O-2006-2781-C Passed - original 2004

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Retiree (Over/Under 65) Calculation t Retiree Cost Exhibit V To further refine plan contributions by capturing active versus retiree healthcare costs, Humana was asked to retrospectively abstract plan participants into three classifications (actives, retirees over 65 and retirees under 65). This report was made available last week and includes retrospective capture of claims by these three groups. What we have learned is as follows for the experience period 3/2005 to 312006. Units Members Claims $ Cost PMPM Active 326 849 $2,414,610 $237.00 Retiree Under 65 30 62 $286,709 $385.36 Retiree over 65 18 33 $ 79,004 $199.50 374 944 $2,780,323 $245.43 *Keep in mind that the membership has increased during the year. Actual cost PMPM as shown here reflects the entire year. (Members include employees and individual dependents; these are actual persons in the plan). This exercise leads to a discussion of how retiree versus active rates should be calculated. In the past, the claims experience for the entire group was the basis for calculation. With one years data now captured, it is feasible to set separate rates for each category. We can project rates based on the cost PMPM using a simple multiple or load factor. The more difficult task is to project what the effect of that type of premium change would have on participation. With the advent of GASB-45 it is reasonable to assume that the actuarial study will focus on the actual health cost of the retiree population and how that cost is projected on a downstream (future) basis. (GASB-45 actuarial services proposal will be provided to Cynthia in the first week of April). If we are to review the above PMPM cost and project premiums for retirees in an exact multiple of active cost the factors would be: Active = X Retiree under 65 = X + 63% Retiree over 65 = X - 16% Since the City can utilize actual retiree cost as a basis for calculating retiree rates, it is therefore reasonable to propose the following illustrations (Exhibit 5). A fixed expense load for administration and stop loss of $30.72 will be added to each rate. Exhibit 6 is the retiree claims and participation data from Humana. 10 tHRH . hilb rogal &. hobbs"