þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Delaware | 76-0479645 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
19001 Crescent Springs Drive | ||
Kingwood, Texas | 77339 | |
(Address of principal executive offices) | (Zip Code) |
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(in thousands)
June 30,
December 31,
2005
2004
(Unaudited)
$
140,241
$
81,740
22,138
18,511
27,921
27,950
1,004
610
76,011
65,149
1,154
1,451
11,582
14,428
4,439
4,731
2,576
489
184
287,250
215,059
2,920
2,920
57,204
57,005
53,266
50,765
18,677
18,622
28,484
28,412
5,564
5,725
166,115
163,449
(100,776
)
(94,392
)
65,339
69,057
11,000
919
18,329
48,814
52,264
1,197
679
61,930
71,272
$
414,519
$
355,388
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(in thousands)
June 30,
December 31,
2005
2004
(Unaudited)
$
1,685
$
3,130
59,917
64,471
103,243
59,277
2,398
1,991
24,124
19,349
18,093
17,461
231
1,674
1,649
211,134
167,559
34,045
34,890
29,064
22,912
2,511
3,498
65,620
61,300
309
309
104,568
101,623
(3,813
)
(60,019
)
(63,925
)
(182
)
(127
)
96,902
88,649
137,765
126,529
$
414,519
$
355,388
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(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2005
2004
2005
2004
$
279,884
$
232,892
$
578,860
$
484,939
223,549
184,347
468,497
386,360
56,335
48,545
110,363
98,579
24,634
21,083
47,965
43,382
367
1,405
12,818
12,916
26,601
24,681
2,488
2,778
4,852
5,322
1,524
2,699
4,399
4,408
3,649
4,570
7,406
9,121
45,480
44,046
92,628
86,914
10,855
4,499
17,735
11,665
1,330
648
2,452
1,014
(571
)
(522
)
(1,115
)
(1,049
)
6
22
(13
)
8,286
11,620
4,647
19,059
19,916
4,336
1,836
7,185
7,867
$
7,284
$
2,811
$
11,874
$
12,049
$
0.28
$
0.11
$
0.46
$
0.45
$
0.28
$
0.10
$
0.45
$
0.44
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SIX MONTHS ENDED JUNE 30, 2005
(in thousands)
(Unaudited)
Accumulated
Common Stock
Additional
Deferred
Other
Issued
Paid-In
Compensation
Treasury
Comprehensive
Retained
Shares
Amount
Capital
Expense
Stock
Income (Loss)
Earnings
Total
30,839
$
309
$
101,623
$
$
(63,925
)
$
(127
)
$
88,649
$
126,529
(9,276
)
(9,276
)
(1,191
)
9,399
8,208
2,399
2,399
34
172
206
885
(4,431
)
3,546
615
615
790
790
28
3
65
96
(3,621
)
(3,621
)
(55
)
(55
)
11,874
11,874
11,819
30,839
$
309
$
104,568
$
(3,813
)
$
(60,019
)
$
(182
)
$
96,902
$
137,765
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(in thousands)
(Unaudited)
Six Months Ended
June 30,
2005
2004
$
11,874
$
12,049
7,553
9,212
1,405
328
203
(1,368
)
1,078
14
24
(3,627
)
(6,392
)
(11,287
)
(28,698
)
(6,939
)
12,007
442
4,847
20,732
(16,756
)
(1,445
)
(2,987
)
(4,554
)
(20,029
)
43,966
20,889
(808
)
(5,905
)
10,928
15,195
631
(2,102
)
312
(7,250
)
56,283
(26,664
)
68,157
(14,615
)
(1,752
)
(16,796
)
453
1,606
12,797
(600
)
(3,778
)
(2,689
)
75
134
(4,449
)
(6,101
)
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(in thousands)
(Unaudited)
Six Months Ended
June 30,
2005
2004
$
(9,276
)
$
(8,278
)
(3,621
)
(820
)
(924
)
8,208
763
206
248
96
81
(5,207
)
(8,110
)
58,501
(28,826
)
81,740
104,728
$
140,241
$
75,902
$
8,528
$
14,234
$
1,056
$
984
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June 30, 2005
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Three Months Ended
Six Months Ended
June 30,
June 30,
2005
2004
2005
2004
(in thousands)
(in thousands)
$
7,284
$
2,811
$
11,874
$
12,049
(215
)
(697
)
(506
)
(1,323
)
$
7,069
$
2,114
$
11,368
$
10,726
$
0.28
$
0.11
$
0.46
$
0.45
$
0.27
$
0.08
$
0.44
$
0.40
$
0.28
$
0.10
$
0.45
$
0.44
$
0.27
$
0.08
$
0.43
$
0.39
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$
41,423
20,220
(2,282
)
(8,159
)
$
51,202
$
22,138
29,064
$
51,202
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Three Months Ended
Six Months Ended
June 30,
June 30,
2005
2004
2005
2004
25,739
26,418
25,694
26,530
668
894
550
920
26,407
27,312
26,244
27,450
1,808
3,458
2,914
3,773
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Benefits costs
We provide health insurance coverage to our worksite employees through a
national network of carriers including UnitedHealthcare (United), Cigna Healthcare,
PacifiCare, Kaiser Permanente, Blue Cross and Blue Shield of Georgia, Blue Shield of
California and Tufts, all of which provide fully insured policies or service contracts.
The policy with United, which was first obtained in January 2002, provides the majority of our
health insurance coverage. As a result of certain contractual terms, we have accounted for this
plan since its inception using a partially self-funded insurance accounting model. Accordingly,
we record the costs of the United Plan, including an estimate of the incurred claims, taxes and
administrative fees (collectively the Plan Costs), as benefits expense in the Consolidated
Statements of Operations. The estimated incurred claims are based upon: (i) the level of claims
processed during the quarter; (ii) recent claim development patterns under the plan; and (iii)
the number of participants in the plan. Each reporting period, changes in the estimated
ultimate costs resulting from changes in the actual claims experience and other trends are
incorporated into the benefits costs estimates.
Additionally, since the plans inception in January 2002, under the terms of the contract,
United establishes cash funding rates 90 days in advance of the beginning of a reporting
quarter. If the Plan Costs for a reporting quarter are greater than the cash funded to United,
a deficit in the plan would be incurred and we would accrue a liability for the excess costs on
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our Consolidated Balance Sheet. On the other hand, if the Plan Costs for the reporting quarter
are less than the cash funded to United, a surplus in the plan would be incurred and we would
record an asset for the excess premiums on our Consolidated Balance Sheet.
In 2005, Administaff and United entered into a new three-year arrangement, whereby a previous
contractual requirement to maintain a security deposit with United was eliminated. Accordingly,
the outstanding security deposit at December 31, 2004 of $17.5 million was returned to
Administaff during the quarter ended June 30, 2005. The terms of the new arrangement also
require Administaff to maintain an accumulated cash surplus in the plan of $11 million, which
was the balance of the accumulated surplus at December 31, 2004, and is now reported as
long-term prepaid insurance. During the six months ended June, 2005, Plan Costs were less than
the net cash funded to United by $8.9 million. As this amount is in excess of the agreed-upon
$11 million surplus maintenance level, the $8.9 million balance is reported as prepaid
insurance, a current asset, on the Companys Consolidated Balance Sheet.
State unemployment taxes
We record our state unemployment (SUI) tax expense based on
taxable wages and tax rates assigned by each state. State unemployment tax rates vary by
state and are determined, in part, based on prior years compensation experience in each
state. Prior to the receipt of final tax rate notices, we estimate our expected SUI tax rate
in those states for which tax rate notices have not yet been received.
In December 2001, as a result of the 2001 corporate reorganization, we filed for a transfer of
our reserve account with the Employment Development Department of the State of California
(EDD). The EDD approved our request for transfer of our reserve account in May 2002, and
notified us of our new contribution rates based upon the approved transfer. In December 2003,
we received a Notice of Duplicate Accounts and Notification of Assessment (Notice) from the
Employment Development Department of the State of California (EDD). The Notice stated that
the EDD was collapsing the accounts of Administaffs subsidiaries into the account of the entity
with the highest unemployment tax rate. The Notice also retroactively imposed the higher
unemployment insurance rate on all our California employees for 2003, resulting in an assessment
of $5.6 million. In January 2004, we filed a petition with an administrative law judge of the
California Unemployment Insurance Appeals Board (ALJ) to protest the Notice. Pending a
resolution of our protest, in the fourth quarter of 2003 we accrued and recorded at the higher
assessed rate for all of 2003.
In June 2004, we agreed to settle our dispute with the EDD for $3.3 million (Settlement).
Based upon receipt of written acknowledgement of this agreement, we reduced our accrued payroll
tax liability and payroll tax expense by $2.3 million during the quarter ended June 30, 2004.
The Settlement was subject to the final approval by EDDs legal department, the California
Attorney Generals office and the ALJ. In October 2004, the legal department of the EDD
verbally indicated they considered the previously agreed-upon settlement amount to be
insufficient and suggested a settlement amount of $5.2 million. We continued discussions with
the State of California, but in February 2005, we were notified that the EDD had
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rejected our settlement offer and that the matter will proceed with the appeals process with the
ALJ. If the outcome of the appeals process is unfavorable and we are assessed additional
interest and penalties, we may recognize an increase in our payroll tax expense in a future
period. Conversely, if the outcome of the appeals process is favorable to us, we may recognize
a decrease in our payroll tax expense in a future period.
Workers compensation costs
On September 1, 2003, we obtained a workers compensation
policy (2004 Policy), which matured and was subsequently renewed on September 16, 2004 for
the period ending September 30, 2005 (2005 Policy). The policies are with selected member
insurance companies of American International Group, Inc. (AIG). Under our arrangement with
AIG, we bear the economic burden for the first $1 million layer of claims per occurrence. AIG
bears the economic burden for all claims in excess of such first $1 million layer. The
policies are fully insured whereby AIG has the responsibility to pay all claims incurred under
the policies regardless of whether we satisfy our responsibilities.
Because we bear the economic burden of the first $1 million layer of claims per occurrence, such
claims, which are the primary component of our workers compensation costs, are recorded in the
period incurred. Workers compensation insurance includes ongoing healthcare and indemnity
coverage whereby claims are paid over numerous years following the date of injury. Accordingly,
the accrual of related incurred costs in each reporting period includes estimates, which take
into account the ongoing development of claims and therefore requires a significant level of
judgment. Our management estimates our workers compensation costs by applying an aggregate
loss development rate to worksite employee payroll levels.
We employ a third party actuary to estimate our loss development rate, which is primarily based
upon the nature of worksite employees job responsibilities, the location of worksite employees,
the historical frequency and severity of workers compensation claims, and an estimate of future
cost trends. Each reporting period, changes in the actuarial assumptions resulting from changes
in actual claims experience and other trends are incorporated into the Companys workers
compensation claims cost estimates. Workers compensation cost estimates are discounted to
present value at a rate based upon the U.S. Treasury rates that correspond with the weighted
average estimated claim payout period (the average discount rate utilized in 2005 and 2004 was
3.5% and 2.5%, respectively) and are accreted over the estimated claim payment period and
included as a component of direct costs in our Consolidated Statements of Operations.
Contingent liabilities
We accrue and disclose contingent liabilities in our consolidated
financial statements in accordance with Statement of Financial Accounting Standards (SFAS)
No. 5,
Accounting for Contingencies
. SFAS No. 5 requires accrual of contingent liabilities
that are considered probable to occur and can be reasonably estimated. For contingent
liabilities that are considered reasonably possible to occur, financial statement disclosure
is required, including the range of possible loss if it can be reasonably determined. We have
disclosed in our financial statements several issues that we believe are reasonably
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possible to occur, although we cannot determine the range of possible loss in all cases. As
these issues develop, we will continue to evaluate the probability of future loss and the
potential range of such losses. If such evaluation were to determine that a loss was probable
and the loss could be reasonably estimated, we would be required to accrue our estimated loss,
which would reduce net income in the period such determination was made.
Deferred taxes
We have recorded a valuation allowance to reduce
our deferred tax assets to the amount that is more likely than not
to be realized. While we have considered future taxable income
and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, our ability to
realize our deferred tax assets could change from our current
estimates. If we determine we will be able to realize our
deferred tax assets in the future in excess of our net recorded
amount, an adjustment to reduce the valuation allowance would
increase net income in the period that such determination is made.
Likewise, should we determine we will not be able to realize all
or part of our net deferred tax assets in the future, an
adjustment to increase the valuation allowance would reduce net
income in the period such determination is made.
Allowance for doubtful accounts
We maintain an allowance for
doubtful accounts for estimated losses resulting from the
inability of our clients to pay our comprehensive service fees.
We believe the success of our business is heavily dependent on our
ability to collect these comprehensive service fees for several
reasons, including:
the fact that we are at risk for the payment of our direct costs and worksite
employee payroll costs regardless of whether our clients pay their comprehensive
service fees;
the large volume and dollar amount of transactions we process; and
the periodic and recurring nature of payroll, upon which the comprehensive service
fees are based.
To mitigate this risk, we have established very tight credit policies. We generally require our
clients to pay their comprehensive service fees no later than one day prior to the applicable
payroll date. In addition, we maintain the right to terminate our Client Service Agreement and
associated worksite employees or to require prepayment, letters of credit or other collateral
upon deterioration in a clients financial position or upon nonpayment by a client. As a result
of these efforts, losses related to client nonpayment have historically been low as a percentage
of revenues. However, if our clients financial condition were to deteriorate rapidly,
resulting in nonpayment, our accounts receivable balances could grow and we could be required to
provide for additional allowances, which would decrease net income in the period that such
determination was made.
Property and equipment
Our property and equipment relate primarily to our facilities and
related improvements, furniture and fixtures, computer hardware and software and capitalized
software development costs. These costs are depreciated or amortized over the estimated
useful lives of the assets. If the useful lives of these assets were determined to be shorter
than their current estimates, our depreciation and amortization expense could be accelerated,
which would decrease net income in the periods of such a determination. In
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addition, we periodically evaluate these costs for impairment in accordance with SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets
. If events or circumstances were to
indicate that any of our long-lived assets might be impaired, we would analyze the estimated
undiscounted future cash flows to be generated from the applicable asset. In addition, we would
record an impairment loss, which would reduce net income, to the extent the carrying value of
the asset exceeded the fair value of the asset. Fair value is generally determined using an
estimate of discounted future net cash flows from operating activities or upon disposal of the
asset.
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Three months ended
June 30,
2005
2004
% Change
(in thousands, except per share and statistical data)
$
279,884
$
232,892
20.2
%
56,335
48,545
16.0
%
45,480
44,046
3.3
%
10,855
4,499
141.3
%
765
148
416.9
%
7,284
2,811
159.1
%
0.28
0.10
180.0
%
86,868
77,209
12.5
%
$
1,074
$
1,005
6.9
%
216
210
2.9
%
175
190
(7.9
)%
42
19
121.1
%
28
12
133.3
%
(1)
Gross billings of $5,983 and $5,413 per worksite employee per month less payroll
cost of $4,909 and $4,408 per worksite employee per month, respectively.
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Three months ended June 30,
Three months ended June 30,
2005
2004
% Change
2005
2004
(in thousands)
(% of total revenues)
$
42,666
$
31,039
37.5
%
15.2
%
13.3
%
24,157
22,021
9.7
%
8.6
%
9.5
%
35,967
33,466
7.5
%
12.9
%
14.4
%
110,474
92,485
19.5
%
39.5
%
39.7
%
64,918
52,270
24.2
%
23.2
%
22.4
%
1,702
1,611
5.6
%
0.6
%
0.7
%
$
279,884
$
232,892
20.2
%
100.0
%
100.0
%
Payroll tax costs
Payroll taxes increased $45 per worksite
employee per month compared to the second quarter of 2004. The
overall cost of payroll taxes as a percentage of payroll cost
increased to 7.56% in the 2005 period from 7.41% in the 2004
period. During the 2004 period, payroll tax expense included a
$2.3 million credit, or 0.23% as a percentage of payroll costs,
related to a state unemployment tax matter with the State of
California. Please read Critical Accounting Policies and
Estimates State Unemployment Taxes on page 18 for a discussion
of our accounting for state unemployment taxes.
Benefits costs
The cost of health insurance and related employee
benefits increased $17 per worksite employee per month over the
second quarter of 2004. This increase is due to a 1.7% increase
in the cost per covered employee and an increase in the percentage
of worksite employees covered under our health insurance plans to
72.1% in the 2005 period from 70.2% in the 2004 period. The
increase in the 2005 period was partially offset by a $2.6
million, or $10 per worksite employee per month, administrative
fee credit from UHC related to the new
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three-year health insurance agreement signed during the second quarter of 2005. Please read
Critical Accounting Policies and Estimates Benefits Costs on page 17 for a discussion of our
accounting for health insurance costs.
Workers compensation costs
Workers compensation costs decreased $2 per worksite
employee per month compared to the second quarter of 2004. As a percentage of non-bonus
payroll cost, workers compensation costs decreased to 1.19% in the 2005 period from 1.34% in
the 2004 period as a result of favorable trends in both the frequency and severity of workers
compensation claims. Please read Critical Accounting Policies and Estimates Workers
Compensation Costs on page 19 for a discussion of our accounting for workers compensation
costs.
Three months ended June 30,
Three months ended June 30,
2005
2004
% change
2005
2004
% change
(in thousands)
(per worksite employee per month)
$
24,634
$
21,083
16.8
%
$
95
$
91
4.4
%
367
1
12,818
12,916
(0.8
)%
49
56
(12.5
)%
2,488
2,778
(10.4
)%
10
12
(16.7
)%
1,524
2,699
(43.5
)%
6
11
(45.5
)%
3,649
4,570
(20.2
)%
14
20
(30.0
)%
$
45,480
$
44,046
3.3
%
$
175
$
190
(7.9
)%
Salaries, wages and payroll taxes of corporate and sales staff
increased 16.8%, or $4 per worksite employee per month, compared
to the 2004 period. The increase was primarily due to a $2.7
million increase in incentive compensation expense based upon the
current forecast of improved operating results for the year. The
overall headcount remained flat as compared to 2004.
Stock-based compensation expense of $367,000 or $1 per worksite
employee per month was related to the amortization of the
compensation expense associated with the February 2005 restricted
stock grant. Please read Note 3 to the consolidated financial
statements on page 13 for additional information.
General and administrative expenses decreased 0.8%, or $7 per
worksite employee per month, compared to the second quarter of
2004. This decrease per worksite employee per
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month was primarily due to the increase in the average number of worksite employees paid per
month.
Commissions expense decreased 10.4%, or $2 per worksite employee
per month, compared to the 2004 period, due to the termination of
the American Express Marketing Agreement at the end of 2004.
Advertising costs decreased 43.5% or $5 per worksite employee per
month, compared to the second quarter of 2004, due primarily to a
shift in the spring advertising campaign to the first quarter of
2005 compared to the second quarter in 2004.
Depreciation and amortization expense decreased 20.2%, or $6 per
worksite employee per month, compared to the 2004 period as the
effect of certain fixed assets becoming fully amortized more than
offset the incremental depreciation and amortization expense
related to the 2005 capital additions.
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Six months ended
June 30,
2005
2004
% Change
(in thousands, except per share and statistical data)
$
578,860
$
484,939
19.4
%
110,363
98,579
12.0
%
92,628
86,914
6.6
%
17,735
11,665
52.0
%
1,324
8,251
(84.0
)%
11,874
12,049
(1.5
)%
0.45
0.44
2.3
%
85,298
76,001
12.2
%
$
1,131
$
1,063
6.4
%
216
216
181
191
(5.2
)%
35
26
34.6
%
23
26
(11.5
)%
(1)
Gross billings of $6,122 and $5,566 per worksite employee per month less payroll
cost of $4,991 and $4,503 per worksite employee per month, respectively.
Six months ended June 30,
Six months ended June 30,
2005
2004
% Change
2005
2004
(in thousands)
(% of total revenues)
$
87,230
$
66,606
31.0
%
15.1
%
13.7
%
50,057
46,074
8.6
%
8.6
%
9.5
%
77,001
70,771
8.8
%
13.3
%
14.6
%
225,333
189,284
19.0
%
38.9
%
39.0
%
135,746
109,256
24.2
%
23.5
%
22.6
%
3,493
2,948
18.5
%
0.6
%
0.6
%
$
578,860
$
484,939
19.4
%
100.0
%
100.0
%
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Payroll tax costs
Payroll taxes increased $44 per worksite
employee per month compared to the first half of 2004. The
overall cost of payroll taxes as a percentage of payroll cost
increased in the 2005 period to 8.52% from 8.46% in the 2004
period. During the 2004 period, payroll tax expense included a
$2.3 million credit, or 0.11% as a percentage of payroll costs,
related to a state unemployment tax matter with the State of
California. Please read Critical Accounting Policies and
Estimates State Unemployment Taxes on page 18 for a discussion
of our accounting for state unemployment taxes.
Benefits costs
The cost of health insurance and related employee
benefits increased $27 per worksite employee per month over the
first half of 2004. This increase is due to a 4.2% increase in
the cost per covered employee and an increase in the percentage of
worksite employees covered under our health insurance plans to
72.4% in the 2005 period from 70.7% in the 2004 period. The
increase in the 2005 period was partially offset by a $2.6
million, or $5 per worksite employee per month, administrative fee
credit from UHC related to the new three-year health insurance
agreement signed during the second quarter of 2005. Please read
Critical Accounting Policies and Estimates Benefits Costs on
page 17 for a discussion of our accounting for health insurance
costs.
Workers compensation costs
Workers compensation costs
decreased $4 per worksite employee per month compared to the first
half of 2004. As a percentage of non-bonus payroll cost, workers
compensation costs decreased to 1.16% in the 2005 period from
1.35% in the 2004 period as a result of favorable trends in both
the frequency and severity of workers compensation claims.
Please read Critical Accounting Policies and Estimates Workers
Compensation Costs on page 19 for a discussion of our accounting
for workers compensation costs.
Table of Contents
Six months ended June 30,
Six months ended June 30,
2005
2004
% change
2005
2004
% change
(in thousands)
(per worksite employee per month)
$
47,965
$
43,382
10.6
%
$
94
$
95
(1.1
)%
1,405
3
26,601
24,681
7.8
%
52
54
(3.7
)%
4,852
5,322
(8.8
)%
9
12
(25.0
)%
4,399
4,408
(0.2
)%
9
10
(10.0
)%
7,406
9,121
(18.8
)%
14
20
(30.0
)%
$
92,628
$
86,914
6.6
%
$
181
$
191
(5.2
)%
Salaries, wages and payroll taxes of corporate and sales staff
increased 10.6%, but decreased $1 per worksite employee per month,
compared to the 2004 period. The increase in total dollars was
primarily due to a $3.6 million increase in incentive compensation
expense based upon the current forecast of improved operating
results for the year. The overall corporate headcount remained
flat in the 2005 period as compared to 2004.
Stock-based compensation expense of $1.4 million or $3 per
worksite employee per month was a result of: (i) $790,000 related
to the acceleration of stock option vesting during the first
quarter of 2005; and (ii) $615,000 related to the amortization of
deferred compensation expense associated with the February 2005
restricted stock grant. Please read Note 3 to the consolidated
financial statements on page 13 for additional information.
General and administrative expenses increased 7.8%, due primarily
to increases in: (i) professional fees such as accounting,
consulting and recruiting; and (ii) repairs and maintenance costs,
but decreased $2 per worksite employee per month compared to the
first half of 2004.
Commissions expense decreased 8.8%, or $3 per worksite employee
per month, compared to the 2004 period, due to the termination of
the American Express Marketing Agreement at the end of 2004,
partially offset by an increase in commissions paid to Administaff
sales representatives.
Advertising costs decreased 0.2% or $1 per worksite employee per
month, compared to the first half of 2004.
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Depreciation and amortization expense decreased 18.8%, or $6 per
worksite employee per month, compared to the 2004 period, as the
effect of certain fixed assets becoming fully amortized more than
offset the incremental depreciation and amortization expense
related to the 2005 capital additions.
Table of Contents
Three months ended
Six months ended
June 30,
June 30,
2005
2004
Change
2005
2004
Change
$
1,279,197
$
1,020,997
25.3
%
$
2,554,525
$
2,053,287
24.4
%
87,760
52,099
68.4
%
231,575
149,270
55.1
%
$
1,191,437
$
968,898
23.0
%
$
2,322,950
$
1,904,017
22.0
%
$
4,909
$
4,408
11.4
%
$
4,991
$
4,503
10.8
%
337
225
49.8
%
452
327
38.2
%
$
4,572
$
4,183
9.3
%
$
4,539
$
4,176
8.7
%
Timing of customer payments / payrolls
We typically collect our comprehensive
service fee, along with the clients payroll funding, from clients at least one day prior
to the payment of worksite employee payrolls. Therefore, the date of the last day of a
reporting period has a substantial impact on our reporting of operating cash flows. For
example,
Table of Contents
many worksite employees are paid on Fridays; therefore, operating cash flows decline in the
reporting periods that end on a Friday, such as in December 2004, when client prepayments
were $11.2 million and accrued worksite employee payroll was $59.3 million. However, for
those reporting periods that end on a Thursday, such as in June 2005, when customer
prepayments were $51.7 million and accrued worksite employee payroll was $103.2 million, our
cash flows are higher due to the collection of the comprehensive service fee and clients
payroll funding prior to processing the large number worksite employees payrolls one day
subsequent to quarter-end.
Medical plan funding
Our healthcare contract with United establishes participant cash
funding rates 90 days in advance of the beginning of a reporting quarter. Therefore,
changes in the participation level of the United Plan have a direct impact on our operating
cash flows. In addition, changes to the funding rates, which are solely determined by
United based primarily upon recent claim history and anticipated cost trends, also have a
significant impact on our operating cash flows. Since inception of the United Plan in
January 2002, cash funded to United has exceeded Plan Costs, resulting in a $19.9 million
surplus, $8.9 million of which is reflected as a current asset, and $11.0 million of which
is reflected as a long-term asset on our Consolidated Balance Sheet at June 30, 2005.
Additionally, the $17.5 million included in long-term deposits on the Consolidated Balance
Sheet at December 31, 2004, was returned to Administaff in the quarter ended June 30, 2005.
Workers compensation plan funding
Under our arrangement with AIG, we make monthly
payments to AIG comprised of premium costs and funds to be set aside for payment of future
claims (claim funds). These pre-determined amounts are stipulated in our agreement with
AIG, and are based primarily on anticipated worksite employee payroll levels and workers
compensation loss rates during the policy year. Changes in payroll levels from that which
was anticipated in the arrangement with AIG can result in changes in the amount of the cash
payments to AIG, which will impact our reporting of operating cash flows. Our claim funds
paid to AIG, based upon anticipated worksite employee payroll levels and workers
compensation loss rates, were $24.3 million, less claims paid of $8.2 million, in 2005 and
$25.2 million, less claims paid of $3.8 million, for the 2004 period. This compares to our
estimate of workers compensation loss costs of $17.9 million and $18.7 million in 2005 and
2004, respectively. Additionally, in the period ended June 30, 2005, Administaff received
$16.8 million from AIG for the return of excess funding related to the 2003-2004 policy.
Operating results
Our net income has a significant impact on our operating cash flows.
Our net income remained relatively flat in 2005 compared to 2004. Please read
Results of
Operations Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
on
page 26.
Table of Contents
Table of Contents
Table of Contents
- 34 -
- 35 -
- 36 -
Total Number
of Shares
Purchased as
Maximum Number
Total Number
Part of Publicly
of Shares that May
of Shares
Average Price Paid
Announced
Yet Be Purchased
Period
Purchased (1)
per Share
Program (2)
Under the Program (2)
04/30/2005
$
7,100,523
899,477
05/31/2005
100,000
20.02
7,200,523
799,477
06/30/2005
110,300
21.73
7,310,823
689,177
210,300
$
20.92
7,310,823
689,177
(1)
Our board of directors has approved the repurchase of up to an aggregate amount of
8,000,000 shares of Administaff common stock, of which 7,310,823 had been repurchased as of
June 30, 2005. During the three months ended June 30, 2005, we purchased 210,300 shares of
our common stock.
(2)
Unless terminated earlier by resolution of the board of directors, the repurchase
program will expire when we have repurchased all shares authorized for repurchase under the
repurchase program.
Table of Contents
1.
Election of Class I Directors to serve until the Annual Meeting of Stockholders
in 2008.
For
Withheld
16,120,836
8,508,090
17,581,354
7,047,572
17,581,054
7,047,872
Directors continuing in office were Jack M. Fields, Jr., Paul S. Lattanzio, Richard G.
Rawson, Paul J. Sarvadi and Austin P. Young.
2.
Approval of the amendment and restatement of the 2001 Incentive Plan.
For
Against
Abstain
7,840,828
10,873,052
138,532
3.
Ratification of Ernst & Young, LLP as the Companys independent auditors for
the year ending December 31, 2005.
For
Against
Abstain
22,024,490
2,368,918
235,518
(a)
List of exhibits.
10.1
Minimum Premium Financial Agreement, amended and restated
effective January 1, 2005, by and between Administaff of Texas, Inc. and United
Healthcare Insurance Company.
10.2
Minimum Premium Administrative Services Agreement, amended and
restated effective January 1, 2005, by and between Administaff of Texas, Inc.
and United Healthcare Insurance Company.
31.1
Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
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31.2
Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Table of Contents
- 37 -
Administaff, Inc.
By
:
/s/ Douglas S. Sharp
Douglas S. Sharp
Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Duly Authorized Officer)
Table of Contents
Minimum Premium Financial Agreement, amended and restated
effective January 1, 2005, by and between Administaff of Texas, Inc. and United
Healthcare Insurance Company.
Minimum Premium Administrative Services Agreement, amended and
restated effective January 1, 2005, by and between Administaff of Texas, Inc.
and United Healthcare Insurance Company.
Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Section 1:
|
Definitions | |
|
||
Section 2:
|
Insurance | |
|
||
Section 3:
|
Premium | |
|
||
Section 4:
|
Term and Termination of the Agreement | |
|
||
Section 5:
|
Changes in Maximum Monthly Employer Benefit Obligation and Premium | |
|
||
Section 6:
|
Representations of the Parties | |
|
||
Section 7:
|
Guaranty of Administaff Inc. | |
|
||
Section 8:
|
Notices | |
|
||
Section 9:
|
Choice of Law | |
|
||
Section 10:
|
Entire Agreement, Amendment and Waiver | |
|
||
Exhibit A
|
Reviews and Establishment of Monthly Payable Rates and Premiums | |
|
||
Exhibit B
|
Non-MP Policies | |
|
||
Exhibit C
|
Minimum Premium Financial Agreement Banking Arrangement | |
|
||
Exhibit D
|
Policies, Rates and Factors |
MP Financial Agreement
|
2 |
MP Financial Agreement
|
3 |
(a) | Agreement means this Minimum Premium Financial Agreement, Amended and Restated Effective as of January 1, 2005, including any attached Exhibits, as amended from time to time. | ||
(b) | Arrangement Month means each calendar month during the period that both a Policy and the Agreement are effective. | ||
(c) | Arrangement Quarter means each calendar quarter during the period that both a Policy and the Agreement are effective. | ||
(d) | Check means the instrument of payment issued by the Company for the payment of Health Benefits pursuant to the Agreement, whether such instrument is a draft, a check, an electronic funds transfer or similar instrument. | ||
(e) | Claims Account shall have the meaning assigned to it in section 2(a) of the Agreement. | ||
(f) | Company means United HealthCare Insurance Company. | ||
(g) | Employer means Administaff of Texas, Inc. | ||
(h) | Employee means an employee or former employee of the Employer or of a member of Employers controlled group as defined in Section 414(b) and (c) of the Internal Revenue Code of 1986, as amended, which is a participating employer under the Plan who is covered under the Plan, and a qualified beneficiary who is covered under the Plan pursuant to Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time (COBRA), except that members of a family unit who elect COBRA coverage as a single family unit shall be considered a single Employee. | ||
(i) | Health Benefits means the benefits that are payable by the Company under the terms of the Policies. For purposes of the Agreement, overpayment and subrogation recoveries (less the percentage of each such recovery that the Company retains or is charged by its vendors for its services in pursuing the recovery) shall be included as a credit to Health Benefits. There shall be no credit to Health Benefits for any *** or other |
MP Financial Agreement
|
4 |
payments received by the Company from *** or other third parties in connection with *** under the Plan. | |||
In the second and third Arrangement Months of an Arrangement Quarter, Health Benefits shall also include those Health Benefits Paid during the prior Arrangement Month to the extent that they exceeded the ***. | |||
(j) | Incurred when referring to Health Benefits means that the Company has become liable for payment of such Health Benefits under a Policy. | ||
(k) | Investment Grade means a debt rating of BBB- or better (in the case of Standard & Poors) and Baa3 or better (in the case of Moodys). If the debt in question is rated by both Standard & Poors and Moodys, such debt shall not be deemed Investment Grade for purposes of the Agreement unless the ratings provided by both rating services qualify as Investment Grade as defined herein. | ||
(l) | MP Administrative Services Agreement means the Minimum Premium Administrative Services Agreement between the Employer and the Company, as amended from time to time. | ||
(m) | Maximum Monthly Employer Benefit Obligation for an Arrangement Month shall be the amount determined in Exhibit D hereto. The Maximum Monthly Employer Benefit Obligation for an Arrangement Month (other than the first Arrangement Month of an Arrangement Quarter) shall be increased by the amount by which the *** in the prior Arrangement Month exceeded the Health Benefits Paid in that Month. | ||
(n) | Minimum Premium Arrangement and Arrangement mean the minimum premium payment arrangement with respect to the Policies as described in the Agreement. | ||
(o) | MP Premium has the meaning assigned to it in section 3(a) of the Agreement. | ||
(p) | Non-MP Policy means a policy or group contract issued by the Company (or another member of the Companys controlled group) providing medical benefits under the Plan which are not covered by the Minimum Premium Arrangement. Non-MP |
MP Financial Agreement
|
5 |
MP Financial Agreement
|
6 |
The Quoted Premiums under the Policies shall be periodically reviewed and adjusted in accordance with Exhibit A to the Agreement. | |||
(w) | Security Deposit has the meaning assigned in the Security Deposit Agreement. | ||
(x) | Security Deposit Agreement is the Security Deposit Agreement between the Company and the Employer, as amended from time to time. |
(a) | Benefit Payments Paid during Policy Continuance . The Company shall pay from the claims account established as provided in section 2(d) below (the Claims Account) those Health Benefits of the Policies that are Paid during the Arrangement Month and that in the aggregate are equal to or less than the Maximum Monthly Employer Benefit Obligation for the Arrangement Month. The Employer shall fund that Claims Account as provided in section 2(d) of the Agreement. For Health Benefits that are Paid prior to termination of the Policies, the Company shall pay from its own funds those Health Benefits that are Paid during an Arrangement Month to the extent that they exceed the Maximum Monthly Employer Benefit Obligation for the Arrangement Month. | ||
(b) | Benefits Paid After Policy Termination . In the event that a Policy is terminated, the Company shall be responsible for paying from its own funds Health Benefits of such Policy that are Incurred but not Paid before such Policy terminates. The Maximum Monthly Employer Benefit Obligation does not apply to such Health Benefits. | ||
(c) | Companys Obligation . Any Health Benefits of the Policies that are required to be paid from the Claims Account shall be paid by the Company from its own funds if the Health Benefits are not paid by another source, which may include the Employer or another funding vehicle established or maintained by the Employer for that purpose. The Employer agrees to reimburse |
MP Financial Agreement
|
7 |
the Company for any Health Benefits paid by the Company pursuant to this obligation. | |||
(d) | Claims Account . The Company and the Employer shall establish and maintain those banking arrangements, including the Claims Account, described in Exhibit C to the Agreement. In addition to its obligations under Exhibit C , the Employer shall fund the Claims Account as necessary to enable the Company to pay in a timely manner from the Claims Account the Health Benefits described in section 2(a). |
(i) | If the Employer does not maintain the banking arrangements required in this section or in Exhibit C , including any required balance, the Company will provide notice to the Employer so that it can take corrective action, and the Company may terminate the Agreement in accordance with section 4 of the Agreement. | ||
(ii) | After a reasonable period of time as determined by the Company, the Company shall place stop payment instructions on Checks issued pursuant to the Agreement that are not Paid. The Company shall be responsible for complying with applicable abandoned property laws, if any, with respect to any Checks that are not Paid prior to the termination of the Agreement. Any amount transferred to a state in compliance with such laws shall be treated as Paid on the date that the transfer is made. | ||
(iii) | Upon termination of the Agreement, the Claims Account shall be closed as soon as reasonably practicable after the Company determines that all Health Benefits required to be Paid from the Claims Account have been Paid, and any funds remaining in the Claims Account shall be recovered by the Employer, subject to the Companys right to offset such funds against amounts owed to it under the Minimum Premium Arrangement. |
MP Financial Agreement
|
8 |
(a) | MP Premium . The MP Premium for the Policies for the Arrangement Month shall be the amount determined pursuant to Exhibit D hereto. The MP premium is due on the first day of the Arrangement Month to which it applies. As provided in section 1(v) of the Agreement, the MP Premium may include any adjustments authorized in Exhibit E of the MP Administrative Services Agreement in respect of previous Arrangement Months including any additions, terminations or changes in coverage not known at the beginning of the Arrangement Month to which such MP Premium applies. | ||
(b) | Additional Quarterly Premium . For each Arrangement Quarter, the Employer shall pay an Additional Quarterly Premium to the Company in an amount equal to the ***, before the *** of the Agreement, for the Arrangement Months in such Arrangement Quarter less the Health Benefits Paid by the Company from the Claims Account in such Arrangement Quarter. Such invoice shall be sent by the Company no later than *** months following the close of the Policy Year which includes the Arrangement Quarter to which such invoice relates. An Additional Quarterly Premium shall not be due with respect to any Arrangement Quarter in a Policy Year if a written invoice for such Additional Quarterly Premium is not sent by the Company to the Employer within *** of the close of the Policy Year; provided that the Company shall not have been prevented by the Employer from exercising its right to audit the Employer as provided in section 5(c) of the MP Administrative Services Agreement. The Additional Quarterly Premium shall be paid by the Employer within *** calendar days of the date of the Companys invoice and *** provided in any Policy shall be applicable to the payment of the Additional Quarterly Premium. | ||
(c) | Pooling Charge . Effective January 1, 2005, Employer may elect, with respect to Arrangement Years 2005, 2006 and/or 2007, a pooling option under which it shall pay a pooling charge to the Company in the amount described in Exhibit D . In the event that Employer elects the pooling option for Arrangement Year 2005, 2006 and/or 2007, the Company will |
MP Financial Agreement
|
9 |
apply the pooling adjustment described in Section 7 of Exhibit A to this Agreement with respect to such Arrangement Year. To elect the pooling option for an Arrangement Year, Employer shall notify the Company in writing of its election on or before February 1 st of the Arrangement Year to which such option relates, provided, however, that, for the 2005 Arrangement Year, the Company shall provide additional terms and conditions of the pooling option, if any, by April 5, 2005, and the Employer shall have 30 days from receipt of such information to provide written notification to the Company of its acceptance or rejection of the pooling option for 2005. For Arrangement Years after 2007, Company may, in its sole discretion, determine whether or upon what terms to offer the pooling option. Any Pooling Charge paid by the Employer shall not be treated as Policy Revenue. | |||
The Pooling Charge is due on the first day of each Arrangement Month in the Arrangement Year for which an election has been made, provided that (i) the grace period described in section 4.(b)vii. of the Agreement shall apply to the Pooling Charge, and (ii) paragraph 4 of Exhibit E of the MP Administrative Services Agreement shall apply in determining the appropriate number of Employees covered under a Policy or Non-MP Policy for each month. |
(a) | Agreement shall be effective as of January 1, 2005 (Effective Date). The Agreement shall be in effect for an initial period of twelve (12) months (Agreement Period) and shall continue automatically for successive Agreement Periods of twelve (12) months each unless it is terminated earlier in accordance with this section 4. | ||
(b) | The Agreement may be terminated as follows: |
i. | Either party may elect to terminate the Agreement upon the insolvency of the other, or the filing of a petition in bankruptcy by or against the other, the appointment of a receiver for the other or its property, execution of an assignment by the other for the benefit of creditors, or conviction of the other or any principal officer or manager |
MP Financial Agreement
|
10 |
of the other for any crime tending to adversely affect the ownership or operation of the business. | |||
ii. | Either party may elect to terminate the Agreement as of the last day of an Arrangement Quarter by giving written notice to the other party at least 180 calendar days prior to the date of termination. | ||
iii. | The Agreement shall automatically terminate upon the date as of which all Policies are terminated. | ||
iv. | Either party may elect to terminate the Agreement due to a material breach of the Agreement (other than non-payment) by the other party, if notice of the breach is provided by the non-breaching party and the breach is not cured within 90 calendar days of such notice. In such event, the termination shall be effective on the date designated by the non-breaching party, which date is no earlier than the date that the non-breaching party provided notice of the breach to the breaching party. | ||
v. | Except as provided in subparagraph vii, the Company may elect to terminate the Agreement effective on or after the first day of an Arrangement Month in which the Employer fails to (A) pay any fee, tax, premium or other amount owed under the Agreement or the MP Administrative Services Agreement, (B) pay any amounts due under the Policies (as modified by the Agreement) or under any Non-MP Policy, (C) fund the Claims Account described in section 2(d) of the Agreement, or (D) deposit any portion of the Security Deposit required by the Security Deposit Agreement. | ||
vi. | The Company may elect to terminate the Agreement as of the date of the Employers failure to comply with any duty described in section 6 of the MP Administrative Services Agreement, if the Company provides notice of the failure and the Employer does not cure it within *** calendar days of the notice. | ||
vii. | Any grace period otherwise applicable under a Policy shall not apply to the MP Premium. However, the Company shall not terminate the Agreement for the Employers failure to pay the MP Premium on the first day of the |
MP Financial Agreement
|
11 |
Arrangement Month if the Employer pays (a) an amount equal to *** of the total MP Premium for the previous Arrangement Month on or before the *** calendar day of the applicable Arrangement Month; and (b) the remaining balance of the MP Premium for the Arrangement Month on or before the *** calendar day of such Arrangement Month. | |||
viii. | The Company may elect to terminate the Agreement upon written notice to the Employer immediately upon the closing of a sale to a single buyer (Buyer) of more than 50% of voting equity securities of the Employer or of the ultimate publicly traded corporation of the Employer or a sale of all or substantially all of the assets of the Employer if: |
(A) | the Buyer is (I) CIGNA, AETNA, PacificCare, Anthem, Coventry, First Health, HealthNet, Humana, Oxford, Wellpoint, or any other Blue Cross or Blue Shield plan, (II) any affiliate (as defined in clause E below) of or successor of an entity identified in (I), or (III) any other entity that has, at the time of the sale, a competitive position relative to the Company as a health insurer substantially similar to that of any of the entities named in clause (I) above as of the date the Agreement is executed; | ||
(B) | the debt rating on Buyers public debt, if any, is below Investment Grade as of the day preceding the closing of the sale; | ||
(C) | the ultimate parent of the Buyer, if any, has not, at the time of the closing of the sale, executed a guaranty of the Employers obligations under the Agreement substantially in the same form as section 7 of the Agreement; | ||
(D) | the amount deposited in the Security Deposit as of the date of closing of the sale is less than the amount then required under the Security Deposit Agreement; or | ||
(E) | As used in clause (A) above, an affiliate of an entity is an organization or entity which controls, is controlled by or is under common control with the |
MP Financial Agreement
|
12 |
entity to which it is an affiliate. Control for this purpose refers to the ownership of more than 50% of the voting power of an entity. |
ix. | Except as provided in paragraph (B) below, the Employer may terminate this Agreement by giving the Company notice thereof not more than *** business days following receipt from the Company of notice of an *** of more than *** percentage points in the percentage of the *** used to calculate the MP Premium. (For example, if the percentage of the *** used to calculate the MP Premium equals ***, the Company may *** such percentage by *** percentage points to *** without triggering the Employers termination right under this clause ix.) |
(A) | Any such termination shall be effective on the date set forth in the Employers notice to the Company, but in any event not sooner than the date the applicable *** would otherwise be effective. | ||
(B) | The Employer shall not have the right to terminate the Agreement pursuant to this section 4(b)(ix) if the increase in the percentage of the Quoted Premium used to calculate the MP Premium is pursuant to section 4(c) or due to the imposition of any premium tax not included in the Quoted Premium at the time that the imposition was effected. |
(c) | The Policies shall terminate upon termination of the Agreement. If one or more of the Policies may not, by its terms, be terminated as of the date that the Agreement would otherwise terminate, the Agreement shall be terminated notwithstanding the inability to terminate a Policy as of the same date, and the terms of the Policy shall remain in force, unmodified by the Agreement, until such Policy can be terminated. However, effective as of the date of the termination of the Agreement, the monthly premium due under each such Policy and Non-MP Policy shall automatically be increased (Increased Premium) such that the sum of (i) the aggregate Increased Premiums due under such Policies and Non-MP Policies through their termination dates and (ii) the Accumulated Surplus as of the Initial Termination Review equals *** of the aggregate monthly premiums that would be |
MP Financial Agreement
|
13 |
payable under such policies through their termination dates in the absence of an increase. | |||
(d) | In the event of termination of the Agreement, the Employer shall pay an Additional Quarterly Premium attributable to the Arrangement Quarter in which the Agreement terminates but only for the portion of the Arrangement Quarter during which the Agreement was in effect. Such Additional Quarterly Premium generally shall be determined and due in the manner set forth in section 3(b) of the Agreement; provided however, that the Additional Quarterly Premium attributable to any partial Arrangement Month shall be calculated based on the proration formula set forth in section 4(e) below. | ||
(e) | If the Agreement is terminated other than at the end of an Arrangement Month, unless the Quoted Premium is itself prorated under the terms of the Policy, the Maximum Monthly Employer Benefit Obligation and the MP Premium for the month in which termination occurs shall be prorated based upon the ratio of the number of calendar days in the Arrangement Month before termination to the total number of calendar days in the Arrangement Month. | ||
(f) | If the Agreement is terminated retroactively and any Policy remains in effect after such retroactive termination date, amounts due and paid by the parties under the Agreement after the effective date of termination shall be credited against their respective obligations under the Policy after such date. | ||
(g) | If the Agreement is terminated, the MP Premium and the Maximum Monthly Employer Benefit Obligation for the last Arrangement Month prior to the termination date shall be adjusted as authorized in Exhibit E of the MP Administrative Services Agreement to include the effect of any additions, terminations or changes in coverage not reflected at the time of termination in respect of Arrangement Months prior to termination. | ||
(h) | In the event that either party reasonably believes that any state or other jurisdiction may impose a penalty on it for proceeding with its performance under the Agreement, such party will promptly advise the other party of such belief and the basis therefor. In such event, the parties agree to cooperate in good faith to resolve such matter to the satisfaction of both parties. |
MP Financial Agreement
|
14 |
After a good faith effort by the parties to eliminate the risk of a material penalty being imposed, if the matter is not resolved to the satisfaction of both parties, the party upon which such penalty may be imposed may immediately discontinue the Agreements application in such state or jurisdiction by providing notice to that effect to the other party. In that event, the Agreement will continue to apply in all other states or jurisdictions. |
(a) | The Company may change the percentage of the *** used to calculate the Maximum Monthly Employer Benefit Obligation described in section 1(m) of the Agreement and/or the MP Premium described in section 3(a) of the Agreement effective on any January 1 st after the Effective Date, provided that the Company provides *** calendar days notice of the change. | ||
(b) | Upon the notice provided in section 5(c), the Company also may change one or more of the following rates as provided below: |
(i) | the percentage of the *** used to calculate the Maximum Monthly Employer Benefit Obligation, as described in section 1(m) of the Agreement, | ||
(ii) | the percentage of the *** used to calculate the MP Premium, as described in section 3(a) of the Agreement, | ||
(iii) | the Quoted Premium rate under a Policy, or | ||
(iv) | the monthly premium rate under a Non-MP Policy. |
Each rate described in items (i) through (iv) above is referred to in this section as Rate (or collectively as Rates). | |||
If the total number of Employees covered by all of the Policies and Non-MP Policies changes by *** or more compared to the total number of Employees covered by all of the Policies and Non-MP Policies on the later of (x) the Effective Date of the Agreement or (y) ***, then that Rate may be changed by the Company. |
MP Financial Agreement
|
15 |
(c) | The change in Rate described in subsection (b) shall be effective upon the first of the month following *** calendar days notice to the Employer in the case of a *** increase in the number of Employees covered. In the case of a *** decrease in such coverage, the change in Rate shall be effective on the date established by the Company in a notice to the Employer, but no earlier than the *** day of the next Arrangement Month following the date of the notice. |
(a) | The Employer represents and warrants to Company as follows: |
(i) | The Employer has full authority to execute and deliver the Agreement, the Security Deposit Agreement and the MP Administrative Services Agreement and to perform its obligations hereunder and thereunder. | ||
(ii) | The Employer is subject to no restriction, agreement, law, judgment or decree which would prohibit or be violated by the execution and delivery hereof or the consummation of the transactions contemplated hereby. The Agreement has been duly executed and delivered by the Employer and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. | ||
(iii) | No consent, approval or other action by, or notice to, or registration or filing with, any governmental or administrative agency or authority, or any other person (other than any registration or filing made in the ordinary course of business), is required or necessary in connection with the execution, delivery and performance of the Agreement by the Employer, or the consummation by the Employer of the transactions contemplated hereby. |
(b) | The Company hereby represents and warrants to the Employer as follows: |
(i) | The Company has full authority to execute and deliver the Agreement, the Security Deposit Agreement and the MP |
MP Financial Agreement
|
16 |
Administrative Services Agreement and to perform its obligations hereunder and thereunder. | |||
(ii) | The Company is subject to no restriction, agreement, law, judgment or decree which would prohibit or be violated by the execution and delivery hereof or the consummation of the transactions contemplated hereby. The Agreement has been duly executed and delivered by the Company and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. | ||
(iii) | No consent, approval or other action by, or notice to, or registration or filing with, any governmental or administrative agency or authority, or any other person (other than any registration or filing made in the ordinary course of business), is required or necessary in connection with the execution, delivery and performance of the Agreement by the Company, or the consummation by the Company of the transactions contemplated hereby. |
(a) | Any notice required to be given under the Agreement shall be given in writing by sending or delivering such notice to the receiving party (i) by prepaid registered or certified first class U.S. mail, return receipt requested, (ii) by overnight express courier with recipients signature required, (iii) by hand delivery with recipients signature required, (iv) by facsimile, provided that the other party has specifically requested that a specifically |
MP Financial Agreement
|
17 |
designated notice be made by facsimile, or (v) by any other method by which the date of receipt by the party entitled to such notice may be determined. Notice shall be effective when sent. | |||
(b) | Notices to a party shall be sent or delivered: | ||
To the Company at: | |||
United Healthcare
Small Business Group 5901 Lincoln Drive Edina, MN 55436 Fax: (952) 992-7155 Attention: President, Small Business Group |
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With a Copy to: | |||
United Healthcare
Legal Department 5901 Lincoln Drive Edina, MN 55436 Fax: (952) 992-5180 Attention: General Counsel |
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And: | |||
United Healthcare
Small Business Group 5901 Lincoln Drive Edina, MN 55436 Fax: (952) 992-7155 Attention: Vice President, Underwriting |
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And to the Employer at: | |||
Administaff of Texas, Inc.
19001 Crescent Springs Drive Kingwood, Texas 77339-3802 Fax: (281) 312-3350 Attention: President |
MP Financial Agreement
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18 |
With a Copy to: | |||
Administaff of Texas, Inc.
19001 Crescent Springs Drive Kingwood, Texas 77339-3802 Fax: (281) 358-6492 Attention: General Counsel |
|||
(c) | Each party may change the person(s) designated to receive notice on behalf of such party, or the address or facsimile to which the notice shall be sent, upon written notice to the other party. |
(a) | Upon execution of the Agreement, all prior or contemporaneous letters of understanding, agreements, requests for proposal, proposals, representations, statements, negotiations and understanding, whether oral or written, are hereby terminated and superseded by the Agreement, the MP Administrative Services Agreement, the Security Deposit Agreement, the Policies and Non-MP Policies and all riders thereto. | ||
(b) | Any amendments or modifications to the Agreement must be in writing, and must be signed by the duly authorized representatives of each party. Each party shall provide to the other a written certification of the names of those person(s) duly authorized to execute amendments or modifications on behalf of the party. Each party shall be entitled to rely on the others certification of authority unless and until it is modified. | ||
(c) | No term or provision of the Agreement shall be deemed waived and no breach excused unless the party claimed to have waived the term or provision or to have excused the breach does so in a signed writing. |
MP Financial Agreement
|
19 |
(d) | In the event of any conflict between the terms and conditions of the Agreement, the MP Administrative Services Agreement, the Security Deposit Agreement or the Policies or Non-MP Policies, the following order of precedence shall be followed in resolving the conflict. The terms of the Security Deposit Agreement shall first control, then the Agreement, then the MP Administrative Services Agreement and lastly the Policies or Non-MP Policies, as applicable. | ||
(e) | Termination of the Agreement shall not extinguish the rights or liabilities of either party arising prior to termination. The parties respective rights and obligations under sections 2(d)(ii)-(iii), 4(c) through (g), 7 and Exhibit A of the Agreement shall survive termination of the Agreement. | ||
(f) | Absent extraordinary and unforeseen circumstances, neither party shall seek, with respect to the 2005, 2006 or 2007 Arrangement Years, an amendment or modification to ***; and provided, further, that the Companys rights under section 5(a) of the Agreement shall be suspended with respect to changes for the 2006 and 2007 Arrangement Years (except with regard to a modification consistent with a change in actual premium tax expense). |
MP Financial Agreement
|
20 |
ADMINISTAFF OF TEXAS, INC. | UNITED HEALTHCARE | |||||||
INSURANCE COMPANY | ||||||||
By
|
/s/ Richard G. Rawson
|
By |
/s/ Simeon A. Schindelman
|
|||||
Authorized Signature | Authorized Signature | |||||||
|
||||||||
Name Richard G. Rawson | Name Simeon A. Schindelman | |||||||
|
||||||||
Title President | Title President, Small Business | |||||||
|
||||||||
Date 5/27/2005 | Date 6/1/2005 |
By
|
/s/ Richard G. Rawson
|
|||
Authorized Signature | ||||
|
||||
Name Richard G. Rawson | ||||
|
||||
Title President | ||||
|
||||
Date 5/27/2005 |
MP Financial Agreement
|
21 |
1. | The Policies . The Employer has entered into a Minimum Premium Arrangement covering certain of the Companys insurance policies or HMOs. The Arrangement covers those Policies identified in section 1(s) of the Agreement. The Company has also issued Non-MP Policies (identified in section 1(p)) to the Employer which policies are not subject to the Minimum Premium Arrangement. | |
2. | Procedure for Establishing Premiums . A monthly *** rate for the Policies and the Non-MP Policies collectively (Monthly Payable Rate) is established for each Arrangement Quarter as provided in this Exhibit A , and as further provided in Appendix II to this Exhibit. Each Arrangement Quarter, the Company sets the monthly premium for Employees covered under each Policy and Non-MP Policy based on the *** of Employees among the Policies and the Non-MP Policies in order to produce a *** rate that *** the Monthly Payable Rate for the Arrangement Quarter. (The monthly premium for each Policy corresponds to the Quoted Premium referenced in the Agreement.) The Monthly Payable Rate shall be established as provided in section 4 of this Exhibit. | |
3. | Reviews of Experience under Policies and Non-MP Policies |
a. | Within 90 calendar days following the end of each Arrangement Year, the Company shall review the Employers aggregate experience under the Policies and the Non-MP Policies for that Arrangement Year (Annual Review). As part of the Annual Review, the Company shall determine whether an aggregate Deficit or Surplus exists with respect to the Policies and the Non-MP Policies based on an analysis of the Incurred Claims, expenses and Policy Revenue for the Arrangement Year, which analysis shall be provided in a written report to the Employer within 90 calendar days of the close of such Arrangement Year. That report shall be in a form substantially similar to and contain the information described in Appendix I attached to this Exhibit A . |
MP Financial Agreement
|
22 |
b. | Within 45 calendar days following the end of each Arrangement Quarter, the Company shall provide to the Employer a report that reflects the Companys determination of whether an Accumulated Deficit or Accumulated Surplus exists as of the end of such Arrangement Quarter with respect to the Policies and the Non-MP Policies based on an analysis of the Incurred Claims, expenses and Policy Revenue for the Arrangement Quarter (and prior Arrangement Quarters). Such analysis shall be provided in a written report substantially similar to and contain the information described in Appendix I attached to this Exhibit A (Quarterly Review), and such report shall include a summary of adjudicated claims under the Policies and Non-MP Policies by incurral month. | ||
c. | As part of the Quarterly Review, the Company shall provide to the Employer a written list of Policies and Non-MP Policies that were effective at any time during the Arrangement Quarter under review (Current Policy List). |
4. | Prospective Adjustment of Monthly Payable Rate and Premiums |
a. | The Company shall, in its sole discretion, establish in advance the Monthly Payable Rate for each Arrangement Quarter. In establishing the Monthly Payable Rate for an Arrangement Quarter prior to the second Arrangement Quarter of 2005, the Company shall take into account any Accumulated Deficit or Accumulated Surplus, but shall not be required *** Accumulated Deficit or Accumulated Surplus in the Monthly Payable Rate of a single Arrangement Quarter. Beginning with the second Arrangement Quarter of 2005, the Company shall not take into account any Accumulated Deficit or Surplus when establishing Monthly Payable Rates. | ||
The Company shall notify the Employer of the applicable Monthly Payable Rate at least 90 calendar days in advance of the start of the Arrangement Quarter. | |||
b. | The Company is authorized, in its ***, to revise the premium of any Policy or Non-MP Policy for each Arrangement Quarter so as to result in a *** rate for all |
MP Financial Agreement
|
23 |
Policies and Non-MP Policies that *** the revised Monthly Payable Rate for that Arrangement Quarter. |
5. | Termination Review |
a. | Upon termination of the Agreement, the Company shall provide a two-step termination review, substantially in the form of the Annual Review (Termination Review). The two steps in the Termination Review shall be: |
i. | Within 10 calendar days after the termination of the Agreement, the Company shall determine the Accumulated Deficit or Accumulated Surplus as of the date of the termination of the Agreement (Initial Termination Review). | ||
ii. | Within 195 calendar days after the termination of the Agreement and all Policies and Non-MP Policies (except those issued to a Client as well as, or instead of, to the Employer), the Company shall determine the Accumulated Deficit or Accumulated Surplus as of the end of the last Arrangement Quarter (or Partial Arrangement Quarter) (Final Termination Review). |
b. | In calculating the Accumulated Deficit or Accumulated Surplus for purposes of the Termination Review, Non-MP Policies shall include those policies or group contracts issued by the Company that were but are no longer covered by the Minimum Premium Arrangement. | ||
c. | If the Final Termination Review demonstrates an Accumulated Surplus, the Company shall pay to the Employer an amount equal to the Accumulated Surplus within 10 calendar days after the completion of the Final Termination Review. | ||
d. | If the Initial Termination Review and/or Final Termination Review demonstrates an Accumulated Deficit, the Company shall have such rights to the balance in the Security Deposit as described in the Security Deposit Agreement. |
MP Financial Agreement
|
24 |
6. | Management of the Redetermined Accumulated Surplus/Deficit |
a. | Redetermined Accumulated Surplus/Deficit . As part of the Quarterly Review relating to an Arrangement Quarter, the Company shall also redetermine the Accumulated Surplus or Accumulated Deficit for the Arrangement Quarter preceding the Arrangement Quarter that is the subject of the Quarterly Review (such quarter being the Preceding Quarter). The redetermined Accumulated Surplus (or redetermined Accumulated Deficit) for a Preceding Quarter (Redetermined Accumulated Surplus or Redetermined Accumulated Deficit, respectively) shall be calculated in the same manner that the Accumulated Surplus or Accumulated Deficit is calculated in accordance with section 3 of this Exhibit A , except that any amounts reserved for *** (as determined by the Company, in its sole discretion) shall not be included within the definition of IBNR Reserve and, therefore, will not be taken into consideration when calculating the Redetermined Accumulated Surplus/Deficit. | ||
The basis for the Companys calculation of the Redetermined Accumulated Surplus/Deficit for a Preceding Quarter shall be described in a written report provided to the Employer at the same time as the Quarterly Review for the Arrangement Quarter. The fourth Arrangement Quarter of 2004 shall be the first Arrangement Quarter to be redetermined under this section. | |||
b. | If, as part of a Quarterly Review or Annual Review, the Company determines that the Redetermined Accumulated Surplus for the Preceding Quarter exceeds $11 million, then commencing 15 days after such determination, the Company shall waive the Employers then current obligation to fund the Claims Account, if any, in an amount equal to the Redetermined Accumulated Surplus amount less $11 million. Any Claims Account funding waived by the Company under this subparagraph 6.b. shall not be |
MP Financial Agreement
|
25 |
recognized as Policy Revenue (e.g., as Health Benefits Paid from the Claims Account or otherwise) but the claims funded by such waiver shall be included as Incurred Claims. | |||
The parties acknowledge that (i) the Company waived Additional Quarterly Premium due in 2005 with respect to the fourth Arrangement Quarter of 2004 in the amount of $1,954,028.35 and (ii) such amount shall not be recognized as Policy Revenue. | |||
c. | If, as part of a Quarterly Review or Annual Review, the Company determines that the Redetermined Accumulated Surplus for a Preceding Quarter is less than $11 million or a Redetermined Accumulated Deficit exists, then the Employer shall, within *** days of the redetermination pay to the Company an amount equal to the difference between $11 million and either (A) the Redetermined Accumulated Surplus amount as of the redetermination date or (B) the Redetermined Accumulated Deficit amount (expressed as a negative value) as of the redetermination date, as applicable. Such payment shall be treated as additional Policy Revenue for purposes of this Exhibit A . | ||
d. | The Company may draw upon some or all of the Redetermined Accumulated Surplus upon a failure by the Employer to pay (i) any amount then currently payable under the Agreement, the Policies or the Non-MP Policies, including but not limited to any amount described in section 4(b)(v) of the Agreement, or (ii) any amount due under any Policy or Non-MP Policy in effect following termination of the Agreement; provided, however, that any such draw upon the Redetermined Accumulated Surplus shall only be allowed under this Section up to an amount not greater than the Aggregate Payable Rate for the applicable Arrangement Quarter reduced by any amount related to such Aggregate Payable Rate otherwise paid by the Employer within five (5) business days of the final due date of such amount or any applicable incremental amount thereof. For purposes of this section 6.d., Aggregate Payable Rate means an amount equal to the product of (i) the applicable Monthly Payable Rate multiplied by three and (ii) the number of employees covered under the |
MP Financial Agreement
|
26 |
Policies and Non-MP Policies in a given month determined as of the 15 th day of the applicable month. | |||
e. | The Companys right to apply the Redetermined Accumulated Surplus described in subparagraph 6.d. shall be in addition to, and not in lieu of, any other remedy available at law or in equity to the Company, and any such draw by the Company shall not cure the Employers failure to pay amounts due, without the Companys express written consent; provided, however, that any such amounts applied by the Company shall reduce any damages recoverable from the Employer under such other remedies to the extent such damages do not take into consideration the amounts previously applied by the Company. Any amount applied pursuant to subparagraph 6.d. shall not be recognized as Policy Revenue. |
7. | Pooling Adjustment Effect of Employers Election of Pooling Option on Calculation and Redetermination of Surplus or Deficit |
If the Employer elects to pay a Pooling Charge with respect to an Arrangement Year pursuant to section 3.c of the Agreement, the calculation of the Accumulated Surplus or Accumulated Deficit and the calculation of the Redetermined Accumulated Surplus or Redetermined Accumulated Deficit for that Arrangement Year shall be modified such that claims incurred by an Employee or an Employees dependent in excess of $1,000,000 within the Arrangement Year and paid by December 31 st of the subsequent Arrangement Year will be excluded from Incurred Claims, but will be recognized as Health Benefits Paid and as claims paid for purposes of section 2.a. of Appendix II of this Exhibit A for that Arrangement Year. The Pooling Charge paid by the Employer will not be recognized as Policy Revenue. |
8. | Definitions | |
For the purpose of this Exhibit A and the Security Deposit Agreement, terms with initial capitals have the meanings set forth in the Agreement, except as set forth in this section as follows: |
a. | Accumulated Deficit means, as of the last day of an Arrangement Period (i) the sum of the Deficits, if any, for |
MP Financial Agreement
|
27 |
such Arrangement Period and all preceding Arrangement Periods, reduced by (ii) the sum of the Surpluses for all preceding Arrangement Periods, provided, however, that a Deficit or Surplus shall not be counted twice in the case of overlapping Arrangement Periods. | |||
b. | Accumulated Surplus means, as of the last day of an Arrangement Period (i) the sum of the Surpluses, if any, for such Arrangement Period and all preceding Arrangement Periods, reduced by (ii) the sum of the Deficits for all preceding Arrangement Periods, provided, however, that a Deficit or Surplus shall not be counted twice in the case of overlapping Arrangement Periods. | ||
b.-1 | Actual Tax Rate means, with respect to an Arrangement Period, (i) the initial premium tax for that Arrangement Period based on MP Premiums, premiums under the Non-MP Policies, and Additional Quarterly Premiums paid with respect to the Arrangement Period divided by (ii) the Policy Revenue for the Arrangement Period. | ||
To illustrate, the Actual Tax Rate will be calculated according to the following formula: | |||
Actual Tax Rate = *** | |||
c. | Annual Review has the meaning set forth in section 3(a) of this Exhibit A . | ||
d. | Arrangement Period means, as the context indicates, an Arrangement Year, Arrangement Quarter, or Partial Arrangement Quarter. | ||
e. | Arrangement Year means each calendar year during the period that both a Policy and the Agreement are in effect. | ||
f. | Claims Recognition Date means the 180 th day following the end of the last Arrangement Quarter (or Partial Arrangement Quarter). | ||
g. | Deficit means, with respect to an Arrangement Period, the excess of *** for the Arrangement Period over (ii) the Policy Revenue for the Arrangement Period. |
MP Financial Agreement
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28 |
To illustrate, the Deficit will be calculated according to the following formula:
Deficit = *** |
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h. | Expense Percentage means the percentage for the Policies and the Non-MP Policies set forth in Exhibit D to the Agreement. The Company shall adjust the Expense Percentage for any Arrangement Quarter for which the percentage of the Quoted Premium used to calculate the MP Premium has been changed pursuant to section 5 of the Agreement. The Company shall notify the Employer of an adjustment to the Expense Percentage at the same time that it provides the notice required under section 5 of the Agreement. | ||
i. | IBNR Reserve means the amount actuarially determined by the Company, *** as a reserve for Incurred Health Benefits that are paid after the date of termination of the Policies and incurred health benefits that are paid after termination of the Non-MP Policies. For purposes of the Final Termination Review, the IBNR Reserve shall be (A) reduced by *** Overpayments (as defined in section 2(d) of the MP Administrative Services Agreement) recoveries under the Policies and Non-MP Policies *** to be received after the Claims Recognition Date and (B) calculated as of the Claims Recognition Date and shall not include Health Benefits or Non-MP Policy health benefits that are included in the calculation of Incurred Claims as Paid Health Benefits under the Policies and paid health benefits under the Non-MP Policies. | ||
j. | Incurred Claims means, with respect to an Arrangement Period (or Partial Arrangement Quarter), the sum of (i) Paid Health Benefits under the Policies and paid health benefits under the Non-MP Policies and (ii) any actuarially appropriate adjustments made by the Company, *** to the IBNR Reserve for such Arrangement Period (including establishment of the IBNR Reserve in the first Arrangement Quarter). For purposes of the Final Termination Review, item (i) of the preceding sentence shall include Health Benefits Paid under the Policies and health benefits paid under the Non-MP Policies through |
MP Financial Agreement
|
29 |
the Claims Recognition Date. Unless Overpayments recoveries have already been credited to Health Benefits, Incurred Claims shall be reduced by Overpayments (as defined in section 2(d) of the MP Administrative Services Agreement) recoveries under the Policies and Non-MP Policies received during the applicable Arrangement Period (and received prior to the Claims Recognition Date in the case of termination of the Agreement). | |||
k. | Partial Arrangement Quarter means that period between the end of the last complete Arrangement Quarter under the Agreement and the termination of the last Policy or Non-MP Policy, whichever is later. | ||
l. | Policy Revenue means, with respect to an Arrangement Period, the sum of (i) the MP Premiums paid with respect to such Arrangement Period for the Policies, (ii) the monthly premiums paid under the Non-MP Policies, (iii) except as otherwise provided in this Exhibit A , *** Maximum Monthly Employer Benefit Obligation amounts for the Arrangement Months in the Arrangement Period before the *** of the Agreement) for an Arrangement Quarter therein, (iv) the Additional Quarterly Premium paid by the Employer with respect to the Policies for the Arrangement Period, and (v) such other amounts that are described in this Exhibit A as included in Policy Revenue. Any withdrawals made by the Company from the Security Deposit during such Arrangement Period shall be credited as Policy Revenue. | ||
Effective as of the date this Agreement is fully executed, Policy Revenue in an Arrangement Quarter shall include an accrued and compounded interest credit (Interest Credit) equal to the product of (A) the Average Surplus (as defined below), (B) an annual interest rate equal to the average of the rates for the three months in the Preceding Quarter at the yields at auction (on a bank-discount basis) for three month Treasury bills, plus 25 basis points, and (C) the number of days in the Arrangement Quarter divided by 365. The Interest Credit for an Arrangement Quarter shall be credited as the final step in the determination of the Accumulated Surplus or Deficit during the Quarterly Review for that Arrangement Quarter. |
MP Financial Agreement
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30 |
MP Financial Agreement
|
31 |
HMO | PPO | Total | ||||||||||||||
(A) |
Quoted Premium
|
* | ** | * | ** | * | ** | |||||||||
(B) |
Monthly Premium
|
* | ** | * | ** | |||||||||||
Employee Lives Jan
|
* | ** | * | ** | * | ** | ||||||||||
Feb
|
* | ** | * | ** | * | ** | ||||||||||
Mar
|
* | ** | * | ** | * | ** | ||||||||||
(C) |
1st Quarter Total
|
* | ** | * | ** | * | ** | |||||||||
(D) |
Quarterly Total of Monthly Premium
|
(BxC) | * | ** | * | ** | * | ** | ||||||||
(E) |
Maximum Monthly Employer Benefit Obligation/Employee
|
* | ** | |||||||||||||
(F) |
Maximum Quarterly Employer Benefit Obligation
|
(ExC) | * | ** | ||||||||||||
(G) |
Claims Presented Through Bank Account During Quarter
|
* | ** | |||||||||||||
(H) |
Additional Quarterly Premium
|
*** | * | ** | ||||||||||||
(I) |
Total Quarterly Premiums
|
(D+H) | * | ** | * | ** | * | ** | ||||||||
(Note that all four quarters will be presented to arrive at)
|
||||||||||||||||
(I.1) |
Total Annual Premiums
|
|||||||||||||||
(J) |
Total Quarterly Administaff Costs
|
(G+I) | * | ** | * | ** | * | ** | ||||||||
(Note that all four quarters will be presented to arrive at)
|
||||||||||||||||
(J.1) |
Total Annual Administaff Costs
|
|||||||||||||||
(K) |
Total Quarterly Administaff Costs/Employee
|
(J/C) | * | ** | * | ** | * | ** | ||||||||
(Note that all four quarters will be presented to arrive at)
|
||||||||||||||||
(K.1) |
Total Annual Administaff Costs/Employee
|
|||||||||||||||
(L) |
Claims Processed or Presented During Year
|
* | ** | * | ** | * | ** | |||||||||
(M) |
Prior Year IBNR
|
* | ** | * | ** | * | ** | |||||||||
(N) |
Current Year IBNR
|
* | ** | * | ** | * | ** | |||||||||
(O) |
Change in IBNR
|
(N-M) | * | ** | * | ** | * | ** | ||||||||
(P) |
Total Annual Incurred Claims
|
(L+O) | * | ** | * | ** | * | ** | ||||||||
(Q) |
Administration @ *** of Annual Administaff Costs
|
*** | * | ** | * | ** | * | ** | ||||||||
(R) |
Premium Tax (Est. HMO=1.0%, PPO 1.75%)
|
(I.1x1.0% or 1.75%) | * | ** | * | ** | * | ** | ||||||||
(S) |
Total Annual Medical Program Costs
|
(P+Q+R) | * | ** | * | ** | * | ** | ||||||||
(T) |
Annual Surplus or Deficit
|
(S-J.1) | * | ** | * | ** | * | ** |
- *** The Additional Quarterly Premiums collected for PPO enrollees are subject to premium tax. |
- *** |
1. | Paragraph 2 of Exhibit A of the MP Financial Agreement provides that the Company will establish for each Arrangement Quarter the Monthly Payable Rate, a monthly *** rate for the Policies and the Non-MP Policies collectively (for purposes of this Appendix II , the MPR), which rate will then be used to establish the monthly premiums for the Policies and Non-MP Policies. Certain components of the Companys methodology for determining the MPR for an Arrangement Quarter are reflected in a rate calculation worksheet that is provided by the Company to the Employer when the Company communicates the new MPR to the Employer pursuant to section 4.a of Exhibit A (Rate Calculation Worksheet), |
2. | The methodology used by the Company for establishing the MPR shall include the following components: |
a. | In estimating future PEPM claims, the Company shall utilize (i) the claims paid in the *** months preceding the month in which the MPR is established, and (ii) the covered Employee headcount for the *** month period beginning two months before the *** month period used in item (i) (such two-month earlier period hereinafter referred to as the Base Period). For example, assuming the MPR for the second Arrangement Quarter of 2004 is established by the Company in December 2003, the Company would use the paid claims experience from *** through ***, and the covered Employee headcount for the period *** through ***. For purposes of this subparagraph 2.a., claims paid shall include (A) the total amount of the Employers Claims Account funding obligation waived by the Company in the relevant period, and (B) claims Incurred by an Employee or an Employees dependent in excess of $1,000,000 within a ***-month calendar year period and paid within *** months to the extent excluded from Incurred Claims as a result of Employers election of the pooling option described in section 7 of Exhibit A . |
MP Financial Agreement
|
32 |
b. | Any adjustment to the MPR due to changes in health cost risk factors shall be actuarially justifiable (i.e., using credible database and tools agreed upon by Employer and Company). The Companys tabular data used to make the adjustments shall be documented and discussed in the Rate Calculation Worksheet, and the Company shall not change such tabular data more frequently than annually. | ||
c. | The Company shall apply rate adjustments to reflect changes in the following health cost risk factors between the Base Period and the Arrangement Quarter for which the MPR is being developed. (Continuing the example from subparagraph (a), the base period is *** through *** and Arrangement Quarter for which the MPR is being developed is the second Arrangement Quarter of 2004.) |
i. | Age | ||
ii. | Gender distribution | ||
iii. | Family size distribution | ||
iv. | Geographic distribution | ||
v. | Enrollment distribution by plan type (HMO, PPO, etc) | ||
vi. | Plan design changes |
d. | In estimating future PEPM claims, the Company shall apply cost change trend factors for medical claims and prescription drug claims separately. In addition, the trend period will be the period between the mid-point of the Base Period and the mid-point of the Arrangement Quarter for which the MPR is being developed. | ||
e. | The Company shall establish trend factors based on a reasonable assessment of risk and cost changes in projecting future medical and prescription drug claims. The Company shall limit the change in trend factors used to project medical and prescription drug claims to an increase of *** above the trend factors used to establish |
MP Financial Agreement
|
33 |
the Monthly Payable Rate for the prior Arrangement Quarter. This change in trend factor limitation will not be applicable if: |
(i) | the Employer modifies its management practices such that, as of the Arrangement Month that the trend factor is established, there has been (a) more than a *** increase in the number of Clients (as defined in the MP Services Agreement) with less than *** enrollees over the immediately preceding Arrangement Quarter, or (b) more than a *** increase in the number of COBRA enrollees covered in the three months of the immediately preceding Arrangement Quarter , or | ||
(ii) | as of the Arrangement Month that the trend factor is established, the age/gender factor has increased more than *** over the average factor for the three months of the immediately preceding Arrangement Quarter. |
In the event the threshold in any of the conditions listed in (i) or (ii) above is exceeded, the trend factors used to project medical and prescription drug claims may be increased up to *** above the trend factors used in the immediately preceding Rate Calculation Worksheet. | |||
f. | The Company shall reflect administration, profit/risk charge, and premium tax as separate items in the Rate Calculation Worksheet. |
3. | The Company may change the rate setting methodology described in this Appendix II upon 180 days notice to the Employer. | |
4. | The Company shall report to the Employer in detail on the establishment of the MPR in the Rate Calculation Worksheet. |
MP Financial Agreement
|
34 |
UNET | ||||||||
Policy | Effective | Termination | ||||||
Number | UNET Policy Number | Date | Date | |||||
|
Select HMO | Downstate New York | ||||||
701648AA
|
ACTIVE | 01/01/02 | 12-31-2004 | |||||
701648AB
|
COBRA | 01/01/02 | 12-31-2004 | |||||
701648B
|
ACTIVE w/o Dental | 01/01/04 | 12-31-2004 | |||||
701648BQ
|
COBRA w/o Dental | 01/01/04 | 12-31-2004 | |||||
|
||||||||
|
Select HMO - | New Jersey | ||||||
701648AC
|
ACTIVE | 01/01/02 | 12-31-2004 | |||||
701648AD
|
COBRA | 01/01/02 | 12-31-2004 | |||||
701648BR
|
ACTIVE w/o Dental | 01/01/04 | 12-31-2004 | |||||
701648BS
|
COBRA w/o Dental | 01/01/04 | 12-31-2004 | |||||
|
||||||||
|
Select HMO | Texas | ||||||
701648AG
|
ACTIVE | 01/01/02 | 12/31/03 | |||||
701648AH
|
COBRA | 01/01/02 | ||||||
|
Select HMO | Upstate New York | ||||||
701648BJ
|
ACTIVE | 01/01/02 | 12-31-2004 | |||||
701648BK
|
COBRA | 01/01/02 | 12-31-2004 | |||||
701648DS
|
ACTIVE w/o Dental | 01/01/04 | 12-31-2004 | |||||
701648DT
|
COBRA w/o Dental | 01/01/04 | 12-31-2004 | |||||
|
||||||||
|
Choice HMO | Florida | ||||||
701648AI
|
ACTIVE | 01/01/02 | ||||||
701648AJ
|
COBRA | 01/01/04 | ||||||
701648BZ
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648C
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Arizona | ||||||
701648AP
|
ACTIVE | 01/01/02 | ||||||
701648AT
|
COBRA | 01/01/02 |
MP Financial Agreement
|
35 |
UNET | ||||||||
Policy | Effective | Termination | ||||||
Number | UNET Policy Number | Date | Date | |||||
701648CS
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648CT
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Ohio | ||||||
701648AX
|
ACTIVE | 01/01/02 | ||||||
701648BA
|
COBRA | 01/01/02 | ||||||
701648CU
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648CV
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Georgia | ||||||
701648BB
|
ACTIVE | 01/01/02 | ||||||
701648BC
|
COBRA | 01/01/02 | ||||||
701648CY
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648CZ
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Kentucky | ||||||
701648BD
|
ACTIVE | 01/01/02 | ||||||
701648BE
|
COBRA | 01/01/02 | ||||||
701648D
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648DL
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Texas | ||||||
701648BF
|
ACTIVE | 01/01/02 | ||||||
701648BG
|
COBRA | 01/01/02 | ||||||
701648DN
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648DP
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Utah | ||||||
701648BL
|
ACTIVE | 01/01/02 | ||||||
701648BN
|
COBRA | 01/01/02 | ||||||
701648DU
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648DV
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Missouri | ||||||
701648BP
|
ACTIVE | 01/01/02 | ||||||
701648BX
|
COBRA | 01/01/02 | ||||||
701648DX
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648DY
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Arkansas |
MP Financial Agreement
|
36 |
UNET | ||||||||
Policy | Effective | Termination | ||||||
Number | UNET Policy Number | Date | Date | |||||
701648CA
|
ACTIVE | 01/01/02 | ||||||
701648CB
|
COBRA | 01/01/02 | ||||||
|
||||||||
|
||||||||
|
Choice HMO | Arkansas | ||||||
701648DZ
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648E
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Mississippi | ||||||
701648CC
|
ACTIVE | 01/01/02 | ||||||
701648CD
|
COBRA | 01/01/02 | ||||||
701648EA
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648EB
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | District of Columbia | ||||||
701648CG
|
ACTIVE | 01/01/02 | ||||||
701648CH
|
COBRA | 01/01/02 | ||||||
701648EE
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648EF
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Virginia | ||||||
701648CI
|
ACTIVE | 01/01/02 | ||||||
701648CJ
|
COBRA | 01/01/02 | ||||||
701648EG
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648EH
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Tennessee | ||||||
701648CE
|
ACTIVE | 01/01/02 | ||||||
701648CF
|
COBRA | 01/01/02 | ||||||
701648EC
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648ED
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Louisiana | ||||||
701648BH
|
ACTIVE | 01/01/02 | ||||||
701648BI
|
COBRA | 01/01/02 | ||||||
701648DQ
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648DR
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Colorado | ||||||
701648AK
|
ACTIVE | 01/01/02 | ||||||
701648AN
|
COBRA | 01/01/02 | ||||||
701648CQ
|
ACTIVE w/o Dental | 01/01/04 |
MP Financial Agreement
|
37 |
UNET | ||||||||
Policy | Effective | Termination | ||||||
Number | UNET Policy Number | Date | Date | |||||
701648CR
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Alabama | ||||||
701648CN
|
ACTIVE | 01/01/02 | ||||||
701648CP
|
COBRA | 01/01/02 | ||||||
701648EK
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648EL
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Select EPO | Wisconsin | ||||||
701648DI
|
ACTIVE & COBRA | 01/01/02 | 12-31-2004 | |||||
701648DI
|
ACTIVE & COBRA w/o Dental | 01/01/04 | 12-31-2004 | |||||
|
||||||||
|
Choice HMO | Fairfax VA | ||||||
701648CK
|
ACTIVE | 01/01/02 | ||||||
701648CL
|
COBRA | 01/01/02 | ||||||
701648EI
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648EJ
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Select EPO | South Carolina | ||||||
701648DH
|
ACTIVE & COBRA | 01/01/02 | 12-31-2004 | |||||
701648DH
|
ACTIVE & COBRA w/o Dental | 01/01/04 | 12-31-2004 | |||||
|
||||||||
|
Choice HMO | Iowa | ||||||
701648AS
|
ACTIVE | 02/01/03 | ||||||
701648AU
|
COBRA | 02/01/03 | ||||||
701648EQ
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648ER
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice HMO | Rhode Island | ||||||
701648AV
|
ACTIVE | 05/01/03 | ||||||
701648AY
|
COBRA | 05/01/03 | ||||||
701648ES
|
ACTIVE w/o Dental | 01/01/04 | ||||||
701648ET
|
COBRA w/o Dental | 01/01/04 | ||||||
|
||||||||
|
Choice EPO | Indiana | ||||||
701648AZ
|
ACTIVE & COBRA | 08/01/03 | 12-31-2004 |
MP Financial Agreement
|
38 |
UNET | ||||||||
Policy | Effective | Termination | ||||||
Number | UNET Policy Number | Date | Date | |||||
701648AZ
|
ACTIVE & COBRA w/o Dental | 01/01/04 | 12-31-2004 | |||||
|
||||||||
|
Choice HMO | Georgia Consumer | ||||||
701648EV
|
ACTIVE | 07/01/04 | ||||||
701648EY
|
COBRA | 07/01/04 | ||||||
701648EZ
|
ACTIVE w/o Dental | 07/01/04 | ||||||
701648F
|
COBRA w/o Dental | 07/01/04 | ||||||
|
||||||||
|
Choice HMO | Illinois | ||||||
701648FE
|
ACTIVE | 01/01/05 | ||||||
701648FB
|
COBRA | 01/01/05 | ||||||
701648FC
|
ACTIVE w/o Dental | 01/01/05 | ||||||
701648FD
|
COBRA w/o Dental | 01/01/05 | ||||||
|
||||||||
|
Choice HMO - | Ohio (NK) | ||||||
701648FE
|
ACTIVE | 01/01/05 | ||||||
701648FF
|
COBRA | 01/01/05 | ||||||
701648FG
|
ACTIVE w/o Dental | 01/01/05 | ||||||
701648FH
|
COBRA w/o Dental | 01/01/05 | ||||||
|
||||||||
|
Choice HMO - | Indiana (IK) | ||||||
701648FI
|
ACTIVE | 01/01/05 | ||||||
701648FJ
|
COBRA | 01/01/05 | ||||||
701648FK
|
ACTIVE w/o Dental | 01/01/05 | ||||||
701648FX
|
COBRA w/o Dental | 01/01/05 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
247936
|
*** | 1/1/2002 | ||||
247974
|
*** | 1/1/2002 | 5/28/2003 | |||
247977
|
*** | 1/1/2002 | 3/1/2002 | |||
247989
|
*** | 1/1/2002 | 5/27/2003 | |||
247996
|
*** | 1/1/2002 | 9/1/2002 | |||
248003
|
*** | 1/1/2002 | 3/1/2003 | |||
248006
|
*** | 1/1/2002 | 1/22/2002 | |||
248026
|
*** | 1/1/2002 | ||||
248030
|
*** | 1/1/2002 | ||||
248035
|
*** | 1/1/2002 | 1/1/2002 |
MP Financial Agreement
|
39 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
248041
|
*** | 1/1/2002 | 2/1/2004 | |||
248056
|
*** | 1/1/2002 | 1/11/2002 | |||
248063
|
*** | 1/1/2002 | 1/1/2004 | |||
248110
|
*** | 1/1/2002 | ||||
248128
|
*** | 1/1/2002 | ||||
248131
|
*** | 1/1/2002 | 10/1/2003 | |||
248133
|
*** | 1/1/2002 | ||||
248135
|
*** | 1/1/2002 | 2/22/2002 | |||
248144
|
*** | 1/1/2002 | 8/15/2003 | |||
248151
|
*** | 1/1/2002 | 8/1/2002 | |||
248163
|
*** | 1/1/2002 | 1/1/2002 | |||
248165
|
*** | 1/1/2002 | 7/1/2002 | |||
248180
|
*** | 1/1/2002 | 6/1/2002 | |||
248197
|
*** | 1/1/2002 | 11/1/2002 | |||
248208
|
*** | 1/1/2002 | 6/16/2002 | |||
248241
|
*** | 1/1/2002 | 1/1/2005 | |||
248263
|
*** | 1/1/2002 | 11/22/2002 | |||
248271
|
*** | 1/1/2002 | ||||
248291
|
*** | 1/1/2002 | 3/4/2003 | |||
248306
|
*** | 1/1/2002 | 5/1/2003 | |||
248314
|
*** | 1/1/2002 | 9/4/2002 | |||
248324
|
*** | 1/1/2002 | ||||
248325
|
*** | 1/1/2002 | 5/31/2002 | |||
248339
|
*** | 1/1/2002 | 9/8/2003 | |||
248346
|
*** | 1/1/2002 | ||||
248352
|
*** | 1/1/2002 | 3/30/2002 | |||
248370
|
*** | 1/1/2002 | 6/1/2002 | |||
248371
|
*** | 1/1/2002 | 4/28/2002 | |||
248372
|
*** | 1/1/2002 | ||||
248373
|
*** | 1/1/2002 | 2/25/2002 | |||
248374
|
*** | 1/1/2002 | ||||
248375
|
*** | 1/1/2002 | ||||
248376
|
*** | 1/1/2002 | 11/1/2002 | |||
248379
|
*** | 1/1/2002 | 5/31/2002 | |||
248382
|
*** | 1/1/2002 | ||||
248384
|
*** | 1/1/2002 | 1/1/2005 | |||
248388
|
*** | 1/1/2002 | ||||
248390
|
*** | 1/1/2002 | 6/26/2002 | |||
248396
|
*** | 1/1/2002 | 4/15/2003 | |||
248399
|
*** | 1/1/2002 | 1/1/2005 | |||
248404
|
*** | 1/1/2002 | 7/1/2002 | |||
248405
|
*** | 1/1/2002 |
MP Financial Agreement
|
40 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
248407
|
*** | 1/1/2002 | 12/2/2002 | |||
248408
|
*** | 1/1/2002 | ||||
248409
|
*** | 1/1/2002 | ||||
248410
|
*** | 1/1/2002 | 7/1/2002 | |||
248411
|
*** | 1/1/2002 | ||||
248412
|
*** | 1/1/2002 | 3/1/2002 | |||
248413
|
*** | 1/1/2002 | 6/1/2003 | |||
248414
|
*** | 1/1/2002 | ||||
248415
|
*** | 1/1/2002 | ||||
248416
|
*** | 1/1/2002 | 1/1/2005 | |||
248417
|
*** | 1/1/2002 | 6/12/2003 | |||
248418
|
*** | 1/1/2002 | ||||
248421
|
*** | 1/1/2002 | 6/1/2002 | |||
248429
|
*** | 1/1/2002 | ||||
248433
|
*** | 1/1/2002 | 1/1/2002 | |||
248442
|
*** | 1/1/2002 | ||||
248457
|
*** | 1/1/2002 | 1/1/2003 | |||
248463
|
*** | 1/1/2002 | 10/26/2002 | |||
248466
|
*** | 1/1/2002 | ||||
248473
|
*** | 1/1/2002 | ||||
248474
|
*** | 1/1/2002 | 6/15/2002 | |||
248478
|
*** | 1/1/2002 | 8/8/2002 | |||
248480
|
*** | 1/1/2002 | ||||
248486
|
*** | 1/1/2002 | ||||
248494
|
*** | 1/1/2002 | 4/1/2003 | |||
248495
|
*** | 1/1/2002 | 7/1/2002 | |||
248497
|
*** | 1/1/2002 | ||||
248501
|
*** | 1/1/2002 | ||||
248516
|
*** | 1/1/2002 | 1/1/2003 | |||
248519
|
*** | 1/1/2002 | ||||
248521
|
*** | 1/1/2002 | 1/1/2003 | |||
248524
|
*** | 1/1/2002 | 10/16/2002 | |||
248528
|
*** | 1/1/2002 | ||||
248532
|
*** | 1/1/2002 | 2/1/2003 | |||
250136
|
*** | 1/1/2002 | 7/1/2002 | |||
250197
|
*** | 1/7/2002 | 7/1/2003 | |||
250201
|
*** | 1/1/2002 | ||||
250656
|
*** | 1/1/2002 | 6/1/2003 | |||
250657
|
*** | 1/1/2002 | 1/1/2003 | |||
250658
|
*** | 2/1/2002 | ||||
250659
|
*** | 2/1/2002 | 2/1/2004 | |||
250660
|
*** | 1/1/2002 | 2/16/2005 |
MP Financial Agreement
|
41 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
250669
|
*** | 2/15/2002 | 12/9/2002 | |||
252657
|
*** | 3/1/2002 | ||||
252926
|
*** | 3/1/2002 | 6/1/2002 | |||
253683
|
*** | 3/4/2002 | 3/18/2002 | |||
253774
|
*** | 3/1/2002 | 2/19/2003 | |||
253775
|
*** | 3/1/2002 | ||||
253778
|
*** | 2/27/2002 | 8/28/2002 | |||
254553
|
*** | 4/1/2002 | 5/21/2002 | |||
254678
|
*** | 4/1/2002 | 5/31/2002 | |||
254741
|
*** | 4/1/2002 | ||||
255675
|
*** | 4/1/2002 | 10/9/2002 | |||
255701
|
*** | 4/1/2002 | ||||
255709
|
*** | 4/1/2002 | 4/1/2002 | |||
256410
|
*** | 2/4/2002 | 2/4/2002 | |||
256498
|
*** | 2/4/2002 | 8/12/2002 | |||
256505
|
*** | 4/1/2002 | 1/2/2004 | |||
257668
|
*** | 4/15/2002 | 5/2/2003 | |||
261873
|
*** | 6/1/2002 | 10/1/2004 | |||
262606
|
*** | 7/1/2002 | 1/1/2003 | |||
262614
|
*** | 6/1/2002 | ||||
262616
|
*** | 6/1/2002 | 7/1/2004 | |||
262666
|
*** | 6/1/2002 | 3/6/2003 | |||
263961
|
*** | 6/7/2002 | 8/1/2002 | |||
264562
|
*** | 7/1/2002 | 10/22/2004 | |||
264565
|
*** | 7/1/2002 | ||||
266459
|
*** | 7/28/2002 | 5/2/2004 | |||
266473
|
*** | 7/28/2002 | ||||
267825
|
*** | 9/1/2002 | 3/3/2004 | |||
268747
|
*** | 9/1/2002 | 1/15/2004 | |||
271606
|
*** | 10/1/2002 | 1/1/2003 | |||
272924
|
*** | 11/1/2002 | 5/1/2003 | |||
273651
|
*** | 10/16/2002 | ||||
274488
|
*** | 11/20/2002 | 1/1/2003 | |||
277124
|
*** | 1/1/2003 | 1/1/2005 | |||
278257
|
*** | 12/1/2002 | 11/29/2004 | |||
279171
|
*** | 1/1/2003 | 7/1/2003 | |||
279197
|
*** | 1/6/2003 | 2/12/2004 | |||
279225
|
*** | 12/15/2002 | 4/15/2003 | |||
281742
|
*** | 1/1/2003 | ||||
282005
|
*** | 1/1/2003 | 12/1/2003 | |||
282007
|
*** | 1/1/2003 | ||||
282062
|
*** | 1/6/2003 | 3/1/2004 |
MP Financial Agreement
|
42 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
286373
|
*** | 2/1/2003 | ||||
288802
|
*** | 3/1/2003 | 3/2/2004 | |||
303058
|
*** | 7/1/2003 | ||||
303075
|
*** | 5/1/2003 | ||||
303083
|
*** | 5/1/2003 | ||||
310924
|
*** | 5/22/2003 | ||||
311776
|
*** | 8/11/2003 | ||||
314764
|
*** | 7/1/2003 | 10/1/2004 | |||
314770
|
*** | 7/1/2003 | ||||
315038
|
*** | 7/1/2003 | 4/1/2004 | |||
326974
|
*** | 9/1/2003 | 8/16/2004 | |||
334639
|
*** | 9/14/2003 | ||||
338429
|
*** | 10/1/2003 | ||||
345349
|
*** | 9/1/2003 | ||||
348740
|
*** | 10/1/2003 | 3/1/2004 | |||
348746
|
*** | 10/1/2003 | 3/1/2004 | |||
353316
|
*** | 11/1/2003 | 11/1/2004 | |||
369064
|
*** | 1/1/2004 | ||||
378384
|
*** | 1/1/2004 | 1/1/2004 | |||
391528
|
*** | 3/1/2004 | ||||
395396
|
*** | 3/1/2004 | 10/1/2004 | |||
399283
|
*** | 2/16/2004 | 6/12/2004 | |||
400182
|
*** | 2/16/2004 | ||||
420189
|
*** | 5/3/2004 | ||||
421616
|
*** | 6/1/2004 | ||||
389529
|
*** | 1/1/2004 | ||||
400899
|
*** | 2/19/2004 | ||||
426244
|
*** | 2/1/2004 | ||||
428344
|
*** | 7/1/2004 | ||||
429009
|
*** | 5/12/2004 | 5/12/2004 | |||
429057
|
*** | 5/12/2004 | 5/12/2004 | |||
430384
|
*** | 7/1/2004 | ||||
433257
|
*** | 6/13/2004 | 10/15/2004 | |||
433886
|
*** | 6/21/2004 | 10/1/2004 | |||
4436305
|
*** | 7/15/2004 | 11/1/2004 | |||
445040
|
*** | 9/5/2004 | ||||
456752
|
*** | 10/1/2004 | ||||
461332
|
*** | 11/1/2004 | ||||
462865
|
*** | 11/2/2004 | ||||
464334
|
*** | 1/1/2005 | ||||
467310
|
*** | 1/1/2005 | ||||
468171
|
*** | 1/1/20005 | 3/1/2005 |
MP Financial Agreement
|
43 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
469055
|
*** | 12/20/2004 | ||||
469086
|
*** | 1/1/2005 | 1/1/2005 | |||
469115
|
*** | 1/1/2005 | ||||
469117
|
*** | 1/1/2005 | ||||
472227
|
*** | 1/1/2005 | ||||
473377
|
*** | 1/3/2005 | ||||
473385
|
*** | 1/28/2005 | ||||
474789
|
*** | 1/29/2005 | ||||
475654
|
*** | 1/30/2005 | ||||
475961
|
*** | 1/31/2005 | ||||
476007
|
*** | 2/1/2005 | ||||
476271
|
*** | 2/2/2005 | ||||
250579
|
*** | 1/16/2002 | 5/1/2002 | |||
250671
|
*** | 1/22/2002 | 3/4/2002 | |||
251016
|
*** | 1/13/2002 | 3/1/2005 | |||
256129
|
*** | 3/1/2002 | 7/1/2002 | |||
256904
|
*** | 1/1/2002 | 6/1/2002 | |||
256960
|
*** | 3/20/2002 | 6/1/2002 | |||
257422
|
*** | 3/26/2002 | 6/1/2002 | |||
257424
|
*** | 4/9/2002 | 4/9/2002 | |||
259230
|
*** | 4/2/2002 | 11/1/2002 | |||
259740
|
*** | 4/14/2002 | 7/9/2002 | |||
260298
|
*** | 4/2/2002 | 8/2/2002 | |||
260303
|
*** | 4/16/2002 | 7/16/2002 | |||
263976
|
*** | 4/3/2002 | 6/26/2002 | |||
265506
|
*** | 6/20/2002 | 3/24/2003 | |||
265510
|
*** | 6/1/2002 | 11/1/2002 | |||
265515
|
*** | 6/1/2002 | 9/21/2002 | |||
265560
|
*** | 6/1/2002 | 10/12/2002 | |||
268687
|
*** | 7/1/2002 | 7/1/2002 | |||
268689
|
*** | 8/8/2002 | 11/1/2002 | |||
268694
|
*** | 7/24/2002 | 11/24/2002 | |||
269888
|
*** | 8/1/2002 | 8/1/2002 | |||
269896
|
*** | 8/1/2002 | 8/1/2002 | |||
269898
|
*** | 8/1/2002 | 8/1/2002 | |||
269899
|
*** | 7/18/2002 | 11/17/2002 | |||
274864
|
*** | 10/15/2002 | 4/15/2003 | |||
274873
|
*** | 10/16/2002 | 1/13/2003 | |||
274875
|
*** | 10/16/2002 | 12/1/2002 | |||
274880
|
*** | 10/16/2002 | 11/16/2002 | |||
274914
|
*** | 10/16/2002 | 11/16/2002 |
MP Financial Agreement
|
44 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
275044
|
*** | 9/12/2002 | 11/30/2002 | |||
280221
|
*** | 12/1/2002 | 3/1/2003 | |||
280224
|
*** | 11/1/2002 | 2/1/2003 | |||
280225
|
*** | 1/1/2003 | 7/1/2003 | |||
280327
|
*** | 12/4/2002 | 6/4/2004 | |||
281701
|
*** | 1/1/2003 | 10/3/2003 | |||
282549
|
*** | 12/10/2002 | 2/10/2004 | |||
283649
|
*** | 11/20/2002 | 2/20/2004 | |||
286556
|
*** | 12/27/2002 | 9/1/2003 | |||
288804
|
*** | 1/21/2003 | 6/4/2004 | |||
293814
|
*** | 2/1/2003 | 5/27/2003 | |||
293891
|
*** | 2/27/2003 | 12/1/2003 | |||
310933
|
*** | 5/1/2003 | 11/1/2003 | |||
315060
|
*** | 6/12/2003 | 7/1/2003 | |||
315099
|
*** | 6/12/2003 | 10/1/2003 | |||
315132
|
*** | 6/2/2003 | 10/1/2003 | |||
343286
|
*** | 8/21/2003 | 12/17/2003 | |||
355898
|
*** | 9/15/2003 | ||||
360528
|
*** | 9/1/2003 | 2/1/2004 | |||
373490
|
*** | 11/11/2003 | ||||
375159
|
*** | 12/3/2003 | 3/1/2005 | |||
386745
|
*** | 2/1/2004 | ||||
388711
|
*** | 11/26/2003 | 1/1/2004 | |||
390767
|
*** | 2/1/2004 | 3/1/2005 | |||
390903
|
*** | 2/6/2004 | 3/1/2005 | |||
390937
|
*** | 1/7/2004 | 3/1/2005 | |||
397824
|
*** | 3/3/2004 | ||||
397852
|
*** | 3/3/2004 | ||||
397859
|
*** | 3/3/2004 | 12/4/2004 | |||
397876
|
*** | 3/3/2004 | ||||
397881
|
*** | 3/3/2004 | 5/4/2004 | |||
398067
|
*** | 3/3/2004 | ||||
398089
|
*** | 3/15/2004 | ||||
398122
|
*** | 3/3/2004 | ||||
398159
|
*** | 3/3/2004 | 9/1/2004 | |||
406144
|
*** | 2/19/2004 | 6/6/2004 | |||
421429
|
*** | 4/16/2004 | 7/1/2004 | |||
421796
|
*** | 5/6/2004 | 3/1/2005 | |||
401392
|
*** | 3/1/2004 | 4/1/2004 | |||
428137
|
*** | 5/11/2004 | 6/1/2004 | |||
442733
|
*** | 7/13/2004 | 10/4/2004 | |||
452935
|
*** | 8/13/2004 | 3/1/2005 |
MP Financial Agreement
|
45 |
PRIME | Effective | Termination | ||||
Policy # | Policyholder | Date | Date | |||
454038
|
*** | 9/8/2004 | 3/1/2005 | |||
459689
|
*** | 10/2/2004 | 3/1/2005 | |||
462574
|
*** | 11/19/2004 | 3/1/2005 | |||
463573
|
*** | 11/24/2004 | 1/3/2005 | |||
464871
|
*** | 12/1/2004 | 3/1/2005 | |||
465323
|
*** | 9/2//2004 |
MP Financial Agreement
|
46 |
Bank Name: | JPMorgan Chase | |||||
|
||||||
Bank Address: | 717 Travis Street, Houston, Texas 77002 | |||||
|
||||||
Bank ABA Routing #: | 113000609 | |||||
|
||||||
Bank Account Name | Administaff Companies, Inc. | |||||
|
||||||
Bank Account Number: | *** | |||||
|
||||||
Bank Contact: | Valerie Luecke |
CC: |
UnitedHealthcare
JPMorgan Chase |
I. | The definition of Policy for purposes of Section 1(s) of the Agreement shall be as follows: |
| Effective January 1, 2005: |
o | Policy No. 701648 (Medical FL, FN, FQ, FR, FS, FT, FU, FV, FY, FZ, G, GA, GB, GC) (Policy) |
II. | The Maximum Monthly Employer Benefit Obligation shall be the following: |
| Effective January 1, 2005: |
o | *** of the Quoted Premium for each Policy |
III. | The MP Premium shall be the following: |
| Effective January 1, 2005: |
o | *** of the Quoted Premium for each Policy |
IV. | The Expense Percentage shall be the following: |
| Effective January 1, 2005: |
o | *** for the Policies and Non-MP Policies |
| with respect to the 2005 Arrangement Year, |
o | *** per Covered Employee per Arrangement Month. |
For example, assuming that the number of covered Employees for each month of 2005 remains constant at 46,871, the annual Pool Charge for the 2005 Arrangement |
MP Financial Agreement
|
47 |
Year would be the product of (i) 46,871 multiplied by *** and (ii) 12 months, which would equal approximately ***. | |||
| with respect to the 2006 Arrangement Year, |
o | an amount determined by the Company, but in no event greater than *** per Covered Employee per Arrangement Month. |
| with respect to the 2007 Arrangement Year, |
o | an amount determined by the Company, but in no event greater than *** per Covered Employee per Arrangement Month. |
MP Financial Agreement
|
48 |
MP Services Agreement | 2 |
(a) | Agreement means this Minimum Premium Administrative Services Agreement, Amended and Restated Effective January |
MP Services Agreement | 3 |
1, 2005, including any attached Exhibits, as amended from time to time. | ||
(b) | Check means the instrument of payment issued by the Company for the payment of Health Benefits pursuant to the Agreement whether such instrument is a draft, a check, or an electronic funds transfer or similar instrument. | |
(c) | Claims Account has the meaning assigned to it in section 1(e) of the MP Financial Agreement. | |
(d) | Client means any organization that has a client service agreement or other similar agreement with the Employer. | |
(e) | Company means United HealthCare Insurance Company. | |
(f) | Confidential Participant Information has the meaning assigned to it in section 5(a)(i) of the Agreement. | |
(g) | Effective Date has the meaning assigned to it in section 9 of the Agreement. | |
(h) | Employee means an employee or former employee of the Employer or of a member of Employers controlled group as defined in Section 414(b) and (c) of the Internal Revenue Code of 1986, as amended, which is a participating employer under the Plan who is covered under the Plan, and a qualified beneficiary who is covered under the Plan pursuant to Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time (COBRA), except that members of a family unit who elect COBRA coverage as a single family unit shall be considered a single Employee. | |
(i) | Employer means Administaff of Texas, Inc. | |
(j) | ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. | |
(k) | Health Benefits or Benefits has the meaning assigned to it under the MP Financial Agreement. |
MP Services Agreement | 4 |
(l) | Incurred when referring to Health Benefits means that the Company has become liable for payment of such Health Benefits under a Policy. | |
(m) | Investment Grade has the meaning assigned to it under the MP Financial Agreement. | |
(n) | MP Arrangement means the Minimum Premium Arrangement as defined in the MP Financial Agreement. | |
(o) | MP Financial Agreement means the Minimum Premium Financial Agreement between the Employer and the Company, as amended from time to time. | |
(p) | Non-MP Policy means a group medical insurance policy or group contract issued by the Company (or another member of the Companys controlled group) to the Employer that is identified as a Non-MP Policy in the MP Financial Agreement. Non-MP Policies refers collectively to two or more such Policies, group contracts or both. | |
(q) | Paid when referring to Health Benefits, means that a Check for payment of such Health Benefits has been ***. | |
(r) | Participant means an Employee or his or her dependent who is covered under the Plan and who has been identified by the Employer as such pursuant to section 6(a) of the Agreement. | |
(s) | Plan means the employee health benefit plan maintained by the Employer that is insured by a Policy, but only to the extent benefits under the employee benefit plan are subject to the MP Financial Agreement. Any benefits that are insured by a Policy but not subject to the MP Financial Agreement are excluded from the term Plan. | |
(t) | Policy means a group health insurance policy issued by the Company to the Employer that is identified as a Policy in the MP Financial Agreement. Policies refers collectively to two or more such policies. | |
(u) | Proprietary Business Information has the meaning assigned to it in section 5(d)(iii) of the Agreement. |
MP Services Agreement | 5 |
(v) | Security Deposit has the meaning assigned to it in the Security Deposit Agreement. | |
(w) | Security Deposit Agreement means the Security Deposit Agreement between the Company and the Employer, as amended from time to time. | |
(x) | Scope has the meaning assigned to it in section 5(b)(i) and 5(c)(i), as appropriate, of the Agreement. | |
(y) | Third Party Disclosure Agreement is the agreement attached as Exhibit D of the Agreement. |
(a) | The Company shall perform each of its duties and obligations under each Policy in accordance with such Policys terms and all applicable laws and regulations. To the extent that, pursuant to a Policy, the Company is responsible for the performance of any duty imposed on the Employer and/or the Plan under applicable laws and regulations, including but not limited to ERISA and the Health Insurance Portability and Accountability Act, the Company shall perform such duty in accordance with such laws and regulations. | |
(b) | The Employer hereby and under the Policies designates the Company, pursuant to a procedure set forth in the Plan, as the fiduciary as defined by ERISA for the purpose of (i) reviewing, making decisions on and paying claims for Health Benefits and (ii) reviewing and making decisions on denials of such Health Benefits. The Company shall serve as the final review committee under the Plan to determine for all parties all questions relating to the payment of Health Benefits and shall have the discretion, authority, and responsibility to construe and interpret the terms of the Plan and to make factual determinations. | |
(c) | The rate of accuracy of Health Benefit payments by the Company under each Policy and each Non-MP Policy shall be consistent with the accuracy rate that a reasonably prudent claims administrator would be expected to achieve under similar circumstances. The amounts payable by the Employer under the Agreement, the MP Financial Agreement and the Policies |
MP Services Agreement | 6 |
and Non-MP Policies shall be subject to the modifications specified in the performance standards set out in Exhibit A . | ||
(d) | The Company shall provide services to recover Overpayments, as defined below, paid under the Policies and Plan benefits that were paid under the Policies and are recoverable by the Plan because payment was or should have been made by a third party (other than in connection with coordination of benefits, Medicare, or other Overpayments) for the same expense. |
(i) | The Company engages affiliated and unaffiliated vendors to assist in the recovery of Overpayments and third party claims made with respect to the Policies and Non-MP Policies. The fees charged by both affiliated and unaffiliated vendors are netted against any recoveries. If the fee charged by any affiliated vendor exceeds *** of the recovery, the Company shall notify the Employer within 30 calendar days of the effective date of such charge. The Employer shall not be responsible for the cost of recovering any Overpayments made by the Company due to the Companys *** as determined by mutual agreement of the parties or by a court or other tribunal. | ||
(ii) | The Employer delegates to the Company the discretion and authority to develop and use standards and procedures for any recovery under this section, including but not limited to, whether or not to seek recovery, what steps to take if the Company decides to seek recovery, and under what circumstances to compromise a claim or settle for less than the full amount of the claim. The Employer recognizes that use of these standards and procedures may not result in recovery or in full recovery for any particular case. The Company will not pursue any recovery if any applicable law does not permit it, or, if recovery would be impractical. The Company may choose to initiate litigation to recover payments, but it shall have no obligation to pursue litigation. If the Company initiates litigation, the Employer shall cooperate with the Company in the litigation. | ||
(iii) | If the Agreement terminates, or, if the Companys recovery services terminate, the Company may, but is not required to, continue to recover any Overpayments. The Company shall include Overpayments recoveries in the Termination Review (as defined in Exhibit A to the MP Financial |
MP Services Agreement | 7 |
Agreement) in the manner reflected in Exhibit A to the MP Financial Agreement, and the Company shall otherwise be authorized to retain all Overpayments recoveries obtained after the Claims Recognition Date (as defined in the MP Financial Agreement). | |||
(iv) | The Employer will not engage any entity except the Company to provide these recovery services without the Companys prior approval. | ||
(v) | For purposes of the Agreement, Overpayments shall mean payments that exceed the amount payable under a policy (for example, because of a provider billing error, retroactive or inaccurate eligibility information, coordination of benefits, Medicare disputes, or missing information), and other overcharges made by providers, including hospitals, discovered during the course of a hospital bill audit. |
(e) | Claims Incurred prior to termination of any Policy shall be processed in accordance with such Policy. |
(a) | The Company will maintain all claims records for the period required by ERISA. Following termination of the Agreement, the Company will supply the Employer with historical information in the Companys possession reasonably needed by the Employer to administer the Plan. In addition, during the year following termination, the Employer may request and the Company shall provide, at its prevailing charge, the following information: |
(i) | As to each Policy and Non-MP Policy that terminates at any date other than December 31, the following reports for the relevant period of the calendar year in which such Policy or Non-MP Policy terminates: |
MP Services Agreement | 8 |
(A) | Year-to-date claims analysis for such year reflecting, for each Participant, total charges, deductibles, co-insurance and out-of-pocket maximum charges; and | ||
(B) | Per Participant, year-to-date report regarding relevant annual benefit maximums. |
(ii) | For each Policy and Non-MP Policy: |
(A) | Per Participant, lifetime maximum report and | ||
(B) | Per Participant, lifetime maximum report regarding, as applicable, specific medical conditions, treatments, therapies, services and/or benefits. |
(b) | The Company shall make the necessary reporting to the United States Internal Revenue Service regarding payments that are made by the Company on behalf of the Plan to health care providers pursuant to the Agreement. | |
(c) | The Company shall provide the Employer with information, as required by ERISA, in a manner that enables the Employer to comply with ERISAs annual reporting requirements. | |
(d) | The Company shall provide to the Employer the reports identified in Exhibit C to the Agreement. | |
(e) | The Company receives payments from prescription drug manufacturers in connection with pharmacy benefit services provided to its customers, including the Employer. The Company shall promptly notify the Employer if the average payment per member per month (determined annually) attributable to the Policies and Non-MP Policies exceeds by more than *** per member per month the average payment for all of the Companys *** business. The Company shall notify the Employer of such excess, if any, for 2004 by the deadline for the Quarterly Review for the first Quarter of 2005, and annually thereafter. |
(a) | Employers Access to Information . During the term of the Agreement, if in order to administer the Plan, the Employer reasonably requests information, for an auditor or otherwise, that |
MP Services Agreement | 9 |
the Company has in its possession, the Company will provide access to that information, if legally permissible, as long as the information relates to the Companys services under the Agreement, and the Employer provides (60) sixty calendar days prior notice of the need for the information. |
(i) | The Employer hereby represents that any request by the Employer for disclosure of any information that contains personally identifiable information about a Participant (Confidential Participant Information) shall constitute the Employers representation to the Company that the Participant has authorized disclosure to the Employer or the Employer otherwise has the legal authority to have access to the information. The Employer must also represent at the time of the disclosure request that it has a reasonable procedure in place for handling Confidential Participant Information as required by any then current law. | ||
(ii) | The Company will provide information only while the Agreement is in effect, unless the Employer demonstrates that the information is required for Plan purposes and such disclosure is permitted by law. The Employer shall pay the Companys reasonable expenses in providing information after the termination of the Agreement. | ||
(iii) | The Company will also provide reasonable access to information to an entity providing services to the Employer, such as an auditor or other consultant, upon request. Before the Company gives access to Confidential Participant Information to that entity, that entity will be required to sign a Third Party Disclosure Agreement, substantially in the form of Exhibit D . |
(b) | Audits by the Employer . During the term of the Agreement, the Employer or a mutually agreeable entity may audit the Company to determine whether it is fulfilling its obligations under the Agreement. |
(i) | The Employer shall advise the Company at least sixty (60) calendar days in advance of its intent to audit. The place, time, type, duration, and frequency of all audits must be reasonable and agreed to by the Company, which consent |
MP Services Agreement | 10 |
shall not be unreasonably withheld. All audits shall be limited to information relating to the calendar year in which the audit is conducted and/or the immediately preceding calendar year. With respect to the Companys transaction processing services, the audit scope and methodology shall be consistent with generally acceptable auditing standards, including a statistically valid random sample or other acceptable audit technique as reasonably approved by the Company (for purposes of this subsection (b), Scope). | |||
(ii) | The Employer will pay any expenses that the Employer incurs, and will be charged a reasonable additional fee, determined by the Company, for more than one audit every twelve (12) months, for any on-site audit visit that is not completed within five (5) business days, or for sample sizes exceeding the Scope set forth above. The Employer will incur a reasonable per claim charge for samples in excess of the Scope, and a $1000 charge for each day an audit exceeds the five (5) day on-site review limit per year. The additional fees cover the additional resources, facility fees, and other incremental costs associated with an audit that exceeds the Scope. The Employer will also pay any unanticipated reasonable expenses the Company incurs and all expenses incurred by the Company on any audit initiated after a termination notice is provided but before the effective date of the termination of the Agreement. | ||
(iii) | The Employer will provide the Company with a copy of any final audit report. |
(c) | Audits by the Company . During the term of the Agreement, the Company may audit the Employer to determine whether the Employer is fulfilling its obligations under the Agreement. |
(i) | The Company shall advise the Employer at least sixty (60) calendar days in advance of its intent to audit. The place, time, type, duration, and frequency of all audits must be reasonable and agreed to by the Employer, which consent shall not be unreasonably withheld. All audits shall be limited to information relating to the calendar year in which the audit is conducted and/or the immediately preceding calendar year. The audit scope and methodology shall be |
MP Services Agreement | 11 |
consistent with generally acceptable auditing standards, including a statistically valid random sample or other acceptable audit techniques as reasonably approved by the Employer (for purposes of this subsection (c), Scope). The Company will bear any expenses that it incurs in conducting an audit. The Company shall provide the Employer with a copy of any final audit report. | |||
(ii) | The Company shall pay any expenses that the Company incurs, and will be charged a reasonable additional fee, determined by the Employer, for more that one audit every twelve (12) months, for any on-site audit visit that is not completed within five (5) business days, or for sample sizes exceeding the Scope set forth above. The Company shall incur a $1000 charge for each day an audit exceeds the five (5) day on-site review limit per year. The Company shall incur a reasonable per Client charge for samples in access of the Scope. The additional fees cover the additional resources, facility fees, and other incremental costs associated with an audit that exceeds the Scope. The Company will also pay any unanticipated reasonable expenses the Employer incurs and all expenses incurred by the Employer on any audit initiated after a termination notice is provided but before the effective date of the termination of the Agreement. |
(d) | Confidentiality . Except as otherwise provided herein or required by law, Proprietary Business Information and Confidential Participant Information will be the used solely to administer the Plan or to perform under the Agreement. |
(i) | Except as provided in paragraph (ii) of this subsection (d), Confidential Participant Information and Proprietary Business Information will not be disclosed to any person or entity other than either partys employees, subcontractors, or representatives needing access to such information to administer the Plan or perform under the Agreement. | ||
(ii) | The Company or a related entity may the use Confidential Participant Information for research, creating comparative databases, statistical analysis, or other studies, provided that the information is de-identified or the use of the Confidential Participant Information is otherwise in |
MP Services Agreement | 12 |
accordance with then current law. The Company will maintain the confidentiality of such information as it relates to or could be identified with any individual Participant, provider, the Employer, any Client or the Employers or Clients business. Such research, databases, analyses, and studies are considered by the Company to be Proprietary Business Information as defined in the following clause. | |||
(iii) | Proprietary Business Information means information about the business of the Company or the Employer that is confidential, proprietary, trade secret or is not readily available to the general public, or information that has been designated by either of the parties as confidential or proprietary. |
(e) | Publicity . The Company and the Employer acknowledge the important legal and economic interests each party has in the protection of its respective trademarks and tradenames, as well as in the accuracy and appropriateness of information released to the public concerning such party. Accordingly, each party shall obtain the consent of the other for the use of the other partys name as follows: |
(i) | With respect to any media release, advertising campaign and other similar public announcement by one party referring to the other party (Media Release), the disclosing party shall provide to the other party a Disclosure Notice (as defined below). |
(A) | An Authorized Person shall provide written objections or written approval on behalf of the non-disclosing party within 24 hours. For purposes of this subsection, with respect to the Company, its General Counsel and President, Small Business Operations, are both Authorized Persons. With respect to the Employer, the Vice President, Benefits, and the General Counsel are Authorized Persons. By written notice to the other party, either party may change its Authorized Persons. | ||
(B) | In no event may a disclosing party publish (or cause to be published) a Media Release without the prior |
MP Services Agreement | 13 |
written approval of an Authorized Person of the other party. |
(ii) | With respect to a filing or written communication with a state department of insurance or department of health, or other similar regulatory body, by one party referring to the other party (Special Regulatory Filing), the disclosing party shall provide to the other a Disclosure Notice. The disclosing party may file or publish the Special Regulatory Filing if the other party does not object in writing within 5 business days of the Disclosure Notice. In no event may a party file or publish a Special Regulatory Filing if the other party provides a timely written objection unless the stated objection has been resolved by the parties or unless required by law or pursuant to a valid court order. | ||
(iii) | With respect to all other regulatory filings, public announcements and public disclosures referring to the other party, other than such releases, announcements, disclosures, employee enrollment and communication materials as are used on a regular basis in the ordinary course of a partys business, (Other Disclosures) a disclosing party shall use its best efforts to provide to the other a Disclosure Notice at least 5 business days in advance of the proposed announcement or disclosure date of such Other Disclosure. In no event may a party file or publish Other Disclosures if the other party provides a timely written objection unless the stated objection has been resolved by the parties unless required by law or pursuant to a valid court order. |
Disclosure Notice means a written statement identifying and attaching the relevant portion of the proposed disclosure, indicating the proposed disclosure date and time, and identifying to whom any objections should be delivered. |
(a) | The Employer shall provide the following information and reports to the Company - |
(i) | The Employer will identify to the Company those Employees, dependents and/or other persons eligible to |
MP Services Agreement | 14 |
be Participants. In processing claims and providing other services under the Agreement, the Company will be entitled to rely on the most current information in its possession regarding Participant eligibility. The Employer shall report eligibility to the Company as provided in Exhibit E of the Agreement, and eligibility information will be effective in claims processing as described in such Exhibit. | |||
(ii) | The Employer shall provide such other reports to the Company, including but not limited to risk management reports, as are described in Exhibit E of the Agreement. |
(b) | The Employer shall conduct its business with each Client and administer the Plan to ensure that |
(i) | each Employee has available no more than one open enrollment period per calendar year (other than qualifying status change events or otherwise in accordance with section 125 of the Internal Revenue Code of 1986, as amended) and the Employer administers the Benefits under the Plan on a calendar year basis notwithstanding the effective date of the Clients participation in the Plan; | ||
(ii) | at least *** of the eligible Employees of the Employer participate in the Plan (for this purpose, an eligible employee who is covered as a dependent under such employees spouses group health coverage is deemed covered under the Plan), and, as to each Client, no Employee contributes more than *** of the contribution required for employee only coverage; provided that for so long as at least *** of the total Clients meet this contribution standard, then Employer may continue or renew service agreements with Clients under which Employees contribution for employee only coverage is more than ***; provided further that no new service agreements violative of this contribution standard shall be executed on or after June 1, 2002. | ||
(iii) | except as provided in Exhibit F to the Agreement, each Employee is offered concurrently no more than ***; |
MP Services Agreement | 15 |
(iv) | except as provided in Exhibit F to the Agreement, the Company shall be the exclusive provider of health and dental benefits for each Employee; | ||
(v) | if the Employer terminates coverage for all or substantially all Employees at a worksite, that termination *** as of the date of notice to the Company of the termination. |
For purposes of this section (6)(b), the Plan shall mean the plan of benefits provided by the Employer under both the Policies and the Non-MP Policies. | ||
(c) | Except to the extent that (i) the Agreement specifically requires the Company to have fiduciary responsibility, or (ii) a Policy imposes responsibility on the Company for a specific Plan administrative function, the Employer accepts complete responsibility for the Plan, including its design, and for compliance with any laws that apply to the Plan. | |
(d) | The Employer will provide to Participants the information and documents they need to obtain Health Benefits within a reasonable period of time after coverage begins. In the event of the termination of the Agreement, the MP Financial Agreement or the Policy, the Employer will notify all affected Participants of the termination. | |
(e) | Upon the Companys request, the Employer shall provide to the Company documentation of the Employers current debt rating, if applicable. In addition, the Employer shall notify the Company immediately upon learning that the Employers debt rating has fallen below Investment Grade. | |
(f) | The following provisions govern coverage provided to new Clients obtained by the Employer as a result of the Employers acquisition of, joint venture with, or any similar type of transaction with another professional employer organization (New PEO Clients). |
(i) | The Employer may not add New PEO Clients to the MP Arrangement or to the Non-MP Policies without the express written consent of the Company. Within not more than 30 calendar days following the Companys receipt of all information required by the Company to evaluate the |
MP Services Agreement | 16 |
economic risk associated with the proposed addition of the New PEO Client(s) to the MP Arrangement as a result of any such acquisition or transaction, the Company shall inform the Employer of its decision regarding such proposed addition and, if such addition is approved, any condition(s), including separate rating for a designated period, which the Company intends to impose as a condition to such addition. | |||
(ii) | Within a reasonable period of time not to exceed six (6) months after consummation of the transaction, the Employer must provide to New PEO Clients coverage under the MP Arrangement or a Company product that is *** to that which the New PEO Clients ***, but different and separate from the MP Arrangement, if offered by the Company. In either case, within such six (6) month period, the Company shall be the *** coverage for such ***. | ||
(iii) | If the Company exercises its right under section 6(f)(i) of the Minimum Premium Services Agreement to decline the addition to the MP Arrangement and to the Non-MP Policies of such New PEO Clients, or imposes conditions on such a proposed addition that are unacceptable to the Employer in its sole discretion, the exclusivity provisions of section 6(b)(iv) above shall not apply and the Employer may contract with any other *** New PEO Clients on such terms as it shall determine. | ||
(iv) | A Client once covered under the MP Arrangement may not be deemed a New PEO Client or covered under any arrangement exclusively for New PEO Clients. |
(a) | The Employer agrees to indemnify and hold harmless the Company from any and all liability, loss, damages, fines, penalties and costs, including but not limited to, expenses and reasonable attorneys fees, which the Company shall sustain arising out of or in connection with (1) any gross negligence or material breach of the Agreement on the part of the Employer, (2) any determination by the Employer regarding the eligibility for coverage under a Policy or a Non-MP Policy of an Employee or Employees dependent, (3) any direction of the Employer to the |
MP Services Agreement | 17 |
Company, (4) the offering or termination of the Policies or Non-MP Policies, or the manner of the offering or termination of the Policies or Non-MP Policies, to Clients, or (5) the release or use by Employer of any information obtained from the Company pursuant to section 5(a), unless the parties agree or it is determined in a final non-appealable decision by a court or regulatory agency having jurisdiction of the matter that the liability therefore was the direct consequence of criminal conduct or fraud on the part of the Company or negligence or a material breach of the Agreement on the part of the Company. | ||
(b) | The Company agrees to indemnify and hold harmless the Employer and/or the Plan from any and all liability, loss, damages, fines, penalties and costs, including but not limited to, expenses and reasonable attorneys fees, that the Employer or Plan shall sustain arising out of or in connection with gross negligence or material breach of the Agreement on the part of the Company or any direction of the Company to the Employer, unless the parties agree or it is determined in a final non-appealable decision by a court or regulatory agency having jurisdiction of the matter that the liability therefore was the direct consequence of criminal conduct or fraud on the part of the Employer or negligence or a material breach of the Agreement by the Employer. The Company shall not indemnify or hold harmless the Employer or the Plan for any losses arising out of Overpayments. If Health Benefits are required to be paid pursuant to any judgment in favor of the plaintiff or a settlement with the plaintiff or the order of a regulatory agency having jurisdiction of the matter and such judgment or settlement is final or payable during the term of the Agreement, any portion of such judgment or settlement attributable to Health Benefits shall be treated as a claim for Health Benefits at the time that the judgment or settlement is final and shall be paid by the Company to the same extent as any other claim for Health Benefits under the provisions of section 5 of the Agreement and section 2 of the MP Financial Agreement. | |
(c) | The Company and the Employer shall promptly advise each other as to matters which come to their respective attentions involving potential legal actions or regulatory enforcement activity which involve the Plan or are related to the activities of either party with respect to the Plan or the Agreement and shall |
MP Services Agreement | 18 |
promptly advise each other of legal actions or administrative proceedings which have actually commenced. | ||
(d) | In the event that a lawsuit or administrative proceeding is brought against the Employer or the Plan but not the Company, the defense and associated costs of such action or proceeding shall be paid by the Employer, provided that the costs, including attorneys fees, of such defense shall be reimbursed to the Employer or Plan by the Company to the extent the Employer or the Plan is entitled to indemnification by the Company under subsection (b) of this section 7. The Company shall cooperate fully with the Employer in the defense of any such action or proceeding arising out of matters related to the Agreement. The Employer agrees not to oppose any attempt made by the Company to intervene in such action or proceeding, provided there is no conflict of interest between the Company and the Employer or the Plan. | |
(e) | In the event that a lawsuit or administrative proceeding is brought against the Company arising out of the performance of its duties under the Agreement, the defense of and associated costs of such action or proceeding shall be paid by the Company, provided that the costs, including reasonable attorneys fees, of such defense shall be reimbursed to the Company by the Employer to the extent the Company is entitled to indemnification by the Employer under subsection (a) of this section. The Employer shall cooperate fully with the Company in the defense of any such action or proceeding arising out of matters related to the Agreement. The Company agrees not to oppose any attempt made by the Employer to intervene in such action or proceeding, provided there is no conflict of interest between the Company and the Employer or the Plan. If the Employer or the Plan is also named as a party in such action or proceeding, the Employer may request that the counsel engaged by the Company also provide for the defense of the Employer and/or the Plan. If there is no conflict of interest between the Company and the Employer or the Plan, the Company shall take all reasonable measures to comply with the Employers request. If such counsel does not provide for the Employers or Plans defense, then the Employer and Plan shall pay for the defense and associated costs as provided in subsection (d) of this section, subject to the Employers and/or the Plans right to reimbursement under such subsection. |
MP Services Agreement | 19 |
(a) | In the event that a state or other jurisdiction, in accordance with existing or future law, determines that the Company is liable for payment of any tax, surcharge or assessment (other than taxes based upon net income) (individually or collectively, Tax) with respect to any aspect of the Plan, the Policies, the Non-MP Policies, the MP Arrangement, or the Agreement, the Employer agrees to reimburse the Company for the amount of any such Tax, any interest expense assessed against or incurred by the Company before or after payment of such Tax, and any other charges, penalties or fines in connection therewith, including reasonable attorneys fees, that the Company may sustain in connection with the payment of such Tax, provided, however, that the Company shall have given the Employer prompt notification of the imposition of any such Tax. |
(i) | Subject to the provisions of section 8(a)(ii), any such amount shall be due and payable upon written notification by the Company to the Employer, regardless of whether such notification occurs during the term or following the termination of the Agreement. The Employer shall indemnify and hold harmless the Company from any liability, loss, damages, fines, penalties and costs, including reasonable attorneys fees, which the Company may sustain arising out of or in connection with any compromise, litigation or appeal by the Employer of any Tax or any delay in payment of such Tax as a result of such compromise, litigation or appeal. | ||
(ii) | With respect to any Tax imposed on the Company solely as a result of the Employers status as policyholder or sponsor of the Plan, upon Employers compliance with any bond, security or other legal requirement imposed on a party contesting such a Tax, the Employer shall have the sole discretion in determining whether any such Tax shall be paid, compromised, litigated or appealed and as to all matters of procedure, compromise, defense or appeal of any other aspects concerning liability for any such Tax, except to the extent that the Company would thereby be in violation of any applicable law or rule or would suffer any |
MP Services Agreement | 20 |
injury, loss or liability that would not be fully compensable under section 8(a). | |||
(iii) | The Employer shall not be obligated to reimburse the Company for that portion of any premium tax assessed against the Company that was taken into account by the Company in establishing the Quoted Premium (as defined in the MP Financial Agreement) under a Policy or the premium under a Non-MP Policy. |
(b) | In the event that a state or other jurisdiction, in accordance with existing or future law, imposes upon the Company the duty to act as agent for collection of any Tax imposed on the Plan or the Employer or with respect to any aspect of the Plan, a Policy, a Non-MP Policy, the MP Financial Agreement, or the Agreement, the Employer will pay over any such amount to the Company when requested to do so by the Company, subject to receipt by the Employer from the Company of prompt notice concerning such matter and exercise by the Employer of its rights as stated under subsection 8(a) above. |
(a) | The Agreement shall terminate on the date that the MP Financial Agreement terminates. |
MP Services Agreement | 21 |
(b) | In the event that either party reasonably believes that any state or other jurisdiction may impose a penalty on it for proceeding with its performance under the Agreement, such party will promptly advise the other party of such belief and the basis therefore. In such event the parties agree to cooperate in good faith to resolve such matter to the satisfaction of both parties. After a good faith effort by the parties to eliminate the risk of a material penalty being imposed, if the matter is not resolved to the satisfaction of both parties, the party upon which such penalty may be imposed may immediately discontinue the Agreements application in such state or jurisdiction by providing notice to that effect to the other party. In that event, the Agreement will continue to apply in all other states or jurisdictions. | |
(c) | Termination of the Agreement shall not extinguish the rights or liabilities of either party arising prior to termination. |
(a) | Upon execution of the Agreement, all prior or contemporaneous letters of understanding, agreements, requests for proposal, |
MP Services Agreement | 22 |
proposals, representations, statements, negotiations and understandings, whether oral or written, are hereby terminated and superseded by the Agreement, the MP Financial Agreement, the Security Deposit Agreement, the Policies and Non-MP Policies and all riders thereto. | ||
(b) | Any amendments or modifications to the Agreement must be in writing, and must be signed by the duly authorized representatives of each party. Each party shall provide to the other a written certification of the names of those persons duly authorized to execute amendments or modifications on behalf of the party. Each party shall be entitled to rely on the others certification of authority unless and until it is modified. | |
(c) | No term or provision of the Agreement shall be deemed waived and no breach excused, unless the party claimed to have waived the term or provision or to have excused the breach does so in a signed writing. | |
(d) | In the event of any conflict between the terms and conditions of the Agreement, the MP Financial Agreement, the Security Deposit Agreement or the Policies or Non-MP Policies, the following order of precedence shall be followed in resolving the conflict. The terms of the Security Deposit shall first control, then the MP Financial Agreement, then the Agreement and lastly the Policies or the Non-MP Policies, as applicable. | |
(e) | The parties respective rights and obligations under sections 2(a)-(d), 4(a)-(d), 5(a), 5(d), 7, 8 and 12 of the Agreement shall survive termination of the Agreement. |
(a) | Any notice required to be given under the Agreement shall be given in writing by sending or delivering such notice to the receiving party (i) by prepaid registered or certified first class U.S. mail, return receipt requested, (ii) by overnight express courier with recipients signature required, (iii) by hand delivery with recipients signature required, (iv) by facsimile, provided that the other party has specifically requested that a specifically |
MP Services Agreement | 23 |
designated notice be made by facsimile, or (v) or by any other method by which the date of receipt by the party entitled to such notice may be determined. Notice shall be effective when sent. | ||
(b) | Notices to a party shall be sent or delivered: |
MP Services Agreement | 24 |
(c) | Each party may change the person(s) designated to receive notice on behalf of the party, or the address or facsimile number to which such notice should be sent, upon written notice to the other party. |
ADMINISTAFF OF TEXAS, INC. | UNITED HEALTHCARE | |||||||||
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/s/ Richard G. Rawson | By | Simeon A. Schindelman | |||||||
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Name Richard G. Rawson | Name Simeon A. Schindelman | |||||||||
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Title President | Title President, Small Business | |||||||||
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Date 5/27/2005 | Date 6/1/2005 |
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| Premium Versus Claims | ||
| Claim Expenses by Size of Payment | ||
| Payments by Benefit Type | ||
| Health Care Cost Management Summary | ||
| Claim Experience | ||
| Membership by Market |
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| Membership by Month | ||
| Membership with Demographic Factors and Geographic Factors |
| Claim Expenses by Size of Payment | ||
| Payments by Benefit Type |
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Premium Versus Claims
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Claims Expenses by Size of Payment
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Payments by Benefit Type
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Detailed Payment Report
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Health Care Cost Management Summary
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Claim Experience
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Claim Lag Study
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Inpatient Utilization and Costs by Admission Types
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Utilization by Diagnosis Chapters
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Managed Pharmacy Plan Performance
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Surgical Costs and Utilization by Procedure Chapters
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Membership by Market
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Membership by Month
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Membership with Demographic and Geographic Factors
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Distribution of Discounts
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Distribution of Ineligible Charges
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Distribution of Other Savings
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Inpatient Utilization by Diagnosis Chapters
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Managed Pharmacy Cost and Utilization by Month
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Managed Pharmacy Critical Indicators
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Managed Pharmacy Key Generic Substitution Indicators by Month
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Managed Pharmacy Top Drug Utilization Ranked by Cost &Top Drug Utilization Ranked by
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Managed Pharmacy Top Therapeutic Class Utilization Ranked by Cost & Top Therapeutic Class
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Managed Pharmacy Utilization by Gender and Age
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Network Utilization
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Network Utilization (including Capitation)
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Network Utilization by Provider Type
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Network Utilization by Provider Type (including Capitation)
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Outpatient Utilization by Diagnosis Chapters
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Surgical Utilization by Procedure Category and Place of Service
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Surgical Utilization by Procedure CPT Codes
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Top Hospitals Ranked by Total Net Paid & Top Physicians Ranked by Total Net Paid
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Utilization by Age Group
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Utilization and Costs by Provider Type
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Bill Count by Month
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Annual Customer Reporting & Analysis Executive Summary Report
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MP Services Agreement | 38 |
1. | The Employer shall provide to the Company an accounting of the number of Clients participating in the Plan as of January 1, 2002. | |
2. | The Employer understands that the Company requires a seven business day period from the date notification is received by the Company of a Participants eligibility or termination of coverage under the Plan in order to update the UnitedHealth Group Eligibility System and the subsidiary eligibility systems for pharmacy, dental and mental health/substance abuse benefits. This seven business day period is predicated upon such eligibility information being provided by the Employer to the Company in the format consistent with that outlined in the UnitedHealth Group Eligibility Handbook (last updated on June 19, 2001). The Employer agrees to pay the claims of such Participant(s) whose coverage has been terminated to the extent they would otherwise constitute Health Benefits required to be paid by the Company if the Company authorized the payment of the claims during this period, even if such persons are no longer eligible for Plan benefits during this period. | |
3. | Effective December 31, 2005, the Company shall not be required to make retroactive terminations of Participant eligibility (excluding COBRA Participants) for benefits Incurred under Policies or Non-MP Policies on dates more than 31 calendar days before the date on which the corrected information is received by the Company. The Company shall not be required to make any other retroactive corrections in Participant eligibility for benefits Incurred under Policies or Non-MP Policies on dates more than 60 calendar days before the date on which the corrected information is received by the Company. | |
4. | In calculating the Quoted Premiums under the Policies and the monthly premiums under the Non-MP Policies administered on the Companys UNET system (as designated in Exhibit B to the Minimum Premium Financial Agreement), the following rule shall apply. *** shall be due for Employees whose effective date of coverage is on or before the *** of that month and no premium shall be due for Employees whose effective date of coverage is |
MP Services Agreement | 39 |
after the *** of that calendar month. *** shall be due for Employees whose coverage is terminated after the *** of that calendar month, and *** shall be due for Employees whose coverage is terminated on or before the *** day of that calendar month. | ||
5. | Monthly premiums for the Non-MP Policies administered on the Companys PRIME system (as designated in Exhibit B to the Minimum Premium Financial Agreement) are calculated by the system on an individual Non-MP Policy basis using a roster billing process which reflects the amount due for individual Participants. The calculation of monthly premiums on PRIME uses a *** rule to determine the premium due for partial months coverage as opposed to the *** of the month rule described in paragraph 4 above. | |
6. | Risk Management Reports and Information |
(a) | Commencing with the second quarter of 2005 Quarterly Review meeting (which is expected to occur on or about August 15, 2005), the Employer shall supply the following risk management activity reports to the Company on a quarterly basis at the applicable Quarterly and Annual Review meetings: |
(i) | Reports for *** During the Review Quarter |
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(ii) | Reports for *** as of the End of the Review Quarter |
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(b) | In addition, the parties will cooperate in good faith to establish by August 15, 2005 an appropriate mechanism |
MP Services Agreement | 40 |
(e.g., a process for Employer reporting) to demonstrate Employers compliance with the *** percent employee contribution limitation for employee only coverage for a New Client in Section 6(b)(ii) of the Agreement. | |||
(c) | Representatives of the Employer and the Company shall meet no more than one time in any twelve-month period to allow the Company the opportunity to review and comment on the Employers *** subject to applicable confidentiality provisions of this Agreement and the MP Financial Agreement. Further, the Employer and the Company shall cooperate to establish a process under which the Employer will provide additional information to help the Company better understand the Employers management of new Client accounts. |
MP Services Agreement | 41 |
A. | Except as otherwise set forth in this Exhibit F , the Company shall have the right to be the exclusive provider of medical and dental coverage for Employees; provided, however, that execution of an agreement between the Company and the Employer with respect to the Companys right to be the exclusive provider of dental coverage for Employees with respect to certain geographical coverage areas (Dental Agreement) shall cause this Agreement and the MP Financial Agreement (including any exhibits or appendices to either) to be modified effective as of the effective date of the Dental Agreement to delete any effect on or reference to dental benefits, coverage, policies, or exclusivity rights as to the provision of dental coverage to employees of the Employer, and shall be interpreted in a manner consistent therewith. For purposes of this Exhibit F , Employees shall include employees of the Employer covered under Non-MP Policies as well as the Policies. | |
B. | Exceptions to the Companys Right to be Exclusive Provider |
1. | *** The Employer may offer alternate HMO, EPO, or PPO coverage (but not dental coverage) to Clients in ***. | ||
2. | *** The Employer shall offer to each Client the following coverage options for Employees at *** worksites: (i) existing *** coverage options (medical and/or dental) or (ii) coverage options offered by the Company (medical and/or dental). | ||
3. | CIGNA *** : CIGNA *** or *** may be offered with, at the option of the Company, the Companys ***, in the following markets, provided that each market listed below shall be treated as a New Market (as defined in section B(7) below) and subject to the provisions of section B(5)(b) below at such time as the Company shall offer an ***, *** or the *** Substitute option which is Competitive (as defined in section B(7) below) in such market. |
a. | *** | ||
b. | *** |
MP Services Agreement | 42 |
c. | *** | ||
d. | *** | ||
e. | *** | ||
f. | *** | ||
g. | *** |
4. | New Markets |
a. | The Employer shall offer the Companys PPO option in New Markets. Subject to subsection B.4.b. and Section C of this Exhibit F , if the Employer wishes to also offer an HMO or EPO option in a New Market, the Employer shall (i) notify the Company of its plan, and (ii) offer such option exclusively through the Companys HMO, EPO or the HMO Substitute, provided that the Companys product is Competitive in such New Market at the time of the Employers notice to the Company or becomes Competitive not more than *** months after receipt of the Employers notice to the Company. | ||
b. | If the Employer provides an HMO or EPO option through a Competing Vendor in a New Market consistent with the provisions of this Exhibit F , the Company may elect to offer the Companys PPO option to Employees along with the Competing Vendors HMO or EPO. If the Companys PPO option is provided to Employees, the Company may upon *** days notice to the Employer, cease such offering in the New Market effective on the January 1 following the notice. |
5. | Removal or Addition of the Companys HMOs and Other Products |
a. | If at any time an HMO, the HMO Substitute or EPO offered by the Employer through the Company ceases to be Competitive, the Employer may in its sole discretion cease offering such product and, in |
MP Services Agreement | 43 |
any case, the respective market in which such product operates shall be deemed a New Market. In any such case, the Employer shall notify the Company of its opinion concerning the Competitive status of such product at least *** months before it ceases offering the product and shall have the burden of undertaking the steps required to confirm the same in accordance with section B(7)(b) of this Exhibit F . If the Companys HMO, the HMO Substitute or EPO becomes Competitive within *** months after its receipt of the Employers notice, the Employer may not replace it unless and until it is again not Competitive, in which case a new notice shall be required and a new *** month corrective period will begin. | |||
b. | If at the time the Company begins to offer an HMO, the HMO Substitute or EPO option which is Competitive, the Employer is offering an HMO or EPO option through a Competing Vendor consistent with the provisions of this Exhibit F , the Employer shall offer each Client in such New Market coverage options for Employees in such New Market not later than the *** of such *** consisting of either (i) subject to Section C of this Exhibit F , the Companys ***, the *** Substitute or *** and *** options or (ii) such Competing Vendors *** or *** and, at the Competing Vendors option, its ***. | ||
c. | Notwithstanding sections B.1 and B.3.c. of this Exhibit F , the Employer and the Company shall discuss in detail the circumstances under which the Company could make available and the Employer could accept new Company offerings in Boston and California beginning in 2006. In no event shall Employer be required to include a new Company product in California or Boston that would reasonably be expected to materially increase Employers health plan costs in that market or adversely impact its arrangements with insurers in that market. |
MP Services Agreement | 44 |
6. | Acquisition by Employer of another Professional Employer Organization : The Employers use of Competing Vendors to provide coverage to New PEO Clients will not violate the provisions of section 6(b)(iv) of the Agreement or this Exhibit F if such coverage complies with the provisions of section 6(f) of the Agreement. | ||
7. | Process for Considering Alternative Vendors in Special Markets |
a. | The special procedures for alternate vendors described in this section 7 shall apply to the following markets (Special Markets): |
i. | *** | ||
ii. | *** | ||
iii. | *** | ||
iv. | *** | ||
v. | *** | ||
vi. | *** | ||
vii. | *** |
b. | The Employer and the Company shall discuss in detail whether and upon what terms the offering of vendors other than the Company (Alternate Vendors) in the Special Markets would be a viable alternative to the current approach in any or all of the Special Markets, including but not limited to, the following: |
i. | pricing, product and other competitive information; | ||
ii. | the specific advantages expected to be gained from offering an Alternate Vendor; | ||
iii. | the anticipated process and terms for introducing and offering an Alternate Vendors product, including price, contribution, product |
MP Services Agreement | 45 |
and benefit plan design differences, and employee vs. Client selection process; and | |||
iv. | whether some combination of different or additional Company offerings would best serve the Employer, |
c. | Following these discussions, the Employer may offer an Alternate Vendor in a Special Market without regard to notice and cure provisions of section 5 of this Exhibit F . Any vendor changes made by the Employer pursuant to this section shall be memorialized in an amendment to this Exhibit F . Taking into account the discussions with the Employer, the Companys existing offerings, and the size and product distribution of the existing membership in the Special Market, the Company shall elect one of the following: |
i. | Continue to offer to the Employer an *** option at the Client level. (All co-employees of a Client would be offered ***); | ||
ii. | Continue to offer to the Employer an *** option at the employee level, where Clients may elect more ***. | ||
iii. | Discontinue offering any option to the Employer in the Special Market. |
d. | If the Employer offers one or more Alternate Vendors in a Special Market, this change in product offering may result in changes in the Monthly Payable Rate, Quoted Premiums or premiums of Non-MP Policies; provided, however, that any such rate or premium change for a Special Market would not be effective before the later of (i) the date the Alternate Vendors coverage becomes effective and (ii) the first of the month following 30 days advance written notice of such rate or premium change by the Company to the Employer. |
MP Services Agreement | 46 |
e. | The Employer has determined to offer the following Alternate Vendors pursuant to this paragraph B.7. |
i. | ***. |
C. | Conversion to Alternative Products | ||
As soon as commercially practicable after ***, the Employer shall begin the process of substituting the Companys *** products for the Company *** under which Employees were covered on ***, subject to the Employers determination that the proposed provider network in the applicable geographic area is adequate; provided, however, that substantially all of the Company *** under which Employees were covered on *** shall be replaced with the Companys ***. | |||
D. | Definitions | ||
As used in this Exhibit F , capitalized terms shall have the meanings assigned to them in the Minimum Premium Administrative Services Agreement to which this Exhibit F is attached or, if no meaning is so assigned, the meaning set forth in this section D of Exhibit F . |
a. | Competing Vendor means a vendor of medical coverage products in a particular geographic market other than the Company. | ||
b. | Competitive when referring to an HMO, the HMO Substitute or an EPO option means that either (i) the Company and the Employer agree or (ii) an independent consultant chosen by mutual agreement of the parties has determined, that such product ranks either *** as compared to competing products of other vendors in the designated market. In making any determination of the rank of a product in a market, such consultant shall apply such criteria relating to *** as it shall determine appropriate. All fees and expenses of any such consultant shall be paid by the Employer. |
MP Services Agreement | 47 |
c. | HMO means a product issued by a licensed health maintenance organization and offered as a network only or lock in product. Any references in this Exhibit F to the Companys HMOs shall include any HMO issued by the Company (or another member of the Companys controlled group). | ||
d. | New Market means a geographic area in which the Employer does not offer an *** option on January 1, 2002. | ||
e. | PPO means any product for network coverage that is not an HMO, the HMO Substitute or an EPO. | ||
f. | EPO means a product issued by a licensed insurance company and offered as a network only or lock in product. | ||
g. | HMO Substitute means the Choice Plus benefit plan (which includes both in-network and out-of- network benefits) developed and offered to the Employer by the Company as a substitute for Companys HMO products in connection with Section C of this Exhibit F . |
MP Services Agreement | 48 |
1. | I have reviewed this quarterly report on Form 10-Q of Administaff, Inc.; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Paul J. Sarvadi | ||||
Paul J. Sarvadi | ||||
Chairman of the Board and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Administaff, Inc.; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Douglas S. Sharp | ||||
Douglas S. Sharp | ||||
Vice President Finance, Chief Financial Officer and Treasurer | ||||
/s/ Paul J. Sarvadi
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Paul J. Sarvadi
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Chairman of the Board and Chief Executive Officer | ||
August 2, 2005
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/s/ Douglas S. Sharp
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Douglas S. Sharp
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Vice President of Finance, Chief Financial Officer and Treasurer | ||
August 2, 2005
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