IMPACT OF SECTION 18 for CITY OF SPRINGFIELD AND CITY RETIREES

1. IMPACT OF SECTION 18 for CITY OF SPRINGFIELD AND CITY RETIREES January 31, 2005

2. What is Section 18? Section 18 of MGL Chapter 32b requires that: • All retirees who are eligible for Medicare must enroll in Medicare Part B. • The City must provide Medicare extension plans. • The city must, by law, pay all penalties associated with late enrollments in Medicare.

3. Why Did the Control Board Adopt Section 18? • Medicare eligible individuals have already paid into the Medicare system, but are not receiving any benefits. • Adoption of Section 18 transfers up to 80% of eligible expenses from the City plan to the Federal Government. • Everyone benefits from accessing the Medicare reimbursements – the plan, the City, the employees and the retirees.

4. Retiree Impact – No Change in Coverage • Coverage after the adoption of Section 18 will be identical to that of active employees. • The difference will be who pays the claims

5. The City Will Save Millions • $5.3 million reduction in health care costs for FY2006 • $18.7 million reduction in health care costs over the next 3 fiscal years. Failure to adopt Section 18 would have increased health care costs by $18.7 million dollars over the next 3 fiscal years.

6. Impact to Retirees • Retirees’ share of reduced costs is significant. - $2.4 million in FY2006 - $2.7 million in FY2007 - $3.1 million in FY2008 • $8.2 million in reduced costs over 3 years. • This reduction will be applied directly to the Retirees’ contributions to the City health plan to keep them whole.

7. Over 500 Retirees Who Already Have Medicare B Will Save Money Every Month Estimates are based on projected PPO rates for FY2006 & new Medicare rates effective January 1, 2005.

8. Retirees who enroll in Medicare B WillContinue to Pay the Same Monthly Cost Estimates are based on projected PPO rates for FY2006 & new Medicare rates effective January 1, 2005.