PEBTF PSET Administrative Staff Commonwealth Contributions Commonwealth Contributions Local Education Agencies Local Education Agencies Legislation Service Contract Service Contract

38. HayGroup ® Slide - 37 HR 159 -- Health Benefits for Public School Employees Alternative Proposed Structure For Commonwealth Wide Health Plan for Education Employees Alternative Proposed Structure For Commonwealth Wide Health Plan for Education Employees Local Education Agencies Local Education Agencies Legislation PSERS or Other Commonwealth Agency PSERS or Other Commonwealth Agency FUNDING SOURCES FOR EDUCATION EMPLOYEES Commonwealth Contributions Commonwealth Contributions Employee Contributions Employee Contributions

39. HayGroup ® Slide - 38 HR 159 -- Health Benefits for Public School Employees Winners & Losers

40. HayGroup ® Slide - 39 HR 159 -- Health Benefits for Public School Employees Examples of “Strawman” Plan Designs

41. HayGroup ® Slide - 40 HR 159 -- Health Benefits for Public School Employees Examples of “Strawman” Plan Designs

42. HayGroup ® Slide - 41 HR 159 -- Health Benefits for Public School Employees Implementation Bargaining contracts

43. HayGroup ® Slide - 42 HR 159 -- Health Benefits for Public School Employees Implementation Timetable

44. HayGroup ® Slide - 43 HR 159 -- Health Benefits for Public School Employees Projected Cost Savings

45. HayGroup ® Slide - 44 HR 159 -- Health Benefits for Public School Employees Summary of State Survey

46. HayGroup ® Slide - 45 HR 159 -- Health Benefits for Public School Employees Question & Answer Session