June 14, Dear Mike: 2017 Underwriting Results - Employee Benefit Plans

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Samuel Collins
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1 ViiilEriTonton Services Department Human Resources Branch Edmonton City Centre West Phone: (780) Suite 300D, Avenue Fax No: (780) Edmonton, AB T5J 4B7 June 14, 2018 Mr. Mike Scott President Canadian Union of Public s Local Princess Elizabeth Avenue NW Ste 102 Edmonton, Alberta T5G 0Y5 Dear Mike: RE: 2017 Underwriting Results - Benefit Plans The Human Resources Branch has completed its annual financial review of the Supplementary Health Care, Dental, Group Life Insurance and Dependent Life Insurance Plans. For your information, attached is a financial statement for each Plan that shows the 2017 experience and the financial position of the Plan as at December 31, Underwriting Results Overall, the annual experience for 2017 was not favorable. All Plans except supplemental health had negative experience results with expenses exceeding income. Dental and Group Life Insurance will see an increase in the premium rates. Supplemental Health and Dependent Life Insurance premium rates will remain the same. The premium changes will be reflected on employees' July 17, 2018 pay advice, At the same time, changes will also be made to the premiums paid by the City. Premium information by Plan is provided below. Supplementary Health Care The 2017 experience under the.plan was positive with income exceeding expenses by $375,039. The Claims Fluctuation Reserve (CFR) was fully funded and the year-end fund balance was in surplus position of $325,633. Overall CUPE experienced a total supplemental health cost increase of 0.65%. Prescription drugs experienced a decrease in costs primarily due to a decrease in usage of the expensive specialty drugs. Two of the specialty medications affecting CUPE's drug costs are anti-inflammatory drugs primarily used for arthritis (Remicade and Humira) experienced a decrease in costs ($64,550) and usage (80 less claims) of these medications. Offsetting this decrease was an increase in the cost of Hepatitis C medication primarily because of an increase in usage. In 2017, the number of claimants using these three high cost drugs, accounted for only 0.62% of the total usage but accounted for over 20% of the total drug cost. As the 2017 healthcare fund ended the year with the year-end fund balance in a surplus position, the Plan is expected to maintain a financially viable position in For this reason, the current premium rate will decrease.

2 2017 Underwriting Results for the Benefit Plans Page 2 Effective June 24, 2018 the bi-weekly rate will be as follows: Decrease Effective June 24, 2018 Employer Total Employer Total (30%) (70%) (100%) (30%) (70%) (100%) Single $11.21 $26.15 $37.36 $10.65 $ $35.49 Family $22.40 $52.26 $74.66 $21.28 $49.65 $70.93 Dental The Plan's 2017 annual experience was not positive in that expenses exceeded income by $179,178. The CFR was fully funded but the year end fund balance was in a deficit position of $61,790. The overall dental expenses increased by just over 1% as compared to Fixed prosthodontics experienced the greatest increase of almost 38%. This is the replacement of teeth in the form of implants, crowns and bridges or the process used to make your teeth look better by the help of veneers. The annual experience is projected to be unfavorable in 2018 so a premium increase will be implemented. With the implementation of a provincial dental fee guide, costs are anticipated to remain at status quo or begin to see a decline. With a fully funded CFR and the anticipated decline in dental expenses, the small premium increase is expected to bring the Plan back to a positive fund balance within the next few years. Effective June 24, 2018 the bi-weekly rate will be as follows: Increase Effective June 24, 2018 Employer Total Employer Total (30%) (70%) (100%) (30%) (70%) (100%) Single $10.42 $19.35 $29.77 $10.94 $20.33 $31.27 Family $26.05 $48.38 $74.43 $27.36 $50.80 $78.16 Group Life The experience under the Plan was unfavorable as expenses exceeded income by $389,863. The Plan ended the year with a deficit in the Group Life fund balance of $850,502. The Plan's experience over the last five years until 2017 was approximately seven death claims per year at approximately $122,000 per benefit claim. In 2017 the Plan experienced nine death claims at approximately $138,300 per claim. The dollar magnitude of potential death claims is always a concern for a plan of relatively small size such as the CUPE30 Group Life Insurance plan. As the Plan is in a deficit positon, a rate increase is required to ensure the Plan's financial viability is returned.

3 2017 Underwriting Results for the Benefit Plans Page 3 Effective June 24, 2018, the bi-weekly rate per $1,000 will be as follows: Increase Effective June 24, 2018 Employer Employer Dependent Life $0.075 $0.075 $0.12 $0.12 The Plan's experience was not favorable with expenses exceeding income by $5,774. The Plan ended the year with a fund balance of $110,358. Although there is a concern with the small group size and the magnitude of risk associated with this type of plan, this risk is minimized by the actual experience over the past ten years. The annual average number of death claims is three and the average total claim payout is approximately $9,000. Based on projected death claims and the positive year-end fund balance, the current premium rate will remain the same. Effective June 24, 2018 the bi-weekly rate will be as follows: $0.75 No Change Effective June 24, 2017 $0.75 Communication of Premium Rate Changes The Human Resources Branch will communicate the premium changes to employees on onecity and Benefit Changes page. Mike, please call me at if you wish to discuss the results of the financial review. Yours truly, Lorraine Wohland Sr. Benefits Planner Attachments c: Mark Beliveau

4 Canadian Union of Public s (CUPE) Supplementary Health Care Plan Statement of,, Reserve, Surplus and Proposed 2018 Rates Projected Contributions $3,106,729 $2,765,261 Interest $2,855 $9,600 Total $3,109,584 $2,774,861 Claims (paid and outstanding) $2,641,169 $2,868,045 Blue Cross Administration Fee $92,769 $99,521 External Audit $607 $700 Total $2,734,545 $2,968,266 Annual Experience Result $375,039 ($193,405) Claims Fluctuation Reserve (CFR) CFR Balance - beginning of year $426,900 $396,175 CFR Transfer at Year end ($30,700) $34,031 CFR Balance End of Year $396,200 $430,207 Required CFR - 15% of annual claims $396,175 $430,207 CFR Balance to be Funded ($25) $0 Supplemental Health Care (SHC) Fund Balance SHC Fund Balance - beginning of Year ($80,106) $325,633 Annual Experience Results $375,039 ($193,405) Claims Fluctuation Reserve Transfer $30,700 ($34,031) SHC Fund Balance - End of Year $325,633 $98,197 Biweekly Contribution Rates (30%EE/70 /0 ER) Proposed Dependent Dependent Proposed Rates Single Rates Rates Single Rates City $52.26 $26.15 $49.65 $24.84 s $22.40 $11.21 $21.28 $10.65 Total $74.66 $37 36 $70.93 $35.49

5 Canadian Union of Public s (CUPE) Dental Plan Statement of,, Reserve, Surplus and Proposed 2018 Rates Projected Contributions $2,889,237 $2,936,393 Interest $3,802 $7,300 Total $2,893,039 $2,943,693 Claims (paid and outstanding) $2,968,574 $2,968,574 Blue Cross Administration Fee $103,021 $103,010 External Audit $622 $633 Total $3,072,217 $3,072,217 Annual Experience Result ($179,178) ($128,524) Claims Fluctuation Reserve (CFR) CFR Balance - beginning of year $440,700 $445,286 CFR Transfer at Year end $4,600 $0 CFR Balance End of Year $445,300 $445,286 Required CFR - 15% of annual claims $445,286 $445,286 CFR Balance to be Funded ($14) $0 Supplemental Health Care (SHC) Fund Balance SHC Fund Balance - beginning of Year $121,988 ($61,790) Annual Experience Results ($179,178) ($128,524) Claims Fluctuation Reserve Transfer ($4,600) $0 SHC Fund Balance - End of Year ($61,790) ($190,314) Biweekly Contribution Rates (35V0EE/65% ER) Proposed Dependent Dependent Proposed Rates Single Rates Rates Single Rates City $48.38 $19.36 $50.80 $20.33 s $26.05 $10.42 $27.36 $10.94 Total $74.43 $29.78 $78.16 $31.27

6 Canadian Union of Public s Local 30 Group Life Plan Statement of,, Reserve, and Surplus For the year ending December 31, 2017 Premium 924,659 Interest 13,407 Total 911,252 Death Claims (9) 1,245,000 Death claims paid by Great West Life (stop loss provision) 0 Death claims paid by Great West Life (high amount pooling) 0 2% premium taxes 39,627 Conversion charge 18,975 Stop Loss pooling charge 13,490 Individual high amount pooling charge 35 Great West Life administration 13,363 External audit fees 625 Total 1,331,115 Claims Fluctuation Reserve Reserve as at December 31, ,000 Reserve as at January 01, ,000 Increase in claims fluctuation reserve (30,000) Annual Experience Result (389,863) GL Fund Balance GL Fund Balance - beginning of year (460,639) Annual experience result (389,8631 GL Fund Deficit - end of year (850,5021 Total assets available for Benefits (628,502)

7 Canadian Union of Public s Local 30 Dependent Group Life Plan Statement of,, Reserve, and Fund Balance For the year ending December 31, 2017 Premium 26,359 Interest 1,278 Total 27,637 Death claims (3) 30,000 Death claims paid by Great West Life (stop loss provision) 0 Conversion charge 0 2% premium taxes 964 Stop Loss pooling charge 720 Great West Life administration 1,167 External audit fees 560 Total 33,411 Claims Fluctuation Reserve Reserve as at December 31, ,000 Less reserve at January 1, ,000 Increase in Claims Fluctuation Reserve Annual Experience Result (5,774) DLI Fund Balance DLI Fund Balance - beginning of year 116,132 Annual experience result (5,774) DLI Fund Balance - end of year 110,358 Total assets available for Benefits 135,358

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