2014 FLEX BENEFITS PLAN

DESIGN

Status of Flex Plan Expenditures,

2014 Plan Design Options, and

Flex Contract RFP & Renewals

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May 2013

Personnel Department – Employee Benefits Division

Key Topics

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∗ Overview of Flex Plan Benefits Costs and Expenditure Projections

∗ Review of Prior Plan Design Changes & Actions to Mitigate Flex Cost Increases

∗ Benchmarking Data

∗ Timeline for 2013 Flex Plan Activities

∗ Discussion of 2014 Plan Design Strategy, Options, and Decisions

Number of Lives Covered

•Number of Employees

•Number of Dependents (Tier Level)

Premium Rates (Price)

•Member utilization of plan

•Member demographics

•Benefit Plan Design

•Carrier Contracting/Pricing

City Subsidy Amount

($)

•The dollar amount provided to employees to cover the cost of insurance coverage.

•This amount is called a City “subsidy” and its codified in MOU or LAAC provisions.

Breakdown of Cost Drivers

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Benefit Cost

Flex Plan Premium Costs PY 2013

4

5

Profile Medical Plan Enrollment

Enrollment Breakdown:

Employees 24,682 41%

Dependents 34,842 59%

Total Covered Lives: 59,524 100%

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Profile Dental Plan Enrollment

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Flex Benefit Expenditure Per Employee

Projected costs assumes -1% employment growth. Average cost includes all Flex Benefits (health, dental, disability, and life) and Proprietary Departments.

$7,024 $7,574

$8,188 $8,593 $9,094

$9,867 $9,969 $10,649

$11,539 $12,494

$13,643

$14,836

$16,040

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

FY 0

5/0

6

FY 0

6/0

7

FY 0

7/0

8

FY 0

8/0

9

FY 0

9/1

0

FY 1

0/1

1

FY 1

1/12

FY 1

2/13

(C

)

FY 1

3/14

(P

)

FY 1

4/1

5 (P

)

FY 1

5/16

(P

)

FY 1

6/1

7 (P

)

FY 1

7/18

(P

)

Civilian Flex Average Cost Per Employee

Flex Benefit Expenditure Per Employee Detail

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Projections as of May 22, 2013. Projections vary depending on changes in enrollment, final premium rates, proprietary department and reimbursement rates.

Fiscal YearTotal Flex Costs

(Includes Prop. Depts) EnrollmentAverage FY Per Member Cost PEPFY Growth %

FY 05/06 $ 189,766,905 27,018 $ 7,024

FY 06/07 $ 215,076,770 28,397 $ 7,574 7.8%

FY 07/08 $ 240,548,196 29,377 $ 8,188 8.1%

FY 08/09 $ 253,404,124 29,491 $ 8,593 4.9%

FY 09/10 $ 259,932,657 28,584 $ 9,094 5.8%

FY 10/11 $ 256,673,296 26,013 $ 9,867 8.5%

FY 11/12 $ 254,393,241 25,519 $ 9,969 1.0%

FY 12/13 (C) $ 265,105,523 24,894 $ 10,649 6.8%

FY 13/14 (P) $ 282,756,287 24,503 $ 11,539 8.4%

FY 14/15 (P) $ 303,086,807 24,258 $ 12,494 8.3%

FY 15/16 (P) $ 327,644,931 24,016 $ 13,643 9.2%

FY 16/17 (P) $ 352,740,537 23,776 $ 14,836 8.7%

FY 17/18 (P) $ 377,557,000 23,538 $ 16,040 8.1%

FY 18/19 (P) $ 402,961,310 23,303 $ 17,293 7.8%

Overview of Flex Expenditure Projections

General Fund (excludes Proprietary Departments)

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Projected costs for FY 14 to FY 17 assumes -1% employment growth.

Review of Prior Plan Design Changes & Actions to Mitigate Flex Cost Increases

(slides 10, 11 & 12)

10Savings estimate includes Proprietary Departments.

Plan Year 2011

January 1, 2011Estimated Savings

(12 months)

Implemented Health Care Reform Changes (increased adult child eligibly, $0 copay for preventative care, & eliminated lifetime maximum limit).

$ 0.53

Consolidated Life and Disability Insurance with single provider $ (1.95)

Sub-Total Savings: $1.42 million

Mid Year Plan Changes (Effective July 1, 2011)Estimated Savings

(6 months)

Increase the Office Visit Copay - HMO to $15 and PPO to $30

Increase PPO Calendar Year Deductible by $250 / individual and $500 / family

Increase ER Copay to $100 for all plans

Increase prescription drug copays

Reduction in medical premium July - December: $ (4.42)

Capped City dental subsidy at 85% of the Dental PPO Employee Only level

Reduction in City contribution towards dental premium July - December $ (1.38)

Eliminated the $7.50 per pay period Flex Credit $ (1.96)

Sub-Total Savings: $7.76 million*

Total Savings Plan Year 2011: $9.18 million

Review of Prior Plan Design Changes & Actions to Mitigate Flex Cost Increases Cont.

11Savings estimate includes Proprietary Departments.

Plan Year 2012January 1, 2012 Estimated Savings

Reduced Dental PPO Plan reimbursement for certain procedures from 80% to 50%

$ (0.70)

Employee Benefits Trust Fund Transfer to General Fund $ (8.10)

Total Savings Plan Year 2012: $8.8 million

Review of Prior Plan Design Changes & Actions to Mitigate Flex Cost Increases Cont.

12Savings estimate includes Proprietary Departments.

Plan Year 2013January 1, 2013 Estimated Savings

Employee Benefits Trust Fund Transfer to General Fund $ (5.0)

Implement Blue Cross Select Network $ (7.1)

Medical Plan Provider Rate Reduction $ (0.8)

Freeze Disability Cap $ (0.1)

Dependent Audit $ 0.25

Total Savings Plan Year 2013: $ 12.75 million

TOTAL SAVINGS PY 2011, 2012 & 2013 $30.7 MILLION

Benchmarking Data

Staff and Mercer Consulting will provide the JLMBC with various benchmarking data during the process. The following items are included in the JLMBC materials:

∗ Flex medical plan type enrollment by bargaining unit

∗ Anthem and Kaiser Family Rate Premiums 1997-2013

∗ Mercer Benefit Benchmarking City of Los Angeles to Other Public Entities – HMO and PPO Plan Copays & Deductibles

∗ Mercer 2012 National Survey of Employer-Sponsored Health Plans

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Timeline for 2013 Flex Plan Activities

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Key Milestones for 2013 Plan Year

Target Date Action Items

February Medical RFP Issued

April Non-Staff Model RFP Responses Received

May Staff Model RFP Response Received

June 6, 2013 Mercer and Staff present renewal recommendations to the JLMBC

June 11 and 13JLMBC makes final 2012 renewal recommendations and plan design changes

JunePersonnel Department submits Medical Provider recommendation to Mayor

June City Council considers JLMBC recommendations for the 2013 Flex Plan Design

June Staff Starts Open Enrollment Project including implementation of Health Care Reform requirements

June Contract Negotiations and Implementation Plan Developed

July Staff and TPA Coordinate Systems Set Up with New Rates

August Staff presents the 2012 Open Enrollment Campaign to the JLMBC

September 2012 Plan Design and Flex benefits are communicated to employees

October 1st Open Enrollment Month

November / December Enrollment Process and Coordination

January 1st 2014 Plan Year Begins

∗ Flex Medical Plans – HMO and PPO Options

∗ Flex Plan Design Changes Copays & Deductibles

∗ Default Medical Plan – Change to Lowest Cost HMO Plan

∗ Alternative Network Options

∗ Freeze the basic disability maximum benefit cap to $3,014 per month

∗ Wellness Program

∗ Dependent Audit

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Discussion of 2014 Plan Design Options, Strategies and Decision Points

∗ Recommendation(s) on medical plan carrier selection

∗ Contract Renewal for Other Flex Carriers

∗ Flex Plan Design

∗ Employee Benefit Trust Fund

JLMBC Decisions for PY 2014

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