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2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
2015 renewal presentation march 28
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2015 renewal presentation march 28

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  • 1. L O C K T O N C O M P A N I E S Metropolitan Community College 2015 Renewal Presentation March 28, 2014 Insurance Committee Meeting
  • 2. 1 Agenda  2013/2014 YTD Plan Performance  2015 BlueKC Renewal  2015 Lockton’s Renewal Analysis  Appendix  Basics of Stop Loss
  • 3. 2013 and 2014 Plan Performance
  • 4. 3 2013 Experience – All Plans Combined Month/Year Total Subscribers Total Members Adminn Stop Loss Total Fixed Medical Claims Capitated Claims Rx Claims Specific Stop- Loss Reimbursable Claims ($200K) Monthly Net Paid Claims Monthly Net Paid Claims + Fixed Costs Monthly ER & EE Funding Monthly EE Contributio ns Total Net Plan Cost Jan-13 1,139 1,963 $68,150 $23,568 $91,718 $672,156 $1,903 $157,157 $0 $831,216 $922,934 $1,005,452 $165,656 $757,278 Feb-13 1,135 1,959 $67,736 $23,425 $91,161 $912,997 $1,737 $150,877 $0 $1,065,611 $1,156,772 $999,897 $163,270 $993,502 Mar-13 1,129 1,948 $67,448 $23,326 $90,775 $873,164 $2,318 $232,639 $99,606 $1,008,515 $1,099,290 $995,475 $162,287 $937,002 Apr-13 1,127 1,934 $67,167 $23,229 $90,396 $942,530 $1,978 $171,363 $133,089 $982,783 $1,073,179 $992,392 $161,427 $911,752 May-13 1,133 1,943 $67,533 $23,355 $90,888 $723,128 $2,004 $188,242 $20,683 $892,691 $983,579 $997,821 $162,345 $821,234 Jun-13 1,125 1,933 $67,094 $23,203 $90,297 $831,496 $1,985 $237,372 $110,623 $960,230 $1,050,527 $991,139 $162,210 $888,316 Jul-13 1,085 1,885 $65,304 $22,584 $87,888 $826,966 $1,828 $162,356 $46,649 $944,501 $1,032,389 $964,095 $165,666 $866,723 Aug-13 1,086 1,895 $65,509 $22,655 $88,164 $727,268 $1,749 $242,215 $23,770 $947,463 $1,035,627 $966,297 $166,412 $869,215 Sep-13 1,093 1,908 $65,951 $22,808 $88,759 $862,121 $1,877 $173,210 $139,055 $898,154 $986,912 $971,382 $165,151 $821,761 Oct-13 1,102 1,917 $66,466 $22,986 $89,452 $596,154 $1,841 $198,703 $21,725 $774,973 $864,425 $978,404 $167,295 $697,130 Nov-13 1,106 1,916 $66,594 $23,030 $89,624 $957,021 $1,841 $241,178 $211,291 $988,749 $1,078,373 $980,030 $166,313 $912,060 Dec-13 1,107 1,914 $66,556 $23,017 $89,574 $831,524 $1,860 $212,455 $75,673 $970,166 $1,059,740 $979,246 $165,405 $894,335 Total 13,367 23,115 $801,507 $277,189 $1,078,696 $9,756,526 $22,921 $2,367,768 $882,164 $11,265,05 0 $12,343,74 6 $11,821,63 0 $1,973,437 $10,370,30 9 Average/PEP M 1,114 $59.96 $20.74 $80.70 $729.90 $1.71 $177.14 $66.00 $842.75 $923.45 $884.39 $147.64 $775.81 Funding Surplus/(Deficit) -$522,116 % of Funding 104.4%
  • 5. 4 2014 Experience – All Plans Combined Month/Year Total Subscribers Total Members Total Fixed Medical Claims Capitated Claims Rx Claims Specific Stop- Loss Reimbursable Claims ($200K) Monthly Net Paid Claims Total ACA Fees Monthly Net Paid Claims + Fixed Costs + ACA Fees Monthly ER & EE Funding Monthly EE Contributions Total Net Plan Cost Jan-14 1,106 1,870 $97,538 $812,695 -$61 $169,924 $0 $982,558 $9,966 $1,090,062 $901,132 $101,032 $989,030 Feb-14 1,109 1,869 $97,656 $418,545 $0 $139,965 $0 $558,510 $9,951 $666,117 $901,188 $100,546 $565,570 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Total 2,215 3,739 $195,194 $1,231,240 -$61 $309,889 $0 $1,541,068 $19,917 $1,756,179 $1,802,320 $201,579 $1,554,600 Average/Month 1,108 1,870 $97,597 $615,620 -$31 $154,945 $0 $770,534 $9,958 $878,089 $901,160 $100,789 $777,300 Average/PMPM $52.20 $329.30 -$0.02 $82.88 $0.00 $412.16 $5.33 $469.69 $482.03 $53.91 $415.78 Funding Surplus/(Deficit) $46,141 % of Funding 97.4% February ‘14 is the most favorable claims month MCC has had in three years!
  • 6. 5 Large Claims March 2013 – February 2014 Based on actuarial claims distribution tool, we would expect a group of similar membership to have seven members with claims in excess of $100,000 and 2.2 members with claims in excess of $200,000. Large Claims - March 2013 - February 2014 Claimant Plan 2014 Plan* Status Paid Claims Above $100K Prognosis/ Projected Claims over next 6 months Diagnosis MNZH-ZWZF-BHS BlueCare HMO HDHP Active $956,601 $856,601 Premie/$300K+ Respiratory MNZH-ZWST-AHM BlueCare HMO Early Retiree/Pre-65 $263,240 $163,240 Injury/Poisoning MNZH-ZWZV-MHS PPO Option 1 Early Retiree/Pre-65 $260,760 $160,760 Musculoskeletal and Connective Tissue MNZH-ZWPX-GHS PPO Option 1 Premier Active $232,417 $132,417 Genitourinary MNML-MHSD-YHM PPO Option 1 Cobra $217,589 $117,589 $100K-150K Genitourinary MNZH-ZWBH-BHM PPO Option 1 Premier Active $207,535 $107,535 $50K-75K Neoplasms MNOW-MDGU-AHM BlueSaver (HDHP) HDHP Early Retiree/Pre-65 $195,997 $95,997 Neoplasms MNZH-ZWPD-BHM PPO Option 1 Active $157,795 $57,795 Neoplasms MNZH-ZWGL-QHO BlueCare HMO Active $152,210 $52,210 Endocrine, Nutritional and Metabolic Diseases MNOW-MDGV-YHM PPO Option 1 Regular Retiree/Post- 65 $150,291 $50,291 Musculoskeletal and Connective Tissue (Rx) MNZH-ZWZW-ZHM PPO Option 1 HDHP Active $117,773 $17,773 Neoplasms Total $2,912,208 $1,812,208 *If blank, member is not appearing on the large claim report through February 2014.
  • 7. 6 2014 Plan Design Premier Standard HDHP Preferred Care Blue Preferred Care Blue Preferred Care Blue Benefit In-Network Out-of-Network In-Network Out-of-Network In-Network Out-of-Network Annual Deductible Individual Family $500 $1,000 $500 $1,000 $1,000 $2,000 $1,000 $2,000 $2,500 $5,000 $2,500 $5,000 Coinsurance 90% 70% 80% 70% 100% 80% Out of Pocket Maximum Individual Family $2,000 $4,000 $4,000 $8,000 $3,000 $6,000 $6,000 $12,000 $2,500 $5,000 $5,000 $10,000 Includes copays Medical Medical Medical Medical N/A N/A Includes deductible Yes Yes Yes Yes Yes Yes Office Visit Copay $20 30% Coinsurance $30 30% Coinsurance 0% Coinsurance 20% Coinsurance Inpatient Hospital 10% Coinsurance 30% Coinsurance 20% Coinsurance 30% Coinsurance Deductible then Coinsurance Emergency Room $100 Copay+Deductible then 10% Coinsurance $150 Copay+Deductible then 30% Coinsurance Deductible then 0% Coinsurance Deductible then 20% Coinsurance Prescription Drugs Retail Generic Preferred Brand Non-Preferred Brand Mail Order Generic Preferred Brand Non-Preferred Brand $10 $30 $50 $20 $60 $100 $10 then 50% $30 then 50% $50 then 50% $20 then 50% $60 then 50% $100 then 50% $10 $30 $50 $20 $60 $100 $10 then 50% $30 then 50% $50 then 50% $20 then 50% $60 then 50% $100 then 50% $0 $0 $0 $0 $0 $0 $0 then 50% $0 then 50% $0 then 50% $0 then 50% $0 then 50% $0 then 50% Bold indicates changes for 2014
  • 8. 7 2014 Cost Sharing Before MCC HSA and HRA Contributions Total Projected 2014 Premium $10,674,671 2014 Employee Contributions $1,028,740 2014 Total Net Projected MCC Cost $9,645,930 % Subsidized 90% Cost per Employee Enrollment 1041 Gross Cost per Employee $10,254 Net Cost per Employee $9,266 After MCC HSA and HRA Contributions Total Projected 2014 Premium $10,674,671 2014 Employee Contributions $1,028,740 2014 Total Net Projected MCC Cost $9,645,930 MCC HSA and HRA Contributions $1,383,525 Total Net Projected Plan Costs + HSA/HRA Contributions $11,029,455 % Subsidized 103% Cost per Employee Enrollment 1041 Gross Cost per Employee $10,254 Net Cost per Employee, including HSA/HRA Contributions $10,595
  • 9. 2015 BlueKC Renewal
  • 10. 9 2015 BlueKC Renewal  The Modified Cost Plus contract is comprised of Fixed Fees, which include Administrative Fees, Stop Loss Fees, and Excise Tax (which applies to the Stop Loss Fee). The combined increase equates to +15%.  Administrative Fees: +3%  Stop Loss: +40%  ACA Excise Tax: 2.4%  As we analyze the stop loss component of the overall fees, it is important to look at historical plan performance: Stop Loss Fee $ Over Spec Loss Ratio 2011 $332,949 $1,853,381 557% 2012 $346,339 $499,918 144% 2013 $365,479 $775,354 212% 3 Year Total $1,044,767 $3,128,653 299%
  • 11. 10 BlueKC 2015 Renewal – Fixed Fees *Includes the 2.4% Excise Tax February 2014 Enrollment 2014 Current 2015 Renewal Fixed Fees Admin Employee Only 725 $41.55 $42.80 Employee + Spouse 145 $85.48 $88.04 Employee + Child(ren) 112 $77.50 $79.82 Family 127 $121.42 $125.07 $799,424 $823,434 Stop Loss Employee Only 725 $19.36 $27.27 Employee + Spouse 145 $39.82 $56.08 Employee + Child(ren) 112 $36.10 $50.85 Family 127 $56.57 $79.68 $372,450 $524,603 Total Annual Fixed Fees 1,109 $1,171,874 $1,348,037 Impact to Current (%) N/A 15.0% Impact to Current ($) $176,163
  • 12. 11 BlueKC Renewal – ACA Taxes 2014 Current 2015 Renewal PPACA Fees - PMPY Comparative Effectiveness Fee $2 $2 Reinsurer Fee $63 $44 Total PPCA PMPY Fee $65 $46 Total Annual PPACA Fee (1870 members) $121,550 $86,020 Important Note: ACA Taxes are not included in the Contractual Billed Rates
  • 13. 12 BlueKC 2015 Renewal (cont.)  The second component of the Modified Cost Plus contract is Maximum Claim Liability Factors/Aggregate Stop Loss Limits.  Using claims through January, BlueKC initially proposed an increase of +16.7%. Based on Lockton’s underwriting, as well as updated claims through February, we were able to negotiate the increase to +10%.  To maintain compliance with ACA requirements, Prescription Drug copays will apply towards the Out-of-Pocket Maximum effective 1/1/2015. To account for this, BlueKC has proposed an increase to the Out-of-Pocket maximums on the Standard and Premier plans:  Standard: From $3,000/$6,000 to $3,900/$7,800  Premier: From $2,000/$4,000 to $3,000/$6,000  Should MCC wish to keep the Out-of-Pocket maximums the same in 2015, the Maximum Claim Factors would increase by an additional +1.55% to the Premier & Standard plans.
  • 14. 13 Prescription Drug Analysis  If MCC maintains the current Out-of-Pocket Maximum (OOPM),  Average savings for members meeting OOPM  Premier: $716 Per Member Per Year (PMPY)  Standard: $940 PMPY  If MCC implements the proposed OOPM,  Percentage of members who would be paying more:  Premier: 9.4% (49 members) paying on average $76.50 more PMPY  Standard: 10.9% (47 members) paying on average $82.75 more PMPY
  • 15. 14 BlueKC 2015 Renewal – Contractual Billed Rates February 2014 Enrollment 2014 Current 2015 Initial Renewal No Changes to OOOPM 2015 Initial Renewal Changes to OOPM 2015 Negotiated Renewal No Changes to OOPM 2015 Negotiated Renewal Changes to OOPM Premier Employee Only 324 $711.75 $841.08 $829.31 $797.09 $785.99 Employee + Spouse 40 $1,464.07 $1,730.10 $1,705.89 $1,639.61 $1,616.78 Employee + Child(ren) 21 $1,327.40 $1,568.60 $1,546.65 $1,486.56 $1,465.86 Family 15 $2,079.69 $2,457.58 $2,423.19 $2,329.03 $2,296.61 Standard Employee Only 96 $600.82 $699.90 $700.90 $673.18 $663.97 Employee + Spouse 43 $1,235.87 $1,459.76 $1,439.68 $1,384.70 $1,365.76 Employee + Child(ren) 47 $1,120.55 $1,305.34 $1,306.34 $1,268.95 $1,238.33 Family 27 $1,755.60 $2,073.65 $2,045.12 $1,967.01 $1,940.11 HDHP Employee Only 305 $495.20 $576.69 $577.69 $547.79 $547.79 Employee + Spouse 62 $1,051.13 $1,224.17 $1,224.17 $1,162.54 $1,162.54 Employee + Child(ren) 44 $953.03 $1,109.92 $1,110.92 $1,067.50 $1,054.05 Family 85 $1,493.17 $1,738.98 $1,738.98 $1,651.44 $1,651.44 Total Annual Contractual Billed Rates 1,109 $11,330,251 $13,287,069 $13,204,274 $12,640,871 $12,522,258 Impact to Current (%) N/A 17.3% 16.5% 11.6% 10.5% Impact to Current ($) N/A $1,956,818 $1,874,023 $1,310,620 $1,192,007 Total Annual Contractual Billed Rates + ACA $11,451,801 $13,373,089 $13,290,294 $12,726,891 $12,608,278 Impact to Current (%) 16.8% 16.1% 11.1% 10.1% Impact to Current ($) $1,921,288 $1,838,493 $1,275,090 $1,156,477
  • 16. 15 2015 BlueKC Proposed Plan Design – Without Plan Changes Premier Standard HDHP Preferred Care Blue Preferred Care Blue Preferred Care Blue Benefit In-Network Out-of-Network In-Network Out-of-Network In-Network Out-of-Network Annual Deductible Individual Family $500 $1,000 $500 $1,000 $1,000 $2,000 $1,000 $2,000 $2,500 $5,000 $2,500 $5,000 Coinsurance 90% 70% 80% 70% 100% 80% Out of Pocket Maximum Individual Family $2,000 $4,000 $4,000 $8,000 $3,000 $6,000 $6,000 $12,000 $2,500 $5,000 $5,000 $10,000 Includes copays Medical and Rx Medical and Rx Medical and Rx Medical and Rx N/A N/A Includes deductible Yes Yes Yes Yes Yes Yes Office Visit Copay $20 30% Coinsurance $30 30% Coinsurance 0% Coinsurance 20% Coinsurance Inpatient Hospital 10% Coinsurance 30% Coinsurance 20% Coinsurance 30% Coinsurance Deductible then Coinsurance Emergency Room $100 Copay+Deductible then 10% Coinsurance $150 Copay+Deductible then 30% Coinsurance Deductible then 0% Coinsurance Deductible then 20% Coinsurance Prescription Drugs Retail Generic Preferred Brand Non-Preferred Brand Mail Order Generic Preferred Brand Non-Preferred Brand $10 $30 $50 $20 $60 $100 $10 then 50% $30 then 50% $50 then 50% $20 then 50% $60 then 50% $100 then 50% $10 $30 $50 $20 $60 $100 $10 then 50% $30 then 50% $50 then 50% $20 then 50% $60 then 50% $100 then 50% $0 $0 $0 $0 $0 $0 $0 then 50% $0 then 50% $0 then 50% $0 then 50% $0 then 50% $0 then 50%
  • 17. 16 2015 BlueKC Proposed Plan Design – With Plan Changes Premier Standard HDHP Preferred Care Blue Preferred Care Blue Preferred Care Blue Benefit In-Network Out-of-Network In-Network Out-of-Network In-Network Out-of-Network Annual Deductible Individual Family $500 $1,000 $500 $1,000 $1,000 $2,000 $1,000 $2,000 $2,500 $5,000 $2,500 $5,000 Coinsurance 90% 70% 80% 70% 100% 80% Out of Pocket Maximum Individual Family $3,000 $6,000 $6,000 $12,000 $3,900 $7,800 $7,800 $15,600 $2,500 $5,000 $5,000 $10,000 Includes copays Medical and Rx Medical and Rx Medical and Rx Medical and Rx N/A N/A Includes deductible Yes Yes Yes Yes Yes Office Visit Copay $20 30% Coinsurance $30 30% Coinsurance 0% Coinsurance 20% Coinsurance Inpatient Hospital 10% Coinsurance 30% Coinsurance 20% Coinsurance 30% Coinsurance Deductible then Coinsurance Emergency Room $100 Copay+Deductible then 10% Coinsurance $150 Copay+Deductible then 30% Coinsurance Deductible then 0% Coinsurance Deductible then 20% Coinsurance Prescription Drugs Retail Generic Preferred Brand Non-Preferred Brand Mail Order Generic Preferred Brand Non-Preferred Brand $10 $30 $50 $20 $60 $100 $10 then 50% $30 then 50% $50 then 50% $20 then 50% $60 then 50% $100 then 50% $10 $30 $50 $20 $60 $100 $10 then 50% $30 then 50% $50 then 50% $20 then 50% $60 then 50% $100 then 50% $0 $0 $0 $0 $0 $0 $0 then 50% $0 then 50% $0 then 50% $0 then 50% $0 then 50% $0 then 50%
  • 18. 17 2015 Illustrative Cost Share Annual Costs 2014 2015 No Plan Changes 2015 w/Plan Changes Total Projected Premium $10,674,671 $11,907,460 $11,797,961 Employee Contributions $1,028,740 $1,028,740 $1,028,740 Total Net Projected MCC Cost $9,645,930 $10,878,720 $10,769,221 % Subsidized 90% 91% 91% Cost per Employee Enrollment 1041 1041 1041 Gross Cost per Employee $10,254 $11,438 $11,333 Net Cost per Employee $9,266 $10,450 $10,345 Annual Costs if MCC funds HSA and HRA at 2014 Level 2014 2015 No Plan Changes 2015 w/Plan Changes Total Projected Premium $10,674,671 $11,907,460 $11,797,961 Employee Contributions $1,028,740 $1,028,740 $1,028,740 Total Net Projected MCC Cost $9,645,930 $10,878,720 $10,769,221 MCC HSA and HRA Contributions (If funded by MCC at 2014 Level) $1,383,525 $1,383,525 $1,383,525 Total Net Projected Plan Costs + HSA/HRA Contributions $11,029,455 $12,262,245 $12,152,746 % Subsidized 103% 103% 103% Cost per Employee Enrollment 1041 1041 1041 Gross Cost per Employee $10,254 $11,438 $11,333 Net Cost per Employee + HSA/HRA Contributions $10,595 $11,779 $11,674 *Enrollment reflects data provided on census dated 1/17/2014 and therefore the total premium differs from other exhibits using February enrollment
  • 19. 18 Benchmarking $3,300 $1,000 $1,000 $750 $0 $1,000 $1,000 $750 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 MCC HDHP Lockton Education Services Lockton Midwest Region Lockton 1,000 - 4,999 Employees HSA Employer Contributions Individual Family
  • 20. 19 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 2014 2015 2016 2017 2018 Family EE + Spouse EE + Dependents Family Limit Employee Single Limit What is Our Exposure in 2018? (Active Ees) In 2018, an excise tax will be applied if the total value of employee and employer-paid health coverage exceeds $10,200 for single and $27,500 for family coverage. Any amounts in excess of these limits will be subject to a 40% excise tax. Cost Trended at 9% Excise Tax in 2018 2018 Excise Tax Projection at 9% Trend $581,926
  • 21. 20 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 2014 2015 2016 2017 2018 Family EE + Spouse EE + Dependents Family Limit Employee Single Limit What is Our Exposure in 2018? (Pre-65 Retirees) In 2018, an excise tax will be applied if the total value of employee and employer-paid health coverage exceeds $11,850 for single and $30,950 for family coverage. Any amounts in excess of these limits will be subject to a 40% excise tax. Cost Trended at 9% Excise Tax in 2018 2018 Excise Tax Projection at 9% Trend $33,307
  • 22. Lockton’s 2015 Renewal Analysis
  • 23. 22 Lockton’s 2015 Renewal Analysis – Assuming no Changes to Out-of-Pocket Maximum Adjusted Paid Claims Projection $493.92 Current Aggregate Factors PMPM $452.93 Variance from Current 9.0% 1 Rx copays accumulating toward the OOPM. Assumes that the out of pocket maximums stay at the current levels. Total Plan Cost PMPM $557.86 Current Funding Rates PMPM $510.43 Variance from Current 9.3% Annualized Costs Enrollment (Members) 22,428 Claims Costs $11,077,573 Fixed Costs $1,348,037 Annual Taxes (HCR) $86,049 Total Plan Cost $12,511,659 1 Rx copays accumulating toward the OOPM. Assumes that the out of pocket maximums stay at the current levels. Maximum Claim Liability Increase Overall Needed Increase
  • 24. 23 Lockton’s 2015 Renewal Analysis – Assuming Changes to Out-of-Pocket Maximum Total Plan Cost PMPM $554.91 Current Funding Rates PMPM $510.43 Variance from Current 8.7% Annualized Costs Enrollment (Members) 22,428 Claims Costs $11,011,415 Fixed Costs $1,348,037 Annual Taxes (HCR) $86,049 Total Plan Cost $12,445,501 1 Rx copays accumulating toward the OOPM. Assumes that the out of pocket maximums are increased for the Premier & Standard to offset the Rx impact. Overall Needed Increase Adjusted Paid Claims Projection $490.97 Current Aggregate Factors PMPM $452.93 Variance from Current 8.4% Maximum Claim Liability Increase
  • 25. 24 2015 Renewal – Lockton vs. BlueKC Assuming No Change to Out-of-Pocket Maximum BlueKC 2014 Renewal Initial BlueKC 2015 Renewal Negotiated BlueKC 2015 Renewal Lockton's 2015 Projection Aggregate Claims PMPM $453 $533 $503 $494 Admin PMPM $36 $37 $37 $37 Stop Loss PMPM $17 $23 $23 $23 ACA $5 $4 $4 $4 TOTAL PMPM $511 $597 $567 $558 BlueKC 2014 Renewal Initial BlueKC 2015 Renewal Negotiated BlueKC 2015 Renewal Lockton's 2015 Projection Claims $10,147,131 $11,960,590 $11,278,144 $11,077,638 Admin $1,170,454 $1,347,923 $1,347,923 $1,347,923 ACA $121,550 $86,095 $86,095 $86,095 Total Plan Costs $11,439,135 $13,394,608 $12,712,162 $12,511,656 Increase from Prior Year (%) 0% 17% 11% 9% Increase from Prior Year ($) ($387,808) $1,955,473 $1,273,027 $1,072,521
  • 26. 25 2015 Renewal – Lockton vs. BlueKC Assuming Change to Out-of-Pocket Maximum BlueKC 2014 Renewal Initial BlueKC 2015 Renewal Negotiated BlueKC 2015 Renewal Lockton's 2015 Projection Aggregate Claims PMPM $453 $528 $498 $491 Admin PMPM $36 $37 $37 $37 Stop Loss PMPM $17 $23 $23 $23 ACA $5 $4 $4 $4 TOTAL PMPM $511 $592 $562 $555 BlueKC 2014 Renewal Initial BlueKC 2015 Renewal Negotiated BlueKC 2015 Renewal Lockton's 2015 Projection Claims $10,147,131 $11,850,376 $11,174,302 $11,011,415 Admin $1,170,454 $1,347,923 $1,347,923 $1,347,923 ACA $121,550 $86,095 $86,095 $86,095 Total Plan Costs $11,439,135 $13,284,394 $12,608,320 $12,445,433 Increase from Prior Year (%) 0% 16% 10% 9% Increase from Prior Year ($) ($387,808) $1,845,259 $1,169,185 $1,006,298
  • 27. 26 Lockton’s 2015 Renewal Analysis  In an effort to mitigate the increase, Lockton requested alternative specific deductible quotes, as higher deductibles yield lower specific premium rates. Based on the Monte Carlo simulation, MCC ‘wins’ 88% of the time at the current $200,000 specific deductible. Current Contract Contract Alternative 2 Contract Alternative 3 Without Stop Loss $200,000 $225,000 $250,000 What is the plan's expected cost under the various options? Expected Claims (Paid by Plan after specific and aggregate) $11,968,150 $11,352,732 $11,426,082 $11,485,884 Specific Premium $511,670 $487,914 $463,061 Total Expected Cost (Expected Claims + Stop Loss Premium) $11,968,150 $11,864,402 $11,913,996 $11,948,945 % of simulations this option "wins" 88% 0% 12% Premium savings $0 -$23,756 -$48,609 Additional Expected Claims $0 $73,350 $133,152
  • 28. Basics of Stop Loss
  • 29. 28 Stop Loss Background  Self-insured (or quasi self-insured) clients who want to mitigate risks due to large or unanticipated claims purchase stop loss coverage through their claims administrator or from a third-party carrier.  Under the BlueKC Cost Plus arrangements, customers are required to purchase stop loss through BlueKC; Only under a true Administrative Service Only (ASO) agreement is carving out the stop loss permissible.  Stop Loss Products:  Individual/Specific Stop Loss  Coverage per member in excess of a set threshold  Lockton performs Monte Carlo analysis, which is an actuarial tool, to better determine the appropriate threshold.  Aggregate Stop Loss  Coverage for total claim spend above a corridor (e.g. 125% over expected claims)
  • 30. 29 Individual/Specific Stop Loss  Protects from catastrophic large claims on an individual member basis.  Once claims for any covered member exceed the set threshold, all eligible claims over this amount during the policy period are reimbursed  Under the BlueKC Cost Plus Arrangement, customers benefit from improved cash flow, as BlueKC starts paying claims in excess of the specific deductible (vs. the client paying then getting reimbursed) $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Claimant A Claimant B Claimant C Claimant D Claimant E Specific Deductible
  • 31. 30 Aggregate Stop Loss  Protects from abnormally high claims for the entire covered population  BlueKC sets Aggregate/Maximum Claim Factors; if claims for the policy period exceed these, the Employer would be reimbursed the excess. $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
  • 32. 31 Stop Loss Analysis Benchmark Data Percentage of Employers carrying Stop Loss Covered Employees 500-999 1,000-4,999 5,000-9,999 10,000-19,999 20,000+ With Stop Loss 95% 90% 74% 60% 33% Without Stop Loss 5% 10% 26% 40% 67% Source: 2012 Mercer Study Of those Employers with Stop Loss, Percentage with Specific, Aggregate or Both Covered Employees 500-999 1,000-4,999 5,000-9,999 10,000-19,999 20,000+ Specific Only 28% 40% 53% 60% 64% Aggregate Only 16% 13% 9% 10% 11% Specific & Aggregate 56% 47% 38% 30% 25% Median Specific Loss Deductible Covered Employees 500-999 1,000-4,999 5,000-9,999 10,000-19,999 20,000+ Specific Stop Loss Deductible $150,000 $225,000 $300,000 $400,000 $400,000
  • 33. 32 Our Mission To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management Our Goal To be the best place to do business and to work This document contains the proprietary work product of Lockton Companies and is provided on a confidential basis. Any reproduction, disclosure or distribution to any third party without first securing written permission from Lockton Companies is expressly prohibited. www.lockton.com © 2014 Lockton, Inc. All rights reserved. Images © 2014 Thinkstock. All rights reserved.

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