GVHR » Topics » 6. HEALTH BENEFITS

This excerpt taken from the GVHR 10-Q filed May 11, 2009.
             HEALTH BENEFITS

 

Blue Cross Blue Shield of Florida, Inc. and its subsidiary Health Options, Inc. (together “BCBSF/HOI”) is the Company’s primary healthcare partner in Florida, delivering medical care benefits to approximately 17,000 Florida-based client employees. The Company’s policy with BCBSF/HOI is a minimum premium policy expiring September 30, 2009. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified in the agreement and aggregate loss coverage is provided to the Company at the level of 115% of projected claims.  The Company is required to pre-fund the estimated monthly expenses and claim liability charges of the plan by the first of each calendar month.  The estimated monthly expenses are based upon the Minimum Premium Rate and the Annual Excess liability rate, as set forth in the agreement, times the number of insureds. The monthly estimated claim liability charge is based upon an average of monthly paid claims as determined by BCBSF/HOI based on three month periods specified in the agreement.  Differences between the pre-funded amounts and actual amounts subsequently determined shall be settled in the following month. As part of the Company’s obligation to BCBSF/HOI, the Company posted an irrevocable letter of credit in favor of BSBSF/HOI in an initial amount of $5,000 on October 1, 2008, which shall be increased monthly by approximately $1,000 over a seven month period until it reaches $11,766 on May 1, 2009. As of March 31, 2009, the outstanding letter of credit in favor of BSBF/HOI was $10,000.

 

Outside the state of Florida, Aetna Health, Inc. (“Aetna”) is the Company’s largest medical care benefits provider for approximately 16,500 client employees. The Company’s 2008/2009 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO and PPO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability.

 

In 2006, the Company announced the addition of UnitedHealthcare as an additional health plan option. As of March 31, 2009, UnitedHealthcare provided medical care benefits to approximately 2,000 client employees as well as the Company’s internal employees. The UnitedHealthcare plan is a fixed cost contract. Effective May 1, 2008, UnitedHealthcare and the Company amended their agreement to extend coverage availability through September 30, 2009 for internal employees and those clients covered by UnitedHealthcare as of May 1, 2008. As such, UnitedHealthcare is no longer available as an option to those clients not covered by UnitedHealthcare as of May 1, 2008.

 

The Company provides coverage under various regional medical benefit plans to approximately 1,000 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional medical plans are subject to fixed cost contracts.

 

The Company’s dental plans, which include both a PPO and HMO offering, are provided by Aetna for all client employees who elect coverage. All dental plans are subject to fixed cost contracts that cap the Company’s annual liability.

 

In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and a qualified transportation fringe benefit program.

 

Part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness and accident and dental insurance programs, and a vision discount plan.

 

Included in accrued insurance premiums and health reserves at March 31, 2009 and December 31, 2008, are $11,614 and $10,129, respectively, of short-term liabilities related to the Company’s health benefit plans. Of these amounts $11,489 and $9,491, respectively, represent an accrual for the estimate of claims incurred but not reported at March 31, 2009 and December 31, 2008 related to the BCBSF/HOI contract. Health benefit reserves are determined quarterly by the Company and include an estimate of claims incurred but not reported and claims reported but not yet paid. The calculation of these reserves is based upon a number of factors, including but not limited to actuarial calculations, current and historical claims payment patterns, plan enrollment and medical trend rates. During the three months ended March 31, 2009 and 2008, the Company recorded net health plan surplus of approximately $3,100 and $1,000, respectively, which decreased its cost of services.

 

These excerpts taken from the GVHR 10-K filed Mar 16, 2009.

Health Benefits

 

 Claims incurred under the health benefit plans are expensed as incurred according to the terms of each contract. For certain contracts, liability reserves are established for the benefit claims reported but not yet paid and claims that have been incurred but not yet reported.

 

Health Benefits



 



 Claims incurred
under the health benefit plans are expensed as incurred according to the terms
of each contract. For certain contracts, liability reserves are established for
the benefit claims reported but not yet paid and claims that have been incurred
but not yet reported.



 



Health Benefits



 



 Claims incurred
under the health benefit plans are expensed as incurred according to the terms
of each contract. For certain contracts, liability reserves are established for
the benefit claims reported but not yet paid and claims that have been incurred
but not yet reported.



 



9.  HEALTH BENEFITS

 

Blue Cross Blue Shield of Florida, Inc. and its subsidiary Health Options, Inc. (together “BCBSF/HOI”) is the Company’s primary healthcare partner in Florida, delivering medical care benefits to approximately 17,500 Florida-based client employees. The Company’s policy with BCBSF/HOI is a minimum premium policy expiring September 30, 2009. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified in the agreement and aggregate loss coverage is provided to the Company at the level of 115% of projected claims.  The Company is required to pre-fund the estimated monthly expenses and claim liability charges of the plan by the first of each calendar month.  The estimated monthly expenses are based upon the Minimum Premium Rate and the Annual Excess liability rate, as set forth in the agreement, times the number of insureds. The monthly estimated claim liability charge is based upon an average of monthly paid claims as determined by BCBSF/HOI based on three month periods specified in the agreement.  Differences between the pre-funded amounts and actual amounts subsequently determined shall be settled in the following month. As part of the Company’s obligation to BCBSF/HOI, the Company posted an irrevocable letter of credit in favor of BSBSF/HOI in an initial amount of $5,000 on October 1, 2008, which shall be increased monthly by approximately $1,000 over a seven month period until it reaches $11,766 on May 1, 2009. As of December 31, 2008, the outstanding letter of credit in favor of BSBF/HOI was $7,000.

 

Outside the state of Florida, Aetna Health, Inc. (“Aetna”) is the Company’s largest medical care benefits provider for approximately 17,000 client employees. The Company’s 2008/2009 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO and PPO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability.

 

In 2006, the Company announced the addition of UnitedHealthcare as an additional health plan option. As of December 31, 2008, UnitedHealthcare provided medical care benefits to approximately 2,000 client employees as well as the Company’s internal employees. The UnitedHealthcare plan is a fixed cost contract. Effective May 1, 2008, UnitedHealthcare and the Company amended their agreement to extend coverage availability through September 30, 2009 for internal employees and those clients covered by UnitedHealthcare as of May 1, 2008. As such, UnitedHealthcare is no longer available as an option to those clients not covered by UnitedHealthcare as of May 1, 2008.

 

The Company provides coverage under various regional medical benefit plans to approximately 1,000 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional medical plans are subject to fixed cost contracts.

 

The Company’s dental plans, which include both a PPO and HMO offering, are provided by Aetna for all client employees who elect coverage. All dental plans are subject to fixed cost contracts that cap the Company’s annual liability.

 

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Table of Contents

 

In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and a qualified transportation fringe benefit program.

 

Part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness and accident and dental insurance programs, and a vision discount plan.

 

Included in accrued insurance premiums and health reserves at December 31, 2008 and December 31, 2007, are $10,129 and $10,356, respectively, of short-term liabilities related to the Company’s health benefit plans. Of these amounts $9,491 and $10,100, respectively, represent an accrual for the estimate of claims incurred but not reported at December 31, 2008 and 2007 related to the BCBSF/HOI contract. Health benefit reserves are determined quarterly by the Company and include an estimate of claims incurred but not reported and claims reported but not yet paid. The calculation of these reserves is based upon a number of factors, including but not limited to actuarial calculations, current and historical claims payment patterns, plan enrollment and medical trend rates. During the years ended December 31, 2008, 2007 and 2006, the Company recorded net health plan surplus (subsidy) of approximately $6,000, $3,100 and ($2,500), respectively, which decreased (increased) its cost of services and reserves for incurred but not reported claims.

 

9.  HEALTH BENEFITS



 



Blue Cross Blue
Shield of Florida, Inc. and its subsidiary Health
Options, Inc. (together “BCBSF/HOI”) is the Company’s primary
healthcare partner in Florida, delivering medical care benefits to
approximately 17,500 Florida-based client employees. The Company’s policy with
BCBSF/HOI is a minimum premium policy expiring September 30,
2009. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI
for the cost of the claims incurred by participants under the plan, plus the
cost of plan administration. The administrative costs per covered client
employee associated with this policy are specified in the
agreement and aggregate loss coverage is provided to the Company at the level
of 115% of projected claims.  The Company
is required to pre-fund the estimated monthly expenses and claim liability
charges of the plan by the first of each calendar month.  The estimated monthly expenses are based upon
the Minimum Premium Rate and the Annual Excess liability rate, as set forth in
the agreement, times the number of insureds. The monthly estimated claim
liability charge is based upon an average of monthly paid claims as determined
by BCBSF/HOI based on three month periods specified in the agreement.  Differences between the pre-funded amounts
and actual amounts subsequently determined shall be settled in the following
month. As part of the Company’s obligation to BCBSF/HOI, the Company posted an
irrevocable letter of credit in favor of BSBSF/HOI in an initial amount of
$5,000 on October 1, 2008, which shall be increased monthly by
approximately $1,000 over a seven month period until it reaches $11,766 on May 1,
2009. As of December 31, 2008, the outstanding letter of credit in favor
of BSBF/HOI was $7,000.



 



Outside the state
of Florida, Aetna Health, Inc. (“Aetna”) is the Company’s largest medical
care benefits provider for approximately 17,000 client employees. The Company’s 2008/2009 policy with Aetna provides for an HMO and PPO
offering to plan participants. The Aetna HMO and PPO medical benefit plans are
subject to a guaranteed cost contract that caps the Company’s annual liability.



 



In 2006, the
Company announced the addition of UnitedHealthcare as an additional health plan
option. As of December 31, 2008, UnitedHealthcare provided medical care
benefits to approximately 2,000 client employees as well as the Company’s
internal employees. The UnitedHealthcare plan is a fixed
cost contract. Effective May 1, 2008, UnitedHealthcare and the
Company amended their agreement to extend coverage availability through September 30,
2009 for internal employees and those clients covered by UnitedHealthcare as of
May 1, 2008. As such, UnitedHealthcare is no longer available as an option
to those clients not covered by UnitedHealthcare as of May 1, 2008.



 



The Company
provides coverage under various regional medical benefit plans to approximately
1,000 client employees in various areas of the country. Included in the list of
medical benefit plan providers are Kaiser Foundation
Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional
medical plans are subject to fixed cost contracts.



 



The Company’s
dental plans, which include both a PPO and HMO offering, are provided by Aetna
for all client employees who elect coverage. All dental
plans are subject to fixed cost contracts that cap the Company’s annual
liability.



 



F-19
















Table of
Contents



 



In addition to
dental coverage, the Company offers various fixed cost insurance programs to
client employees such as vision care, life, accidental
death and dismemberment, short-term disability and long-term disability. The
Company also offers a flexible spending account for healthcare, dependent care
and a qualified transportation fringe benefit program.



 



Part-time employees of clients are eligible to enroll in limited benefit
programs from Star HRG. These plans include fixed cost sickness and accident
and dental insurance programs, and a vision discount plan.



 



Included in
accrued insurance premiums and health reserves at December 31,
2008 and December 31, 2007, are $10,129 and $10,356, respectively, of
short-term liabilities related to the Company’s health benefit plans. Of these
amounts $9,491 and $10,100, respectively, represent an accrual for the estimate
of claims incurred but not reported at December 31,
2008 and 2007 related to the BCBSF/HOI contract. Health benefit reserves are
determined quarterly by the Company and include an estimate of claims incurred
but not reported and claims reported but not yet paid. The calculation of these
reserves is based upon a number of factors, including but
not limited to actuarial calculations, current and historical claims payment
patterns, plan enrollment and medical trend rates. During the years
ended December 31, 2008, 2007 and 2006, the Company recorded net health
plan surplus (subsidy) of approximately $6,000, $3,100 and ($2,500),
respectively, which decreased (increased) its cost of services and reserves for
incurred but not reported claims.



 



9.  HEALTH BENEFITS



 



Blue Cross Blue
Shield of Florida, Inc. and its subsidiary Health
Options, Inc. (together “BCBSF/HOI”) is the Company’s primary
healthcare partner in Florida, delivering medical care benefits to
approximately 17,500 Florida-based client employees. The Company’s policy with
BCBSF/HOI is a minimum premium policy expiring September 30,
2009. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI
for the cost of the claims incurred by participants under the plan, plus the
cost of plan administration. The administrative costs per covered client
employee associated with this policy are specified in the
agreement and aggregate loss coverage is provided to the Company at the level
of 115% of projected claims.  The Company
is required to pre-fund the estimated monthly expenses and claim liability
charges of the plan by the first of each calendar month.  The estimated monthly expenses are based upon
the Minimum Premium Rate and the Annual Excess liability rate, as set forth in
the agreement, times the number of insureds. The monthly estimated claim
liability charge is based upon an average of monthly paid claims as determined
by BCBSF/HOI based on three month periods specified in the agreement.  Differences between the pre-funded amounts
and actual amounts subsequently determined shall be settled in the following
month. As part of the Company’s obligation to BCBSF/HOI, the Company posted an
irrevocable letter of credit in favor of BSBSF/HOI in an initial amount of
$5,000 on October 1, 2008, which shall be increased monthly by
approximately $1,000 over a seven month period until it reaches $11,766 on May 1,
2009. As of December 31, 2008, the outstanding letter of credit in favor
of BSBF/HOI was $7,000.



 



Outside the state
of Florida, Aetna Health, Inc. (“Aetna”) is the Company’s largest medical
care benefits provider for approximately 17,000 client employees. The Company’s 2008/2009 policy with Aetna provides for an HMO and PPO
offering to plan participants. The Aetna HMO and PPO medical benefit plans are
subject to a guaranteed cost contract that caps the Company’s annual liability.



 



In 2006, the
Company announced the addition of UnitedHealthcare as an additional health plan
option. As of December 31, 2008, UnitedHealthcare provided medical care
benefits to approximately 2,000 client employees as well as the Company’s
internal employees. The UnitedHealthcare plan is a fixed
cost contract. Effective May 1, 2008, UnitedHealthcare and the
Company amended their agreement to extend coverage availability through September 30,
2009 for internal employees and those clients covered by UnitedHealthcare as of
May 1, 2008. As such, UnitedHealthcare is no longer available as an option
to those clients not covered by UnitedHealthcare as of May 1, 2008.



 



The Company
provides coverage under various regional medical benefit plans to approximately
1,000 client employees in various areas of the country. Included in the list of
medical benefit plan providers are Kaiser Foundation
Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional
medical plans are subject to fixed cost contracts.



 



The Company’s
dental plans, which include both a PPO and HMO offering, are provided by Aetna
for all client employees who elect coverage. All dental
plans are subject to fixed cost contracts that cap the Company’s annual
liability.



 



F-19
















Table of
Contents



 



In addition to
dental coverage, the Company offers various fixed cost insurance programs to
client employees such as vision care, life, accidental
death and dismemberment, short-term disability and long-term disability. The
Company also offers a flexible spending account for healthcare, dependent care
and a qualified transportation fringe benefit program.



 



Part-time employees of clients are eligible to enroll in limited benefit
programs from Star HRG. These plans include fixed cost sickness and accident
and dental insurance programs, and a vision discount plan.



 



Included in
accrued insurance premiums and health reserves at December 31,
2008 and December 31, 2007, are $10,129 and $10,356, respectively, of
short-term liabilities related to the Company’s health benefit plans. Of these
amounts $9,491 and $10,100, respectively, represent an accrual for the estimate
of claims incurred but not reported at December 31,
2008 and 2007 related to the BCBSF/HOI contract. Health benefit reserves are
determined quarterly by the Company and include an estimate of claims incurred
but not reported and claims reported but not yet paid. The calculation of these
reserves is based upon a number of factors, including but
not limited to actuarial calculations, current and historical claims payment
patterns, plan enrollment and medical trend rates. During the years
ended December 31, 2008, 2007 and 2006, the Company recorded net health
plan surplus (subsidy) of approximately $6,000, $3,100 and ($2,500),
respectively, which decreased (increased) its cost of services and reserves for
incurred but not reported claims.



 



This excerpt taken from the GVHR 10-Q filed Nov 10, 2008.
             HEALTH BENEFITS

 

Blue Cross Blue Shield of Florida, Inc. and its subsidiary Health Options, Inc. (together “BCBSF/HOI”) is the Company’s primary healthcare partner in Florida, delivering medical care benefits to approximately 19,000 Florida-based client employees. The Company’s policy with BCBSF/HOI is a minimum premium policy expiring September 30, 2009. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified in the agreement and aggregate loss coverage is provided to the Company at the level of 115% of projected claims.  The Company is required to pre-fund the estimated monthly expenses and claim liability charges of the plan by the first of each calendar month.  The estimated monthly expenses are based upon the Minimum Premium Rate and the Annual Excess liability rate, as set forth in the agreement, times the number of insureds. The monthly estimated claim liability charge is based upon an average of monthly paid claims as determined by BCBSF/HOI based on three month periods specified in the agreement.  Differences between the pre-funded amounts and actual amounts subsequently determined shall be settled in the following month. As part of the Company’s obligation to BCBSF/HOI, the Company posted an irrevocable letter of credit in favor of BSBSF/HOI in an initial amount of $5,000 on October 1, 2008, which shall be increased monthly by approximately $1,000 over a seven month period until it reaches $11,766 on May 1, 2009.

 

Aetna Health, Inc. (“Aetna”) is the Company’s largest medical care benefits provider for approximately 17,000 client employees outside the state of Florida. The Company’s 2007/2008 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement. Beginning with the 2007 plan year, Aetna agreed to eliminate the callable feature of the PPO plan that previously existed and differences in actual plan experience versus projected plan experience for the year will factor into subsequent year rates.

 

In 2006, the Company announced the addition of UnitedHealthcare as an additional health plan option. As of September 30, 2008, UnitedHealthcare provides medical care benefits to approximately 3,000 client employees. The UnitedHealthcare plan is a fixed cost contract. Effective May 1, 2008, UnitedHealthcare and the Company amended their agreement to extend coverage availability through September 30, 2009 for those clients covered by UnitedHealthcare as of May 1, 2008.

 

The Company provides coverage under various regional medical benefit plans to approximately 1,000 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional medical plans are subject to fixed cost contracts.

 

The Company’s dental plans, which include both a PPO and HMO offering, are provided by Aetna for all client employees who elect coverage. All dental plans are subject to fixed cost contracts that cap the Company’s annual liability.

 

In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and a qualified transportation fringe benefit program.

 

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Table of Contents

 

Part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness and accident and dental insurance programs, and a vision discount plan.

 

Included in accrued insurance premiums and health reserves at September 30, 2008 and December 31, 2007 are $8,804 and $10,356, respectively, of short-term liabilities related to the Company’s health benefit plans. Of these amounts $8,773 and $10,100, respectively, represent an accrual for the estimate of claims incurred but not reported at September 30, 2008 and December 31, 2007.

 

Health benefit reserves are determined quarterly by the Company and include an estimate of claims incurred but not reported and claims reported but not yet paid. The calculation of these reserves is based upon a number of factors, including but not limited to actuarial calculations, current and historical claims payment patterns, plan enrollment and medical trend rates.

 

During the three months ended September 30, 2008, the Company reduced its reserve for incurred but not reported claims by approximately $940, which decreased its cost of services and resulted in a health plan surplus for the period. This reduction was based upon favorable claims development.  There were no changes to the health plan reserves that impacted cost of services during the three months ended September 30, 2007.

 

During the nine months ended September 30, 2008 and 2007, the Company reduced its reserve for incurred but not reported claims by approximately $2,671 and $2,600, respectively, which decreased its cost of services and resulted in a health plan surplus for each period. These reductions were based upon favorable claims development.

 

This excerpt taken from the GVHR 10-Q filed Aug 11, 2008.
                                     HEALTH BENEFITS

 

Blue Cross Blue Shield of Florida, Inc. and its subsidiary Health Options, Inc. (together “BCBSF/HOI”) is the Company’s primary healthcare partner in Florida, delivering medical care benefits to approximately 19,000 Florida-based client employees. The Company’s policy with BCBSF/HOI is a minimum premium policy expiring September 30, 2008. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified by year and aggregate loss coverage is provided to the Company at the level of 110% of projected claims. The Company’s obligation to BCBSF/HOI under its current contract may require an irrevocable letter of credit (“LOC”) in favor of BCBSF/HOI if the coverage ratio, as set forth in the BCBSF/HOI agreement, is not maintained. The coverage ratio is calculated quarterly. If the Company’s coverage ratio does not meet the minimum requirement, the Company must provide an LOC valued at up to two months of projected claims (average monthly claims approximated $9,600 for the last twelve months). On February 25, 2008, the Company and BCBSF/HOI entered into the Second Amendment to Agreement to Provide Comprehensive Health Care Benefits (the “Second Amendment”) amending the Agreement to Provide Comprehensive Health Care Benefits, dated as of October 1, 2005, between the parties, restating the definition of “Coverage Ratio” to exclude certain non-cash asset and goodwill impairment charges commencing with the fiscal quarter ending December 31, 2007.  As of June 30, 2008, the minimum coverage ratio was met and no LOC was required. As the Company negotiates its renewal with BCBSF/HOI, it is possible that BCBSF/HOI will require collateral, the terms of which cannot yet be determined.

 

Aetna Health, Inc. (“Aetna”) is the Company’s largest medical care benefits provider for approximately 15,000 client employees outside the state of Florida. The Company’s 2007/2008 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement. Beginning with the 2007 plan year, Aetna agreed to eliminate the callable feature of the PPO plan that previously existed and differences in actual plan experience versus projected plan experience for the year will factor into subsequent year rates.

 

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Table of Contents

 

In 2006, the Company announced the addition of UnitedHealthcare as an additional health plan option. As of June 30, 2008, UnitedHealthcare provides medical care benefits to approximately 4,000 client employees. The UnitedHealthcare plan is a fixed cost contract. Effective May 1, 2008, UnitedHealthcare and the Company amended their agreement to extend coverage availability through September 30, 2009 for those clients covered by UnitedHealthcare as of May 1, 2008.

 

The Company provides coverage under various regional medical benefit plans to approximately 1,000 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional medical plans are subject to fixed cost contracts.

 

The Company’s dental plans, which include both a PPO and HMO offering, are provided by Aetna for all client employees who elect coverage. All dental plans are subject to fixed cost contracts that cap the Company’s annual liability.

 

In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and a qualified transportation fringe benefit program.

 

Part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness and accident and dental insurance programs, and a vision discount plan.

 

Included in accrued insurance premiums and health reserves at June 30, 2008 and December 31, 2007 are $8,713 and $10,356, respectively, of short-term liabilities related to the Company’s health benefit plans. Of these amounts $8,684 and $10,100, respectively, represent an accrual for the estimate of claims incurred but not reported at June 30, 2008 and December 31, 2007.

 

Health benefit reserves are determined quarterly by the Company and include an estimate of claims incurred but not reported and claims reported but not yet paid. The calculation of these reserves is based upon a number of factors, including but not limited to actuarial calculations, current and historical claims payment patterns, plan enrollment and medical trend rates.

 

During the three months ended June 30, 2008, the Company reduced its reserve for incurred but not reported claims by approximately $731, which decreased its cost of services and resulted in a health plan surplus for the period. This reduction was based upon favorable claims development.  There were no changes to the health plan reserves that impacted cost of services during the three months ended June 30, 2007.

 

During the six months ended June 30, 2008 and 2007, the Company reduced its reserve for incurred but not reported claims by approximately $1,731 and $2,601, respectively, which decreased its cost of services and resulted in a health plan surplus for each period. These reductions were based upon favorable claims development.

 

This excerpt taken from the GVHR 10-Q filed May 12, 2008.

8.             HEALTH BENEFITS

 

Blue Cross Blue Shield of Florida, Inc. and its subsidiary Health Options, Inc. (together “BCBSF/HOI”) is the Company’s primary healthcare partner in Florida, delivering medical care benefits to approximately 19,000 Florida-based client employees. The Company’s policy with BCBSF/HOI is a minimum premium policy expiring September 30, 2008. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified by year and aggregate loss coverage is provided to the Company at the level of 110% of projected claims. The Company’s obligation to BCBSF/HOI under its current contract may require an irrevocable letter of credit (“LOC”) in favor of BCBSF/HOI if the coverage ratio, as set forth in the BCBSF/HOI agreement, is not maintained. The coverage ratio is calculated quarterly. If the Company’s coverage ratio does not meet the minimum requirement, the Company must provide an LOC valued at up to two months of projected claims (average monthly claims approximated $9,700 for the last twelve months). On February 25, 2008, the Company and BCBSF/HOI entered into the Second Amendment to Agreement to Provide Comprehensive Health Care Benefits (the “Second Amendment”) amending the Agreement to Provide Comprehensive Health Care Benefits, dated as of October 1, 2005, between the parties, restating the definition of “Coverage Ratio” to exclude certain non-cash asset and goodwill impairment charges commencing with the fiscal quarter ending December 31, 2007.  As of March 31, 2008, the minimum coverage ratio was met and no LOC was required. If current trends continue, the Company will not be able to maintain the minimum coverage ratio through the end of the current contract

 

12



 

with BCBSF/HOI and will need to either seek modifications or provide an LOC as discussed above. If such modifications are not obtained or an LOC is required, this may have a material impact on the Company’s cash flow and ability to conduct its operations.

 

Aetna Health, Inc. (“Aetna”) is the Company’s largest medical care benefits provider for approximately 15,000 client employees outside the state of Florida. The Company’s 2007/2008 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement. Beginning with the 2007 plan year, Aetna agreed to eliminate the callable feature of the PPO plan that previously existed and differences in actual plan experience versus projected plan experience for the year will factor into subsequent year rates.

 

In 2006, the Company announced the addition of UnitedHealthcare as an additional health plan option. As of March 31, 2008, UnitedHealthcare provides medical care benefits to approximately 5,000 client employees. The UnitedHealthcare plan is a fixed cost contract expiring September 30, 2008, that caps the Company’s annual liability. Under the terms of the current agreement with UnitedHealthcare, this plan is no longer offered as an option for new co-employed clients after July 1, 2007. Coverage through UnitedHealthcare will continue to be an option for clients covered by UnitedHealthcare as of June 30, 2007. Effective May 1, 2008, UnitedHealthcare and the Company amended their agreement to extend coverage availability through September 30, 2009 for those clients covered by UnitedHealthcare as of May 1, 2008.

 

The Company provides coverage under various regional medical benefit plans to approximately 1,000 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional medical plans are subject to fixed cost contracts.

 

The Company’s dental plans, which include both a PPO and HMO offering, are provided by Aetna for all client employees who elect coverage. All dental plans are subject to fixed cost contracts that cap the Company’s annual liability.

 

In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and a qualified transportation fringe benefit program.

 

Part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness and accident and dental insurance programs, and a vision discount plan.

 

Included in accrued insurance premiums and health reserves at March 31, 2008 and December 31, 2007 are $8,841 and $10,356, respectively, of short-term liabilities related to the Company’s health benefit plans. Of these amounts $8,812 and $10,100, respectively, represent an accrual for the estimate of claims incurred but not reported at March 31, 2008 and December 31, 2007.

 

Health benefit reserves are determined quarterly by the Company and include an estimate of claims incurred but not reported and claims reported but not yet paid. The calculation of these reserves is based upon a number of factors, including but not limited to actuarial calculations, current and historical claims payment patterns, plan enrollment and medical trend rates.

 

During the three months ended March 31, 2008 and 2007, the Company reduced its reserve for incurred but not reported claims by approximately $1,000 and $2,601, respectively, which decreased its cost of services and resulted in a health plan surplus for each period. These reductions were based upon favorable claims development.

 

13



 

These excerpts taken from the GVHR 10-K filed Mar 17, 2008.

10. HEALTH BENEFITS

        Blue Cross Blue Shield of Florida, Inc. and its subsidiary Health Options, Inc. (together "BCBSF/HOI") is the Company's primary healthcare partner in Florida, delivering medical care benefits to approximately 21,000 Florida-based client employees. The Company's policy with BCBSF/HOI is a minimum premium policy expiring September 30, 2008. Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified by year and aggregate loss coverage is provided to the Company at the level of 110% of projected claims. The Company's obligation to BCBSF/HOI under its current contract may require an irrevocable letter of credit ("LOC") in favor of BCBSF/HOI if the coverage ratio, as set forth in the BCBSF/HOI agreement, is not maintained. The coverage ratio is calculated quarterly. If the Company's coverage ratio does not meet the minimum requirement, the Company must provide an LOC valued at up to two months of projected claims (average monthly claims approximated $9,400 for the last twelve months). On February 25, 2008, the Company and BCBSF/HOI entered into the Second Amendment to Agreement to Provide Comprehensive Health Care Benefits (the "Second Amendment") amending the Agreement to Provide Comprehensive Health Care Benefits, dated as of October 1, 2005, between the parties, restating the definition of "Coverage Ratio" to exclude certain non-cash asset and goodwill impairment charges commencing with the fiscal quarter ending December 31, 2007. As of December 31, 2007, the minimum coverage ratio was met and no LOC was required. If current trends continue, the Company will not be able to maintain the minimum coverage ratio through the end of the current contract with BCBSF/HOI and will need to either seek modifications or provide an LOC as discussed above. If such modifications are not obtained or an LOC is required, this may have a material impact on the Company's cash flow and ability to conduct its operations.

        Aetna Health, Inc. ("Aetna") is the Company's largest medical care benefits provider for approximately 16,000 client employees outside the state of Florida. The Company's 2007/2008 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company's annual liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement. Beginning in the 2007 plan year Aetna has agreed to eliminate the callable feature of the PPO plan that previously existed and differences in actual plan experience versus projected plan experience for the year will factor into subsequent year rates.

F-23


GEVITY HR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in $000's, except share and per share data)

10. HEALTH BENEFITS (Continued)

        In 2006, the Company announced the addition of UnitedHealthcare as an additional health plan option. As of December 31, 2007, UnitedHealthcare provides medical care benefits to approximately 5,000 client employees. The UnitedHealthcare plan is a fixed cost contract expiring September 30, 2008, that caps the Company's annual liability. Under the terms of the current agreement with UnitedHealthcare, this plan is no longer offered as an option for new co-employed clients after July 1, 2007. Coverage through UnitedHealthcare will continue to be an option for clients covered by UnitedHealthcare as of June 30, 2007.

        The Company provides coverage under various regional medical benefit plans to approximately 1,000 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional medical plans are subject to fixed cost contracts.

        The Company's dental plans, which include both a PPO and HMO offering, are provided by Aetna for all client employees who elect coverage. All dental plans are subject to fixed cost contracts that cap the Company's annual liability.

        In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and a qualified transportation fringe benefit program.

        Part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness and accident and dental insurance programs, and a vision discount plan.

        Included in accrued insurance premiums and health reserves at December 31, 2007 and December 31, 2006 are $10,356 and $13,066, respectively, of short-term liabilities related to the Company's health benefit plans. Of these amounts $10,100 and $10,609, respectively, represent an accrual for the estimate of claims incurred but not reported at December 31, 2007 and 2006.

        Health benefit reserves are determined quarterly by the Company and include an estimate of claims incurred but not reported and claims reported but not yet paid. The calculation of these reserves is based upon a number of factors, including but not limited to actuarial calculations, current and historical claims payment patterns, plan enrollment and medical trend rates.

        During the years ended December 31, 2007, 2006 and 2005, the Company recorded net health plan surplus (subsidy) of approximately $3,100, ($2,500) and $4,300, respectively, which decreased (increased) its cost of services and reserves for incurred but not reported claims.

10. HEALTH BENEFITS



        Blue Cross Blue Shield of Florida, Inc. and its subsidiary Health Options, Inc. (together "BCBSF/HOI") is the Company's primary healthcare partner
in Florida, delivering medical care benefits to approximately 21,000 Florida-based client employees. The Company's policy with BCBSF/HOI is a minimum premium policy expiring September 30, 2008.
Pursuant to this policy, the Company is obligated to reimburse BCBSF/HOI for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative
costs per covered client employee associated with this policy are specified by year and aggregate loss coverage is provided to the Company at the level of 110% of projected claims. The Company's
obligation to BCBSF/HOI under its current contract may require an irrevocable letter of credit ("LOC") in favor of BCBSF/HOI if the coverage ratio, as set forth in the BCBSF/HOI agreement, is not
maintained. The coverage ratio is calculated quarterly. If the Company's coverage ratio does not meet the minimum requirement, the Company must provide an LOC valued at up to two months of projected
claims (average monthly claims approximated $9,400 for the last twelve months). On February 25, 2008, the Company and BCBSF/HOI entered into the Second Amendment to Agreement to Provide
Comprehensive Health Care Benefits (the "Second Amendment") amending the Agreement to Provide Comprehensive Health Care Benefits, dated as of October 1, 2005, between the parties, restating the
definition of "Coverage Ratio" to exclude certain non-cash asset and goodwill impairment charges commencing with the fiscal quarter ending December 31, 2007. As of
December 31, 2007, the minimum coverage ratio was met and no LOC was required. If current trends continue, the Company will not be able to maintain the minimum coverage ratio through the end of
the current contract with BCBSF/HOI and will need to either seek modifications or provide an LOC as discussed above. If such modifications are not obtained or an LOC is required, this may have a
material impact on the Company's cash flow and ability to conduct its operations.



        Aetna
Health, Inc. ("Aetna") is the Company's largest medical care benefits provider for approximately 16,000 client employees outside the state of Florida. The Company's
2007/2008 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company's annual
liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement. Beginning in the 2007 plan year Aetna has agreed to eliminate the callable feature of the PPO plan that previously
existed and differences in actual plan experience versus projected plan experience for the year will factor into subsequent year rates.



F-23








GEVITY HR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in $000's, except share and per share data)




10. HEALTH BENEFITS (Continued)



        In
2006, the Company announced the addition of UnitedHealthcare as an additional health plan option. As of December 31, 2007, UnitedHealthcare provides medical care benefits to
approximately 5,000 client employees. The UnitedHealthcare plan is a fixed cost contract expiring September 30, 2008, that caps the Company's annual liability. Under the terms of the current
agreement with UnitedHealthcare, this plan is no longer offered as an option for new co-employed clients after July 1, 2007. Coverage through UnitedHealthcare will continue to be an
option for clients covered by UnitedHealthcare as of June 30, 2007.



        The
Company provides coverage under various regional medical benefit plans to approximately 1,000 client employees in various areas of the country. Included in the list of medical
benefit plan providers are Kaiser Foundation Health Plan, Inc. and Harvard Pilgrim Healthcare. These regional medical plans are subject to fixed cost contracts.



        The
Company's dental plans, which include both a PPO and HMO offering, are provided by Aetna for all client employees who elect coverage. All dental plans are subject to fixed cost
contracts that cap the Company's annual liability.



        In
addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment,
short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and a qualified transportation fringe benefit
program.



        Part-time
employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness and accident and dental insurance
programs, and a vision discount plan.



        Included
in accrued insurance premiums and health reserves at December 31, 2007 and December 31, 2006 are $10,356 and $13,066, respectively, of short-term
liabilities related to the Company's health benefit plans. Of these amounts $10,100 and $10,609, respectively, represent an accrual for the estimate of claims incurred but not reported at
December 31, 2007 and 2006.



        Health
benefit reserves are determined quarterly by the Company and include an estimate of claims incurred but not reported and claims reported but not yet paid. The calculation of these
reserves is based upon a number of factors, including but not limited to actuarial calculations, current and historical claims payment patterns, plan enrollment and medical trend rates.




        During
the years ended December 31, 2007, 2006 and 2005, the Company recorded net health plan surplus (subsidy) of approximately $3,100, ($2,500) and $4,300, respectively, which
decreased (increased) its cost of services and reserves for incurred but not reported claims.



This excerpt taken from the GVHR 10-Q filed Oct 27, 2005.

6.       HEALTH BENEFITS

        Blue Cross Blue Shield of Florida (“BCBSF”) is the Company’s primary healthcare provider in Florida, delivering medical care benefits to approximately 22,000 Florida-based client employees. The Company’s policy with BCBSF is a minimum premium policy expiring September 30, 2008. Pursuant to this policy, the Company is obligated to reimburse BCBSF for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified by year and the aggregate stop-loss coverage is provided to the Company at the level of 110% of projected claims for the plan year beginning October 1, 2005.

        The Company is required to pre-fund the estimated monthly expenses and claim liability charges of the plan by the first of each calendar month. The estimated monthly expenses are based upon the Minimum Premium Rate and the Annual Excess liability rate, as set forth in the agreement, times the number of insureds. The estimated claim liability charge is based upon expected claims for the annual contract period divided by 12. Differences between the pre-funded amounts and actual amounts subsequently determined shall be settled in the following month.

12

        The Company’s obligation to BCBSF may require an Irrevocable Letter of Credit (“LOC”) in favor of BCBSF if a certain Coverage Ratio, as set forth in the agreement, is not maintained. The Coverage Ratio is calculated quarterly. Calculation of a Coverage Ratio outside of the minimum requirement will require an LOC valued at up to two months of projected claims. As of September 30, 2005, the minimum coverage ratio was met and no LOC was required. Under the Company’s previous agreement with BCBSF, a $6,000 certificate of deposit was pledged as collateral for a standby LOC. This collateral was released by BCBSF and is no longer classified as restricted in the Company’s consolidated balance sheet as of September 30, 2005.

        Aetna is the primary medical care benefits provider for approximately 28,000 client employees throughout the remainder of the country. The Company’s 2005 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement whereby the PPO plan is subject to a 7.5% additional premium if actual claims are greater than projected at the inception of the policy year (maximum charge per year is 7.5% with carryover into subsequent years of amounts that exceed 7.5%). Beginning October 1, 2005, the Aetna additional premium has been reduced to 5.0%.

        The Company provides coverage under various regional medical benefit plans to approximately 2,000 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. in California, Health Partners (Minnesota) in Minnesota, Harvard Pilgrim Healthcare in Massachusetts and Capital Health Plans in the Tallahassee, Florida region. These regional plans are subject to fixed cost contracts that cap the Company’s liability.

        The Company’s dental plans, which include both a PPO and HMO offering, are primarily provided by Aetna for all client employees who elect coverage. All dental plans are subject to guaranteed cost contracts that cap the Company’s annual liability.

        In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and transportation costs.

        Beginning October 1, 2004, part-time employees of clients were eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness, accident and dental insurance programs, and a vision discount plan.

        Included in accrued insurance premiums, health and workers’ compensation insurance reserves at September 30, 2005 and December 31, 2004 are $14,638 and $18,831, respectively, of short-term liabilities related to the Company’s healthcare plans. Of these amounts, $14,145 and $14,580, respectively, represent an accrual for the estimate of claims incurred but not reported at September 30, 2005 and December 31, 2004. There were no long-term liabilities related to the Company’s health benefit plans at September 30, 2005 and December 31, 2004.

        Health benefit reserves are based primarily upon an annual independent actuarial estimate of claims incurred but not reported and for claims reported but not yet paid at year end, and a rollforward analysis by the Company at interim dates. The calculation of these reserves is based upon a number of factors, including current and historical claims payment patterns and medical trend rates.

13

This excerpt taken from the GVHR 10-Q filed Jul 28, 2005.

6. HEALTH BENEFITS

        Blue Cross Blue Shield of Florida (“BCBSFL”) is the Company’s primary healthcare provider in Florida, delivering medical care benefits to approximately 21,000 Florida-based client employees. The Company’s policy with BCBSFL is a minimum premium policy expiring September 30, 2005. Pursuant to this policy, the Company is obligated to reimburse BCBSFL for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified by year and the aggregate stop-loss coverage is provided to the Company at the level of 115% of projected claims. The Company’s obligation to BCBSFL related to incurred but not reported claims is secured by a letter of credit. As of June 30, 2005 and December 31, 2004, the amount of the letter of credit for BCBSFL securing such obligations was $6,000. The amount of the letter of credit was originally intended to approximate one month’s claims payments. The policy allows for an adjustment to the letter of credit amounts based on premium volume and for increases to the claims payment factor to a maximum of two months of expected claims payments. The Company is currently in negotiations with BCBSFL regarding the terms of the October 1, 2005 policy renewal.

        Aetna is the primary medical care benefits provider for approximately 26,000 client employees throughout the remainder of the country. The Company’s 2005 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement whereby the PPO plan is subject to a 7.5% additional premium if actual claims are greater than projected at the inception of the policy year (maximum charge per year is 7.5% with carryover into subsequent years of amounts that exceed 7.5%).

        The Company provides coverage under various regional medical benefit plans to approximately 1,800 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. in California, Health Partners (Minnesota) in Minnesota, Harvard Pilgrim Healthcare in Massachusetts and Capital Health Plans in the Tallahassee, Florida region. These regional plans are subject to fixed cost contracts that cap the Company’s liability.

        The Company’s dental plans, which include both a PPO and HMO offering, are primarily provided by Aetna for all client employees who elect coverage. All dental plans are subject to guaranteed cost contracts that cap the Company’s annual liability.

12

        In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and transportation costs.

        Beginning October 1, 2004, part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness, accident and dental insurance programs, and a vision discount plan.

        Included in accrued insurance premiums, health and workers’ compensation insurance reserves at June 30, 2005 and December 31, 2004 are $16,559 and $18,831, respectively, of short-term liabilities related to the Company’s healthcare plans. Of these amounts, $13,794 and $14,580, respectively, represent an accrual for the estimate of claims incurred but not reported at June 30, 2005 and December 31, 2004. There were no long-term liabilities related to the Company’s health benefit plans at June 30, 2005 and December 31, 2004.

        Health benefit reserves are based primarily upon an annual independent actuarial estimate of claims incurred but not reported and for claims reported but not yet paid at year end, and a rollforward analysis by the Company at interim dates. The calculation of these reserves is based upon a number of factors, including current and historical claims payment patterns and medical trend rates.

This excerpt taken from the GVHR 10-Q filed May 9, 2005.

6.       HEALTH BENEFITS

        Blue Cross Blue Shield of Florida (“BCBSFL”) is the Company’s primary healthcare provider in Florida, delivering medical care benefits to approximately 21,000 Florida-based client employees. The Company’s policy with BCBSFL is a minimum premium policy expiring September 30, 2005. Pursuant to this policy, the Company is obligated to reimburse BCBSFL for the cost of the claims incurred by participants under the plan, plus the cost of plan administration. The administrative costs per covered client employee associated with this policy are specified by year and the aggregate stop-loss coverage is provided to the Company at the level of 115% of projected claims. The Company’s obligation to BCBSFL related to incurred but not reported claims is secured by a letter of credit. As of March 31, 2005 and December 31, 2004, the amount of the letter of credit for BCBSFL securing such obligations was $6,000. The amount of the letter of credit was originally intended to approximate one month’s claims payments. The policy allows for an adjustment to the letter of credit amounts based on premium volume and for increases to the claims payment factor to a maximum of two months of expected claims payments.

        Aetna is the primary medical care benefits provider for approximately 26,000 client employees throughout the remainder of the country. The Company’s 2005 policy with Aetna provides for an HMO and PPO offering to plan participants. The Aetna HMO medical benefit plans are subject to a guaranteed cost contract that caps the Company’s annual liability. The Aetna PPO medical benefit plan is a retrospective funding arrangement whereby the PPO plan is subject to a 7.5% additional premium if actual claims are greater than projected at the inception of the policy year (maximum charge per year is 7.5% with carryover into subsequent years of amounts that exceed 7.5%).

        The Company provides coverage under various regional medical benefit plans to approximately 1,500 client employees in various areas of the country. Included in the list of medical benefit plan providers are Kaiser Foundation Health Plan, Inc. in California, Health Partners (Minnesota) in Minnesota, Harvard Pilgrim Healthcare in Massachusetts and Capital Health Plans in the Tallahassee, Florida region. These regional plans are subject to fixed cost contracts that cap the Company’s liability.

        The Company’s dental plans, which include both a PPO and HMO offering, are primarily provided by Aetna for all client employees who elect coverage. All dental plans are subject to guaranteed cost contracts that cap the Company’s annual liability.

        In addition to dental coverage, the Company offers various fixed cost insurance programs to client employees such as vision care, life, accidental death and dismemberment, short-term disability and long-term disability. The Company also offers a flexible spending account for healthcare, dependent care and transportation costs.

12

        Beginning October 1, 2004, part-time employees of clients are eligible to enroll in limited benefit programs from Star HRG. These plans include fixed cost sickness, accident and dental insurance programs, and a vision discount plan.

        Included in accrued insurance premiums, health and workers’ compensation insurance reserves at March 31, 2005 and December 31, 2004 are $18,326 and $18,831, respectively, of short-term liabilities related to the Company’s health care plans. Of these amounts $13,904 and $14,580, respectively, represent an accrual for the estimate of claims incurred but not reported at March 31, 2005 and December 31, 2004. There were no long-term liabilities related to the Company’s health benefit plans at March 31, 2005 and December 31, 2004.

        Health benefit reserves are based primarily upon an annual independent actuarial estimate of claims incurred but not reported and for claims reported but not yet paid at year end and a rollforward analysis by the Company at interim dates. The calculation of these reserves is based upon a number of factors, including current and historical claims payment patterns and medical trend rates.

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