Offer of Services

Subsidy v. Wraparound Risk Analysis

1. This document notifies all self-funded health care plan practitioners of tho services now offered by Self-Funding actuarial Services, Inc. with regards Subsidy Election. A companion offer to available for Creditable Service.

2. The reader is invited to visit www.rxplanning.com which Web Site is devoted to assisting practitioners. and their clients in using these new Medicare benefits in a useful and proper way.

Step 1

The named Entity sends to Self-Funding Actuarial Services, Inc., the following items:

· . Options Checklist (EXHIBIT A)

· Required Data

Such data will be in either of two formats:

Acceptable .

For a recent plan experience period of nine months or more, show the following for retired covered persons who are over 65:

· Individuals (Number) _________________________

· Covered Spouses (Number) ____________________

· Rx Claims for al1 such persona showing both

Submitted ___________________________*

Paid ________________________________

· Desirable, but not mandatory

Preferred

For each covered person who is retired (i.e., not actually working) and over ago 65, such required data includes:

· Name - - -

· SS Number

· Age

· Sex

· Participant or Spouse .

· Eligibility Code

· Rx Claims paid during experience period of __________ to __________

· Number ______________

General information - description of Plan Rx benefits; prior year’s Rx claims experience (claims and census) for covered persons over age 65.

Step 2

Self-Funding Actuarial Services, Inc. returns by e-mail or otherwise the attached Risk Analysis.

3. The fees are as follows:

$1,000 for each Analysis.

EXHIBIT A

Options Checklist for

Subsidy v. Wraparound Risk Analysis

For retirees over age 65, the Plan Sponsor may consider the subsidy or the wraparound on a covered person-selective basis if the basic plan Rx benefit when compared with Medicare Part D meets both the gross and the net tests. See Test A and Test B.

A Test A - Gross and Net Tests are both not met

Stop. Subsldy is not an option.

B. Test B - Gross and Net tests are both met

Proceed, Subsidy is an option, Plan must be amended giving Plan sponsor the option of using Medicare as a means of funding Plan Rx Benefits (with Covered Person's consent) and the Medicare Part D Premiums paid by the Plan Sponsor.

Using the risk management work product, the Plan Sponsor has three options:

1. Option -1

Elect Medicare Part D for all Covered Persons.

2. Option -2

Elect the subsidy for all Covered Persons.

3. Option - 3.

selectively elect either tbe Medicare part D or the subsidy to maximize the Plan Sponsor's financial advantage.

Self-Funding Actuarial Services, Inc.
	8025 North Point Blvd., Suite 207W	Carlton Harker, FSA, MAAA
	Winston-Salem, NC 27106	Principal
	Tel. (336) 759-2035	www.self-fundhealth.com
	Fax (336) 896-0392
	e-mail: harker3@earthlink.net	www.ifebp.org/harker

TO:	TEST COMPANY TPA 123 MAIN STREET WINSTON-SALEM, NC 27106	FROM: Carlton Harker
		Date: 07/15/2005

RE:	Health Care Plan of ABC HZALTH CARE PLAN Subsidy v. Medicare Part D Risk Management Analysis and Supporting Actuarial Opinion; Year: 2005

The Actuarial Statement and Opinion sets forth the following:

· The subject health care plan meets both the gross and net tests required by the new Medicare Part D rules for retired lives over 65 and therefore qualifies for the subsidy provided therein.

· The risk management considerations used in determining whether of not the subject plan is primarylsubsidy waived) postsecondary (subsidy accepted) for particular covered persons are provided as part of the Statement and Opinion. See Conclusions.

The Statement and Opinion is in three parts:

· Provided Data

· Worksheet

· Conclusions.

While this statement is useful as a decision model for the subject calendar yearn the Plan Sponsor is free to modify the distribution of covered persons for primary or secondary status.

PROVIDED DATA

TO:	TEST COMPANY TPA 123 MAIN STREET WINSTON-SALEM, NC 27106	DATE: 07/15/2005	YEAR:2005
		ABC HEALTH CARE PLAN
		CODE: l

Rx Benefit Range	Assumed Midpoint	Frequency Number Retired Covered Persons	Projected Submitted Rx Claims
0- 250	125	20	2500
250-1400	825	16	13200
1400-2250	1825	15	27375
2250-3700	2975	25	74375
3700-5100	4400	14	61600
Over 5100	8000	10	80000

Rx Benefit Range	Factor g	CMS Frequency Distribution	CMS Paid Claims Distribution
0- 250	0.60	0.1549	0.01
250-1400	0.65	0.1680	0.05
1400-2250	0.70	0.1371	0.09
2250-3700	0.75	0.2507	0.27
3700-5100	0.80	0.1450	0.23
Over 5100	0.85	0.1443	0.35
		Medicare	Plan
Annualized Contribution		540 0	0

WORKSHEET

(A)	(B)	(C)	(D)	(E)	(F)	(G)	(H)
(1)*	0-250	250-1400	1400-2250	2250-3700	3700-5100	OVER5100	TOTAL
(2)	125	825	1825	2975	4400	8000	18150
(3)	20	16	15	25	14	10	100
(4)	2500	13200	27375	74375	61600	80000	259050
(5)	0	6900	17719	37500	21000	42550	125669
(6)	2500	6300	9656	36875	40600	37450	133381
(7)	10800	8640	8100	13500	7560	5400	54000
(8)	1500	8580	19163	55781	49280	68000	202304
(9)	1000	4620	8212	18594	12320	12000	56746
(10)	0	0	0	0	0	0	0
(11)	-10800	-1740	9619	24000	13440	37150	71669
(12)	0	9200	23625	68125	58100	48500	207550
(13)	0	2576	6615	19075	16268	13580	58114
(14)	12300	10320	9544	31781	35840	30850	130635
(15)	1500	6004	12548	36706	33012	54420	144190
(16)	1500	8580	19163	55781	49280	68000	202304

________________________________________________________________________

* ROW DESCRIPTIONS:

(1) Rx Benefit Range

(2) Assumed Midpoint

(3) Frequency

(4) Projected Submitted Rx Claims

(5) Medicare Part D - Benefits

(6) Medicare Part D - Beneficiary Copay

(7) Medicare Part D - Contribution

(8) Hea1th Care Plan - Benefits

(9) Hea1th Care Plan - Covered person Copay

(10) Health Care Plan - Contribution

(11) return on Medicare

(12) Subsidy Rx Claims

(13) Subsidy - Calculation

(14) Net Plan Rx Benefits - Medicare Offset

(15) Net Plan Rx Benefits Subsidy Elected

(16) Net Plan Rx Benefits Subsidy Waived

CONCLUSIONS

A. Subsidy-Related Tests
		Medicare Rx Benefits	Plan Benefits
	1. Projected gross Rx benefits	125669	202304
		Col H, Line 5	Col H, Line 8
	2. Annual Contribution	54000	0
		Col H, Line 7	Col H, Line 10
	3. Projected net Rx Benefits	71669	202304
		(1) - (2)	(1) - (2)
	Since Lines (1) and (2) Plan Benefits exceed Lines (1) and (2) for Medicare Rx benefits, the Gross and Net tests are both met.

B. Risk Management Considerations

The net projected plan Rx costs fqr retirees over age 65 are as follower based on four assumptions:

1. All covered persons elect Medicare Part D	130635
2. No covered person elects Medicare Part D; Subsidy is maximized	144190
3. Medicare Part D is elected for Cols D, E, G; Subsidy is elected for Cols .B,C, F	112691
4. Medicare Part D is elected for Cols D, E, F, G; Medicare Part D is waived for Cols B, C but Subsidy is not applied for	118095