2006 Retiree MIP Overview

1
2006 Retiree MIPOverview

• October 2006
• Rajiv Nundy Kent Humphries
• HR Compensation Management

2
Agenda

• Retiree Medical Insurance Program Key features
  and recent changes
• Recent Retiree MIP financial status
• Prescription Program
• Cost of the Rx program
• Medicare Part D

3
Retiree MIP Key Features

• The Retiree MIP is a self insured program which
  provides comprehensive medical, dental and
  prescription coverage
• Funding is shared between the Bank and retirees
  you pay 25 of contributions but close to 40
  overall when including deductibles, coinsurance
  and co-payments.
• The Retiree MIP is a PPO Preferred Provider
  Option type of plan. If you choose an
  in-network medical or dental provider, you will
  have lower out of pocket costs and the Plan will
  also benefit from savings
• The Retiree MIP is a self-insured program Aetna,
  Van Breda and Pharmacare are administrators
  they are required to process claims in accordance
  with the MIP Plan design. The contract is
  designed with financial incentives to encourage
  administrators to pay claims promptly and
  accurately
• If you have a permanent non US address you also
  have a choice, once per year in December, to
  choose between Aetna and Van Breda as your
  administrator. The Plan design is essentially
  the same, but network savings are higher with
  Aetna if most of your medical treatment takes
  place in the US

4
Retiree MIP - recent changes

• Recent Changes
• Increased overall contributions May 1, 2006
  10.8 (third increase in three years in
  aggregate 30 increase)
• Implemented three tier premium based on Single,
  Dual and Family coverage - (600 plus family
  coverages )
• Last increase in deductible and co-pay was Jan 1,
  2003
• Effective Jan 1, 2007 increase deductibles 50
  for Medical Dental and Rx
• Increase out-of-pocket 250 for Medical and Rx
• History of Changes since 1991
• Average annual rate increase of 5.2 over the
  period 1991- 2007 and 7.7 over the more recent
  period 2000-2005

5
Medical, Dental and Prescription costs
6
Summary of recent financial

• Most of this increase is due to
• increased utilization
• Increase in number of hospital admissions,
  inpatient surgeries and ER visits
• Increase in average length of hospital stay
• Increase in catastrophic claims ( over 50,000
  from 24 to 40 claimants in 2005)
• price increase
• Lower in-network hospital discounts
• cost shifting to plan lower out-of-pocket costs
  to retirees
• partially offset with increase in network usage
  and increased Medicare COB savings

7
Prescription Program
8
Prescription Cost and Utilization Statistics
9
Medicare Part D

• Medicare Part D was introduced in Jan 2006 you
  were advised not to enroll
• The Banks Plan is deemed Actuarially Equivalent
  and therefore qualifies for subsidy for those
  Medicare eligible participant who do not enroll
  in Part D subsidy is estimated at approximately
  of 600 per enrollee in 2006 total subsidy is
  projected at over 1.2 million annually in 2006
• subsidy is calculated at 28 of the eligible
  charges between 250 and 5,000, so the maximum
  subsidy is capped at 1,330 per enrollee
• The subsidy will be credited to the RMIP and
  would therefore benefit both retirees and the
  Bank under the existing cost sharing arrangement
  of Retiree and Bank of 25 and 75 respectively
• RMIP members will receive a letter from the Bank
  confirming that the RMIP provides Creditable
  Coverage no later than November 15, 2006. This
  will be provided each year no later than end of
  November
• If you lose RMIP coverage, because you elect to
  end your RMIP coverage, or because you cease to
  be eligible for it ( e.g. if you divorce a Bank
  Group retiree), then you may be able to enroll in
  Medicare D later. The letter of Creditable
  Coverage from the Banks MIP will confirm that
  you had prior RMIP coverage and this will avoid
  you paying a Medicare D premium penalty in the
  future.

10
Medicare Part D vs Retiree MIP Rx
Benefits

• MEDICARE
• Deductible 250
• Medicare pays 75 for claims between 250 and
  2,250
• Medicare pays 0 for claims between 2,250 and
  5,100
• Maximum Annual Deductible and Copay is 3,600 (
  True out-of-pocket)
• Catastrophic coverage begins after 5100 of
  annual expenses submitted Medicare pays 95
  thereafter
• Premium is 420 per participant per year

• Retiree MIP
• Deductible of 50, increase to 100 in 2007
• Brand co-pay is 20 Preferred and 30
  non-Preferred and Generic co-pay is 0
• Maximum annual Out-of-pocket Deductible and Copay
  for Individual is 1,000, increase to 1,250
• Catastrophic coverage begins after approximately
  4,800 (increase to 5,850)of annual expenses
  submitted Bank pays 100 thereafter
• Premium is 25 of annual cost approx. 320 per
  year