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2014 Renewal Proposal – Standard Insurance

Standard 2014 Renewal – proposed for the 1/1/2014 – 12/31/2015 period: • Basic life (non-judicial): 0% increase

• Basic life (judicial): 0% increase
• Optional life insurance (member, spouse, dependents): 0% increase • Retiree life: 0% increase

• Voluntary AD&D: 0% increase
• Short term disability: 17% increase • Long term disability: 8.2% increase

MERCER

April 12, 2013

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2014 Renewal Proposal – Standard Insurance (cont.)
STD
• In 2012, PEBB implemented a change required by the Department of Justice that employees are not required to use all sick leave before the STD benefit pays. Employees may still choose to use sick leave first but will not be required to do so. Increase in costs (0.05%) is being paid from the Premium Deposit Account (PDA) • Calculated experience rate for the most recent 2 years is 0.734%, Standard is requesting a rate of 0.69% • Rate history 2008 0.57% 2009 0.57% 2010 0.54% 2011 0.57% 2012 0.59% 2013 0.59%

2014-2015 Proposed 0.69%

Increase 17%

• Increase in retention as a % of Premium – General expenses increased from 3.6% to 4.0% – Claims administration increase from 6.1% to 8.6% – Risk charges increased from 1.0% to 2.0%

MERCER

April 12, 2013

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2014 Renewal Proposal – Standard Insurance (cont.)
STD Paid Claims & Loss Ratios
$8,000,000 $7,000,000 $6,000,000 120%

100%

Paid claims

$5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2008 2009 2010 Plan Years Paid Claims Loss ratio 2011 2012

80%

60%

40%

20%

0%

MERCER

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2014 Renewal Proposal – Standard Insurance (cont.)
• PEBB currently has a PDA balance with Standard generated from previous surplus premiums paid for the STD, LTD and optional life coverages. A summary of the current PDA and impact of funding the STD plan change follows:
PDA Balance as of 12/31/12 Projected 2013 Withdrawals (0.05% of insured earnings) Projected PDA balance as of 1/1/14 Renewal Options Employee Rate (currently 0.54%) Withdrawal from PDA (currently 0.05%) 2014 Projected Withdrawal Projected PDA balance as of 12/31/14 2015 Projected Withdrawal $4,371.373 ($634,820) $3,736.553 1 0.59% 0.10% $1,269,639 $2,466,914 $1,269,639 2 0.64% 0.05% $634,820 $3,101,734 $634,820

Projected PDA balance as of 12/31/15 (subject to final accounting for STD/LTD/optional life coverages (1/1/14 – 12/31/15)

$1,197,275

$2,466,914

• PDA is cash balance held by Standard to be used at PEBB’s discretion. Implications of “buying” down the rates are that the funds are not available for future use and employees would potentially experience a larger one time rate increase at a later date.
MERCER April 12, 2013

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2014 Renewal Proposal – Standard Insurance (cont.)
LTD
• Rate history
2008 Plan 1
60% benefit, 90-day BWP

2009 0.54% 0.20% 0.99% 0.30%

2010 0.46% 0.18% 0.99% 0.25%

2011 0.46% 0.18% 0.99% 0.25%

2012 0.46% 0.18% 0.99% 0.25%

2013 0.46% 0.18% 0.99% 0.25%

2014-2015 Proposed 0.51% 0.18% 1.06% 0.27%

Increase 10.9% 0.0% 7.1% 8.0%

0.54% 0.20% 0.99% 0.30%

Plan 2
60% benefit, 180-day BWP

Plan 3
66% benefit, 90-day BWP

Plan 4
60% benefit, 180-day BWP

• Increase in retention as a % of Premium – General expenses increased from 3.5% to 7.7% – Claims administration increase from 6.9% to 8.5% – Risk charges increased from 2.0% to 3.0% • Standard initially requested a 15% increase in LTD rates. Agreed to lower the overall increase to 8.2% because of the remaining Claim Fluctuation Reserve (CFR) account. – Standard uses the CFR to cover deficits created by plan experience. As the CFR is drawn down the protection against bad experience is depleted and will likely require Standard to increase risk charges at future renewals (should claims experience not improve) – Potential implication is a larger rate increase at future renewals
MERCER April 12, 2013

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2014 Renewal Proposal – Standard Insurance (cont.)
Paid Claims & Loss Ratios (Incurred Basis)
$10,000,000 $9,000,000 $8,000,000 $7,000,000 100% 80% 60% 40% 20% 0% 2008 2009 2010 Plan Years Paid Claims Loss ratio 2011 2012 140% 120%

Paid claims

$6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0

MERCER

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