CITY OF SCOTTSDALE EBCT MEETING

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City of Scottsdale
EBWT FY 2009/10 Benefits and Retiree Medical
Discussion February 11, 2009
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This discussion will focus on following items

• Medical and dental benefit renewal and
  contribution rates
• Retiree health savings and medical care benefit
  eligibility
• Employee wellness facility use
• City Council will be asked to act on all of these
  items on 2/24/09

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SUMMARY OF HEALTH BENEFITS PROPOSED FY
2009-10 CONTRIBUTION RATES PLAN CHANGES
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Introduction

• City Code requires the City Council to authorize
  the contribution rates for employee health
  benefits
• Three self-insured medical plans (2,863
  Employees/Retirees)
• Aetna EPO (83.8 enrollment / 2,399)
• Aetna PPO (4.2 enrollment / 119)
• MMSI PPO (12.1 enrollment / 345)
• Two dental plans
• Self-insured plan through Delta Dental network
  (1,947 employees)
• Fully-insured plan through Assurant (581
  employees)

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City of Scottsdale FY 2009/10 Medical Benefit
Cost Projection - Overview

• Renewal goal for FY 2009/10 was no increase in
  premiums or employee contributions.
• Mercer calculated projected costs based on the
  most recent 12 months of claims (12/07 to 12/08)
• Medical trend factor of 8 from Mercers
  actuaries was applied
• Adjustments made for large claims and 7/1/08 plan
  design changes
• Trend reduced by
• 4.6 for FY 2008/09 claims surplus and special
  large claim adjustments
• 1.8 for administrative and network change
  savings
• 1.6 for plan design changes
• Result is no change to FY 2009/10 medical and
  dental total costs

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Proposed Plan Administration Changes

• As of January 1, 2009, Aetna added Mayo providers
  to their network
• As part of renewal effort, Mercer conducted
  analysis of how the City should best move forward
  with medical plan options
• Recommendation is to not renew MMSI and
  consolidate all medical plan options with Aetna
• Third Aetna High Level PPO plan will offer
  benefits similar to MMSI plan and will be the
  only COS plan that provides access to Mayo
  providers

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Proposed Plan Design Changes

• Aetna EPO new Aetna High Level PPO plan
• Increase Primary Care copay from 15 to 20
• Specialist copay remains at 40
• Cigna Behavioral Health Plan
• Increase copays under the mental health and
  substance abuse plan from 15 per visit for the
  first 30 visits and 30 per visit thereafter to
  20 per visit for the first 30 visits and 40 per
  visit thereafter

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New Aetna PPO Plan Effective 7/1/09

• Aetna adds new High Level PPO plan
• New plan closely mirrors current MMSI PPO plan
• New plan has out-of-network benefits
• New plan has same copays, deductible, coinsurance
  as MMSI plan for both in and out-of-network
• New Aetna PPO plan has access to Mayo Providers
  NO disruption for MMSI members currently seeing
  Mayo providers
• Same Rx plan and copays, but uses Aetna Formulary
  / Mercer is doing a detailed disruption analysis
• Mercer is doing a detailed provider disruption
  analysis / current match is gt90
• New plan priced at 15 above current EPO plan
  (down from 20) due to better discounts and plan
  management

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Current Aetna Members as of 7/1/09

• EPO and PPO Plans will change back to the
  provider networks used prior to July 1, 2007
• Members will receive new ID cards
• Mayo will NOT be included in the new networks
• Aetna will offer Transition of Care to any EPO or
  Aetna High Deductible PPO members under treatment
  with a Mayo provider
• To maintain access to Mayo providers, must change
  to new High Level PPO plan

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Proposed Dental Plan Contribution Rates FY
2009/10 for Full Time No Changes
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Proposed Dental Plan Contribution Rates FY
2009/10 for Part Time/Job Share No Changes
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Post Retirement Medical Benefits
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Current Retiree Medical Benefit Eligibility

• City medical benefits plan available to retirees
  until age 65
• Number of retirees covered under City plan has
  grown to over 225
• 525 employees eligible to retire within next 5
  years
• Allowing retirees to participate in City plan
  with rates blended with active employees creates
  an implicit subsidy liability for the City
  under GASBs accounting rules
• Present value of implicit cost is 14.8 million

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City of Scottsdale Medical Leave Conversion (MLC)

• Eligibility Criteria
• Those who retiree with a medical leave balance of
  at least 300 hours at retirement value
  converted to MLC account
• MLC account can only be used to pay for City
  medical plan coverage to age 65
• Retirees are also eligible for state subsidy
• 120 current participants 3.8 million balance as
  of June 30, 2009

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Post Retirement Medical Benefits Proposal

• Implement a Retirement Health Savings (RHS)
  benefit within the framework of the current MLC
  Plan
• and
• Modify Retiree Medical Benefit eligibility

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Proposal to Implement Retiree Health Savings
(RHS) Plan Benefit

• Objective allow retirees to accumulate assets
  to pay for qualified health care expenses
  (premiums, co-pays and deductibles) on a tax free
  basis
• Retain current MLC formula however, at
  retirement, funds are deposited directly into an
  individual retiree health savings account
• Accounts administered by a financial organization
• Direct employer contributions only no employee
  contributions allowed
• Fully portable at retirement no need to remain
  on City medical plan
• Tax issues need resolution in order to include
  about 70 employees and 100 retirees that were
  hired prior to July 1, 1982 if not able to
  resolve, remain under current plan.

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Retiree Medical Benefit Eligibility Proposed
Changes

• Current Retirees no change eligible for City
  plan until age 65
• Current Employees must retiree prior to July 1,
  2012 in order to be eligible for City medical
  coverage
• New Employees those hired on or after July 1,
  2009 will not be eligible for City retiree
  medical coverage
• All groups will continue to be eligible for
  Retirement Health Savings benefit through the
  City and retiree medical benefits through the
  state retirement systems.

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If Not Eligible for City Medical Plan, then . . .

• May still receive RHS contribution at retirement
  based on accumulated medical leave hours.
• Some retirees are eligible for other medical
  coverage (another job or through spouse) in
  this case RHS can be used to pay premium.
• ASRS sponsored medical plan is available to all
  ASRS and PSPRS retirees modestly higher cost
  than city plans.
• ASRS/PSPRS subsidies (up to 260 per month)
  available to help pay premium cost of ASRS plans.
• Separate Medicare supplement plans available
  through ASRS to those age 65 and over.

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Employee Wellness Facility Use Proposal

• Request authorization to provide employees and
  retirees access to designated aquatic and fitness
  facilities (senior centers excluded) at no fee
  during non-prime times
• Over 50 of employees already have access to
  fitness equipment at their workplace.
• Pay Scottsdale resident rate for leisure
  education classes
• Access to these facilities is logical extension
  of Live Life Well program rolled out in August
  2008
• Goal to increase employee wellness, reduce
  medical claims costs and decrease workplace
  injuries.
• Emphasis on exercise, nutrition and disease
  prevention already showing positive results (over
  1,400 HRA participants, 1,000 wellness class
  attendees and 500 participants in weight loss
  challenge)