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HomeMy WebLinkAbout12828 .:. , . 1 II, 1'1' !i 'i i! 'I II RESOLUTION NO. ~ II RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE EXECUTION OF AN AGREEMENT WITH ROBERT M. EPLER COMPANY, INC., RELATING TO AN INDEPTH STUDY OF THE UNDERWRITING PRACTICES, PRO- CEDURES AND FINANCIAL EXPERIENCE OF THE CITY'S GROUP LIFE AND HEALTH INSURANCE PROGRAMS. 2 3 4 5 6 7 8 9 BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1. The Mayor of the City of San Bernardino is authorized and directed to execute on behalf of said City an agreement with Robert M. Epler Company, Inc., relating to an 10 indepth study of the underwriting practices, procedures and 11 financial experience of the City's group life and health insurance 12 13 programs, a copy of which is attached hereto, marked Exhibit "V' and incorporated herein by reference as fully as though set forth 14 at length. 15 I HEREBY CERTIFY that the foregoing resolution was duly 16 17 18 cil of the City of San adopted by the Mayor meeting thereof, held Bernardino at a on the c:; Yi day of , 1977, by the following 19 vote, to wit: co~~~~<!;r;~=1::.L" 20 21 22 AYES: NAYS: 23 ABSENT: 24 25 26 27 28 . . . . . . . . . . , , is fa'!!.... day The foregoing resolution is hereby r"m. 1 2 of 3 4 5 6 7 i'O'2" to~ [I City ..~ 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -2- .. ., 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AGREEMENT --------- (employees' group insurance - survey) THIS AGREEMENT is made and entered into this /5dday of (l.b'Y7 " .... , 1977, by and between the CITY OF SAN BERNARDINO, a muMciPal corporation, hereinafter called "City", and ROBERT M. EPLER COMPANY, INC., a corporation, hereinafter called "Consultant. W !. T N E S ~ E T H: WHEREAS, COnsultant has submitted a proposal acceptable to the City which outlines cost savings which can be developed by an evaluation and analysis of the underwriting practices and pro- cedures of Standard Insurance Company of Oregon and Southern California Blue Cross, underwriters respectively, of the City's group life and health insurance programs. The Consultant is eminently well qualified and possesses all consulting and actuaria qualifications necessary to render the services desired by City; and WHEREAS, City desires to retain the services of Consultant to conduct an indepth study of the underwriting practices, pro- cedures and financial experience of the City's group life and health insurance programs as underwritten by Standard Insurance Company of Oregon and Southern California Blue Cross to determine the maximum amount of cost savings which can be achieved by implementing improved underwriting procedures; and WHEREAS, Consultant is ready, willing and able to serve City on the terms and conditions set forth in its proposal and this agreement, NOW, THEREFORE, in consideration of the mutual promises and obligations of the parties as herein expressed, City and ~ . " 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Consultant agree as follows: 1. Employment of COnsultant. City hereby agrees to employ I Consultant to perform all of the services set forth in consultant', proposal to City dated March 25, 1977, a copy of which is attached hereto, marked Exhibit "A" and incorporated herein by reference as though set forth in full and at length. 2. Scope of Services. Consultant Shall perform and carry I out, in a satisfactory and proper manner as determined by City, a study to determine the precise amount of refunds and cost savings which can be obtained from both Standard Insurance Company of I loregon and Southern California Blue Cross as a result of an I lindepth evaluation of each of the insurance companies' underwritin practices and procedures as it pertains to the City's group life and health insurance programs. i I set 3. Study Methodology. Based upon the scope of services as forth in the agreement, Consultant shall take the following steps in performing the feasibility study: a. Meet with City staff to review engagement objectivesl obtain current employee data and review plan administrative pro- cedures. b. Analyze the past four years of each plan's financial accounting information to determine appropriate reserves, premium levels, expense charges and margin requirements. c. Review the past underwriting procedures and practices of each insurance company. d. Develop a strategy to negotiate refunds and underwritin changes with current carriers. e. Perform an audit of claims paid which are selected at -2- . . " 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 ~ ~ 26 27 28 random to make sure payments are made in accordance with the con- tract. f. Present a preliminarY report of findings to date and develop a specific plan of action to proceed with the engagement. g. Meet with present carriers to negotiate refunds of any excess margins as the result of consulting functions performed in Items b, c, d and e above. h. Present a comprehensive and detailed written report setting forth the results of negotiations in Item g, and including recommendations for improvements which should be made in order to improve the group life and health programs' underwriting practices and procedures. 4. study Output. Consultant shall present a written report with all of the findings and recommendations required by this agreement to document the precise amount of cost savings and how the cost savings were developed. 5. Personnel. Consultant represents that he has, or will secure at his own expense, all personnel required to perform the services under this agreement. Consultant shall at all times be and remain an independent contractor and such personnel as may be employed by Consultant shall not be employees or agents of city. 6. Time of Performance. The services of Consultant are to commence as soon as practicable after the execution of this agreement and the final report shall be completed and delivered no later than forty-five (45) days after the starting date. 7. Compensation. City agrees to pay Consultant a total sum not to exceed eight thousand nine hundred twenty dollars ($8,920.00) for the above services in accordance with the -3- " 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 II. il. il Ii II following fee schedule, said sum to constitute full and complete compensation for Consultant's services rendered hereunder: Estimated Hourly Man-HoUrS Rate Fee Consulting Manager 38 60 $2,280 Consulting Actuary/Underwriter 20 60 1,200 Group Insurance Consultant 136 40 5,440 Total 194 $8,920 -- i In addition, City agrees to pay a sum not to exceed nine i lihundred dollars ($900.00) for stenographic expenses, report I' I reproduction and travel. There shall be no other compensation payable to Consultant hereunder, and Consultant shall be solely responsible for paying all expenses for services rendered hereunde . 8. Method of Payment. Notwithstanding any provision in Consultant's proposal of March 25, 1977, a copy of which is attached hereto, City will make an advance payment to Consultant of the sum of one thousand dollars ($1,000.00) with the balance of the sum of seven thousand nine hundred twenty dollars ($7,920.0 ), plus the estimated $900.00 in expenses as set forth in paragraph 7, to be paid upon receipt of the Consultant's final report which documents a cost saving to the City from the group health insur- ance proqram at least equal to the total fee. The final payment shall be made at a date no earlier than submission and acceptance of the final report required hereunder. The provisions of this section 8, shall super.ede any provisions of Consultant's proposal concerning the times, method and extent of payment. 9. Warranties of Consultant. Consultant specifically warrants and represents his skill and expertise to be in accord- -4- ance with Exhibit ~A", and City enters into this agreement in reliance thereon. 10. Assignability. The experience, skill and expertise of Consultant is of the essence of this agreement. Consultant shall not assign (whether by assignment or novation) this agreement or delegate his duties hereunder in whole or in part or any right or interest hereunder without the prior written consent of City. Any assignment or attempt to assign this agreement without such prior written consent or by operation of law shall constitute cause for termination. 11. Interest of Consultant. Consultant covenants that he presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of services required to be performed under this agreement. Consultant further covenants that in the perform- ance of this agreement no person having any such interest shall be employed. 12. Findings Confidential. Any reports, information, data, etc., given to or prepared or assembled by Consultant under this agreement which City requests to be kept as confidential shall not be made availab~e to any individual or organization by Consultant without the prior written approval of City. 13. Publication, Reproduction and Use of Material. No material produced in whole or in part under this agreement shall be subject to copyright in the united States or in any other country. The final report furnished by Consultant to City shall become the sole property of City and City shall have unrestricted authority to publish, disclose, distribute and otherwise use, in -5- ~!. I '., I I whole or in part, any reports, data, or other materials prepared under this agreement. 14. Termination of Contract for Ca.use. If for any cause Consultant shall fail to fulfill in a timely and proper manner his obligations under this agreement, or if Consultant shall violate any of the covenants, agreements or stipulations of this agreement, City shall thereupon have the right to terminate this ~greement by giving written notice to Consultant of such termina- tion and specifying the effective date thereof at least five (5) days before the effective date of such termination. In that event all finished and unfinished documents, data, studies, surveys, drawings and reports or other material prepared by Consultant under this agreement shall, at the option of City, become its property and Consultant shall be entitled to receive just and equitable compensation for any satisfactory work completed on such documents and other materials. Notwithstanding the above, Consultant shall not be relieved of liability to City for damages sustained by City by virtue of any breach of this agreement by Consultant, and City may withhold any payments to Consultant for the purpose of set-off until such time as the exact amount of damaqes due City from Consultant is determined. This agreement may not be terminated if the failure to perform arises from unforeseeable cause beyond the control and without the fault or negligence of Consultant. 15. Termination for Convenience of City. City may terminate this agreement at any time by giving written notice to Consultant of such termination and specifying the effective date -6- >. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 thereof at least fifteen (15) days before the effective date of such termination. In such event, all finished and unfinished documents and other materials as described in paragraph 14 above shall, at the option of City, become its property. If the agree- ment is terminated by City as provided herein, Consultant will be entitled to be paid all compensation for work performed to the date of termination, including all reimburseable expenses and related costs. If termination is due to the fault of persons other than Consultant, Consultant will be entitled to be paid all compensation for work performed to the date of termination, in- cluding all reimburseable expenses and related costs. Should this agreement be terminated due to fault of Consultant, paragraph 14 hereof relative to termination shall be applicable. 16. Changes. Should City require changes in the scope of the services of Consultant to be performed hereunder, such changes including any corresponding increase or decrease in the amount of Consultant's compensation, which shall be mutually agreed upon by and between City and Consultant, shall be incorporated in this agreement only by written amendments hereto. 17. Consultant to Hold Harmless. Consultant hereby agrees to, and shall, hold City, its elective and appointive boards, commissions, officers, agents and employees harmless from any liability for damage or claims for damage for personal injury, including death, as well as from claims for property damage which may arise from Con~Uluant~s operations under this agreement, whether such operations be by ConsuJ.tant or by anyone or more persons directly or indirectly employed by or acting as agent for Consultant. Consultant agrees to and shall defend City and its -7- 1 2 elective and appointive boards, commissions, officers, agents and employees from any suits or actions at law or in equity for damage caused, or alleged to have been caused, by reason of any of the 3 4 5 6 7 8 9 I aforesaid operations. I , 18. Time of Essence. Time is of the essence with respect i I to COnsultant's performance under this agreement. I 19. Notices. All notices herein required shall be in i writing and delivered in person or sent by certified mail, postage prepaid, addressed as follows: 10 City of San Bernardino 300 North "0" Street San Bernardino, CA 92418 Robert M. Epler Company, Inc. The Fox Building 770 "B" Street, Suite 417 San Diego, CA 92101 13 IN WITNESS WHEREOF, the parties hereto have executed this 14 agreement on the date first hereinabove written. 11 12 15 16 17 ATTEST: 18 19 , ( 20 21 22 23 24 25 26 27 28 ROBERT M. EPLER COMPANY, INC. By 9.." /tJ. A-,y- Titlep""J ~,...,h-' -8- .. . .. .- R. M. EPLER CO.. INC. CONSULTING PLAN TO IMPROVE UNDERWRITING PRACTICES AND PROCEDURES FOR THE CITY OF SAN BERNA~DINO'S GROUP LIFE AND HEALTH INSURANCE PROGRAMS / EXHIBIT "A" , ROBERT M. EPLER COMPANY. INC. EMPLOYEE BENEFIT CONSULTANTS & ACTUARIES THE FOX BUILDING 770 B STREET. SUITE 417 SAN DIEGO. CALIFORNIA 92101 t7'4) 239-0831 March 25, 1977 PRIVATE Mr. David Root Director of Finance City of San Bernardino 300 N. E. Street San Bernardino, California 92401 Dear Mr. Root: As a result of our meeting on Tuesday, March 22, 1977 with Marshall Julian, City Administrator, Fred Frans, Director of Personnel, and yourself, we are setting forth our consulting approach to analyze the underwriting practices, procedures and financial experience of the City of San Bernardino's group life and health insurance programs as underwritten by Standard Insurance Company of Oregon and Southern California Blue Cross. Based on a preliminary evaluation of background information provided us by the City, we find that substantial cost savings can be achieved by retaining our Firm to con- du!=t an indepth evaluation of both Standard of Oregon's and Blue Cross' underwriting prac- tices and procedures as well as performing an analysis of financial experience of each plan. ENGAGEMENT OBJECTIVE The primary objective of our study is to determine the precise amount of refunds and cost savings which can be obtained from both Standard of Oregon and Blue Cross as a result of a thorough actuarial and underwriting evaluation of the present group life and health insurance programs. / R. M. EPLER CO.. INC. Mr. David Root March 25, 1977 2 CONSULTING APPROACH Based upon the engagement objective as outlined in this proposal, we plan to take the following steps to ensure that the maximum cost savings are obtained: 1. Meet with City staff to review engagement objectives; obtain current employee data and review plan administrative procedures. 2. Analyze the past 4 years of each plan's financial accounting information to determine appropriate reserves, premium levels, expense charges and margin requirements. 3. Review the past underwriting procedures and practices of each insurance company. 4. Develop a strategy to negotiate refunds and underwriting changes with current carriers. 5. Perform an audit of claims paid which are selected at random to make sure payments are made in accordance with the contract. 6. Present a preliminary report of our findings to date and develop a specific plan of action to proceed with the engagement. 7. Meet with present carriers to negotiate refunds of any excess margins as the result of consulting functions performed in Items 2, 3, 4 and 5 above. 8. Present a written report of the results of our negotiations in Item 7 including recommendations about improvements which can be made to improve the group life and health programs' underwriting practices and procedures. During the course of our work we plan to meet with you to review our progress, findings and recommendations. As part of our progress meetings, we will provide you with written reports outlining the status of our engagement. We find these meetings are important to make sure the engagement objective is met and that the City has a complete understanding of how the finalized cost savings were developed. ADVANTAGES OF THE STUDY As we have discussed with you, there are substantial cost savings which can be developed as a result of improved underwriting procedures and practices. Based upon R. M. EPLER CO.. INC. Mr. David Root March 25, 1977 3 our preliminary analysis of each plan's last four years claims experience, we find that an annual cost savings of $20,000 to $30,000 can be developed as the result of our study. The ability to develop the cost savings requires a thorough knowledge of insurance companies', underwriting procedures, reserving practices, and group insurance actuarial methods. We have these skills including a full understanding of alternative funding methods. Attached as Exhibit A is a copy of our Firm's brochure which discusses in detail our group insurance consulting and actuarial capabilities. TIME AND PEES We estimate that our fee for this engagement as outlined in this letter will not exceed $8,920. The following is the estimated man-hours, the hourly rates and fee allocation for each member of the project consulting team: Estimated Man-Hour Hourly Rate Fee Consulting Manager Consulting Actuary/Underwriter Group Insurance Consultant 38 20 136 194 60 60 40 $ 2,280 1,200 5,440 $ 8,920 As we discussed with you, our fees are based upon the time required to complete the engagement and hourly rates which reflect the skill and experience of the staff assigned. In addition there will be expenses for stenographic assistance, report reproduction and travel. These expenses will not exceed $900. We will make every attempt to hold our fees to a minimum and should they be less than anticipated, we will, of course, bill only for the time involved. / R. M. EPLER CO.. INC. Mr. David Root March 25, 1977 4 From our fee we ask for a $3,000 retainer with the balance of our fee paid when we deliver our final report and the City accepts our findings about the cost savings developed as a result of our work. We will guarantee a cost savings at least equal to our total con- suiting fee for this engagement. Upon obtaining the City's authorization to proceed with the assignment and our receipt of all necessary financial and underwriting information from each insurance carrier, we will complete our final report within 45 days. ********** We look forward to working with you and members of the City staff on this important 'assignment. Sincerely, Attachment ROBERT M. EPLER COMPANY, INC. ~JJl~~~~. /, " R. M. EPLER CO.. INC. EXHIBIT A GROUP INSURANCE CONSULTING AND ACTUARIAL SERVICeS OF THE ROBERT M. EPLER COMPANY, -INC. > R. M. EPLER CO.. INC. CONSULTING AND ACTUARIAL SERVICES ROBERT M. EPLER COMPANY, INC. TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . GROUP INSURANCE CONSULTING. . . . . . . . . . . . . . . . . . . . . . . . . Preliminary Analysis . . . . . . . . . . . . . . . . . . . . . . . . . Plan Costs . . . . . . . . . . . . . . . . . .. . . . . . . . Marketing . . . . . . . . . . . . . . . . . . . . . . " . . Program Installation . . . . . . . . . . . . . . . . . . . . . . . . . General Considerations . . . . . . . . . . . . . . . . . . . . . . . .. Special Considerations - Self-Insurance ADVANTAGES OF OUR FIRM Engagement Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ROBERT M. EPLER COMPANY, INC. What We Do . . . . . . . . . . . . . . e. . . . . . . . . . . CONSUL TING STAFF Robert M. Epler Consulting Manager J. Paul Dorris Consulting Actuary Michael D. Baker Consultant Jane M. Barry Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page I 2 3 3 If 4 5 5. 6 7 8 9 10 10 11 11 ~ ROBERT M. EPLER COMPANY, INC. EMPLOYEE BENEFIT CONSULTANTS & ACTUARIES THE FOX BUILDING 770 B STREET. SUITE 417 SAN DIEGO. CALIFORNIA 92101 (714) 239~0831 INTRODUCTION We have prepared this brochure to tell you important facts about our Firm and its professional approach in solving employee benefit program problems. An increasingly important area of interest to us and our clients is group insurance. Although most of the brochure is about our actuarial and consulting services to improve a client's group insurance program, we have also provided information about our overall employee benefit capabilities. We ask you to take a few minutes to read and understand what we have presented. In each of the group insurance studies we have developed a first year cost saving which was far in excess of our fee. We think you will agree that it would be worth your time to discuss how we can be of assistance. Sincerely, ROBERT M. EPLER COMPANY, INC. f!dJm~~,~. " -1- ~. . R. M. EPLER CO.. INC. GROUP INSURANCE CONSULTING Inflation and its dramatic effect on medical costs has forced many employers to reevaluate their group insurance program. As independent group insurance consultants and actuaries, we have developed a sophisticated program to assist employers in under- standing how group insurance costs can be reduced while still providing a competitive schedule of benefits. Group life, health, dental and long-term disability plans with annual premiums in excess of $100,000 are the major areas of our concern and interest. From experience we have found that employers are unaware that, in many cases, group insurance program costs can be reduced through negotiations. Major insurance companies are agreeable to favorable (to the policyholder) adjustments in premium rates and retention charges (to cover administration costs, state premium tax, commissions and profit margin) based on a properly developed study which demonstrates that costs are out of line. One immediate method to reduce costs is to eliminate the payment of commissions. Insurance companies provide the same quality of service whether or not commissions are paid. In our analysis pf group insura.nce plans there appears to be a lack of a realistic financial statement of a pian's annual experience. Without a well-developed accounting of the disposition of paid premiums, paid claims, incurred but unreported claims, insur- a!,\ce companies' reserves and expense charges, it is impossible to determine the actual cost of a program. Accountability of the premium dollar is necessary before an effective cost reduction program can be implemented. We work with major insurance companies and prefer to use those companies with claims service facilities close to the client's center of operation. For special risks such as long-term disability, we use a broader market base outside of Southern California. In addition to cost reduction and financial reporting we are concerned about every aspect of a client's group insurance program to make sure the program continues to operate on the most economical basis, and at the same time provides accurate and effi- / -2- . , R. M. EPLER CO.. INC. cient claims service. Regardless of the problem with the employer';; group insurance plan, the advisor to the employer must have the necessary skill and knowledge to intelli- gently evaluate and analyze each and every factor pertaining to the program. In our experience the last resort to solving any group insurance problem is to put the plan out to bid to competitive insurance companies. If at all possible, the in- force carrier is the one with whom the solution should be found using proper negotiations by an independent third party (Robert M. Epler Company, Inc.). We have outlined some of the steps and procedures we use in. our group insurance consulting practice. As you can appreciate, we are being general in the following approach and have presented some of the important areas which should be considered when under- taking a consulting assignment. PRELIMINARY ANALYSIS I. Assist management in the definition of company benefit and budget objectives. 2. Review prior years' claims experience to determine whether premium rates, retention and reserves are proper. 3. Review the benefit structure in relation to prior claims experience to determine what problem areas, if any, are caused by excessive benefits. 4. Review benefit structure to determine the adequacy of the pian's ability to meet employee needs. 5. Conduct industry surveys of benefit levels to be used in designing a revised pro- gram. 6. Work with management and employee groups to develop a better understanding and appreciation of the program. PLAN COSTS I. Review indepth insurance companies' retention levels and contract agreements. 2. Review pooling levels for health and life insurance plans. .' -3- .' , , R. M. EPLER CO.. INC. Review the insurance companies' premium levels. Review contractual provisions of plan. Review benefit structure to make sure benefits are not subject to the full effect of inflation. 8. Review incurred but unreported claim reserves for adequacy and redundancy. 9. Develop an annual financial statement which identifies all costs and reserves. MARKETING 1. Develop standardized bid specifications with proper exhibits in order for an in- surance company to provide complete information relating to premium rates, reserving practices, claims pooling practices and retention charges. Evaluate each bidding insurance company's claims procedures to make sure that the administration process is simplified to avoid excessive company personnel time involvement. Interview the most competitive insurance companies' group salaried representatives to determine their ability to properly provide service for maximum efficiency. Evaluate each bidding insurance company's claims payment facilities to make sure they have a proper claims control system' and a prompt claims payment capabi~ Iity. PROGRAM INSTALLATION 1. 2. 4. 3. 3. Review the insurance companies' contingency reserve practices. 4. Review the insurance companies' practices regarding the payment of interest on reserves. 5. 6. 7. 2. 3. Review new or revised contract to ensure proposal specifications compliance. Assist in installing a new or revised program by coordinating employee enroll- ment and administrative procedures with group representative and employer. Develop an effective communication program to improve employee understanding. -4- R. M. EPLER CO.. INC. 4. Review the installed program to make sure the system is operating properly. GENERAL CONSIDERATIONS' 1. Provide consulting input on a continuous basis. 2. Assist and recommend in developing continuing program objectives. , 3. Assist employer in the evaluation of Health Maintenance Organizations. 4. Monitor the on-going program results to ensure it continues to meet benefit and cost objectives. SPECIAL CONSIDERATIONS - SELF-INSURANCE For larger employee groups where there is a minimum annual premium of $500,000, we evaluate the feasibility of self-insurance and consider the following: I. Prepare a feasibility study of self-insurance versus insured approach. 2. Evaluate the need for and assist in obtaining, if needed, stop loss insurance. 3. Install proper administrative procedures to ensure maximum efficiency. 4. Develop a communication program to familiarize employees with the self-insured plan. 5. Provide on-going consulting and actuarial services to ensure the financial sound- ness of a self-insured program. 6. Assist client's legal counsel to ensure plan compliance with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA). ~ -5- . . , . R. M. EPLER CO.. INC. ADVANTAGES OF OUR FIRM In discussing group insurance consulting with prospective clients, we are frequently asked to explain the difference between a broker and our Firm. Outlined below are the necessary functions required to complete a successful engagement comparing our services with those of a broker. ENGAGEMENT OBJECTIVES To provide adequate benefits at the lowest cost using sound actuarial and under- writing concepts. Necessary Functions to Consulting Maximize Objectives Actuary Broker 1. Audit claims experience Yes Sometimes 2. Prepare an annual financial statement Yes No 3. Evaluate benefits structure Yes Sometimes 4. Analyze insurance companies' under- writing procedures Yes No 5. Evaluate administrative procedures Yes Sometimes 6. Evaluate funding alternatives Yes No 7. Understand and identify the complete problem Yes No 8: Negotiate with insurance companies and others based on cost projections Yes No 9. Obtain proposals based on standardized specifications Yes Yes 10. Evaluate proposals Yes Yes II. Select service source Yes Yes Many times we find it is not necessary to put a group insurance program out to bid. Obtaining proposals is the last resort which should be used only when negotiations fail. Using our knowledge to negotiate an improved financial arrangement is our first step to install an effective cost reduction program. / -6- " " . . R. M. EPLER CO., INC. We have complete capability to solve any group insurance problem. Because of our indepth experience in benefit design and funding vehicle evaluation we know that our efforts will result in a finalized program that provides the maximum level of benefits for each dollar of contribution. Providing prompt and efficient service as well as continuing technical assistance are the most important factors in our relation- ship with clients. We feel a personal responsibility to our clients and we devote ourselves to service. We cannot stress enough the importance of having a local consulting firm to solve administrative problems and to monitor the operational results of your employee benefit program to make sure the adopted program continues to meet objectives and all government regulations. Compliance with government regulations is now more important than ever with the passage of the Employee Retirement Income Security Act of 1974 (ERISA). We do not sell a product and we are compensated on a fee basis only. Our standard procedure is to write a proposal letter outlining our understanding of the problem, the consulting approach we plan to use and an estimate of our fee. There is no financlal obligation by a prospective client until the proposal letter is accepted. -' -7- , . . " . R. M. EPLER CO.. INC. ROBERT M. EPLER COMPANY, INC. WHAT WE DO Collectively, our professional staff has over 35 years of experience in all phases of employee benefit planning which include plan design, benefit structure evaluation, funding evaluation of employee benefit plans, development of communication programs and administrative procedures. Our consulting and actuarial services are based upon a thorough understanding of health, life, dental and long-term disability plans as well as pension and profit-sharing plans. Deferred compensation plans and other employee perquisites are an important part of our work experience. At the same time our capabilities to evaluate all types of funding vehicles, including self-insurance, have proved to be very beneficial in developing the most appropriate program for our clients. We are the only fully staffed consulting and actuarial firm il) San Diego County and we have the advantage of providing our clients with prompt and efficient service. As consultants and actuaries, we place a great emphasis on developing an insight into our clients' specific needs. Our clients have told us that our independent judgment, objectivity and overall experience in the employee benefit field were the primary reasons fQr selecting us as their consultants and actuaries. The following is a representative list of clients for whom we have provided employee benefit consulting assignments: Central Federal Savings and Loan Association City of La Mesa City of National City City of San Diego Coronado Hospital Catholic Diocese of San Diego First Federal Savings and Loan Association of San Diego Grossmont Hospital District Oceanside Federal Savings and Loan Association San Diego Blood Bank Sea World, Inc. Walker Scott Company Zoological Society of San Diego, Inc. / -8- . " 'R. M. EPLER CO.. INC. We know our client list demonstrates our ability to work with all size employee groups to solve different types of employee benefit plan problems. -9- .' ;, ,. . . .~ ... ' .. R. M. EPLER CO.. INC. CONSULTING STAFF As an employee benefit consulting firm, we find our most important responsibility is to provide our clients with professionals who have all of the expertise, experience and knowledge requirements necessary to complete any type of employee benefit assign~ ment we undertake. The following descriptions provide a brief background about our staff: ROBERT M. EPLER - Consulting Manager During the past nineteen years, Mr. Epler has had numerous assignments in the entire employee benefit field. Prior to establishing his o~n firm in 1971, Mr. Epler was an employee benefit consulting manager with an international consulting organization for eight years and, before that time, was employed for six years with a local trust department as a Trust Officer administering pension and profit-sharing plans. Specifically, he is responsible for developing and evaluating life, medical, disability and retirement plans. Included in his consulting background is the analysis of the method of funding benefits in order to provide plan benefits at the lowest possible cost. He has indepth experience in the development of self-insured plans and efficient administrative procedures. J. PAUL DORRIS - Consulting Actuary . Mr. Dorris is a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries. He is an Enrolled Actuary ullderthe Employee Retirement Income Security Act of 1974 (ERISA). For ten years Mr. Dorris has been actively involved in the development of actuarial matters and benefit structure design of all types of group life and health insurance programs as well as pension plans. Of particular irlterest to our clients is Mr. Dorris' experiencc~ as a group insurance and ~ension actucry. Mr. Dorris also '.5 kn(),....~dgeact: in ~~~ t~"':~";:'!,~..al as~cts of Health M2'...ntena~~!= O~gar ,"::;.\._~~',~ and""e '-..':'.." ::-:r''':-,:,;,:~:~_. ~i ~ .( ~~ R. M. EPLER CO.. INC. in reviewing the progress of their development. Prior to joining our Firm, as an indepen- dent contractor, Mr. Dorris was a Vice President in charge of the Group Department of a California domiciled life insurance company. MICHAEL D. BAKER - Consultant Mr. Baker has been responsible for our Firm's group insurance study engagements for the past three years. Mr. Baker has experience in all aspects of group insurance consulting, plan benefit design and underwriting principles. His work background includes financial analysis. of claims experience, comparison of insurance company bid proposals as well as preparing and summarizing employee benefit surveys. JANE M. BARRY - Consultant Ms. Barry has had over seven years consulting experience in the design and adminis- tration of all types of retirement plans. In addition to her client responsibilities, as a pension consultant, she supervises the preparation of all of our Firm's Internal Revenue Service plan qualification filings as well as the preparation of necessary Federal and State information returns for qualified programs. Included in her work background Is assisting in the design and implementation of employee benefit plans, communication booklets, administrative manuals, and summari- zation of survey results. -11-