1. 2003 Open Enrollment Benefits Presentation Presented By: Mark G. Cauthen Effective: 1/1/2003

2. Topics of Discussion n Self Insured Plan n Overview of the Trust Fund n Factors Driving Increase in Cost of Health Care n 2003 Plan Changes u Private Health Care Systems (PHCS) n 2003 Rate Adjustments

3. What does it mean to be Self-Insured? n The employer assumes the role of the insurance company and assumes all of the risk.

4. Overview of the Trust Fund n Joint fund between City and Colorado Springs Utilities (CSU) Where all of the premiums go n Where claims are paid from (similar to a checking account) n We need to bring in more revenue than what is spent on claims n Projected 2002 expenditures (City/CSU) u Medical: $16 million u Pharmacy: $3.8 million u Dental: $2.8 million

5. How is the Trust Fund Kept Viable? n Premium Rate Increases n Cost Sharing with Employees n Vendor Management u Audited Walgreen's F As a result, we are renegotiating for better rates u Performed a Medicare Audit u Collected funds from Memorial Hospital as a result of the Medicare Audit

6. Factors Driving Rising Costs in Healthcare Premiums (2001-2002) n Nationally u Litigation and Risk Management -- 7% u Fraud and Abuse -- 5% u General Inflation (CPI) -- 18% u Increased Consumer Demand -- 15% u Rising Provider Expenses -- 18% u Legislation/Regulations -- 15% u Rx, Medical Technology -- 22% Source: PricewaterhouseCoopers analysis, April 2002

7. Factors Driving Increase in Cost for City n Increasing Medical costs n Increase in our Claims Experience n Low Reserve Level because of Several Catastrophic Claims n Projected increase in cost of claims for 2003

8. 2003 Rate Increases n State Employees -- 39% n National -- 25% n City -- 14.3%

9. 2003 Plan Changes n Plans Affected: u Medical u Pharmacy u Dental u Vision

10. Medical Plans n We will have 3 Medical Plans Next Year u EPO u EPO Mid-Level u CORE n The Swing Plan will be Eliminated u There will be a new out-of-network option available under the EPO Mid-Level Plan

11. Terms n Out-of-Pocket Maximums u The maximum amount that you will spend annually for covered expenses, does not include co-pays. u After the out-of-pocket maximum is reached, the plan pays 100% for covered services n Annual Deductible u The amount that must be paid by the member before the plan pays anything n Co-Insurance u The portion of Eligible Medical Expenses for which the Covered individual has financial responsibility

12. Hospital Pre-Admission Diagnostic Testing n Subject to the Inpatient Hospital diagnostic coinsurance n EPO--Plan pays 90%, Employee pays10% up to the out-of-pocket maximum n EPO Mid-Level (In-Network)--Plan pays 80%, Employee pays 20% up to the out-of-pocket maximum n EPO Mid-Level [Out-of-Network] and CORE u Subject to deductible and co-insurance

13. EPO: Plan Change n Out-of-Pocket Maximums u 2003 F $750 per Individual per year F $2,250 per Family per year u 2002 F Individual -- $500 F Family-- $1,500

14. EPO: Plan Change n In-patient Hospital Stays u 2003 F 10% Co-insurance (applies to the out- of-pocket maximum) u 2002 F $100 co-pay per day of confinement, $500 maximum

15. EPO: Plan Change n Pharmacy Benefit u Increase to Maximum Co-Pay on Brand Named Prescriptions only F Retail: From $35.00 to $50.00 per RX (30 day supply) F Mail: From $40 to $60 for a 90 day supply F Generic Pricing Stays the Same

16. EPO Mid-Level: Plan Change n Plan Enhancement u Two Features: In and Out-of-Network Options (Replaces Swing Option) u In-Network option continues to function as it does today in that you have to use MHMN. u Out-of-Network: Separate Benefit Schedule, deductible, and coinsurance

17. EPO Mid-Level: Plan Change Annual Deductible u Out-of-Network: F $1,000 per individual F $2,000 maximum for a family u Plan pays 70% for most services after the annual deductible is met u Plan pays 100% for eligible medical expenses once the out-of-pocket maximum is reached u In-Network: F No Annual Deductible

18. EPO Mid-Level: Plan Change Out-of-Pocket Maximums u In Network F Individual--$1,000 F Family--$3,000 u 2002 F Individual--$750 F Family--$2,250

19. EPO Mid-Level: Plan Change Out-of-Pocket Maximums u Out-of-Network F Individual--$3,250 F Family--$9,750 F These amounts are above the deductible F Plan pays 100% for covered services after out-of-pocket maximum is reached

20. EPO Mid-Level: Plan Change n Inpatient Hospital Stays u 2003 F In-Network 20% Co-insurance (applies to the out-of- pocket maximum) F Out-Of-Network 30% Co-insurance (applies to out-of- network out-of-pocket maximum u 2002 $300 co-pay per day of confinement, $750 maximum

21. EPO Mid-Level: Plan Change n Pharmacy Benefit u Increase to Maximum Co-Pay on Brand Named Prescriptions only u Retail: From $35.00 to $60.00 per RX [30 day supply] u Mail: From $40 to $75 for a 90 day supply

22. Swing Medical Plan n Will be discontinued in 2003 u Enhancement of EPO Mid-Level Plan F Features an out-of-network benefit option

23. Core Medical: Plan Change n Out-of-Pocket Maximums u 2003 F Increased to $7,750 per individual u 2002 F $7500 per individual

24. Core Medical: n Annual Deductible u $1,500 per individual per year, no family limitation u No change from 2002

25. Private Healthcare Systems (PHCS) n New Option for 2003 u PHCS F New Wrap Around Network F Nearly 370,000 providers and 3,500 facilities F We have Pre-Negotiated Network Discounts u Eligibility F Members who are enrolled in a City Medical Plan (EPO, EPO Mid-Level, or CORE) can take advantage of the PHCS in Certain Circumstances

26. Private Healthcare Systems (PHCS) n National Network u Enables members to choose providers from within a national network n In-Network Benefit u All plan participants receive the in-network benefit for emergency situations n Discounts u All emergency situations, all plans u EPO Mid-Level plan participants who use the out- of-network benefit and use PHCS services

27. EPO Participants - PHCS n Can only be used for out-of-area emergency situations u As defined in the Medical Summary Plan Description (SPD) n Non Emergency out-of-area services will not be paid by the plan

28. EPO Mid-Level Participants - PHCS n PHCS enables EPO Mid-Level out-of- network participants to take advantage of discounts u Emergency and Non-Emergency situations

29. Core Participants - PHCS n PHCS enables CORE indemnity plan to take advantage of discounts

30. New Generic Medical Cards n To be distributed by January 1, 2003 n Will include PHCS information

31. Alternative Medicine n Pilot Program for 2003 n Applies to all Medical Plans n No additional premium n Must be enrolled in a medical plan n New Option for 2003

32. Alternative Medicine n Services must be provided by a licensed provider n Covers: u Acupuncture u Nutritionist u Chiropractic u Massage therapy u Homeopathic Services

33. Alternative Medicine n All plans pay 50% of each claim n Maximum amount paid by plan is $300 per family n 50% co-insurance does not apply to the plans out-of-pocket maximum or deductible

34. Dental Plans n Delta Hi-Option DPO Dental Plan u Formerly Delta Premier Dental Plan (Springs Dental) u Enhanced by including the DPO provider Network u When DPO provider is used, employee and plan receive discounts u DPO Providers will be shown in Red Lettering in the provider directory

35. Dental Plans n Delta Standard-Option DPO Dental Plan u Formerly Delta Preferred DPO Dental Plan u No change in deductible (In or Out-of- Network) F $50 per individual F $150 per family u DPO Providers will be shown in Red Lettering in the provider directory

36. Dental Plans - Calendar Year Deductibles n Delta Hi-Option DPO Dental Plan u $50 Per Individual u $100 Family n Delta Standard-Option DPO Dental Plan u $50 Per Individual u $150 Per Family n Core Dental u $75 Per Individual

37. Vision n Benefit Enhancement u Frames: In-Network Frame allowance increased to $130 retail ($50 Wholesale) n Service Enhancements u Contact Lenses: F Member Preferred Pricing F Direct delivery to your home F Other Incentives u Contact VSP at 1-800-877-7195 to learn more

38. Rate Increases n Medical u Prescription (RX) n Dental

39. Funding the Medical Plan n Due to an increase in medical plan costs and increased claims experience, there will be a 14.3% increase in overall funding for 2003

40. Rate Re-Structuring n The rate structure was realigned to more accurately reflect the claims experience and industry standards. n Creates greater equity for the participants

41. Rate Re-Structuring

42. Dental n Rate increase of 13.1%

43. Vision u Rate Increase is zero

44. After Hours Clinic n Effective Sept 30, Memorial Hospital After- Hours Clinic Moved n Location: 2502 E. Pikes Peak Ave (North side of building) n Open 7 days a week: 11 a.m. to 11 p.m. n Closed Holidays n Phone: 365-2888 n Call ahead to decrease waiting time

45. Benefit Enhancement Recap u Medical F PHCS Wrap Around Network F EPO Mid-Level, Out-of-Network Option F Alternative Medicine u Dental F DPO Provider Network Discount Added to Delta Hi-Option DPO Dental Plan u Vision F Frame Allowance Increase

46. Questions n Benefits Line: 385-5904, Press 2 at the Prompt.