2 New Capital Resources Remarkable Opportunity A Unique Advance Funding Model Providing Capital Resources & Stability Foundation for Healthcare Expense.

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New Capital Resources Remarkable Opportunity

A Unique Advance Funding Model

Providing Capital Resources & Stability

Foundation for Healthcare Expense & Risk Trend Reversal

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OGR Advanced Funding Model - History

Advance Funding Model

• Developed first in 1990’s as risk management program

• Included a funding transaction

Main purpose at that time:

1. Quantify a company’s future health care liability and financial risks

2. Pre-fund such liability for a 36 month term

3. Convert volatile and unknown variable future costs into a current fixed cost obligation

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OGR Advanced Funding Model - History

Most Important to Today:

• Original Model has proven successful

• All maintained “fully collateralized” conditions

• None of original trusts have had to “unwind”

Fast-Forward:

• Original architect Jeff Bemoras partners with PFR to expand on model and roll out the One Global Resources Model nationwide on large scale…

• PFR in-turn brings in ROI – Health Data Resources to ensure ALL Client data is collected and utilized to recover and conserve capital

• PFR brings in the “missing link” by partnering with LifeStrive®, enabling TrendShift® Data Directed Health Trend Management

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OGR Advanced Funding Model - TodayToday

Fast-Forward

Now Delivers Employers & Governments:

• Predictability / Monthly Identified Budget in a volatile cost environment• Savings related to the liquidity and its strength in negotiation with Fixed

Cost Providers. • Long Term Claims Management, Risk Trend reversal and associated cost

savings opportunity. • Reserve build-up for future buy-down of Health Care exposure beyond the

initial term. • Prepayment of future liability that may help to insulate Bond and/or Credit

Rating for client.

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Cash Out

Trust Agreement“Trust”

•All cash invested in accordance with established investment policy

•No cash disbursed for claim payments or administrative fees unless coverage ratio adequate

Debt Service

Claim Payments

AdministrativeFees

Cash ProceedsFrom Loan

Employer Monthly

RemittancePayments

Cash In

Interest Income

One Global Model-Cash Flow

Flow of Funds DiagramTrust Certificates

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“Cash Flow-Fully Insured”

$133,563,648.M

Employer’s ObligationRemittance = $3,816,867.34

Fixed for 36 Months

Grantor Trust

Issues Debt

Trust PaysPrincipal& Interest

FIXED Financing Rate1.85%

Gross Savings = $6,138,415.20Net Savings=$4,802,779.20

•Budgetability / Predictability•Stability•Negotiated Discounted Premium•Identified Savings

Day 1 Trust wires all funds to Carrier $133,563,648.M

ESCROW Account

Insurers Rate of Return2.25%

$4,544,459.00

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“Self Insured Case Example”

V = 85%FC = 15%R =

Employer’s ObligationRemittance = $1.9MFixed for 36 Months

95% Actuarial Confidence Level

$78.1MFIXED Financing Rate FIXED Investment Rate

• Budgetability / Predictability• Arbitrage (Investment Opportunity)• Balance Sheet implication-Footnoted on P & L

Fully Collateralized‘Aaa’ Rated Grantor Trust

P & I V

FC

Surplus = $6.9MYears 4-6Tax-Free

Rolling Reserve

Investment

Issues Debt

‘ALL-IN’ 3 YEAR COST

1.85% 2.25%

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Advanced Funding Elements

    Grantor Trust- Becomes the Obligor of the Debt, acts like a Single Purpose Entity established to isolate the client from financial risk.

Escrow Agreement- Established in conjunction with Fully Insured Transactions

Remittance Agreement- Client’s Obligation under the Trust are simply to remit once a month for 36 months...

Independent Trustee- established to manage disbursement of funds, and monitor sufficiency and investment criteria.

e.g. Joint Powers Authority, Wells Fargo Bank etc.

101% Cash Collateralized Equity to Debt Position -Trust is security for the Note. Funds inside the trust are always over cash collateralized.

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Employer’s Perspective

Employer Advantages

• Provides Longer Term Predictability

• 3 years of Fixed Premiums

• Establishes an Identified Long-term Budget

• Generates Cash Flow opportunities- Investment Arbitrage

• Establishes longer term focus on Cost Reduction, through Audit Profiles, and Data Directed Health Trend Management

• OPEB-GASB Implications - Reduces Possible ARC Payments

- Improvements in Bond ratings

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Carrier Perspective

Advantages for the Carrier

• 3 years premium funded in advance, day one - Fully Insured

• 3 year membership lockdown, per customer

• Increased persistency rates provide stability to block

• Eliminate marketing costs on renewals for 3 years

• Solidify relationships with broker/ consultants

• Marketing opportunity to gain significant new membership

• Reduced Actuarial and Underwriting Costs associated with constantly having to Re-Up the client

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“Data Needs”

Data Requirement

• All office locations

• SIC code

• 3 years premium history for medical/Rx (past 3 renewals)

• Census including: gender, DOB, coverage level

• Summary plan designs for last 3 years

• Indication of any major population shifts

• Projected trend for the next year

• Any large claims in excess of $20K

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“The Process”

Steps in the Process- Gathering Data (Phase 1)

Compilation three years of claims data

-Analysis and Assessment of Claims data (Phase 1)

Evaluating growth/trend

- Formal Presentation (Phase 1)

Presentation of the Funding Model and findings

- Evaluation of current data and Final presentation to client (Phase 2)

Taking into account all outstanding variables and current information

- Funding Process & Implementation (Phase 3)

Matching clients requirements with Funding and Investment criteria

- On Going Evaluation and reporting (Phase 3)

Healthcare Report card, analytics and sufficiency testing

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“Final Agreements”

Phase Process

- Phase 1 Gathering Data

This Phase allows us to collect data, evaluate claims and report back to the client

- Phase 2 Final Presentation

This Phase allows us to update information, pull together any outstanding variables and present to the client prior to funding

- Phase 3 Funding

This Phase allows our specialists to take the program to the financial markets for funding and implementation