PEB and K-12 Baseline

Presented byTim BarclayPrincipal & Consulting Actuary

October 5, 2011

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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

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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

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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

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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

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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

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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

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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