1. City of Phoenix Health Plans: Costs, Levers and Next Steps Cindy Bezaury City of Phoenix

2. BACKGROUND City healthcare costs have increased by $58 million over 10 years, from $95M to $153M Cadillac Tax in 2018 $11 million additional cost by 2022 Other fees and compliance costs increasing City Health Care Task force focused on options for retirees and active employees Retiree major change occurring in 2016 2

3. RETIREES Retirees pay 100% of premium costs City subsidizes retiree healthcare in two ways: –MERP or PEHP MERP is a benefit negotiated for some employees; City pays between $117 and $302 per month, depending on service and category PEHP is an investment account; newer employees receive $150 for each month they are enrolled in the health plan; at retirement, the fund balance can be used for qualified medical expenses –Qualified City Contribution $90 to $375 per month $6.2 million annual cost to the City 3

4. *Does not include the value of the City Qualified Contribution, MERP, or PEHP account balances. 4

5. 12 34 Shift Costs Higher Deductibles Copays Coinsurance Reduced Benefits Network Options Narrow Network Providers Eliminate HMO Alternative Strategies Cost Containment / Service Direction Accountable Care Organizations (ACOs) Dependent Eligibility Audit Marketplace Solutions Lower costs through private marketplace solutions LEVERS 5

6. RETIREES – INSURANCE OPTIONS 3 Marketplace Solutions Health Care Marketplace Immediately lower prices for retirees Retirees agreed to move Engage through expanded Open Enrollment and Communication program 6 Towers Watson approved as vendor for Private Retiree Health Care Marketplace and management of Health Reimbursement Accounts. 450 client organizations on their platform, OneExchange, with 62 public sector 1.1 million retirees using the exchange $400,000 cost for first year, $250K each year after Paid using savings from City Qualified Contribution

7. 7 SAMPLE RETIREES – CHOICES PSPRS COPERS Today BCBS/Cigna Premium Cost – MERP/PEHP + City Qualified Contribution + PSPRS Subsidy 2016 State Plan Costs – MERP/PEHP + PSPRS Subsidy Marketplace* - MERP or Federal Subsidy (for pre-Medicare) *Marketplace will provide access to a variety of plans and plan choices, so retirees can select the plan that is right for them. Today BCBS/Cigna Premium Cost – MERP/PEHP + City Qualified Contribution 2016 Marketplace* - MERP/PEHP or Federal Subsidy (for pre-Medicare)

8. RETIREE COSTS 8 EE EEEEE

9. LONG TERM STEPS/STUDY – 2017 Health Care Task Force will continue to examine options Update on these potential solutions Fall 2015 through Spring 2016 Action will be needed by July 2016 Health Care Task Force Discussions 2 3 9