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Home My WebLink About12/03/2014 AGENDA 9. CITY COUNCIL 345 6th Street, Suite 600, Bremerton, WA 98337 ❑ Phone (360)473-5280 DECEMBER 3, 2014 CITY COUNCIL MEETING AGENDA 1. BRIEFING: 5:00 —5:30 P.M. in COUNCIL CONFERENCE ROOM 603 A. General Council Business 2. CALL TO ORDER: 5:30 P.M. in FIRST FLOOR CHAMBERS A. Pledge of Allegiance B. Invocation 3. MAYOR'S REPORT 4. PUBLIC RECOGNITION 5. CONSENT AGENDA A. Claims & Check Register B. Minutes of Budget Workshop— November 17, 2014 C. Minutes of Meeting — November 19, 2014 6. PUBLIC HEARING A. Public Hearing on Ordinance No. 5266 adopting the City of Bremerton FY-2015 Budget 7. GENERAL BUSINESS A. Contracts for Partially Self-Funded Medical Insurance Program 8. COUNCIL MEMBER REPORTS 9. ADJOURNMENT OF CITY COUNCIL BUSINESS MEETING ® Americans with Disabilities Act(ADA) accommodations provided upon request. Those requiring special accommodations please contact the City Clerk at(360) 473-5323 at least 24 hours prior to the Meeting. BREMERTON CITY COUNCIL MEETING SPEAKERS LIST PLEASE PRINT YOUR NAME BELOW IF YOU PLAN TO COMMENT SO YOUR NAME CAN BE INCLUDED IN THE RECORD 5WOLFFo � C � �5 ren 2 ��r er 062 C n/i CAS Q Di,o ri-D REQUESTS FOR INFORMATION MUST BE SUBMITTED IN WRITING TO THE CLERK THANK YOU 0 the FOR YOUTH DEVELOPMENTO FOR HEALTHY LIVING FOR SOCIAL RESPONSIBILITY YOUR ADVENTURE STARTS HERE I Winter Day Camp BREMERTON FAMILY YMCA _F'• .l} December 22, 23, 26 f d. *Closed Christmas Eve, Christmas Day, and New 1 =_ << - _ �� Year's Day a �, � Regular Hours � 8:30am-3:30pm - Extended Care � 3:30pm-Spm :1�`: Sports Arts an d crafts Swimming Registration COST YMCA Members $35 per day; $175 for all six daysopens Community Members $45 per day; $200 for all six daysNovember10 Extended Care $10 per day for each camper Items of Concern I-594 Section 2 (page 4) (9) "Firearm" means a weapon or device from which a projectile or projectiles may be fired by an explosive such as gunpowder." Carried by most local hardware stores locally and statewide Who is doing the background check and do the stores all possess a FFL for the transfer? Are our contractors now going to become felons for having these in their jobsite tool bones? i Carried by Walmart,West Marine, Scuba stores and others on open shelves,signaling devices are required by the US Coast Guard for boats over 16 feet. Who is doing the background check and do the stores all possess a FFL for the sale or transfer? F r r•"�— �' '1' lu' a' � is Authorized by the Washington State Patrol and many municipalities Who is doing the background check and do the stores all possess a FFL for the sale or transfer? I-594 Effective 12-04-2014 Law Enforcement(per WA State fiscal impact statement) I-594 would create two new crimes. A person who knowingly violates Section 3 of the initiative could be subject to a gross misdemeanor, punishable under Chapter 9A.20 RCW. A person who knowingly violates Section 3 a second time, or more, is subject to a class C felony, punishable under Chapter 9A.20 RCW. Section 2 (page 4) (9) "Firearm" means a weapon or device from which a projectile or projectiles may be fired by an explosive_such as gunpowder." NEW SECTION. Sec. 9. A new section is added to chapter 9.41 RCW to read as follows: Notwithstanding the penalty provisions in this chapter, any person knowingly violating section 3 of this act is guilty of a gross misdemeanor punishable under chapter 9A.20 RCW. If a person previously has been found guilty under this section,then the person is guilty of a class C felony punishable under chapter 9A.20 RCW for each subsequent knowing violation of section 3 of this act. A person is guilty of a separate offense for each and every gun sold or transferred without complying with the background check requirements of section 3 of this act. It is an affirmative defense to any prosecution brought under this section that the sale or transfer satisfied one of the exceptions in section 3(4)of this act. NEW SECTION. Sec.3. A new section is added to chapter 9.41 RCW to read as follows: (1) All firearm sales or transfers, in whole or part in this state including without limitation a sale or transfer where either the purchaser or seller or transferee or transferor is in Washington, shall.be subject to background checks unless specifically exempted by state or federal law. The background check requirement applies to all sales or transfers including, but not limited to, sales and transfers through a licensed dealer, at gun shows, online, and between unlicensed persons. (2)No person shall sell or transfer a firearm unless: (a)The person is a licensed dealer; (b)The purchaser or transferee is a licensed dealer; or (c)The requirements of subsection (3)of this section are met. (3)Where neither party to a prospective firearms transaction is a licensed dealer, the parties to the transaction shall complete the sale or transfer through a licensed dealer... Lori Smith From: Lori Smith on behalf of City Council Sent: Wednesday, December 03, 2014 3:11 PM To: 'taylor niemy' Subject: RE: Citizen Concern - Pan Handling Ban information (Taylor Niemy) Attachments: panhandling ban overturn history.docx Mr. Niemy, This is to acknowledge receipt of your e-mail (with the attachment and link below), which I have provided to the Council Members for their review and consideration. I also shared a copy with the City Attorney and Police Chief due to the subject of panhandling; and with the Director of Community Development due to the link on Tiny Houses for the Homeless. Your interest in the City is appreciated. Sincerely Lori Smith Legislative Assistant Bremerton City Council (360)473-5280 _................. From: taylor niemy [mailto:tniemyCaOgmail.com] Sent: Wednesday, December 03, 2014 3:01 PM To: City Council Subject: Pan Handling Ban information Please see the attachment for a list of cities that overturned their panhandling ban because of the unconstitutionality of it. Tlie next link is for affordable housing options for the homeless. littp•//www yesma.azinc or./new-econom /�y-liouse-villagcs-for-the-liomcless-an-affordable-solution- catches-on i Tiny Houses for the Homeless: An Affordable Solution Catches On by Erika Lundahl— ... Page 1 of 6 Give YES! Throughout the Yew 2-for-1 Gift Subscriptions 10 Tiny Houses for the Homeless: An Affordable Solution Catches On A growing number of towns and cities have found a practical solution to homelessness through the construction of tiny-house villages—and housing officials are taking notice. by Erika Lundahl posted Feb 20, 2014 r t I An architect's rendering of Quixote Village in Olympia,Wash.Image courtesy of Panza. On a Saturday in September,more than 125 volunteers showed up with tools in hand and built six new 16-by- 2o-foot houses for a group of formerly homeless men.It was the beginning of Second Wind Cottages,a tiny- house village for the chronically homeless in the town of Newfield,N.Y.,outside of Ithaca. On January 29,the village officially opened,and its first residents settled in.Each house had cost about $1o,000 to build,a fraction of what it would have cost to house the men in a new apartment building. The project is part of a national movement of tiny-house villages,an alternative approach to housing the homeless that's beginning to catch the interest of national advocates and government housing officials alike. "It's certainly something that we would encourage other communities to take a look at,"says Lee Jones at the Department of Housing and Urban Development. For many years,it has been tough to find a way to house the homeless.More than 3.5 million people experience homelessness in the United States each year,according to the National Law Center on Homelessness and Poverty.Shortages of low-income housing continue to be a major challenge.For every loo households of renters in the United States that earn"extremely low income"(30 percent of the median or less),there are only 3o affordable apartments available,according to a 2013 report from the National Low Income Housing Coalition. http://www.yesmagazine.org/new-economy/tiny-house-villages-for-the-homeless-an-affor... 12/3/2014 Tiny Houses for the Homeless: An Affordable Solution Catches On by Erika Lundahl—... Page 2 of 6 But Second Wind is truly affordable,built by volunteers on seven acres of land donated by Carmen Guidi,the main coordinator of the project and a longtime friend of several of the men who now live there.The retail cost of the materials to build the first six houses was somewhere between$1o,000 and$12,000 per house,says Guidi.But many of the building materials were donated,and all of the labor was done in a massive volunteer effort. "We've raised nearly$1oo,000 in loo days,"he says,and the number of volunteers has been"in the hundreds,maybe even thousands now." The village will ultimately include a common house,garden beds,a chicken coop,and 18 single-unit cottages. Tiny Housing Boom for the Homeless Dignity Village in Portland,OR,and Opportunity Village in Eugene,OR,once forged new ground in offering tiny house villages as transitional housing for homeless people rather than tents or dormitory style public housing.Now the concept has taken hold.Here are the four most recent projects: ,.��•`.l Jam. :'cep,- ��1��`•• Newfield,NY ! Olympia,WA Madison,WI Austin,TX Second Wind Quixote Village OM Viliagc Communityl irstl Cottages (OccupyMadisonj Village %6 residents n residents mis resedents zoo residents A houses planned ;o houses planned is houses planned Unit number undecided Open Jan,29 2024 open Dec.22,2023 Opel?Doc.24,2023 open D¢c,2024 Cost estimate per unit: Cost estimate per unit Cost estimate per unit., Cost estimate per person. $22,000 plus labor $67,500 $5,000 930,000 YES-ma&a ne lnloyyhic 20ta r S�atrF sKond was tatugr4 m w,mpuwago.;0[a,pr GLtlfnn ne,mnagnemmun.tpmn shavectoo.m,;r"0kso sowtrnak "Camp Quixote" becomes a village "The typical development for extremely low-income housing is trending up toward$200,000 per unit.That's a lot of bills,"says Jill Severn,a board member at Panza,a nonprofit organization that sponsors another tiny- house project called Quixote Village.(The organization's name is a play on Sancho Panza, Don Quixote's sidekick in Miguel de Cervantes'classic novel.) Quixote Village opened in Olympia,Wash., right before Christmas.But it began in February 2007 as"Camp Quixote,"a protest held in a city-owned parking lot.A group of homeless people assembled there to oppose an Olympia ordinance that made it illegal to sit,lie down,or sell things within six feet of downtown buildings. When police evicted the campers eight days after the protest began,the Olympia Unitarian Universalist Congregation stepped in to help,offering temporary refuge on their land. http://www.yesmagazine.org/new-economy/tiny-house-villages-for-the-homeless-an-affor... 12/3/2014 Tiny Houses for the Homeless: An Affordable Solution Catches On by Erika Lundahl— ... Page 3 of 6 i J Residents of Quixote Village in Olympia,Wash., move in with their belongings. Photo courtesy of Panza. For five years,the camp's location rotated,moving and reassembling every 90 days at one of several different local churches.Panza was formed by a corps of volunteers from the faith communities assisting the camp, and the organization worked with the city council to secure and rezone a parcel of county-owned industrial land near a community college and create a permanent site for the village.In December of 2013,the residents of Quixote Village settled into their new homes there. Quixote Village has fostered a positive relationship between its residents and local government and police, says Severn.Despite this,the project was held up in court for a year by a local organization of businesses and landowners called the Industrial Zoning Preservation Association,which cited concerns over the potential impact on local businesses in a nearby industrial park. Panza used the time to fundraise and build an outreach campaign to win over the public.They had the support of legions of volunteers,mostly from local churches,who had staffed the camp. "Having hundreds of[residents]get to know people that were homeless made a huge difference in the success of getting this off the ground,"says Severn. Today,the 30 structures that make up Quixote Village are home to 29 disabled adults,almost all of whom qualify as"chronically homeless,"by the standards of the U.S.Department of Housing and Urban Development. Homelessness in Austin,Texas,costs taxpayers more than$10 million per year. The residents also have a common space with shared showers,a laundry,garden space,and a kitchen.By sharing these amenities,the community was able to increase the affordability of the project and design a neighborhood they believed would fit their needs and make them more self-sufficient. The shared space has also helped them create a supportive community.The residents,who are self-governed, have developed a rulebook that prohibits illegal drugs and alcohol on the grounds and requires that each member put in a certain number of service hours per week.They meet twice a week in the evenings to discuss problems or concerns and to share a common meal that they take turns cooking. The main complaint right now,says Raul Salazar,the village's program manager and only full-time staff member,is that the postal service still hasn't started delivering mail. The cost of units at Quixote Village is significantly higher than at Second Wind—about$88,000 per unit—but that's still less than half the cost of the average public housing project,according to Nan Roman,president and CEO of the National Alliance to End Homelessness.Quixote has had access to state funding and local community grants,as well as private funding from individuals,businesses,and two Native American tribes. The project also received a Community Development Block Grant for$604,000 from the State of Washington Department of Commerce and a$1.5-million grant from the Washington State Legislature. Two architecture and design firms,MSGS Architects and KMB Design Groups,also contributed design services pro bono,and the Thurston County Commission is leasing the land to Quixote for$1 per year. http://www.yesmagazine.org/new-economy/tiny-house-villages-for-the-homeless-an-affor... 12/3/2014 Tiny Houses for the Homeless: An Affordable Solution Catches On by Erika Lundahl— ... Page 4 of 6 Gaining acceptance Many other tiny-house projects are just beginning to get of the ground,raise money,find land,and gain approval from local officials and members of the public. But the unorthodox nature of the small houses presents unique legal zoning limitations and barriers that limit where tiny houses can be stationed. In Madison,Wisc.,Occupy Madison has been facing this very challenge,as the group forged ahead with plans for a tiny house village. Each home will be about 99 square feet if you include the porch,and volunteers enjoy the joke: "We are the 99 square feet!" In the spring of 2011,prior to the launch of the Occupy Wall Street movement,a series of protests at the Wisconsin State Capitol—focused on the state's controversial anti-collective-bargaining bill—prompted additional legislation that prohibited groups from gathering without a permit.When the protests joined forces with Occupy in the fall of 2011,this created a unique opportunity for the voices of the many homeless people in Madison to be heard. "There were some great moments throughout the Occupy movement where a lot of dialogue was going on between the people without homes and the people with homes,"says Allen Barkoff,one of the board members of Occupy Madison,Inc.,a nonprofit formed in December 2012 to address the need for legal places where homeless people in Madison could congregate and stay safe.The organization first looked into buying an apartment building or a shared house for the homeless but ultimately settled on tiny houses as the most flexible and economical way to create homes for people. Like what you're reading?YES!is nonprofit and relies on reader support. Click here to chip in$5 or more to help us keep the inspiration coming. In this case,the cost of building the tiny homes comes to around$5,000 each,funded by private donations and an online crowd-funding campaign.The nonprofit also plans to apply for some city grants. Each home will come with a propane heater,a composting toilet,and an 8o-watt solar panel array—and will be about 98 square feet in size,99 if you include the porch.(The volunteers enjoy the joke: "We are the 99 square feet!") But the question of where the houses can legally be located is still up in the air.Volunteers are now building houses for six people.Because of a recent ordinance change,the houses are allowed to sit on church property in groups of three.City regulations also permit them to be placed on the side of the road,as long as they are relocated every 48 hours. But Madison's snowy winter makes the houses hard to move,explains Barkoff. Now Occupy Madison,Inc.,is in the middle of a lengthy process to purchase a parcel of land on the east side of the city to accommodate 11 houses,along with a central building(a converted gas station)that can serve as a workshop for making more homes.This spring,they will continue to hold neighborhood meetings about the project,talk with police,and work with the Madison Planning and Development Department—and, eventually,the city council—to negotiate zoning issues for the village. The real cost of homelessness Efforts to break through the red tape and raise money to house the homeless almost always pay off for a community.Even the most expensive tiny-house projects—such as a new,ambitious$6-million campaign to build a Zoo-person tiny-house park this year in Austin,Texas—can't rival the cost of homelessness to taxpayers,which was more than$10 million per year in Austin,for example,as YES! reported in December 2013. "It's a very important step in terms of the kinds of services we should be providing to people that need assistance." "Chronically homeless people—people who have disabilities and are homeless for long periods of time—can be very expensive to systems of public care,"explains Roman.In 2007,the National Alliance to End Homelessness compiled three studies showing that it costs the same or less money to provide permanent housing as it does to allow people to remain homeless.In Denver,Colo.,a housing program for the homeless reduced the costs of public services(including medical services,temporary shelter,and costs associated with arrests and incarceration)by an estimated$15,773 per person per year,saving taxpayers thousands of dollars. http://www.yesmagazine.org/new-economy/tiny-house-villages-for-the-homeless-an-affor... 12/3/2014 Tiny Houses for the Homeless: An Affordable Solution Catches On by Erika Lundahl— ... Page 5 of 6 ` Government officials and city planners are beginning to see the tiny-house village as one viable solution for addressing homelessness. "It's certainly something that we would encourage other communities to take a look at when it comes to creating solutions for housing the chronically homeless,"says Lee Jones,a spokesperson for the U.S. Department of Housing and Urban Development. "It's a very important step in terms of the kinds of services we should be providing to people that need assistance." Currently,the various efforts to house the homeless in tiny-house villages comprise a small and pioneering movement: But each new project helps create lessons and a model for other communities. For example,Quixote Village,as a recipient of state funding,is considered a"pilot"project: It is required to report its progress to the state legislature in five years.In the meantime,says Severn,the residents will be settling in,putting in garden beds,building a carpentry workshop,searching for jobs, and simply living their lives. "One of our residents has been homeless for about 25 years,"Severn says. "He told me he's excited to start a little rose garden.It really touched me to hear that." Erika Lundahl wrote this articlefor YES! Magazine,a national,nonprofit media organization that fuses powerful ideas and practical actions. Erika is a freelance writer living in Seattle. Read more: ■ Street Credibility: Homeless Protesters Fight for Recognition ■ Less than 2 Percent of Carpenters Are Women—Meet the Master Builder Working to Change That ■ Living Large in a Tiny House f tiGET YES! BY EMAIL FREE! Like what you're reading?Get the best of YES!each week. e-mail address Go! Like 26,218 people like this. You won't see any commercial ads in YES!,in print or on this website. That means,we rely on support from our readers. SUBSCRIBE I I GIVE A GIFT I I DONATE Independent.Nonprofit.Subscriber-supported. http://www.yesmagazine.org/new-economy/tiny-house-villages-for-the-homeless-an-affor... 12/3/2014 Tiny Houses for the Homeless: An Affordable Solution Catches On by Erika Lundahl— ... Page 6 of,6 • Gift of YES! Lasts i. ti...M 1• r� All Yeay Get Gifts 6 � rrom the YES! • Giftb http://www.yesmagazine.org/new-economy/tiny-house-villages-for-the-homeless-an-affor... 12/3/2014 I t Cities overturned pan handling bans because of the unconstitutionality of it. Portland, Maine http://www.pressherald.com/2014/02/12/federal court says Portland s panhandling ban is uncons titutional http://www.firstamendmentcenter.org/tag/panhandling Arcata, Cali http://www.firstamendmentcenter.org/ca lif-fudge-much-of-town%E2%80%99s-panhandling-ban-is- unconstitutional Grand Rapids, Mi http://www.firstamendmentcenter.org/mich-panhandling-law-struck-down Salt Lake City, Utah http://www.firstamendmentcenter.org/federal-fudge-puts-halt-to-utah%E2%80%99s-panhandling-law Pheonix,AZ http://www.firstamendmentcenter.org/ariz-court-strikes-down-phoenix-panhandling-law NYC, New York http://www.firsta mendmentcenter.org/federal-iudge-grants-class-action-status-to-n-y-panhandlers Albequerque, NM http://www.firstamendmentcenter.org/n-m-iudge-puts-panhandling-ban-on-hold Chicago, IL http://www.firstamendmentcenter.org/chicago-offers-to-settle-panhandling-lawsuit LA, Cali http://www.firstamendmentcenter.org/federal-appeals-panel-blocks-enforcement-of-1-a-s-anti- begging-law Suggested Donation Lists: Bremerton BaCKpaCK Non Food Items: Brigade -Laundry Detergent (Powered) -Re-sealable Storage Bags Serv`.vig-�th&{watv�e�"d&°fth&ch�.�'a' wNon Perishable Food Items: th�ey May tecww (quart and gallon sizes) -Canned meats (Tuna, Chicken or Beef) -disposable gloves -Dinner mix boxes -Stick on Labels (Tuna Helper, Chicken Helper, Hamburger Helper) Fresh Food Items: -Refried Beans and Chili *Shelf Stable Milk -Canned Vegetables *Cheese products -Canned Meals(Spaghetti Os, Ravioli) *Fresh Fruit -Mac and Cheese (Apples, Bananas, Oranges, Pears, etc.) -Dried Fruit(Raisins etc.) *Fresh Vegetables -Instant Oatmeal or other Hot Cereal (Potatoes, Carrots, Squash, Onions etc.) -Cold Cereal (low sugar, large bags/boxes) *purchased from donated funds, -Hot Chocolate, Hot Cider (Individual sized packets) The goal of the Bremerton Backpack -Pasta Sauces(no glass containers) Hygiene Items: Brigade is to provide nutritious food, on the -Pasta (Small, travel or sample sized) weekend, for children in need in Bremerton -Boxed Juices(100%juice) elementary schools. -Granola bars, cookie packs, popcorn, Hand Soap Each weekday Bremerton schools provide free (Individually wrapped servings) Shampoo and Conditioner breakfasts and lunches for students in need. -Applesauce and Puddings Toothpaste and Toothbrushes Unfortunately, some families, struggling or homeless, lack the resources to provide their (Individual serving size) Hair brush and combs children with the same level of nutrition on -Peanut Butter(no glass containers) Deodorant weekends. Area teachers are increasingly -Jelly or Jam (no glass containers) Lotion concerned over the reality of too many -Cup o Noodles/Top Ramen Tissue students arriving at school on Monday mornings, hungry. This lack of consistent Toilet Paper nutrition affects the child's health and their ability to concentrate and make good use of their school time. The Bremerton Backpack Brigade exists to address that concern. Atypical weekly backpack The Backpack Brigade is a non Profit Our Kids Need Your Help! Working might include' organization, governed by a Board of together we can make a genuine difference . Directors and facilitated exclusively by in the life of a child! One Box Chicken Dinner Mix volunteers. One Can Chicken Many area Churches regularly donate OneSoup Canned vegetable non-perishable food items. Individuals, Two Pudding Cups local businesses and fraternal Two Cheese Sticks organizations have been generous in their W Two Apples financial support. The Bremerton School One Bag Mini Carrots District has provided space for a "pantry" One Can Chili to store donated food items prior to ' ` t• One Box Macaroni and Cheese delivery. Two Servings Cereals Each week, volunteers from throughout ! Two Servings(Shelf Stable) Milk the community sort and pack the - Two envelopes Hot Cocoa. mix backpacks, adding purchased cheese, Two Juice boxes Two Granola bars fresh fruits and vegetables to the donated Assorted Hygiene Items as available food items, then delivering the backpacks to schools on the last school day of each The cost(with donated food items) for school week. filling a weekly backpack averages Donations of non-perishable food items, $200 per year,per child. and financial sponsorship make Current Sponsors' this work possible. Central Kitsap Lions Club Donations may be mailed p or delivered to; Kitsap Credit Union When we help a child today, we help ensure we all have better tomorrows! "The Backpack Brigade" Safeway PO Box 2533 St Paul's Episcopal Church A decision to partner with the Backpack Bremerton WA 98310 Rice Fergus Miller Architects Brigade, with your donation of food or First Christian Church Grace Point Church cash will make a huge difference in the Kitsap Interfaith Network (K.I.N.) lives of children in need, right here in our own community! More Information Contact: Myra Battin Costco myrabattinCcDyahoo.com or 360 4719588 Northwest Harvest Walmart i ! � r pill �'�� join us on Friday, ® • e • ip St You'll find unique Santa will arrive by fire truck at the Shops &Art Galleries Naval Museum at 5:30PM. filled with artwork Stick around for the {x and gems, and one-of-a-kind tree lighting and BHS gifts to give or to keep. marching band! Meet artists and shop owners, old friends and new! We've wrapped up the From 6:00 to 7:OOPM, holiday spirit all for you! have your picture taken with Santa by / Hudson Photography Hop on the HorseL Artistry at the Kitsap Drawn Carriage Historical Society. Ride at Pacific & Burwell. It's free and fun for all ages. O Stop by the Sing with theO Evergreen Children's Sweet Adelines carolers, O Theatre &Aurora choirs and chorales. tF Valentinetti Their holiday music Puppet Museum at brings good cheer • 257 4th Street to around town. O see exhibits and enjoy s^ free refreshments! For good things Q _. to eat just walk O Keep WinterFest down the street, O going with dinner each step of the way, you'll find and friends. lots of treats! The restaurants are Like hot cocoa ready withgood cheer and and goodies fine fare, some even so sweet. �"� have live music to share. 14* 1 7 �1'ejented by the $)6vV46tNn 'u;nne;� ,,��6ena�n6n, $)&wn(6Wn CaJ$ngge; and IrDeal" Spr9ap�. Poster produced by the City of Brem erton's Mayor's Office For more information, contact Sandy at 360-377-8888 9(laj\�` ♦ U I IfI 0 '`` Aj( i.cl tnl 9(lapwftel _N�:•i_cl t. _Dcce�_l-boo 5fli, 5:00 - S:00 5: 1.5 P11 s7LI. l arriN'(s w i tl l the W111, 014' 11(wk AI„I,il�r 5:'2:i-S:(l0.Pho :i) with S.lian .11 Allhill AInrm l IO( raliln'(l I,iiu food, warm�� if;, rc,iai Jun,iiiun **� ,r Sl'�L\'1�1-1!_iel' 1=1.f1llt w/pl'1zes fur I4wal 1•(14n1 kinks) * * # * � ('ix,l:i�:� cL li�•I`rr• Ilnu+Iles pw r:ll(1 _I'�L'_L'n��: l_i�_�llii.l.l,� * � -• � �** * *. f* f • y r As I,I,II,,ored by f,heA—lrl,tle Te .1311"i_lles Kiwanis Park Tuesday, Dec. 16 _ 6 - 7 pm lv • , ��,,, - �" ` 1701 5th Street, Bremerton 6-IVP << • =4 Come meet Santa and sing or holiday carols with us. n Free Hot Chocolate will be served ! Sponsored by: Community of Christ and Lutheran Church AGENDA BILL 15A CITY OF BREMERTON CITY COUNCIL ...................................................................................a 0 0 M 1 SUBJECT: Claims & Check Register ' Study Session Date: N/A COUNCIL MEETING Date: December 3, 2014 Department: Financial Services Presenter: Shannon Corin Phone: 473-5323 SUMMARY: Approval of the following checks and electronic fund transfers: 1) Check #'s 361239 through 361381 and EFT's 14389 through 14426 in the amount of $3,133,231.85. 2) Regular Payroll for the pay period ending November 15, 2014 in the amount of$713,150.58. 3) Retiree Payroll for the pay period ending November 30, 2014 in the amount of$55,485.42. ATTACHMENTS: None FISCAL IMPACTS (Include Budgeted Amount): STUDY SESSION AGENDA: 0 No Presentation ❑ Full Presentation STUDY SESSION ACTION: N Consent Agenda ❑ General Business ❑ Public Hearing RECOMMENDED MOTION: Move to approve Consent Agenda as presented. COUNCIL ACTION: ❑ Approve ❑ Deny ❑ Table ❑ Continue ❑ No Action Form Updated 01/25/13 AGENDA BILL 513 CITY OF BREMERTON CITY COUNCIL SUBJECT: Minutes of Budget Workshop— Study Session Date: N/A November 17, 2014 COUNCIL MEETING Date: December 3, 2014 Department: City Council Presenter: Council President Phone: (360) 473-5280 SUMMARY: Attached is a summary of the City Council Budget Workshop on November 17, 2014. ATTACHMENTS: Meeting Minutes FISCAL IMPACTS (Include Budgeted Amount): N/A STUDY SESSION AGENDA: ❑x No Presentation ❑ Full Presentation STUDY SESSION ACTION: ❑x Consent Agenda ❑ General Business ❑ Public Hearing RECOMMENDED MOTION: Move to approve the Consent Agenda as presented. COUNCIL ACTION: ❑ Approve ❑ Deny ❑ Table ❑ Continue ❑ No Action Form Updated 11/02/12 DIGITAL RECORDING CITY COUNCIL BUDGET WORKSHOP MINUTES Monday, November 17, 2014 The Budget Workshop of the City Council of the City of Bremerton was called to order in the Council Conference Room 603 of the DICKS GOVERNMENT CENTER located at 345 6th Street, Bremerton, Washington, Monday, November 17, 2014, at 4:00 PM, with Council President Greg Wheeler presiding. Council members present were Eric Younger, Roy Runyon, Dino Davis, Jerry McDonald, Leslie Daugs, and Mike Sullivan. Also present were Finance Director Cathy Johnson and Budget Analyst Caroline Tompson. Legislative Assistant Lori Smith was present to provide staff support to the Council. President Wheeler announced that the 2015 Budget Workshop was for the Council to hear presentations on the proposed budget. It was further announced that this Budget Workshop was open to the public, but there would be no opportunities for input or participation; that no action will be taken, and the content of these items is subject to change. Cathy Johnson, Financial Services Director, concluded presentations on the 2015 Budget Process while Council Members asked questions and commented on the overview of each Fund & Department Budget as well as proposed changes. A Public Hearing will be held on Ordinance No. 5266 to adopt the City of Bremerton FY-2015 Budget at the City Council Meeting on Wednesday, December 3, 2014. With no further business, President Wheeler adjourned the Budget Workshop at 5:00 PM. Prepared and Subinitted, y: LORI SMITH Legislative Assistant Attest: SHANNON CORIN, City Clerk GREG WHEELER, City Council President GW:SC:ls:cg AGENDA BILL CITY OF BREMERTON CITY COUNCIL ■■eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee■ SUBJECT: Minutes of Meeting — Study Session Date: N/A November 19, 2014 COUNCIL MEETING Date: December 3, 2014 Department: City Council Presenter: Council President Phone: (360) 473-5280 SUMMARY: Attached is a summary of the City Council Meeting on November 19, 2014. ATTACHMENTS: Meeting Minutes FISCAL IMPACTS (Include Budgeted Amount): N/A STUDY SESSION AGENDA: 9 No Presentation ❑ Full Presentation STUDY SESSION ACTION: Z Consent Agenda ❑ General Business ❑ Public Hearing RECOMMENDED MOTION: Move to approve the Consent Agenda as presented. COUNCIL ACTION: ❑ Approve ❑ Deny ❑ Table ❑ Continue ❑ No Action Form Updated 11/02/12 DIGITAL RECORDING CITY COUNCIL MEETING MINUTES Wednesday, November 19, 2014 A weekly meeting of the City Council of the City of Bremerton was called to order on Wednesday, November 19, 2014, at 5:00 PM in Council Conference Room 603 of the NORM DICKS GOVERNMENT CENTER, 345 6th Street, Bremerton, Washington, with Council President Greg Wheeler presiding. Council Members present were Eric Younger, Roy Runyon, Jerry McDonald, Leslie Daugs, and Mike Sullivan. Council Member Dino Davis was absent. Also present were City Attorney Roger Lubovich; City Clerk Shannon Corin; Council Assistant Christine Grenier; and Kevin Matthew, Information Services Manager. A COUNCIL BRIEFING was held to discuss General Council Business at 5:00 PM in the Council Conference Room. At 5:30 PM the meeting moved to the Meeting Chambers. The Pledge of Allegiance was led by Council Member Mike Sullivan followed by the invocation provided by Pastor Eric Roberts of Discovery Fellowship. BPD SWEARING-IN CEREMONY Chief Steve Strachan introduced new Police Officer Jeff Schaefer who introduced his wife and family. Judge James Docter then administered the Oath of Office. MAYOR'S REPORT On behalf of Mayor Lent, President Wheeler invited former Council Member Faye Flemister forward. Ms. Flemister thanked all of the citizens who donated funds to pay for new street signs for "Dr Martin Luther King Way', then presented a check to the City that covered the full cost. The KEDA Briefing originally scheduled has been postponed to a future date still to be determined. BPD BRIEFING Police Chief Steve Strachan provided a monthly update on police operations; and shared that a downward trend was noted in most types of crime when data from October 2014 was compared to October 2013 and in prior years considering data for violent and property crimes. Questions and comments were made by Daugs and Wheeler... PUBLIC RECOGNITION Taylor Niemv read a statement in protest of the recently passed Panhandling Ordinance, which he believed criminalizes the poor and those individuals who would help the less fortunate; and intends to contact the ACLU regarding the constitutionality of the panhandling ban. Mike Walton on behalf of the Public Facilities District Board of Directors presented the final check to the City of Bremerton for the Kitsap Conference Center Expansion Project, which was accepted by Public Works & Utilities Director Chal Martin; and recommended that the City allocate funding for marketing and promotion efforts to encourage use of this rental space. Chase Hatcher asked why the City would pass a law against panhandling when laws addressing other public safety issues like jaywalking were already in place. Jane Rebelowski provided copies of nine police reports to Council Members to reflect that the City's current laws already covered what this new ordinance is proposed to address. Joseph Rogers asked for Council to show compassion and to reconsider their decision. He added that if people who panhandle should be fined, then those who provide money to the panhandlers should be fined as well. City Council Meeting Minutes Wednesday, November 19, 2014 Page 2 of 5 CONSENT AGENDA 8A— Claims & Check Register: Check Numbers 361013 through 361239, and EFT-14336 through EFT-14388 in the amount of $3,060,368.06; and Regular Payroll for the pay period ending October 31, 2014 in the amount of $746,889.98 8B— Minutes of Meeting — November 5, 2014 8C— Minutes of Budget Workshop— November 6, 2014 8D— Minutes of Study Session — November 12, 2014 8E— Minutes of Budget Workshop— November 13, 2014 8F— Interlocal Agreement with the City of Port Orchard for Water Supply 8G — Interlocal Agreement with Kitsap County Administrative Services for Court Security Services 8H — Appointment of Patty Lent to the Kitsap Transit Board Composition Review Committee There were no questions or comments from the public... 06:09:33 Motion was made by Runyon and seconded by McDonald, Comments were provided by Runyon... 06:10:21 M/S/C/U (Runyon/McDonald) Move to approve the CONSENT AGENDA as presented. PUBLIC HEARINGS 9A— PUBLIC HEARING ON ORDINANCE NO. 5263 AMENDING CHAPTER 20.52 OF THE BREMERTON MUNICIPAL CODE (BMC) ENTITLED "SIGN STANDARDS": Garrett Jackson, Community Development, summarized that the action before Council is to conduct a Public Hearing and adopt an Ordinance amending BMC Chapter 20.52 entitled "Sign Standards" regarding sign dimensions and quantities, a new sign variety "co-op" signs, provide clarification for wayfinding signs, and removing cessation from the non-conforming sign section. President Wheeler opened the public hearing...With no comments received President Wheeler closed the hearing to the public, and opened discussion to the City Council... 06:24:12 Motion was made by Younger and seconded by Runyon; Questions and comments were provided by Younger, Runyon and Daugs; with responses provided by Mr. Jackson... 6:28:42 M/S/C/U (Younger/Runyon) Move to pass Ordinance No. 5263 to amend Bremerton Municipal Code Chapter 20.52 regarding sign dimensions and quantities, co-op signage, clarification for wayfinding signs, and removing cessation form the nonconforming sign section. 9B— PUBLIC HEARING ON RESOLUTION NO. 3237 ESTABLISHING THE COMPREHENSIVE PLAN UPDATE WORK PROGRAM, SCHEDULE, AND PUBLIC PARTICIPATION PLAN: AND TO SUSPEND COMPREHENSIVE PLAN AMENDMENT APPLICATIONS IN 2016: Allison Satter, Community Development, explained that the action before Council is to conduct a Public Hearing and adopt a resolution to set the Comprehensive Plan Update Work Program, Schedule, and Public Participation Plan, and affirm the acceptance of Comprehensive Plan Update Amendment Applications to 2015, and to suspend applications in 2016: This resolution provides a work program and schedule to review potential amendments to the City of Bremerton Comprehensive Plan and Land Use Map, with early and continuous public participation. In addition, the resolution limits the time frame to accept Comprehensive Plan Amendment Applications from the public to allow staff adequate time to review and analyze prior to the Comprehensive Plan Update adoption in June 2016. City Council Meeting Minutes Wednesday, November 19, 2014 Page 3 of 5 President Wheeler opened the public hearing... Ron Ragae emphasized that majority of public comment is supportive of a proposed casino. President Wheeler asked that comments be made on the agenda item before them, rather than on a specific project. Mr. Raape disagreed with the current Work Plan since the proposed casino is not included. With no further comments received President Wheeler closed the hearing to the public, and opened discussion to the City Council... 06:44:27 Motion was made by Younger and seconded by Daugs; Questions and comments were provided by Younger, Daugs, Sullivan and Runyon; with responses provided by Ms. Satter and Community Development Director Andrea Spencer... 06:49:50 M/S/C (Younger/Daugs) Move to pass Resolution No. 3237 to establish the Comprehensive Plan Update Work Program, Public Participation Plan, and Schedule; and to affirm amendment applications to January 5, 2015 to April 1, 2015. Voted in favor of Motion: Younger, Sullivan, Daugs, McDonald, Wheeler Voted opposed to the Motion: Runyon Motion carried: 5-Yes; 1-No Council Member Roy Runyon left the meeting at 6:50 PM... 9C— PUBLIC HEARING ON REVENUE SOURCES FOR PROPOSED 2015 CITY BUDGET: Cathy Johnson, Financial Services Director, explained that the purpose of tonight's public hearing is to take comments on the proposed revenue sources for the 2015 Proposed Budget. The proposed budget anticipates property and EMS Levy increases of the full 1% allowed by law, leaves the utility taxes/PILOT rates unchanged, leaves commercial parking tax rates unchanged, adjusts for the annual $20,000 increase to the B&O Tax exemption rate, adjusts anticipated utility rate increase, includes interfund transfers between funds where appropriate, etc. Overall, revenue projections throughout all funds remain conservative. A Powerpoint presentation outlined changes in the rates. President Wheeler announced that the Council is welcoming public comment for revenue sources which are related to General Business items tonight. There were no questions and comments from the public... GENERAL BUSINESS 10A—ORDINANCE NO. 5264 LEVYING PROPERTY TAXES FOR COLLECTION IN 2015: Cathy Johnson, Financial Services Director, summarized that Cities over 10,000 in population are allowed to raise their annual property tax collection by either 1%or the amount of the July Implicit Price Deflator (IPD), whichever is lower. This year the IPD was 1.591%. As presented during the public hearing earlier this evening, the City is requesting the full 1% increase to our general property tax levy over the prior year's collection as allowed by law. This increase, along with the amounts anticipated for new construction, has been included in the proposed 2015 Proposed Budget. In addition, we are also requesting an EMS levy at the rate of $0.050 per $1,000 as authorized by the voters in August 2014. The EMS amount anticipated in the 2015 Proposed Budget includes this amount. City Council Meeting Minutes Wednesday, November 19, 2014 Page 4 of 5 RCW 84.52.020 requires all taxing districts to "certify to the county legislative authority, for the purpose of levying district taxes...the amounts to be raised" by property taxes. RCW 84.55.120 requires that the certification includes the enabling tax ordinance setting the property tax rate. These documents must be submitted to the county by November 30, 2014. There were no questions or comments from the public... 07:01:32 Motion was made by Younger and seconded by McDonald, There were no questions or comments... 07:02:05 M/S/C (Younger/McDonald) Move to approve Ordinance No. 5264 of the City Council of the City of Bremerton, Washington, establishing the amount to be collected in 2015 by taxation on the assessed valuation of taxable property within the City limits of Bremerton and setting the property levy rate.. Voted in favor of Motion: Younger, Sullivan, McDonald, Wheeler Voted opposed to the Motion: Daugs Motion carried: 4-Yes; 1-No 10B— RESOLUTION NO. 3238 AMENDING AND RE-ESTABLISHING CITY RATES AND FEES FOR 2015: Cathy Johnson, Financial Services Director, summarized that each year, as part of the budget process, the various City departments review their charges, rates and fees for services and make recommendations on any changes needed. The attached includes recommended changes to fees charged by the various departments. There were no questions or comments from the public... 07:02:41 Motion was made by Younger and seconded by McDonald, There were no questions and comments... 07:03:00 M/S/C (Younger/McDonald) Move to adopt Resolution No. 3238 amending and re- establishing City Rates and Fees for 2015. Voted in favor of Motion: Sullivan, McDonald, Younger, Wheeler Voted opposed to the Motion Daugs Motion carried: 4-Yes; 1-No 10C—ORDINANCE NO. 5265 AMENDING 2015 RATES AND FEES FOR WATER, WASTEWATER, STORMWATER, AND OTHER RELATED SERVICES: Cathy Johnson, Financial Services Director, stated that on April 3, 2013, the City Council adopted a new rate structure for residential water rates and implemented rates for the City's Water, Wastewater and Stormwater utilities based on results on an extensive study to assess revenue requirements needed to fund their operating and capital programs. Each year, an annual review of the ongoing operations and capital programs is done and adjustments are made to reflect any changes to the capital and operational needs of the utilities. These changes are incorporated into the rate model to identify necessary rate changes to adequately fund utility programs. The attached ordinance reflects these adjustments for fiscal year 2015. There were no questions or comments from the public... 07:03:36 Motion was made by Younger and seconded by McDonald, There were no questions or comments... City Council Meeting Minutes Wednesday, November 19, 2014 Page 5 of 5 07:04:22 M/S/C (Younger/McDonald) Move to approve Ordinance No. 5265 of the City Council of the City of Bremerton, Washington, amending rates and fees established in Ordinance No. 5213 regarding rates and fees relating to the Department of Public Works and Utilities for water, wastewater, stormwater, and other related services. Voted in favor of Motion: McDonald, Younger, Wheeler Voted opposed to the Motion: Daugs, Sullivan Motion carried: 3-Yes; 2-No Following the vote, City Clerk Shannon Corin initially announced that the Motion had failed. But upon further review of the rules and procedures with City Attorney Roper Lubovich, it was clarified that the motion for Ordinance No. 5265 passed with a simple majority... COUNCIL MEMBER REPORTS Eric Younger in response to public comments made earlier in the meeting, felt they would have had more weight if they were provided at the time the ordinance was heard by Council, and further commented that he is grateful to live in a country where people can express different opinions. Jerry McDonald presented flyers for the 16th Annual WinterFest and Magic in Manette holiday events that will be held along with First Friday Art Walk and activities on Friday, December 5 from 5:00 to 8:00 PM in downtown Bremerton and Manette. Leslie Daugs announced that the Bremerton Farmers Market will be hosting a Holiday Market on Friday, November 21 from 3:00 to 7:00 PM at the Sheridan Park Community Center; was pleased that she supported the Police Department's efforts during "Mo-Vember'; believed that the panhandling ordinance addressed public safety and did not stop people from holding up a sign; and wished everyone a great Thanksgiving. Mike Sullivan announced that the Lions Club and Santa will be at Fred Meyer every weekend until Christmas; established that he stands behind his votes on the Renaming of 7th Street, Panhandling Ordinance, and Rezoning; and welcomed all volunteers to the next Lions Park Beach Clean-Up on Saturday, November 22 starting at 10:00 AM. Greg Wheeler reported on the District 4 Meeting held last night; and reminded interested citizens that the next Kiwanis Park Work Party will be on Saturday, November 22 from 9:00 to 11:00 AM. With no further business, President Wheeler adjourned the Council Meeting at 7:15 PM. Prepared and Submitted by: /9- w CHRISTINE G ENIER Council Assistant Attest: SHANNON CORIN, City Clerk GREG WHEELER, City Council President GW:SC:ls:cg AGENDA BILL & A CITY OF BREMERTON CITY COUNCIL SUBJECT: Public Hearing on Ordinance Budget Workshop Dates: Nov 6,13,17, 2014 No. 5266 approving and adopting the 2015 COUNCIL MEETING Date: December 3, 2014 fiscal budget Department: Financial Services Presenter: Cathy Johnson Phone: 360-473-5296 SUMMARY: The proposed budget was presented to Council and the public on October 17, 2014. Three workshops were held on November 6, 13 and 17 and a public hearing was held on November 19, 2014. The attached ordinance represents the final proposed 2015 Fiscal Budget. If adopted, this ordinance would become effective January 1, 2015. ATTACHMENTS: Ordinance No. 5266 of the City Council of the City of Bremerton, Washington, approving and adopting the budget for the City of Bremerton for the fiscal year 2015, and appropriating the amounts set forth in each fund in accordance with RCW 35.33.075. FISCAL IMPACTS (Include Budgeted Amount): The total 2015 budget for all funds is $136,082,276. BUDGET SESSION AGENDA: ❑ No Presentation © Full Presentation STUDY SESSION ACTION: ❑ Consent Agenda ❑ General Business ❑x Public Hearing RECOMMENDED MOTION: Move to approve Ordinance No. 5266 of the City Council of the City of Bremerton, Washington, approving and adopting the budget for the City of Bremerton for the fiscal year 2015, and appropriating the amounts set forth in each fund in accordance with RCW 35.33.075. COUNCIL ACTION: ❑Approve ❑ Deny ❑ Table ❑ Continue ❑ No Action Form Updated 11/02/12 ORDINANCE NO. 5266 AN ORDINANCE of the City Council of the City of Bremerton, Washington, approving and adopting the budget for the City of Bremerton for the fiscal year 2015, and appropriating the amounts set forth in each fund in accordance with RCW 35.33.075. WHEREAS, State law, Chapter 35.33 RCW requires the City to adopt an annual budget and provides procedures for the filing of estimates, a preliminary budget, deliberations, public hearings, and final fixing of the budget; and WHEREAS, a preliminary budget for the fiscal year 2015 has been prepared and filed in the Office of the City Clerk for the City of Bremerton; public hearings have been held for the purposes of fixing the final City Budget; and the City Council has deliberated and has made adjustments and changes deemed necessary and proper; NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF BREMERTON, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. That the 2015 Annual Budget for the City of Bremerton, Washington, on file in the office of the City Clerk, covering the period from January 1, 2015, through December 31, 2015, with regular revenues and unencumbered fund balances of $136,082,276 and expenditures and ending fund balances of $136,082,276 is hereby approved and adopted, and the respective amounts provided for in said budget for the several funds of the City of Bremerton are hereby fixed and adopted as follows: General Fund(001) City Council $ 339,245 Executive 370,746 Financial Services 1,448,784 Legal 1,073,859 Human Resources 553,430 Community Development 1,617,225 Municipal Court 1,430,892 City Auditor 177,811 Law Enforcement 10,218,718 Fire/Emergency Medical 8,815,354 1 2015 Budget Police/Fire Pension 2,140,825 General Facilities 1,145,135 General Parks 2,786,602 Engineering 2,041,444 Non-Departmental 3,342,165 Ending Fund Balance 3,192,752 Total General Fund $ 40,694,987 Arterial Street(10 1) 253,010 Street(102) 5,070,780 Contingency Reserve(103) 570,196 Lodging Tax(104) 551,522 Parking System(105) 1,530,228 Community Development Block Grant(106) 1,149,521 Abatement Revolving(108) 345,363 Police Special Projects(110) 708,996 Public Access Television(l 13) 828,693 Gift&Donations Fund(114) 83,069 Trial Improvement(116) 110,118 One Percent For Arts(117) 51,206 Conference Center Operating(120) 1,752,043 2010 LTGO(203) 696,000 2010 UTGO/LTGO -B (204) 1,151,737 Government Center LTGO(205) 400,172 General Government Capital Improvement(308) 1,260,782 Park Facilities Construction(3 10) 270,270 Lower Wheaton Way(33 1) 97,712 Washington Avenue Connector(334) 3,457,818 Water Utility(401) 14,691,039 Water Capital(404) 6,106,781 Wastewater Utility(45 1) 18,235,814 Wastewater Capital(454) 9,628,425 Stormwater Utility(48 1) 3,993,768 Stormwater Capital(484) 4,189,171 Gold Mountain Golf Complex(407) 4,461,118 Risk Management(503) 3,903,971 Employment Security(506) 497,586 Accumulated Leave Liability(507) 634,163 Equipment Rental Reserve—Operations&Maintenance(509) 1,801,850 Equipment Rental Reserve—Equipment Reserves(5 10) 5,604,545 Information Services(511) 1,299,822 Total All Funds $ 136,082,276 2 2015 Budget That the totals for the funds noted in Section 1 above and as set forth in the official "City of Bremerton 2015 Annual Budget" adopted herein, are hereby appropriated for the fiscal year 2015. SECTION2. Effective January 1, 2015, the annual compensation of the Municipal Court Judge shall be $141,437 which is 95% of the District & Superior Court salaries as established on September 1, 2014. SECTION3. Effective January 1, 2015, the "management, professional, confidential & fiduciary" pay plans shall not receive a cost of living adjustment over the 2014 pay rates. SECTION 4. Effective January 1, 2015, the base salary of the Mayor shall be $107,000 which represents no change over the 2014 base salary. SECTION 5. Nothing contained herein shall be construed to require the City of Bremerton or its officers to fill any vacancy in any of the positions established by this ordinance resulting from the discharge, resignation or retirement of such employee. Nothing herein contained shall require the City of Bremerton or its officers to pay the maximum amount budgeted for any position shown therein. SECTION 6. Severability. If any one or more sections, subsections, or sentences of this Ordinance are held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portion of this Ordinance and the same shall remain in full force and effect. SECTION 7. Effective Date. This ordinance shall take effect and be in force ten (10)days from and after its passage, approval and publication as provided by law. PASSED by the City Council the day of , 2014 GREG WHEELER, Council President 3 2015 Budget Approved this day of , 2014 PATTY LENT, Mayor ATTEST: APPROVED AS TO FORM: SHANNON CORIN, City Clerk ROGER A. LUBOVICH, City Attorney PUBLISHED the day of 92014 EFFECTIVE the day of , 2014 ORDINANCE NO. 5266 4 2015 Budget i /� I � /� �GC%(lGv( (, �`�i COur<<,;,r I , ..J � ; ��/3�/ `� � ;;v� To Bremerton City Council � I � i Ev,;} Concerned Bremerton citizens have requested comment on the Mayor's 2015 budget proposal to defund the Bremerton City Auditor. Mayors budgets occasionally propose ideas that are not well thought out, unworkable,and/or unprofessional. City Council, however, has the final authority and is responsible for passing a well thought out,workable, professional budget that meets all City Charter requirements. Bremerton City Charter Section 18 requires a fully functioning, effective, independent internal City Auditor. Thereby,the final budget must include all necessary funding for the City Auditor. If there be a concern for where to obtain the funding, it apparently has conveniently made been available in the "overbudgeted" reserve,or it can be moved from one or more of the many other less important functions in the budget. Nearly all Mayors through the years have complained about the City Auditor. They don't like having their"dirty laundr�'aired. They like to control audits to achieve specific purposes. Some Mayors, like this one, have gone to extremes to try to remove,dilute the effectiveness of,and/or undermine the independence of the City Auditor. Even some Council members have disptayed these interests. Despite all the attacks,though,the City Auditor remains as it was established—because it serves very important functions, is uniquely effective,and is worth more than it costs the taxpayers. Elected officials and staff being"human",they will likely always create plenty findings for the City Auditor. Properly achieving the full benefits of the present City Auditor through contract audits would likely cost � much more than the present function. Biggest concern is that contract audits would not be independent. They would be controlled by elected officials and/or staff to achieve their interests rather than the best interests of the citizens. Likely many important audits would not be properly done. The City Auditor position was thoughtfully, purposely,and professionally written into the City Charter with emphasis on its INDEPENDENCE to ensure it best serves the interests of Bremerton citizens. Time and again the City Auditor uncovers significant problems. Sometimes the problems are quickly solved internally by the City Auditor working with elected officials and staff through the Audit Committee, sometimes they are presented as recommendatons that must be implemented and/or properly addressed by the Mayor and/or staff. The position and its functioning should be retained as-is indefinitely. Sincerely, ��--�iY Lon Overson Bremerton resident x-City Councilman � ��IAT�o� , ,, ,-�� t� Association of Local Government Auditors : r ��,�,�� , a �'�' C c��.�.. .��5� � . "�'�"�.�r�-�'�� . ' November 10, 2014 ; OFFICERS I ��,��.t,�r�,,, Honorable Members of the Bremerton City Council: ; Corrie Stokes �,i,��.c��Auclilor The Association of Local Government Auditors ALGA has learned that the Cit ` n��su�,,�rx � ) Y ; of Brerrierton is considering options during its 2015 budget process that include Presrali�nl lilr.cl � Kymberwaicmunson replacing or reducing the role of its in-house City Auditor with contracted co��,�}-n��a�co� consulting services. As Deputy Chair of the ALGA Advocacy Committee,and with �:��,�,c:o��,i��,wn the concurrence of the Committee's Chair,Chesapeake(VA)City Auditor Jay s��,�er�„�� Poole, I encourage the Bremerton City Council to consider retaining your in-house Tina Adams ; Scnior Auclilur independent audit function. � Chmiutic,NC i i��s��,��,• . ALGA is a professional organization with more than 300 member organizations j David Givans across the United States and Canada. We support independent auditing in local � Crnnily Inlcrnal Auddor i ��S�i,�„et��,,,,,�•,�it goverrunents as an effective governance and public accountability tool. ALGA r��t,��,��s;��,�, recommends an independent in-house audit department with adequate staffing, I Bill Greene support, and monitoring through a strong audit committee. This model of providing � c:��'A��r�� internal audit services to local government provides many advantages over Phocnia,A"!_ conh•acting out the audit function, including: " � Detailed familiarity with internal operations I BQARD MEMBERS • Increased consistency of the review and oversight process ! AT LARGE ( • Prompt response to audit requests Carmelina DlMondo • Enhanced deterrence of fraud,waste, and abu..se Dircctor,forcnsic lhiil � 'I_orauo,ON • Authentic commitment and loyalty to Bremerton residents Craig Kinton • Meaningful audit.recommendations leading to concrete improvements i Cily Audifor I °n��s,Ta Many of ALGA's member organizations have also found that in-house audit I Pameia we�Pe►t functions have lower hourly costs than consulting services. Although ALGA ; n��""�� supports the in-house,independent audi.t model, some ALGA member organizations � Oaklaind Cuunty.MI ' I enhance their operations by co-sourcing some audits: With the proper supervision ; Kip Memmolt of an experienced in-house audit team,consulting services may provide value when j Dircctor of Audit 5crvice5 I City�nd Count�•�r u�„�•��.c:o specialized skills are required. However, consulting firms contracted to provide � internal audit seivices may impair their independence to also bid on the external ' financial audit. Furthermore, staff time is needed to manage the consultant hiring � and oversight process. • ; � MEMBER SERVICES As the Bremerton City Council contemplates its decision,please consider some of � 449 Lc��•is 1lfvgell Circic ' s��e Z��o the key quality assurance practices concerning the Bremerton City Auditor: � Lc�ingWn,K1'dU503 I'I�one:(R59)27G-0G8G rs��.cxs�>>z�s-usu� • Audit Charter-The Bremerton City Chairter authorizes the appointment of a "'"'"'��'�_"°"�"'��°'�� . City Auditor who serves at the pleasure of the Audit Committee � • Audit Comnlittee-Performs monitoring and oversight of the City Auditor ' i � i . I � Annual Audit Plan—The City Auditor's work plan is approved by the � Audit Committee based on an annual risk assessment ' � Audit Reports—"1'he City Auditor's reports are provided to the public on the City of Bremerton's website ; �• Goveriunent Auditing Sta�tdards-The City Auditor follows the standa�•ds i established by the U.S. Govenunent Accountability Office as a.framework I for conducting hi�h quality audits I The�.quality assurance practices that Bremerton has wisely established work i most effectively within an in-house audit department. B►•emerton's City . Auditor is an experienced, credentialed auditor. We recommend that the � Couricil consider both the important benefits and the high quality products an , in-house audit.function can provide when making your decision. i The members of the ALGA Advocacy Committee are available to answer � � further.questions. Additional infortnation on topics concerning the function of an audit office can be found on our website at www.governmentauditors.org. I i anl available to answer any questions at(206)233-1U95 or I davidg.jones@seattle.gov. ln addition,please feel free to contact ALGA I Advocacy Committee Chair�and Chesapeake City Auditor Jay Poole(757) � 382-8511 or jpoole@cityofchesapeake.net,or ALGA Eresident Elect and King � County(WA)Auditor Kymber Waltmunson(206)477-1043 or � Kymber:waltmunson@kingcounty.gov. - - - ! i Respectfully, i ; J �� ; Davi�i G. Jones,Deputy Chair Advocacy Committee . cc:Patty Lent,Mayor, City of Bremerton � Jay Poole;Chair, ALGA.Advocacy Corrunittee � Coirie Stokes,President,ALGA , Kymber Waltmunson,President Elect, ALGA � . ; � I I i I � I � i . j I � i Christine Grenier From: Lori Smith on behalf of City Council Sent: Monday, November 10, 2014 3:54 PM To: 'Deirdre McKeel' Cc: City Council Subject: FW:Citizen Comments - City Auditor/2015 Budget (Deirdre McKeel) Ms. McKee�, This is to acknowledge receipt of your letter directed to Council Member Dino Davis. A copy has been provided to him, as well as each Council Member for their review and consideration. A copy was also provided to Mayor Lent and City Auditor Gary Nystul for their information, and a copy was retained for the record. Thank you for your interest in the City of Bremerton. Lori Smith Legislative Assistant Bremerton City Council (360)473-5280 • � From: Deirdre McKeel [mailto:deirdre mckeelCa�yahoo.coml Sent: Monday, November 10, 2014 3:31 PM To: Dino Davis; City Council , Subject: City Auditor/ 2015 Budget Councilman Davis, The recent news of Mayor Lent defunding the auditor position and audit committee administrative support in the 2015 budget proposal is oddly inappropriate and questionable at best. The audit committee and its membership is a chartered function with a special purpose. The audit committee, by design, does not report to either the administration or the council. This independence is to maintain its integrity and protect those who are obligated to report without fear of reprisal. Over the last few years I have heard council in study session, at meetings, and quoted in the paper as being frustrated with the lack of control or influence over the audit committee. The Mayor has said similar. I don't understand the ignorance and gamesmanship that continues to reign with regard to the organizational function and need for an auditor and the audit committee. My research indicates that there has been an auditor in place within the city that predates the formalization of the audit committee in 1999. As well, by law, the audit function must.be maintained. The original ordinance states that there would be no cost impact to the budget by the formation of the audit committee and the staffing of the auditor. 1 With the number of projects that will be conducted in the City of Bremerton in the near future, I question the timing of this attempt to defund the auditor position. With the amount of funds being invested in the City of Bremerton and the increased opportunity for financial mistakes in addition to possible oversight lapses, defunding the auditor position seems an act of folly. The council should act on behalf of the residents. I request that you, Councilman Davis, not support this budget proposal from the Mayor unless it is modified to fully fund the Auditor position (1.0 FTE) and the administrative support needed (.2 FTE's). Deirdre McKeel City of Bremerton resident District 5 Z Christine Grenier From: Christine Grenier on behalf of City Council Sent: Thursday, November 06, 2014 2:20 PM To: 'deborah.mcdaniel@gmail.com' Cc: Gary Nystul Subject: Citizen Comments - Proposed Bremerton FY 2015 Budget (Deborah McDaniel) Ms. McDaniel, Thank you for your comments regarding the City's Proposed 2015 Budget. Your letter has been provided to Council Members Wheeler and McDonald per your request; and the remaining Council Members, Mayor Lent, and Financial Services Director Cathy Johnson for their review and consideration. Again,thank you for taking the time to share your comments which will be included in the record for the Budget's Public Hearing(currently scheduled on December 3). Sincerely, Christine Grenier Council/Auditor Assistant City of Bremerton (360)473-5280 From: Deborah McDaniel [mailto:deborah.mcdaniel(a�gmail.com] Sent: Tuesday, November 04, 2014 11:26 AM To: City Council Subject: Attn: Jerry McDonald and Greg Wheeler Hi Jerry and Greg: I'm a Dist 3 constituent, and have a concern that I would like voiced to the entire Council. I'm unable to attend this week's Council meeting, I have a competing volunteer commitment. My concern regards the Mayor's proposed budget, which eliminates the City Auditor position. I'd like to remind the Council that the City Auditor serves at the pleasure of the Audit Committee, not the Mayor or the Council at large. Therefore, I think it is presumptuous for the mayor to eliminate this position from the budget. Further study may reveal a need to amend the City Charter, which would require a citizen vote- additional expense not considered in the budget. � � � � Additionally, I believe that the current Auditor, who has held his position for a number of years, has insights and institutional knowledge about how our city departments/personnel interact and where responsibilities overlap. This knowledge would be impossible to provide to an outside Auditor(s). Lastly, I also believe that it is not practical to think that outside consultant(s) could be brought on board efficiently or cost-effectively, or could perform audits to the same standards as our recent audits have been conducted. It's not part of the current committee's charter to put out RFPs for'routine' audits, never mind having to accept and grade them, then set up contracts with the selected outside auditors. This adds a layer of complexity whichI don't believe has been fully studied. I also doubt if our cost-savings would be that great - i although I do acknowledge that contractors hit a different part of our budget, and we wouldn't have to provide benefits, this is short-sighted thinking. I am very concerned, not just as a member of the Audit Committee, but as a citizen, that this was published without any consultation by the Mayor with Mr. Nystul. It's a cruel way to learn one's job may be on the line. Gary is a very conscientious, hard-working, and a-political (as regards his job) individual - and I think this city would quickly miss both his efforts and his knowledge. I urge you and the Council to consider not approving this aspect of the proposed budget. Thanks for considering my input. Respectfully, Deborah McDaniel Manette Z AGENDA BILL 1A CITY OF BREMERTON CITY COUNCIL ............................0 0 0.E..................0 N N 0 0 0 0 0...0.....\.............f..f I SUBJECT: Partially Self-Funded Medical Study Session Date: N/A Insurance Program COUNCIL MEETING Date: December 3, 2014 Department: Legal/HR Division Presenter: Charlotte Belmore Phone: 473-5926 SUMMARY: Due to the continuous rise in medical insurance costs and changes brought on by the Affordable Health Care Act, the City's Insurance Benefits Committee, made up of employees from each bargaining unit and management, began a year-long task of looking at alternatives to KPS while maintaining the same benefits. Working with our insurance brokers the Benefits Committee came up with a plan to maintain the exact same services and coverage by changing to a partially self-funded plan. This means we will be in control of each aspect of our health care costs rather than paying KPS to manage them. The change to partially self-funded would take effect January 1, 2015. ATTACHMENTS: Contracts with 1)Third Party Administrator (Cypress), 2) Pharmacy Benefit Manager (Envision Pharmaceutical Services, LLC), and 3) Stoploss Coverage (Negotiations with the stoploss provider(s) are ongoing). FISCAL IMPACTS (Include Budgeted Amount): The following administrative fees are included in the 2015 budget: Third Party Administrative approximately $100,000 annually, Pharmacy Benefit Manager approximately $25,000 annually, and Stoploss Coverage is approximately $340,000. STUDY SESSION AGENDA: ❑ No Presentation ❑ Full Presentation W/A STUDY SESSION ACTION: ❑ Consent Agenda ❑x General Business ❑ Public Hearing RECOMMENDED MOTION: Move to authorize the Mayor to finalize and execute the contracts, in substantially the same form as presented, with (1) Cypress Benefit Administrator, LLC, (2) Envision Pharmaceutical Services, LLC, (3) Montgomery Management/Companion Life Insurance Company, and in the event a finalized agreement isn't reached with Montgomery Management/Companion Life Insurance for stoploss coverage, then with HCC Life Insurance Company, and further authorize the Mayor to execute extensions to agreements as presented therein. COUNCIL ACTION: ❑ Approve ❑ Deny ❑ Table ❑ Continue ❑ No Action Form Updated 11/02/12 Charlotte Belmore,Human Resources Manager 345 a street, suite 600,Bremerton, wA 98337 Telephone: 360-473-5926,Fax:360-473-2333 chartotte.belmore@ci.bremerton.wa.us Human Resources Department MEMORANDUM TO: City Council Mayor Patty Lent FROM: I'¢ Charlotte Belmore,Human Resources Manager DATE: November 26,2014 SUBJ: Partially Self-Funded Medical Coverage The City's Insurance Benefits Committee and our insurance brokers,Liberty Benefits Group (LBG),have come up with a proposed partially self-funded medical plan to replace the City's KPS Plan. Moving from fully-funded to partially self-funded allows the City to have control of each aspect of our health care costs rather than paying KPS to manage them. The cost of a self- funded plan has fixed components similar to an insurance premium,e.g.,administration fees, stop loss premium,and variable costs(the claims expense). The administrative fees, stop loss premiums,and any other set fees(e.g.,taxes,reserves etc.)are charged per employee and billed monthly just like a fully funded insurance premium. Fully insured plans,such as KPS,have the same components as partially self-funded plans. Below is a brief explanation of each part of a partially self-funded plan. Third Party Administrator(TPA) A Third Party Administrator(TPA)is the organization that will process insurance claims and perform other administrative services such as network administration and COBRA administration. Individual and Aggregate Stop Loss(IndividuaVAggreaate) The plan pays the claims for covered persons enrolled in the plan;these costs vary from month to month based on health care use by the covered persons. Stop loss insurance reimbursements are made if the claims costs exceed the catastrophic claims levels in the policy. Individual stop loss is purchased to limit the plan's financial exposure on any one individual. Aggregate stop loss is purchased to protect against a higher than usual amount of claims for the entire group. Pharmacy Benefits Manager(PBM) A PBM is primarily responsible for processing prescription drug claims. Reserving The claim reserve funds are set aside for the future payment of incurred claims that have not been settled and thus represent a balance sheet liability. Reserves can build up over time and be used to protect against high claim years. PHARMACY BENEFIT MANAGEMENT SERVICES AGREEMENT This Pharmacy Benefit Management Services Agreement (hereinafter this "Agreement") is entered into by and between Envision Pharmaceutical Services, LLC, an Ohio Limited Liability Company (hereinafter "Envision"), and The City of Bremerton, a Washington Municipality (hereinafter "Plan Sponsor"). This Agreement is effective January 0, 2015 (hereinafter the "Effective Date"). BACKGROUND Envision is a URAC accredited Pharmacy Benefit Management (PBM) company providing comprehensive pharmacy benefit management services nationwide to various employers, unions, and Plan Sponsors that establish and fund health benefit plans covering outpatient prescription medications. Plan Sponsor has established one or more health benefit plans providing coverage for prescription medications to covered individuals and desires to engage Envision to provide pharmacy benefit management services in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual promises and agreements herein contained, Plan Sponsor and Envision hereby agree as follows: 1. DEFINITIONS 1.1 "Administrative Fee" means the amount that Envision charges Plan Sponsor for included services under this Agreement as set forth in Exhibit 1. 1.2 `Benefit Plan" means the Plan Sponsor's group insurance plan, prescription drug plan, or other benefit plan established and funded by Plan Sponsor that covers the cost of Covered Drugs dispensed to Covered Individuals. 1.3 "Benefit Specification Form" or "Benefit Specification Change Form" means the forms, as modified from time to time, that are completed by Plan Sponsor that specify the terms and provisions of the Benefit Plan and the configuration of System edits, such as which Prescription Drugs are covered by Plan Sponsor (including, for example Limited Distribution Drugs or Specialty Drugs), any limitations or exclusions, the Benefit Plan's tier structure and Cost Share requirements, and any conditions associated with the specific services to be rendered by Envision under this Agreement (i.e. Clinical Prior Authorizations, Drug Therapy Management, etc.). If there is any inconsistency between the terms of this Agreement and the Benefit Specification Form or any Benefit Specification Change Form submitted in connection with the services to be provided under this Agreement, then the provisions of the most recent signed Benefit Specification Form or Benefit Change Form shall control. 1.4 "Brand Drug" means a Prescription Drug designated as a branded drug product by Medi- Span as indicated by the multisource (i.e. MONY) code attached to the 11 digit NDC for such drug and adjusted by applicable modifiers, including those established by the FDA under 42 CFR 423.4 (i.e. NDA, ANDA, BLA, authorized generic, and/or bio-similar), the Medi-Span \PBMSA(fnn072414) c,Envision Pharmaceutical Serviccs,LLC Page I of 24 DIPJYAV:�r Brand Code, and other criteria generally used in the industry to determine brand-generic drug status. The classification of a Covered Drug as a Brand Drug or Generic Drug will be determined at the Point-of-Sale and shall not be reclassified thereafter for any purposes under this Agreement. 1.5 "Claim" means an invoice or transaction (electronic or paper) for a Covered Drug dispensed to a Covered Individual that has been submitted to Envision by the dispensing pharmacy or a Covered Individual (including transactions where the Covered Individual paid 100% of the cost). A"340B Claim" is a Claim which has been processed under Section 340B of the Public Health Service Act. 1.6 "Claims Adjudication System" or "System" means Envision's on-line computerized claims processing system. 1.7 "Compound Drug" means a medication that requires compounding by a pharmacist because it is not available from a pharmaceutical manufacturer in the prescribed form or strength. Compound Drugs consist of two or more solid, semi-solid or liquid ingredients, at least one of which is a Prescription Drug. 1.8 "Contract Year" means the complete twelve month period commencing on the Effective Date and each consecutive complete twelve month period thereafter that this Agreement remains in effect. 1.9 "Cost Share" means the amount of money that a Covered Individual must pay to the Participating Pharmacy to obtain a Covered Drug in accordance with the terms of the Benefit Plan. The Cost Share may be a fixed amount (co-payment) or a percentage of the drug cost (co- insurance), or a deductible that must be satisfied before drugs are covered under the Benefit Plan. 1.10 "Covered Drug" means a Prescription Drug or other permitted drug (OTC), medical supplies (e.g. diabetic testing strips), or a medical device (e.g. blood glucose monitoring device) which is dispensed to a Covered Individual and meets the requirements for coverage under the Benefit Plan as communicated to Envision by Plan Sponsor. 1.11 "Covered Individual" or "Member" means each individual (including the Eligible Employee and each of his or her dependents) who has been identified by Plan Sponsor on the Eligibility File as being eligible to receive Covered Drugs. 1.12 "Eligibility File" means that electronic communication supplied to Envision by Plan Sponsor (or Plan Sponsor's agent) which identifies the Covered Individuals covered under Plan Sponsor's Benefit Plan, along with other eligibility information necessary for Envision to provide PBM Services hereunder. Plan Sponsor acknowledges that eligibility begins on the first day the Covered Individual is reported by Plan Sponsor (or its designee) to be effective and continues through the last day the Covered Individual appears on the Eligibility File. 1.13 "Eligible Employee" means an active employee or a Retiree of Plan Sponsor covered under Plan Sponsor's funded Benefit Plan. For purposes of this Agreement, a Retiree is a retired \PBMSA(frm072414) i 00 Envision Pharmaceutical Services,LLC Page 2 of 24 individual who is covered, primarily, by Plan Sponsor and not Medicare Part D. 1.14 "Formulary" means an index of Prescription Drugs, which have been compiled by Envision and reviewed by Envision's Pharmacy & Therapeutics Committee for safety and efficacy (using evidence-based evaluation criteria), that is used, in conjunction with the Benefit Plan, as a guide in the selection of Covered Drugs. The Formulary may be modified by Envision from time to time as new medications and/or new clinical information become available. 1.15 "Generic Drug"means a Prescription Drug that is not a Brand Drug. 1.16 "HIPAA" means the Health Insurance Portability and Accountability Act of 1996, as amended. 1.17 "Limited Distribution Drugs" means Prescription Drugs that are distributed by manufacturers through either one or a very limited number of pharmacies and wholesalers which have been selected by the manufacturer based on approved participation criteria. This group of drugs is usually used to treat conditions that only affect a small patient population and may have special and complex dosing requirements. 1.18 "Mail Order Pharmacy" means the contracted Mail Order Pharmacy to be used by Plan Sponsor's Covered Individuals. 1.19 "Manufacturer Derived Revenue" means rebates, discounts, administrative fees, and any other revenue earned by Plan Sponsor for Claims which comply with the utilization and benefit design requirements of pharmaceutical manufacturer contracts with Envision and otherwise meet the terms and conditions hereunder. 1.20 "MAC List"means a proprietary list of Prescription Drugs for which Envision establishes a maximum price ("MAC Price") payable to the dispensing pharmacy. Envision utilizes the same MAC List to both determine the negotiated price payable to the dispensing pharmacy and the price charged to Plan Sponsor. Plan Sponsor will be charged the exact negotiated amount payable by Envision to the dispensing pharmacy without any markup or spread. Envision updates the MAC List from time-to-time as Prescription Drugs come on the market or come off the market, or as their availability changes due to market circumstances. 1.21 "Participating Pharmacy" means a pharmacy (including the designated Mail Order or Specialty Pharmacy) that has entered into a negotiated pricing agreement with Envision to dispense Covered Drugs to Covered Individuals. 1.22 "Plan Sponsor" means the entity (identified above as Plan Sponsor) which (i) has established and underwrites the Benefit Plan on behalf of its Covered Individuals; (ii) has determined the rules by which the Benefit Plan is to be administered; and (iii) is financially responsible for the payment of Administrative Fees, Fees for Additional Services and Miscellaneous Expenses (as set forth in Exhibit 1), and Covered Drugs dispensed to Covered Individuals hereunder. \PBMSA(frm072414) C Envision Pharmaceutical Services,LLC Page 3 of 24 1.23 "Point-of-Sale" means the location and time that a Covered Drug is dispensed to a Covered Individual, and the corresponding Claim is submitted by the dispensing pharmacy for adjudication by the Claims Adjudication System. 1.24 "Prescriber" means a licensed health practitioner with independent prescribing authority in the state in which the dispensing pharmacy is located. 1.25 "Prescription Drug"means a substance intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease which is dispensed by a duly licensed pharmacy and required by federal law to be dispensed only upon the authorization of a Prescriber. For purposes of this Agreement, over-the-counter medications, medical supplies, and medical devices are not Prescription Drugs, whether or not ordered by a Prescriber. 1.26 "Retail Pharmacy" means a state licensed retail community pharmacy that dispenses prescription medications at its physical location. A Retail Pharmacy does not include a pharmacy that dispenses medications to patients primarily through mail, nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, or clinics, unless such pharmacy is a Participating Pharmacy listed by Envision as a Retail Pharmacy. 1.27 "Specialty Drug" means a Prescription Drug that is typically a high-cost biotech, injectable, infused, oral, or inhaled Prescription Drug, and/or a Prescription Drug that requires special storage, handling, and/or requires close monitoring of the patient's drug therapy to ensure appropriate use and clinical outcome. Specialty Drugs are typically dispensed at a Specialty Pharmacy, but may also be available from other Participating Pharmacies. For purposes of this Agreement, Specialty Drugs are not considered Limited Distribution Drugs. 1.28 "Specialty Pharmacy" means the non-retail Participating Pharmacy that primarily dispenses Specialty Drugs to Plan Sponsor's Covered Individuals and performs special ordering, handling and/or patient intervention services. 1.29 "Usual and Customary Price" or "U&C Price" means the retail amount the pharmacy charges its cash paying customers for the drug dispensed, as reported to Envision by the dispensing pharmacy. 2. STANDARD PBM SERVICES Envision shall perform the following pharmacy benefit management services ("PBM Services"). Unless otherwise noted, the PBM Services specified below are included in the Administrative Fee. 2.1 Welcome Kit: If requested by Plan Sponsor, Envision shall provide an initial "Welcome Kit" which may include, at Plan Sponsor's option, (i) a welcome letter; (ii) plastic identification card ("ID Card"), up to two per family; (iii) a pocket Formulary; and (iv) Mail Order Pharmacy brochure, as specified in the Benefit Specification Form. The standard Welcome Kits will be mailed to Plan Sponsor or, at its option, directly to Covered Individuals. For any materials mailed directly to Covered Individuals, Plan Sponsor shall reimburse Envision for its cost of \IPBMSA(frtn072414) Si Envision Pharmaceutical Services,LLC Page 4 of 24 0 )er 1),kA. J postage. Additional ID Cards or replacement ID Cards (i.e. for lost or stolen ID Cards) will be provided at a cost as specified in Exhibit 1. If Plan Sponsor desires to re-design and/or re-issue 1D Cards, or for special graphic requests, additional charges may apply. 2.2 Claims Processin>;: During the term of this Agreement, Envision shall accept, process, and adjudicate Claims for Covered Drugs (i) submitted electronically by Participating Pharmacies; (ii) submitted by Plan Sponsor's owned pharmacies or Plan Sponsor's contracted pharmacies, if any, (not including 340B Claims, unless such claims are included under a separate 340B Agreement); (iii) submitted by Covered Individuals as Direct Member Reimbursements (DMRs, as defined below); or (iv) received from third parties, such as Medicaid, for reimbursement by Plan Sponsor. Claims shall be checked for eligibility, benefit design, Cost Share requirements, and exclusions to determine which Claims are successfully processed, pended for prior authorization, or rejected for ineligibility or other factors in accordance with Plan Sponsor's specifications as set forth in Plan Sponsor's Benefit Specification Form (incorporated herein by this reference). For Claims that must be processed manually or require special handling, including, without limitation, (i) DMRs, (ii) Claims received from third parties, such as Medicaid, for reimbursement by Plan Sponsor for ineligible payments, or (iii) paper Claims, Plan Sponsor will be charged a Manual Claims Processing fee as set forth in Exhibit 1. After termination of this Agreement, Envision shall process Claims received for dates of service on or before the effective date of termination for a period of ninety(90) days ("Run-Out Period"), subject to the following. Plan Sponsor shall deposit and maintain, with Envision, an amount equal to the last Claims invoice prior to termination. At the end of the Run-Out Period, the balance of the deposit shall be promptly refunded to Plan Sponsor and, thereafter, any Claims received by Envision shall be rejected. 2.2.1 Direct Member Reimbursement (DMR): Envision shall provide, via its website, a form for use by Covered Individuals to obtain reimbursement for amounts paid out-of-pocket (other than Cost Share) for Covered Drugs (e.g. Covered Drugs dispensed at a non-Participating Pharmacy) ("DMR Form"). Envision shall accept and process DMR Claims within ten (10) business days of receipt of the DMR form, invoice Plan Sponsor for the Claim, and reimburse the Covered Individual upon receipt of funds from Plan Sponsor. 2.2.2 Claims from Non-Participating Pharmacies: Unless otherwise directed by Plan Sponsor, Envision shall accept and process Claims received from non-participating government owned or operated pharmacies (e.g. Veterans Administration). 2.2.3 Claims Adjudication System Edits: Plan Sponsor's Benefit Plan may contain additional rules which determine the way in which Claims are to be adjudicated. These rules may include coverage limitations or exclusions, application of clinical intervention (e.g. step therapy, drug therapy management), application of dispensed as written (DAW) codes (e.g. to determine what portion of a Claim is payable by Plan Sponsor and what portion is payable by Members), and administrative overrides to authorize the dispensing of Covered Drugs in certain circumstances (e.g. requests for lost or stolen drugs, vacation supplies, certain package sizes, dosage changes, invalid days' supply). For this purpose, Envision shall program edits into the \PBMSA(frm072414) 0 Envision Pharmaceutical Services,LLC Page 5 of 24 WA " "� l7 Claims Adjudication System which are applied to Claims during the adjudication process as specified in the Benefit Specification Form. The Claims Adjudication System will provide the dispensing pharmacy with the appropriate messaging to advise the pharmacy of the applicable limitation, program, rule, or override. Envision shall also program edits into the Claims Adjudication System which are applied to Claims during the adjudication process to identify the following drug utilization conditions: duplicate prescriptions; over-utilization/refill too soon; under-utilization; drug interactions; pediatric warnings; geriatric warnings; acute/maintenance dosing; therapeutic duplication; drug inferred health state; drugs exceeding maximum dose; and drugs below minimum daily dosage, as specified in the Benefit Specification Form. The Claims Adjudication System will provide the dispensing pharmacy with the appropriate messaging to advise the pharmacy of drug utilization issues. 2.3 Clinical Services 2.3.1 Clinical Prior Authorizations (Initial Coverage Determinations): If Plan Sponsor has elected to receive Clinical Prior Authorization services from Envision, for those Covered Drugs and circumstances specified by Plan Sponsor in the Benefit Specification Form, Envision shall contact the prescriber and verify that the requested drug is appropriate for the diagnosis in the judgment of the prescriber. Plan Sponsor will be charged for Clinical Prior Authorizations as specified in Exhibit 1. If additional internal appeals (redeterminations) and/or the services of an Independent Review Organization are to be provided under this Agreement, such services shall be included in an attached Coverage Determination and Appeals Process Addendum. 2.3.2 Drug Therapy Management (DTM) Programs: Envision offers clinical programs such as Drug Therapy Care Gap Management and Medication Adherence and Persistency. If clinical programs are to be provided under this Agreement, such services and any additional charges shall be set forth in an attached Clinical Services Addendum. 2.4 Pharmacy Network: Envision shall arrange for the dispensing of Covered Drugs to Covered Individuals pursuant to contracts with one or more networks of Participating Pharmacies (referred to herein as a "Network"). The Network designated for Plan Sponsor to be used by Covered Individuals hereunder shall be specified in the Benefit Specification Form. Plan Sponsor acknowledges that the pharmacies participating in a Network may be changed from time to time by Envision, including the designated Mail Order Pharmacy and/or Specialty Pharmacy provider. The list of Participating Pharmacies is constantly updated to reflect any changes in the Network, including pharmacy addresses and telephone numbers, and is accessible via Envision's website. Plan Sponsor acknowledges that (i) orders exceeding a thirty day supply are not available at all Retail Pharmacies; (ii) Covered Drugs shall not be dispensed to Covered Individuals without a prescription order by a Prescriber; and (iii) the availability of drugs are subject to market conditions and that Envision cannot, and does not, assure the availability of any drug from any Participating Pharmacy. 2.4.1 Plan Sponsor Owned Pharmacies. If Plan Sponsor desires to include one or more of its owned or affiliated pharmacies in the network of pharmacies authorized to dispense \PBMSA(fnn072414) «Envisum Pharmaceutical Services,LLC Page 6 of 24 r• Covered Drugs to Plan Sponsor's Covered Individuals, it shall indicate same on the Benefit Specification Form. If Plan Sponsor desires its pharmacy to be available to other Envision clients using one or more of Envision's Networks, such pharmacy shall enter into an Envision Participating Pharmacy Agreement (PPA). If the pharmacy will be for the use of Plan Sponsor's employees only, such pharmacy shall complete an Envision-supplied form indicating the amounts to be invoiced to Plan Sponsor for Claims processed. In either case, the pharmacy shall submit all Claims to Envision for processing. Unless indicated otherwise in the Benefit Specification Form, Envision shall invoice Plan Sponsor for Claims received from Plan Sponsor's owned pharmacy. If the pharmacy is a Participating Pharmacy, Claims shall be adjudicated at the Network rates included in the PPA. 2.5 Customer Service: Envision shall maintain and operate a customer service center with toll-free customer service numbers and adequately staffed with trained personnel 24 hours a day, 7 days a week, 365 days a year, for the use of Plan Sponsor, Covered Individuals, Prescribers, and Participating Pharmacies. 2.6 Records: Envision shall maintain such business records as may be required by applicable law or regulation, or as may be necessary to properly document the delivery of, and payment for, Covered Drugs and the provision of services by Envision under this Agreement. Upon termination of this Agreement, Envision agrees to provide only industry-standard transfer files to a subsequent pharmacy benefit manager at Plan Sponsor's written request. Plan Sponsor agrees to pay or reimburse Envision for any cost charged by a vendor or pharmacy related to the transfer of files from or to such vendor or pharmacy at any time during this Agreement or connected with the termination of this Agreement. 2.7 Reports: Envision shall provide Plan Sponsor with access to a web-based report generator through which Plan Sponsor may create and download a variety of standard and customized reports. Envision shall provide training for a Plan Sponsor designated individual on the capabilities of Envision's web-based reporting program. Plan Sponsor represents that the designated individual has received training and has knowledge of the HIPAA privacy and security regulations. Any reports that are to be provided by Envision to Plan Sponsor without cost (other than those available from Envision's web-based reporting program) shall be mutually determined prior to the configuration of Plan Sponsor's Benefit Plan in the Claims Adjudication System and shall be specified in the Benefit Specification Form. Plan Sponsor shall be charged a fee for any other reports requested by Plan Sponsor. Included in the web-based reports described above, or provided separately, Envision shall supply Plan Sponsor with reports of retrospective reviews to determine the drug utilization patterns of Members (e.g. high cost/high utilization of a particular drug class, therapeutic appropriateness of drug for a particular disease state). 2.7.1 Access to Third Parties: If Plan Sponsor desires Envision to provide one or more third parties access to web-based or other reports, Plan Sponsor shall complete and submit an Envision provided authorization form. Plan Sponsor acknowledges that any reports to be provided to Plan Sponsor's authorized third parties which are not accessible via the web-based reports generator, shall be provided via a secure FTP server. `,PBMSA(frm072414) C0 Envision Pharmaceutical Services,LLC Page 7 of 24 h 2.8 Retiree DrugSubsidy (RDS) Reports: For Plan Sponsors which submit requests for drug subsidies under the Medicare RDS program, Envision shall provide Plan Sponsor with quarterly reports summarizing Claims paid by Plan Sponsor for Medicare Part D drugs dispensed to Covered Individuals who Plan Sponsor has identified on the appropriate form as Medicare eligible retirees. Plan Sponsor acknowledges that any estimated Manufacturer Derived Revenue which has been passed-through to Plan Sponsor will have been deducted from the Claim amounts reported. Unless otherwise specified herein or included under an addendum to this Agreement, Envision shall not be responsible or liable to Plan Sponsor for any RDS services or subsidies. Any assistance requested by Plan Sponsor and/or provided by Envision shall be solely consultative and shall not be deemed to be an acceptance by Envision of any responsibility or liability for the completion or submission of any RDS application or request for subsidies under Medicare Part D. 2.9 Additional Services: Any services to be rendered under this Agreement which are not included in the Administrative Fee as specified in this Section 2 shall be itemized in the Exhibits and Addendums hereto along with any associated costs or charges. 3. PRICING AND PASS-THROUGH METHODOLOGY 3.1 Pass-Through of Discounts and Dispensing Fees: Envision has negotiated discounted drug prices and dispensing fees with Participating Pharmacies. Envision shall pass-through to Plan Sponsor one hundred percent(100%) of the negotiated discount for the drug dispensed (plus any applicable dispensing fee) without any reclassification, mark-up or spread by Envision. The amount invoiced to Plan Sponsor shall be the exact drug ingredient cost and applicable dispensing fee which is paid to the dispensing pharmacy, in accordance with the following: 3.1.1 For Ingredient Cost: Envision shall invoice Plan Sponsor the lower of: (a) The calculated negotiated amount payable to the Participating Pharmacy based on the 11 digit NDC number of the drug dispensed; or (b) If included on the then current Envision MAC List, the MAC Price for the drug dispensed; or (c) The Participating Pharmacy's U&C Price (except for drugs dispensed by the Mail Order Pharmacy or Specialty Pharmacy); less any applicable Manufacturer Derived Revenue and/or any applicable Covered Individual Cost Share. 3.1.2 For Dispensing Fees: Envision shall invoice Plan Sponsor the actual dispensing fee amount payable to the Participating Pharmacy. 3.2 Manufacturer Derived Revenue 3.2.1 Pass-Through of Manufacturer Derived Revenue: Envision has negotiated contracts with pharmaceutical manufacturers to obtain Manufacturer Derived Revenue for eligible Prescription Drugs, and shall pass through to Plan Sponsor one hundred percent (100%) `\PBMSA(frm072414) 0 Envision Pharmaceutical Services,LLC Page 8 of 24 �t of all Manufacturer Derived Revenue earned by Plan Sponsor and paid to Envision by contracted pharmaceutical manufacturers for Plan Sponsor's eligible Claims that comply with the terms of this Agreement. Prescription Drugs eligible for Manufacturer Derived Revenue are included in the Formulary provided by Envision. Plan Sponsor acknowledges that the Manufacturer Derived Revenue earned by Plan Sponsor is dependent on certain factors including, without limitation, the following: (i) the effect of terms and conditions of Plan Sponsor's Benefit Plan on the application of the Formulary; (ii) the structure of Plan Sponsor's Benefit Plan, including but not limited to Cost Share requirements and coverage rules such as Prior Authorizations, Quantity Limits, and Step Therapy (as defined in the Benefit Specification Form); and (iii) the drug utilization patterns of Covered Individuals. Plan Sponsor further acknowledges that Plan Sponsor's portion of market share rebates is based on (i) Plan Sponsor's ability to meet and earn market share rebate levels by pharmaceutical manufacturer and (ii) the ratio of Plan Sponsor's Claims for a particular rebated drug to the total number of Claims for such drug for all Envision clients, as adjusted for the effect of Plan Sponsor's Benefit Plan (e.g. tier structure and Cost Share differentials) on the overall yield of market share rebates. No Manufacturer Derived Revenue shall be payable to Plan Sponsor for 340B Claims, Claims from any Plan Sponsor owned or affiliated pharmacy which is not a Participating Pharmacy, Claims for which Envision has not been paid in full, and other Claims not eligible for Manufacturer Derived Revenue. 3.2.2 Pass-Through Methodology: Manufacturer Derived Revenue shall be advanced to Plan Sponsor by adjusting the Claim for an eligible Prescription Drug by an estimated amount for applicable Manufacturer Derived Revenue using Envision's patented Point-of-Sale Technology. Envision's Point-of-Sale Technology generates a Claim that will be invoiced to Plan Sponsor at the net price after applying a credit for estimated Manufacturer Derived Revenue. (Plan Sponsor acknowledges that, unless otherwise indicated by Plan Sponsor on the Benefit Specification Form, if a Covered Individual pays a percentage of the drug cost (i.e. co- insurance) under the Benefit Plan, a proportional amount of the Manufacturer Derived Revenue will be passed on to the Covered Individual at the Point-of-Sale). 3.2.3 Sole Source: Plan Sponsor represents and warrants to Envision that, at no time during or after the term of this Agreement, is Plan Sponsor receiving rebates and other revenues from pharmaceutical manufacturers other than through Envision, either directly or indirectly (through a Group Purchasing Organization, drug wholesaler, or otherwise) for Claims processed by Envision under this Agreement. Plan Sponsor agrees that it shall not, at any time, submit Claims which have been transmitted to Envision to another pharmacy benefit manager or carrier for the collection of rebates and other revenues from pharmaceutical manufacturers or create a situation which would cause a pharmaceutical manufacturer to decline payments to Envision. Envision reserves the right to recover from Plan Sponsor, and Plan Sponsor shall refund to Envision, any Manufacturer Derived Revenue, including any related penalties and fees, advanced to Plan Sponsor by Envision which is connected with any Claims for which Plan Sponsor received rebates and other revenues from pharmaceutical manufacturers from any other source or for amounts advanced to Plan Sponsor by Envision which have been withheld by a pharmaceutical manufacturer as a result of such Claims not meeting conditions for rebates, the ineligibility of Claims for Manufacturer Derived Revenue (i.e. 340B Claims), or breach of this Agreement by Plan Sponsor. `•,PBMSA(frm072414) 0 Envision Phannaceutical Services,LLC Page 9 of 24 4. PLAN SPONSOR RESPONSIBILITIES 4.1 Implementation: No later than thirty (30) days prior to the Effective Date, Plan Sponsor shall provide Envision with an executed Benefit Specification Form and such data as reasonably necessary for Envision to set up the Claims Adjudication System and commence the provision of PBM Services as of the Effective Date. Such data includes, without limitation, prior utilization reports, pharmacy transfer files, and eligibility. 4.2 Eligibility: Plan Sponsor shall provide Envision (either directly or through an authorized third party administrator) with an Eligibility File, at least monthly, in the HIPAA 834 standard transaction code set format, or such other format as has been previously agreed to by Envision. Plan Sponsor shall provide timely eligibility updates (for example, additions, terminations, change of address or personal information, etc.) to ensure accurate determination of the eligibility status of Covered Individuals. Plan Sponsor acknowledges and agrees that (i) Envision provides such eligibility data to the Participating Pharmacies and understands that Envision and Participating Pharmacies will act in reliance upon the accuracy of data received from Plan Sponsor; (ii) Envision will continue to rely on the information provided by Plan Sponsor until Envision receives notice that such information has changed; and (iii) Envision shall not be liable to Plan Sponsor for any Claims or expense resulting from the provision by Plan Sponsor (or its designee) of inaccurate, erroneous, or untimely information. In addition, if Envision must create or update eligibility by manually entering Covered Individual data, Plan Sponsor will be charged.a data entry fee as specified in Exhibit 1. In lieu of the Eligibility File, Plan Sponsor may provide eligibility information by updating the Claims Adjudication System directly (except for the initial Eligibility File, which must be provided to Envision during the initial implementation), provided Plan Sponsor continues to meet Envision's conditions and specifications for direct eligibility updates. 4.3 Benefit Plan: Plan Sponsor shall provide Envision with complete information concerning the Benefit Plan. Plan Sponsor understands and agrees that Envision shall rely on the terms and provisions provided by Plan Sponsor on the Benefit Specification Form. The Benefit Specification Form may be changed from time to time by Plan Sponsor by providing Envision with a replacement Benefit Specification Form or a Benefit Specification Change Form; provided, however, that the form must be signed by Plan Sponsor to be effective and the form provided to Envision at least thirty (30) days before any such change shall be implemented. If, however, Plan Sponsor provides Envision with an unsigned Benefit Specification Form or Benefit Specification Change Form, Envision shall not be bound by such form and Plan Sponsor shall hold harmless Envision for any consequences resulting from any changes not implemented. The most recent executed Benefit Specification Form shall supersede any prior dated form. Plan Sponsor shall have sole authority to determine the terms of the Benefit Plan and the coverage of benefits thereunder, however, Plan Sponsor understands and agrees that any change in the Benefit Plan or System configuration (e.g. mandatory generic program, coverage of over- the-counter drugs or medications, source of Covered Drugs, use of Plan Sponsor Owned pharmacies, etc.) may affect yields in Manufacturer Derived Revenue and/or average drug pricing. Plan Sponsor agrees that Envision shall not be liable to Plan Sponsor for any reduction of such yields or increase in pricing which result from any such change. Further, any change to `,PBMSA(frm072414) (0 Envision Pharmaceutical Services,LLC Page 10 of 24 lU`, n. the Benefit Plan that affects a material term of this Agreement will require an amendment hereto. Plan Sponsor agrees to execute an amendment, at Envision's request, before implementing the change to the Benefit Plan. 4.4 Formulary: Plan Sponsor shall adopt and adhere to the Formulary provided by Envision. Any customization of the Formulary by Plan Sponsor or use by Plan Sponsor of an alternate Formulary must be approved, in writing, by Envision. Plan Sponsor acknowledges that adherence to the Formulary is necessary to maximize yields in Manufacturer Derived Revenue. Plan Sponsor agrees that Envision shall not be liable to Plan Sponsor for any reduction in yields of Manufacturer Derived Revenue or increase in drug pricing resulting from Plan Sponsor's failure to adhere to the Formulary or a change to the Benefit Plan that affects the application of the Formulary. 4.5 Payment: Plan Sponsor shall timely pay, or cause its designee to timely pay, Envision for services rendered hereunder in accordance with Section 5 below and Exhibit 1. 4.6 Cooperation: Plan Sponsor shall promptly provide Envision with all information (both verbal and written) that is requested by Envision and reasonably necessary for Envision to complete its obligations hereunder. Any information required to be provided by Plan Sponsor in order for Envision to perform a function under this Agreement shall be deemed to be untimely if not received by Envision at least five (5) business days prior to its due date. Further, Plan Sponsor shall not obfuscate, delay, impede, or otherwise fail to cooperate with Envision. 5. TERMS OF PAYMENT 5.1 Fees and Rates: Plan Sponsor hereby accepts the fees and rates specified in Exhibit 1. 5.2 Payments for Claims: Envision shall invoice Plan Sponsor twice each month for Claims incurred. Plan Sponsor shall pay Envision's invoices no later than 12:00 p.m. Eastern time on the tenth (101h) calendar day from receipt of said invoices. Invoices shall be deemed to have been received by Plan Sponsor upon the earliest delivery of the invoice by mail, e-mail, fax, or courier. 5.3 Payment of Administrative Fee: Plan Sponsor agrees that the Administrative Fee set forth in Exhibit 1 shall be added to the invoiced amount for each Invoiced Claim and shall be paid by Plan Sponsor in conjunction with the payment of Claims as set forth in Section 5.2. For purposes of this Section, an "Invoiced Claim" shall be a Claim payable by Plan Sponsor under this Agreement, but shall not include transactions for Claims which have been rejected under the specifications of the Benefit Plan, transactions for previously paid Claims which have been reversed (e.g. as a result of a reversal of a Claim by a Participating Pharmacy or by Envision as a result of an audit), or transactions for reprocessed Claims (e.g. to correct a previously paid Claim). 5.4 Fees for Additional Services and Miscellaneous Expenses: Plan Sponsor agrees to reimburse Envision for Additional Services and Miscellaneous Expenses (e.g. postage) specified in Exhibit 1 hereunder, within seven(7) calendar days of receipt of an invoice. TBMSA(frtn072414) Z Envision Phannaceutical Services,LLC Page I I of 24 5.5 Retroactive Disenrollment or Termination: Retroactive termination or disenrollment of a Covered Individual shall not release Plan Sponsor of its obligation to pay Claims incurred, at any time, on behalf of a Covered Individual or Administrative Fees due to Envision during any period for which services were renderable hereunder based on the then current eligibility. Further, termination of coverage of prescription drugs or the entering into a policy of insurance that covers prescription drugs shall not constitute a permitted termination of this Agreement. 5.6 Taxes, Assessment or Fees: Any sales or use taxes for Covered Drugs sold to Covered Individuals shall be charged, collected, and paid to state and local taxing authorities by the dispensing pharmacy. As part of the reimbursement for a Claim, Plan Sponsor shall reimburse Envision for such taxes payable by the dispensing pharmacy. These sales or use taxes will be added to the overall amount of the Claim and invoiced to Plan Sponsor and/or Member, in accordance with the Benefit Plan. Further, Plan Sponsor shall reimburse Envision for any assessments or related fees required to be paid under state or federal regulations for Plan Sponsor's Claims. 5.7 Financial Responsibility: Plan Sponsor shall be and remain responsible for the payment of all invoices for Administrative Fees, Additional Services, Miscellaneous Expenses, and Claims (along with any associated dispensing fees, taxes, assessments and fees, and Cost Share not ultimately paid by Members). Plan Sponsor acknowledges that Envision will not pay pharmacies for Plan Sponsor's Claims, nor be obligated to pay pharmacies for Claims, unless and until adequate funds are received from Plan Sponsor. 5.7.1 Untimely If Plan Sponsor should fail to timely pay any amounts due Envision hereunder for any reason, including, but not limited to, insolvency, bankruptcy, termination of business, sale, or rebuff, Envision reserves the right to (i) suspend the provision of services; (ii) offset such amounts owed to Envision by any amounts owed by Envision to Plan Sponsor and/or (iii) collect from Plan Sponsor, in addition to such unpaid amounts, interest at a rate of 1.5% per month on the outstanding balance (or, if lower, the rate of interest permitted under the law of Plan Sponsor's state of domicile). If Envision suspends the provision of services, Covered Individuals will be required to pay 100% of the drug cost and any dispensing fees (or the U&C Price, if lower) to receive Covered Drugs. In addition, as a condition of continuing to perform services under this Agreement, Plan Sponsor shall deposit with Envision additional amounts to ensure the timely payment of future invoices. Envision may also discontinue advancing Manufacturer Derived Revenue to Plan Sponsor. Plan Sponsor further agrees that Envision shall not be liable for any consequences resulting from the untimely payment of Participating Pharmacies due to the failure of Plan Sponsor to timely pay Envision as required under this Agreement. q 1� 5.7.2 Financial Viability: Plan Sponsor acknowledges that Envision will periodically conduct a credit check of Plan Sponsor. If such credit check reasonably indicates that Plan Sponsor is not financially viable, Envision may require Plan Sponsor to deposit with Envision a reasonable amount to ensure the timely payment of future invoices. \PBMSA(fnn072414) C Envision Pharmaceutical Services,LLC Page 12 of 24 W J w 5.8 Financial Audit by Plan Sponsor: Within twelve months after the end of each Contract Year hereunder, Plan Sponsor, at its sole expense, may audit Envision's records of Claims adjudicated during the prior Contract Year. Envision shall make available to Plan Sponsor's auditor, any and all financial records containing Plan Sponsor's information and such other records as reasonably necessary for auditor to confirm that the amounts paid by Plan Sponsor are the cost to Envision on the day the Covered Drug was dispensed. Plan Sponsor agrees to not use as its auditors, any person or entity which, in the sole discretion of Envision, is a competitor of Envision, a pharmaceutical manufacturer representative, or any other person or entity which has a conflict of interest with Envision. Plan Sponsor understands that Envision's contracts with pharmaceutical manufacturers, Participating Pharmacies, and other third parties may contain non-disclosure provisions, and hereby agrees to comply with such non-disclosure provisions. Plan Sponsor's auditor shall execute a conflicts of interest disclosure and confidentiality agreement with Envision prior to the audit. Audits shall only be made during normal business hours following thirty (30) days written notice, be conducted without undue interference to Envision's business activity, and in accordance with reasonable audit practices. Plan Sponsor's auditor may inspect Envision's contracts with Participating Pharmacies and pharmaceutical manufacturers at Envision's offices only, and no copies of such contracts may be removed from Envision's offices. Plan Sponsor agrees to disclose the findings and methodologies of a completed audit, and provide Envision with a reasonable period of time to respond to such findings and methodologies, before a demand is made by Plan Sponsor for amounts it believes are due from Envision. 5.9 Financial Audit by Envision: Envision may, at reasonable intervals, request Plan Sponsor to provide records for Envision's inspection which provide supporting documentation for the information contained in the Eligibility File and the data provided by Plan Sponsor (or its designate) upon which the financial terms herein were based. Plan Sponsor agrees to provide such supporting documentation to Envision within ten (10) business days of such request. In addition, and if warranted, Envision may, at its own expense, inspect and audit, or cause to be inspected and audited, once annually, the books and records of Plan Sponsor directly relating to the existence and number of Covered Individuals. Audits shall only be made during normal business hours following thirty (30) days written notice, be conducted without undue interference to Plan Sponsor's business activity, and in accordance with reasonable audit practices. Envision agrees to execute a confidentiality agreement with Plan Sponsor prior to the audit. 6. TERM AND TERMINATION 6.1 Term: The term of this Agreement shall commence on the Effective Date and shall remain in full force and effect for an initial term of three (3) years ("Initial Term") unless earlier terminated as provided herein. Upon the expiration of the Initial Term, and each subsequent renewal term, this Agreement shall renew automatically for an additional term of one year; unless, at least ninety (90) days prior to the end of such term, either party hereto notifies the other, in writing, that this Agreement will terminate at the end of the current term. 6.2 Termination: This Agreement may be terminated as follows: \PBMSA O m072414) Z Envision Pharmaceutical Services,LLC Page 13 of 24 6.2.1 For Cause: By either party hereto in the event the other party breaches any of its material obligations hereunder; provided, however, that the defaulting party shall have thirty(30) days to correct such breach after written notice is given by such non-breaching party specifying the alleged breach; 6.2.2 Insolvency: By either party hereto in the event the other party (i) is adjudicated insolvent, under state and/or federal regulation, or makes an assignment for the benefit of creditors; (ii) files or has filed against it, or has an entry of an order for relief against it, in any voluntary or involuntary proceeding under any bankruptcy, insolvency, reorganization or receivership law, or seeks relief as therein allowed, which filing or order shall not have been vacated within sixty (60) calendar days from the entry thereof; (iii) has a receiver appointed for all or a substantial portion of its property and such appointment shall not be discharged or vacated within sixty (60) calendar days of the date thereof, (iv) is subject to custody, attachment or sequestration by a court of competent jurisdiction that has assumed of all or a significant portion of its property; or (v) ceases to do business or otherwise terminates its business operations, is declared insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement or similar proceeding; 6.2.3 Failure to Pay: By Envision, in addition to any other remedy available to Envision hereunder, in the event Plan Sponsor fails to pay Envision according to terms of this Agreement. 6.2.4 Without Cause: By either party hereto with at least sixty(60) days' written notice to the other party. Notwithstanding the foregoing, neither party may terminate this Agreement without cause under this Agreement before January 1St, 2016. 6.3 Notices: All notices required in this Section 6 shall be reasonably specific concerning the cause for termination and shall specify the effective date and time of termination. 6.4 Effect of Termination: Termination of this Agreement for any reason shall not release any party hereto from obligations incurred under this Agreement prior to the date of termination. Except as otherwise agreed, in writing, no services shall be provided by Envision after the effective date of termination. Envision reserves the right to suspend advancing Manufacturer Derived Revenue to Plan Sponsor upon Plan Sponsor's notification of termination. 7. CONFIDENTIAL INFORMATION 7.1 Confidentiality: Except as otherwise stated herein or required by law, neither party hereto shall disclose any information of, or concerning the other party which has either been provided by one party to the other or obtained by a party in connection with this Agreement (including this Agreement and the terms of this Agreement) or related to the services rendered under this Agreement, all of which information is deemed confidential information. All data, information, and knowledge supplied by a party hereto shall be used by the other party exclusively for the purposes of performing this Agreement. Upon termination of this Agreement, each party shall return to the other party or destroy (if such destruction is certified) all confidential information provided including, without limitation, all copies and electronic \PBMSA(frm072414) 0 Envision Pharmaceutical Services,LLC Page 14 of 24 a -67"?) magnetic versions thereof. Notwithstanding any of the foregoing to the contrary, "confidential information" shall not include any information which was known by a party prior to receiving it from the other party, or that becomes rightfully known to a party from a third party under no obligation to maintain its confidentiality, or that becomes publicly known through no violation of this Agreement. 7.2 Protected Health Information: Plan Sponsor will have access to Protected Health Information (PHI) (as defined by HIPAA) contained in reports provided by Envision or accessed by Plan Sponsor via Envision's website. Plan Sponsor agrees, for itself and its employees, that PHI shall not be used for any impermissible purpose, including, without limitation, the use of PHI for disciplinary or discriminatory purposes, and any user names and passwords assigned to designated individuals shall not be shared with non-designated individuals. In addition, Plan Sponsor, for itself and its Covered Individuals, authorizes Envision to use and share PHI as necessary to carry its obligations hereunder. Envision and Plan Sponsor shall execute a HIPAA Business Associate Agreement. 8. INDEMNIFICATION 8.1 Limited Indemnification by Envision: Envision hereby agrees to indemnify, hold harmless, and defend Plan Sponsor and its employees, officers, directors, trustees, shareholders, and agents from and against any and all liabilities, actions, claims, damages, costs, losses and expenses (including without limitation, reasonable costs of investigation and attorneys' fees) caused by or arising out of(i) any act or omission by Envision in the performance of the services provided under this Agreement; or (ii) any breach of any representation, covenant, or other agreement of Envision contained in this Agreement. 8.2 Limited Indemnification by Plan Sponsor: Plan Sponsor hereby agrees to indemnify, hold harmless, and defend Envision and its employees, officers, directors, shareholders, affiliates and agents from and against any and all liabilities, actions, claims, damages, costs, losses and expenses (including without limitation, reasonable costs of investigation and attorneys' fees) caused by or arising out of (i) the provision by Plan Sponsor or its designee of untimely, incomplete, or erroneous information; or (ii) Plan Sponsor's failure to comply with state or federal law in the operation of its Benefit Plan. 8.3 Limitation of Liability: Notwithstanding the indemnification obligations set forth above (i) each party's liability to the other hereunder will in no event exceed the actual proximate losses or damages caused by breach of this Agreement; and (ii) in no event will either party or any of their respective affiliates, directors, employees or agents, be liable for any indirect, special, incidental, consequential, exemplary or punitive damages, or any damages for lost profits relating to a relationship with a third party, however caused or arising, whether or not they have been informed of the possibility of their occurrence. 8.4 Survival: This Section 8 shall survive the expiration or termination of this Agreement for any reason. \.PBMSA(fnn072414) v Envision Pharmaceutical Services,LLC Page 15 of 24 PrrAA, M1T S 9. RELATIONSHIP WITH CONTRACTED PHARMACIES /W Plan Sponsor acknowledges that Envision is neither an operator of pharmacies nor exercises control over the professional judgment used by any pharmacist when dispensing drugs or medical supplies to Covered Individuals. Nothing in this Agreement shall be construed to usurp the dispensing pharmacist's professional judgment with respect to the dispensing or refusal to dispense any drugs or medical supplies to Covered Individuals. Plan Sponsor agrees that it shall not hold Envision responsible, nor shall Envision be liable to Plan Sponsor or Covered Individuals, for any liability arising from the dispensing of drugs or medical supplies to Covered Individuals by any pharmacy. 10. GENERAL 10.1 Standards of Performance: Envision shall perform its obligations under this Agreement with care, skill, prudence, and diligence, and in accordance with the standards of conduct applicable to a fiduciary. Envision shall disclose all administrative fees and drug costs charged to Plan Sponsor, disclose all Manufacturer Derived Revenue earned by Plan Sponsor and paid to Envision by contracted pharmaceutical manufacturers for Plan Sponsor's eligible Claims, and permit Plan Sponsor to audit such fees, costs, and revenues, as set forth in this Agreement. Envision shall also disclose to Plan Sponsor any activity, policy, or practice of which Envision is aware that presents a conflict of interest with the performance of its obligations hereunder. Plan Sponsor agrees that it retains the sole responsibility for the terms and conditions of its Benefit Plan; its compliance with applicable law, and that of its Benefit Plan, including, without limitation, the interpretation and applicability of any state or federally mandated requirements; and determinations of coverage under the Benefit Plan; and shall not rely on any advice or recommendations of Envision as a substitute for obtaining its own independent accounting, tax, legal, or regulatory advice. Unless otherwise agreed in writing, Plan Sponsor shall also be responsible for the disclosing or reporting of information regarding the Benefit Plan or changes in the Benefit Plan (e.g., calculation of co-payments, deductibles; or creditable coverage) as may be required by law to be disclosed to governmental agencies or Covered Individuals. 10.2 Independent Contractors: Envision and Plan Sponsor are independent contractors. Notwithstanding anything herein to the contrary, neither party hereto, nor any of its respective employees, shall be construed to be the employee, agent, or representative of the other for any reason, or liable for any acts of omission or commission on the part of the other. Plan Sponsor acknowledges that, notwithstanding anything herein to the contrary, Envision negotiates contracts with pharmacies, pharmaceutical manufacturers, and vendors on its own behalf and not specifically or exclusively for Plan Sponsor. 10.3 Exclusivity: During the term of this Agreement, Envision shall be the sole provider of PBM Services to Plan Sponsor, including, without limitation, the exclusive contractor of rebates with pharmaceutical manufacturers for Plan Sponsor's Claims. 10.4 Assignment: Except as follows, this Agreement may not be assigned by either party hereto without the express written consent of the other party, which may not be unreasonably \.PBMSA(frm072414) 0 Envision Pharmaceutical Services,LLC Page 16 of 24 withheld. Envision may assign this Agreement to a commonly controlled subsidiary or affiliate company, or a controlling parent company. 10.5 Binding Effect: This Agreement and the exhibits and schedules attached hereto shall be binding upon and inure to the benefit of the respective parties hereto, and their respective successors and assigns. 10.6 Intellectual Property: Each party hereto reserves the right to and control of the use of their names, symbols, trademarks or service marks presently existing or hereafter established, and no party may use any names, symbols, trademarks or service marks of any other party without the owner's written consent. 10.7 Waiver: Neither the failure nor any delay on the part of either party hereto to exercise any right, power or privilege hereunder will operate as a waiver thereof, nor will any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. In the event any party hereto should waive any breach of any provision of this Agreement, it will not be deemed or construed as a waiver of any other breach of the same or different provision. 10.8 Severability: The invalidity or unenforceability of any term or provision of this Agreement shall in no way affect the validity or enforceability of any other term or provision. 10.9 Change in Law or Market Conditions: If any law, regulation, or market condition(e.g. an applicable industry standard reference on which pricing hereunder is based, changes the methodology for determining drug price in a way that materially changes the pricing or economics of this Agreement), either now existing or subsequently occurring, affects the ability of either party hereto to carry out any obligation hereunder (a "Material Change"), Envision and Plan Sponsor shall renegotiate the affected terms of this Agreement, in good faith, to preserve, to the extent possible, the relative positions of the parties that existed prior to such Material Change. Either party may notify the other party of a Material Change. If a successful renegotiation is not achieved within thirty (30) days after notification of a Material Change, any failure of the affected party to meet its obligations hereunder due to the effect of such Material Change shall not be deemed to be a breach of this Agreement; however, if continuation of this Agreement without modification is in violation of any law or regulation, or makes it impracticable for the affected party to meet its obligations hereunder, either party may terminate this Agreement with sixty(60) days prior written notice. 10.10 Headings: The section or paragraph headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 10.11 Entire Agreement: This Agreement shall constitute the entire agreement between Envision and Plan Sponsor with respect to the subject matter herein and supersede any prior understanding or agreements of any kind preceding this Agreement with respect to such subject matter. Any modification or amendment to this Agreement, or additional obligation assumed by Envision or Plan Sponsor in connection with this Agreement, shall be binding only if evidenced .PBMSA(fnn072414) C)Envision Pharmaceutical Services,LLC Page 17 of 24 . f in a writing signed by both parties hereto. No term or provision of this Agreement shall establish a precedent for any term or provision in any other agreement. 10.12 Acceptance of Offer: Notwithstanding anything herein to the contrary, this Agreement shall not be binding upon the parties hereto unless and until this Agreement is signed and executed by a duly authorized officer of each of the parties. The signing of this Agreement by Plan Sponsor constitutes an offer only until the same has been accepted by Envision. 10.13 Dispute Resolution 10.13.1 Mediation: If either party to this Agreement should declare a breach of this Agreement, or if any dispute arises from this Agreement or the subject of this Agreement, the parties shall first submit the matter to non-binding mediation (not arbitration) and attempt to resolve the matter, in good faith, prior to the institution of any legal action. The parties agree that legal action may be initiated only after each party has presented its case to a qualified mediator associated with a professional mediation firm and such mediator has declared an impasse. Any statements made at such mediation shall be for settlement purposes only and shall not be construed to be an admission. A party demanding mediation shall be entitled to obtain a court order mandating mediation if the other party does not agree to commence mediation within thirty (30) days after written demand. The fees and costs incurred by the party seeking such court order shall be reimbursed by the other party; otherwise, each party shall pay its own costs of mediation. All such mediation proceedings shall be conducted on a confidential basis. The mediation shall be conducted in a mutually agreed upon location in the State of Washington. 10.13.2 Waiver of Trial b�Jury: The parties hereby irrevocably waive their rights to a trial by jury with respect to any claim or controversy arising out of or related to this Agreement. 10.14 Choice of Law: This Agreement shall be construed, interpreted, and governed according to the laws of the State of Washington, except to the extent such laws are preempted by applicable Federal law. 10.15 Force Majeure: Neither Envision nor Plan Sponsor will be deemed to have breached this Agreement or be held liable for any failure or delay in the performance of all or any portion of its obligations under this Agreement if prevented from doing so by a cause or causes beyond its control. Without limiting the generality of the foregoing, such causes include acts of God or the public enemy, fires, floods, storms, earthquakes, riots, strikes, boycotts, lock-outs, acts of terrorism, acts of war, war-operations, restraints of government, power or communications line failure or other circumstances beyond such party's control, or by reason of the judgment, ruling or order of any court or agency of competent jurisdiction, or change of law or regulation (or change in the interpretation thereof) subsequent to the execution of this Agreement. The party claiming force majeure must provide the other party with reasonable written notice. However, as soon as the cause preventing performance ceases, the party affected thereby shall fulfill its obligations as set forth under this Agreement. This Section 10.15 shall not be considered to be a waiver of any continuing obligations under this Agreement, including, without limitation, the obligation to make payments. \PBMSA(frm072414) CO Envision Phannaceutical Services,LLC Page 18 of 24 ri .P. 10.16 Fax Communications: Plan Sponsor agrees that Envision may communicate with Plan Sponsor via fax, and by doing so, such fax is not a violation of the Telephone Consumer Protection Act, 47 U.S.C. §227. 10.17 Notices: All notices required under this Agreement shall be in writing, signed by the party giving notice and shall be deemed sufficiently given immediately after being delivered by hand, or by traceable overnight delivery service, or by registered or certified mail (return receipt requested), to the other party at the address set forth below or at such address as has been given by proper notice. 10.18 Representations: Plan Sponsor represents and warrants that (i) it is self-insured; (ii) the entering into this Agreement for PBM Services is not in violation of any other agreement; (iii) has no undisclosed conflicts of interest; and (iv) it maintains, and shall continue to maintain throughout the term of this Agreement, any and all licenses, governmental authority, or other authorization required to operate an entity of its type. Envision represents that there are no organizational arrangements that could potentially create a conflict of interest that affects clinical or financial decisions. In addition, each signatory named below represents and warrants that he or she (i) has read this Agreement, Exhibits, and other attachments, and fully understands and agrees to the content therein; (ii) has entered into this Agreement voluntarily; (iii) has not transferred or assigned or otherwise conveyed in any manner or form any of the rights, obligations or claims which are the subject matter of this Agreement; and (iv) has the full power and authority to execute this Agreement. 10.19 Third Party Administrator: If Plan Sponsor uses the services of a Third Party Administrator (TPA), consultant, broker, or other third party to carry out any of Plan Sponsor's obligations under this Agreement, said entity(ies) shall be set forth in Exhibit 2 of this Agreement. [SIGNATURE PAGE FOLLOWS] \PBMSA(frtn072414) C Envision Pharmaceutical Services,LLC Page 19 of 24 IN WITNESS WHEREOF, Envision and Plan Sponsor have executed this Agreement as of the Effective Date above. For ENVISION: For PLAN SPONSOR: By: By: Matthew A. Gibbs, Pharm D. Chief Commercial Officer Print Name &Title Address: Address: Envision Pharmaceutical Services, LLC The City of Bremerton 2181 East Aurora Road 3456 1h Street, Suite 600 Twinsburg, OH 44087 Bremerton, WA 98337 PH: 330-405-8080 PH: 360-473-5846 FX: 330-405-8081 FX: 360-473-2333 E-MAIL: charlotte.belmore@ci.bremerton.wa.us FEIN: 91-6001231 PBMSA(fnn072414) :�Envision Pharmaceutical Services,LLC Page 20 of 24 /lam fj EXHIBIT 1 FEES AND DRUG PRICING Administrative Fee (Payable to Envision; not including fees payable to Plan Sponsor's TPAs, consultants, or brokers, if any) For Contract Year 2015: $2.35 per Claim For Contract Year 2016: $2.45 per Claim For Contract Year 2017: $2.55 per Claim Fees for Additional Services and Miscellaneous Expenses 1. Replacement by Envision of lost or stolen ID $1.00 per card plus $0.15 per packet and Cards cost of postage 2. Manual Claims Processing(including DMRs) $1.50 per Claim processed 3. Claim Adjustment Checks (charged to Plan Sponsor for reimbursements made to Covered Individuals for Claim adjustments requested by Plan Sponsor.) $8.50 per check 4. Manually create or update the Eligibility File $1.00 per Covered Individual data entry 5. Ad Hoc Computer or Report Programming $150.00 per hour 6. Clinical Prior Authorizations (Initial Coverage Determinations) $8.00 per authorization 7. Drug Therapy Care Gap Management $0.55 per Member per month (PMPM) 8. Medication Adherence and Persistency(up to three disease states) $0.55 PMPM Drug Pricing and Dispensing Fees(A) Supply/Source BRAND GENERIC For Contract Year Drug Price(B) Dispensing Drug Price(B) Dispensing 15 (Annual Average Fee(C) (Annual Average Fee(o) 20 (based 1 3 year Effective Rate (Annual Effective Rate (Annual Estimate) Average Estimate) Average Agreement) Estimate) Estimate) 30 Days' Supply ata o AWP minus AWP minus 15.60% $1.30 $1.30 Retail Pharmacy74.50% 84 Days' Supply(or greater) at a Retail AWP minus 20.10% N/A AWP minus N/A Pharmacy(non-Mail 76.50% Order) `,PBMSA(fn- 072414) 0 Envision Pharmaceutical Services,LLC Page 21 of 24 .:fJ :I � "c• E Mail Order Pharmacy AWP minus 20.50% N/A AWP minus 79% N/A Specialty Pharmacy (Pass-Through of Contract Rate with Dispensing Pharmacy) Supply/Source BRAND GENERIC Drug Price(B) Dispensing Drug Price(B) Dispensing For Contract Year (Annual Average Fee(C) (Annual Average Fee(C) 2016 Effective Rate (Annual Effective Rate (Annual Estimate) Average Estimate) Average Estimate) Estimate) 30 Days' Supply at a AWP minus 15.70% $1.25 AWP minus 75% $1.25 Retail Pharmacy 84 Days' Supply(or greater) at a Retail AWP minus 20.20% N/A AWP minus 77% N/A Pharmacy(non-Mail Order) Mail Order Pharmacy AWP minus 20.50% N/A AWP minus N/A 79.50% Specialty Pharmacy (Pass-Through of Contract Rate with Dispensing Pharmacy) Supply/Source BRAND GENERIC Drug Price(B) Dispensing Drug Price(B) Dispensing For Contract Year (Annual Average Fee(C) (Annual Average Fee(C) 2017 Effective Rate (Annual Effective Rate (Annual Estimate) Average Estimate) Average Estimate) Estimate) 30 Days' Supply at a AWP minus 15.80% $1.25 AWP minus $1.25 Retail Pharmacy 75.50% 84 Days' Supply(or greater) at a Retail AWP minus 20.30% N/A AWP minus N/A Pharmacy(non-Mail 77.50% Order) Mail Order Pharmacy AWP minus 20.50% N/A AWP minus 80% N/A Specialty Pharmacy (Pass-Through of Contract Rate with Dispensing Pharmacy) (A) For purposes of this Agreement the"Average Wholesale Price" or"AWP" means the average wholesale price of a Covered Drug indicated on the most current pricing file provided to Envision by Medi-Span® (or other applicable industry standard reference on which pricing hereunder is based) for the actual drug dispensed using the 11 digit National Drug Code (NDC) number provided by the dispensing pharmacy. Envision uses a single source for determining AWP and updates the AWP source file at least once weekly. (°) For purposes of this Agreement, the "Annual Average Effective Rate" means, for the category of drugs `.PBMSA(frm072414) ,Envision Pharmaceutical Services,LLC Page 22 of 24 f, f• r being reviewed,the result calculated by the following formula: 1. (IC/AWP)-1, where IC (the "Ingredient Cost") is the sum of all amounts paid by Plan Sponsor for the ingredient costs of the Covered Drugs paid to Participating Pharmacies in the designated Network during the Contract Year, before deducting applicable Manufacturer Derived Revenue; and 2. AWP is the sum of the Average Wholesale Price amounts associated with the same Covered Drugs during the Contract Year. If the calculated price is lower than the allowable amount under any state Medicaid "Favored Nations" rule, Envision shall pass-through, and Plan Sponsor shall pay, the Medicaid allowable amount. Annual Average Effective Rate is calculated using actual price paid by Envision to Participating Pharmacies in the designated Network, plus any Cost Share, (the Ingredient Cost) for all Claims for the applicable category(including Claims paid at the U&C Price) during a Contract Year, excluding(i) Compound Drugs; (ii) Limited Distribution Drugs; (iii) drugs dispensed at a Specialty Pharmacy; (iv) Claims from non- Participating Pharmacies, LTC pharmacies, or government owned or operated pharmacies (e.g. Veterans Administration); (v) Claims paid at government required amounts (e.g. Medicaid); (vi) 340B Claims; (vii) vaccines; (viii) non-Prescription Drugs; and (ix) Claims from any Plan Sponsor owned or affiliated pharmacy which is not a Participating Pharmacy. (c) Annual Average Dispensing Fee is the average per Claim fee for all Claims by Envision to Participating Pharmacies in the designated Network (including Claims paid at the U&C Price) during a Contract Year, excluding (i) Compound Drugs; (ii) Limited Distribution Drugs; (iii) drugs dispensed at a Specialty Pharmacy; (iv) Claims from non-Participating Pharmacies, LTC pharmacies, or government owned or operated pharmacies (e.g. Veterans Administration); (v) Claims paid at government required amounts (e.g. Medicaid); (vi) 340B Claims; (vii) vaccines; (viii) non-Prescription Drugs; and (ix) Claims from any Plan Sponsor owned or affiliated pharmacy which is not a Participating Pharmacy. Annual Average Effective Rate and Annual Average Dispensing Fee Estimate Plan Sponsor acknowledges that the Annual Average Effective Rates and Annual Average Dispensing Fees specified in this Exhibit 1 are conditioned upon Plan Sponsor's adherence to certain conditions under this Agreement and that the actual Annual Average Effective Rates and Annual Average Dispensing Fees will also depend on Plan Sponsor's drug utilization and mix of Participating Pharmacies. Plan Sponsor acknowledges the drug pricing amounts specified in this Exhibit 1 are estimates only. Annual Average Manufacturer Derived Revenue EstimatetDt•tEt•(F) For Contract Year 2015: • For Brand Drugs at a Retail Pharmacy- $19.80 per paid Brand Drug Claim • For 90 day supply of Brand Drugs at the Mail Order Pharmacy- $71.00 per paid Brand Paid Claim 1Dl Manufacturer Derived Revenue estimates are stated as annual average amounts per Contract Year. (E) Estimates are based on a Benefit Plan that has a tier structure with a minimum $20 differential in Cost Share between preferred Brand Drugs and non-preferred Brand Drugs. (F) 340B Claims and other Claims not eligible for Manufacturer Derived Revenue, and Claims from any Plan Sponsor owned or affiliated pharmacy which is not a Participating Pharmacy, shall be excluded from the calculation of the estimates above. Plan Sponsor's yields for Manufacturer Derived Revenue may be affected if: (i) Plan Sponsor makes a change to the Benefit Plan at any time(regardless of whether or not such change is required by law); (ii)the configuration of System edits is modified by Plan Sponsor; (iii) Plan Sponsor does not adhere to the Formulary; (iv) the utilization data provided by Plan Sponsor (or Plan Sponsor's agent) upon which the `•.PBMSA(frm072414) Envision Pharmaceutical Services,LLC Page 23 of 24 -J calculation of estimates were based is inaccurate, incomplete, or there is a substantial change in drug utilization patterns of Covered Individuals; (v) there is a loss of rebates due to pharmaceutical manufacturer drug patent expirations, manufacturer bankruptcy, or removal of a drug from the market; (vi) there are changes in pharmaceutical manufacturer rebate contracting terms or policies; (vii) Plan Sponsor's Benefit Plan does not meet the conditions for rebates of pharmaceutical manufacturer contracts including market share rebates; (viii) if Plan Sponsor has been excluded by a manufacturer; or(ix) there is any governmental regulation, ruling, or guidance that impacts Envision's ability to maintain current Manufacturer Derived Revenue yields. Plan Sponsor acknowledges the Manufacturer Derived Revenue amounts specified in this Exhibit 1 are estimates only. `,PBMSA(fnn072414) C)Envision Pharmaceutical Services,LLC Page 24 of 24 COVERAGE DETERMINATION AND APPEALS PROCESS ADDENDUM This Coverage Determination and Appeals Process Addendum (hereinafter "Addendum") is entered into by and between Envision Pharmaceutical Services, Inc. (hereinafter"Envision") and The City of Bremerton (hereinafter "Plan Sponsor") as follows. This Addendum is effective January 0, 2015 (hereinafter the"Effective Date"). BACKGROUND Envision and Plan Sponsor are parties to a Pharmacy Benefit Management Services Agreement dated January 1St, 2015 (hereinafter"Agreement") under which Envision provides PBM Services to Plan Sponsor. Plan Sponsor wishes for Envision to provide additional services under the Agreement as set forth below. NOW THEREFORE, Envision and Plan Sponsor agree as follows: 1. Initial Coverage Determinations and Appeals: Envision shall administer a Coverage Determination and Appeals Process under Plan Sponsor's direction as described in Exhibit 1-A. The Coverage Determination and Appeals Process will include: (i) Real-time adjudication to determine coverage/non-coverage status of a Claim; (ii) Initial Determinations (including Clinical Prior Authorizations); (iii) Redeterminations ("Internal Appeals"); and (iv) External Appeals utilizing an Independent Review Organization (IRO). The Coverage Determination and Appeals Process will meet the requirements of the Department of Labor's Internal Claims and Appeals and External Review Processes under 29 CFR §2590.715-2719. 2. Compensation: Plan Sponsor shall pay Envision the following fees: Provided Internally by Envision Coverage Determinations (including Clinical Prior $8.00 each Authorizations) Redeterminations (Internal Appeals) $85.00 each External Reviews Performed by IRO Standard Turnaround Time(2 days or greater) 100% pass through Standard Turnaround Time for Complex Independent invoiced amount from IRO Review* Expedited Turnaround Time(within 72 hours) Expedited Turnaround Time for Complex Independent Review* *Complex Independent Review is defined as requiring greater than one hundred pages of clinical documentation 3. All other terms and conditions of the Agreement not modified by this Addendum or any prior amendment or addenda shall remain unchanged. \Appeals Process Addendum 120412 IN WITNESS WHEREOF, Envision and Plan Sponsor have executed this Addendum as of the Effective Date above. For ENVISION: For PLAN SPONSOR: By: By: Print Name and Title Print Name and Title \Appeals Process Addendum 120412 EXHIBIT 1-A EnvisionRxOptions Coverage Determination,Redetermination (Internal Appeal) and Independent Review (External Appeal) Program Description (Revision date 12/04/2012) Envision maintains a process for Coverage Determinations (including Clinical Prior Authorizations), Redeterminations, and External Reviews (Independent Review Organization submissions). Envision utilizes a claim adjudication platform to determine real-time coverage/non-coverage status for Claims submitted electronically at the Point-of-Sale. Claims failing one or more Benefit Plan coverage rules are rejected at the Point-of-Sale and information regarding the reject reason(s) is conveyed to the dispensing pharmacy at the Point-of-Sale. Pharmacy personnel may contact Envision's Customer Service Department to begin the Coverage Determination process or they may inform the Member of the reason(s) for the rejection and provide the Member with instructions to contact the Customer Service Department in the event the Member would like to initiate a Coverage Determination. Coverage Determinations (or Clinical Prior Authorizations) When a Coverage Determination request is initiated, the information connected with the rejected prescription is conveyed by Envision to the Prescriber via fax with a request for specific information regarding the Member's medication history and disease diagnosis. The Prescriber completes the form and returns it to Envision where the information provided by the Prescriber is evaluated by an Envision clinical pharmacist. Expedited Coverage Determinations occur as soon as possible, taking into account medical exigencies, but no later than 24 hours of receipt of the request and standard determinations occur within 72 hours of receipt of the request. If the information provided meets the criteria to allow an override of the initial rejection, an override will be configured in the adjudication system that will allow the Claim to process. If the clinical review determines the prescription fails to meet the coverage criteria, the prescription will remain in rejected status. The result of the Coverage Determination is communicated to the Member by written letter, the Prescriber by fax, and the dispensing pharmacy by fax. In the event the Coverage Determination results in an Adverse Benefit Determination, as defined below, the notice to the Member and Prescriber includes information identifying the Claim involved, the specific reason for the Adverse Benefit Determination, instructions about the right to initiate a Redetermination (Internal Appeal), a link providing the availability and contact information of an agency offering assistance to the Member with the appeals and external review processes, if one is available, and may contain additional information as directed by Plan Sponsor. An Adverse Benefit Determination is a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of a participant's or beneficiary's eligibility to participate in a plan, and including, with respect to \Appeals Process Addendum 120412 group health plans, a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit resulting from the application of any utilization review, as well as a failure to cover an item or service for which benefits are otherwise provided because it is determined to be experimental or investigational or not medically necessary or appropriate. 29 CFR 2560.503-1(m). An Adverse Benefit Determination also includes any rescission of coverage as defined in the regulations restricting rescissions (26 CFR 54.9815-2712T(a)(2), 29 CFR 2590.715-2712(a)(2), and 45 CFR 147.128(a)(2)), whether or not there is an adverse effect on any particular benefit at that time. The availability and contact information of an agency offering assistance to the Member with the appeals and external review processes can be found at: www.liealthcare.gov/using_ insurance/'managing/consumer-help/index.html. Redetermination(Internal Appeal) Upon initiation of a Redetermination by the Prescriber or Member (or the Member's appointed representative), additional supporting documentation may be requested by Envision from the Prescriber. Expedited Redetermination request evaluations occur as soon as possible, taking into account medical exigencies, but no later than 72 hours of receipt of the request to allow the Member to submit additional information for consideration, and standard evaluations occur within 72 hours of receipt of the request. The evaluation is performed by a clinical pharmacist or pharmacists other than the pharmacist or pharmacists that reviewed the original Coverage Determination request, to maintain impartiality within the review process. Envision will allow a Member to review the claim file and to present evidence and testimony as part of the Internal Appeals process. Envision will provide the Member, free of charge, with any new or additional evidence considered, relied upon, or generated by the Redetermination as soon as possible and sufficiently in advance of the date on which the notice of an Adverse Benefit Determination is required to be provided, to give the Member a reasonable opportunity to respond prior to that date. If the Redetermination information supports an override of an Adverse Benefit Determination, an override will be configured in the adjudication system which will allow the Claim to process. If evaluation determines the Redetermination request fails to meet the coverage criteria, the Claim will remain in rejected status. The result of the Redetermination is communicated to the Member by written letter and the Prescriber by fax. In the event the Redetermination results in an Adverse Benefit Determination, the notice to the Member and Prescriber will include information identifying the Claim, the specific reason for the Adverse Benefit Determination including a discussion of the decision including the plan provision relied upon, instructions about their right to initiate an External Review, if applicable, a statement that the Member has a right to bring a civil action under ERISA Section 502(a) following a denial upon appeal, a link providing the availability and contact information of an agency offering assistance to the Member with the external review process, if one is available, and may contain additional information as directed by Plan Sponsor. \Appeals Process Addendum 120412 The Member may, upon request and free of charge, receive reasonable access to and copies of all documents, records, and other information used in the Coverage Determination The availability and contact information of an agency offering assistance to the Member with the appeals and external review processes can be found at: www.healthcare.gov/using- insurance/managing/consumer-help/index.html. External Appeal (Independent Review Organization) A Member may file a request for an External Review with the plan within four months after the date of receipt of notice of a final Adverse Benefit Determination. The Redetermination (Internal Appeal) process must be exhausted before an External Appeal is requested; however a simultaneous request for a Redetermination and an External Appeal may be made in an urgent care situation. When a Member (or the Member's duly appointed representative) initiates an External Appeal request, Envision will complete a preliminary review of the request within five business days of receipt for a standard request and immediately if expedited. This preliminary review will determine (i) if the Member was covered under the Benefit Plan on the date of service, (ii) if the rejection does not relate to the Member's failure to meet the requirements for eligibility, (iii) if the Member has exhausted the Plan Sponsor's internal appeal process, and (iv) if the Member has provided all information required to process an External Review. After the preliminary review is complete, Envision will issue a notification in writing to the Member. Notice will be sent immediately for expedited requests and within one business day after the completed preliminary review for standard requests. If the request is complete, but determined to be ineligible for External Review, the Member notification will include the reason the Claim has been determined to be ineligible and contact information for the Employee Benefits Security Administration. If the request is incomplete, the Member notification will specify the information needed to make the request complete. The Member will have an opportunity to provide the needed information within the four month filing period, or within 48 hours of receiving the notification, whichever is later. Once the preliminary review has been determined to be complete for an External Review, Envision will provide the Claim information, Benefit Plan exclusion and coverage criteria documentation, and clinical review criteria to an Independent Review Organization (IRO). Envision has contracted with three IROS. External Appeal requests are assigned to the IROs by rotation to avoid selection bias. Each contracted IRO holds URAC accreditation status to conduct External Reviews. The IRO is not bound by the previous Redetermination decision and reviews each case in accordance with the terms of the Benefit Plan and coverage documentation. The IRO will notify the Member once it receives the Member's claim information and the Member will have ten business days to submit any additional information for the IRO to consider in its External Appeal. The IRO will convey a final decision to Envision and the Member within 45 days for standard reviews and within 72 hours for expedited reviews. Expedited reviews are permitted when standard review timeframes would seriously jeopardize the life or health of the Member. \Appeals Process Addendum 120412 W If the IRO reverses Envision's adverse Redetermination decision, then Envision will provide coverage and/or payment of the Claim within twenty-four hours of notification of the IRO decision. If the IRO upholds Envision's Adverse Benefit Redetermination decision, the IRO will communicate the decision to Envision and the Member. If the Prescriber files the request on behalf of the Member, then the Prescriber will be notified as well. The Member and Prescriber (if applicable) are provided letters with the specific reasons including the plan provision relied upon for the Adverse Benefit Determination, a statement that the Member may, upon request and free of charge, receive reasonable access to and copies of all documents, records, and other information used in the Coverage Determination, if applicable, a statement that the Member has a right to bring a civil action under ERISA Section 502(a) following a denial upon appeal, and may contain additional information as directed by Plan Sponsor. The IRO's decision is binding, except to the extent that other remedies (including judicial review of the decision)may be available under applicable law to either the Plan or the Member. \Appeals Process Addendum 120412 ORA BUSINESS ASSOCIATE AGREEMENT This BUSINESS ASSOCIATE AGREEMENT (the "Agreement") is effective January 15', 2015 (the "Effective Date"), by and between Envision Pharmaceutical Services, LLC ("Business Associate") and The City of Bremerton ("Plan Sponsor"), each referred to individually herein as a"Party" or collectively as the"Parties". RECITALS A. Plan Sponsor sponsors a health benefit plan that provides coverage for prescription medications and supplies to covered members. Plan Sponsor has entered into a service agreement with Business Associate to provide certain administrative services to, or on behalf of, Plan Sponsor. B. In order for Business Associate to provide services to Plan Sponsor, Plan Sponsor may disclose certain Protected Health Information ("PHI") (as defined in Article 1 of this Agreement) of Plan Sponsor's members to Business Associate and anticipates that Business Associate will create, receive, maintain or transmit PHI on behalf of Plan Sponsor. C. The Parties desire to protect the privacy and security of all PHI in compliance with.the Health Insurance. Portability and Accountability Act ("HIPAA"), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 ("the HITECH Act"), and the regulations promulgated there under. The purpose of this Agreement is to ensure such compliance. D. This Agreement incorporates provisions 42 U.S.C. § 17931(a) and 42 U.S.C. § 17934(a) of the HITECH Act. NOW, THEREFORE, the Parties, in consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, do hereby agree as follows: Article 1: Definitions For the purposes of this Agreement, the following defined terms shall have the following definitions. Except as otherwise stated herein, the defined terms used in this Agreement shall have the meanings given them under HIPAA and the regulations thereunder, including any amendments thereto. 1.1 "Breach" shall mean the acquisition, access, use, or disclosure of PHI in a manner not permitted under Subpart E of 45 C.F.R. Part 164, which compromises the security or privacy of the PHI. "Breach" excludes: (1) Any unintentional acquisition, access, or use of PHI by an employee or a person acting under the authority of Business Associate, if such acquisition, access, or use was \BAA-Plan Sponsor[Rev.09-23-20131 1 made in good faith and within the scope of the authority, and does not result in further use or disclosure in a manner not permitted under Subpart E of 45 C.F.R. Part 164. (2) Any inadvertent disclosure of PHI by a person authorized to access PHI at Business Associate to another person authorized to access PHI at Business Associate, and the information received as a result of the disclosure is not further used or disclosed in a manner not permitted under Subpart E of 45 C.F.R. Part 164. (3) A disclosure of PHI in which Business Associate has a good faith belief that an unauthorized person to whom PHI is disclosed would not reasonably have been able to retain the information. 1.2 "Designated Record Set" shall have the meaning prescribed to it in 45 C.F.R. § 164.501. 1.3 "HHS" shall mean the U. S. Department of Health and Human Services. 1.4 "HIPAA Standards" shall mean the standards for privacy and security of Individually Identifiable Health Information found at 45 C.F.R. Parts 160 and 164. 1.5 "Individual" shall have the same meaning as the term "individual" in 45 C.F.R. § 160.103 and shall include a person who qualifies as a personal representative in accordance with 45 C.F.R. § 164.502(g). 1.6 "Individually Identifiable Health Information" shall have the meaning prescribed to it in 45 C.F.R. § 160.103. 1.7 "Protected Health Information" shall have the meaning prescribed to it in 45 C.F.R. § 160.103, limited to Individually Identifiable Health Information transmitted or maintained in any form or medium that Business Associate creates or receives from or on behalf of Plan Sponsor. 1.8 "Required by Law" shall have the same meaning as the term "required by law" in 45 C.F.R. § 164.103. 1.9 "Secretary" shall mean the Secretary of HHS or his or her designee. 1.10 "Security Incident" shall mean the attempted or successful unauthorized access, use, disclosure, modification, or destruction of information or interference with system operations in an information system. 1.11 "Unsecured PHI" shall mean PHI that is not rendered unusable, unreadable, or indecipherable to unauthorized persons through the use of technology or methodology specified by the Secretary in the guidance issued under section 13402(h)(2) of Public Law 111-5. Article 2: Business Associate Use and Disclosure of PHI 2.1 Purpose. As further described above under Recitals, Business Associate performs certain administrative services for Plan Sponsor. \.BAA-Plan Sponsor[Rev.09-23-2013] 2 2.2 Receipt and Use of PHI. Performance of administrative services by Business Associate requires that Business Associate receive and use PHI obtained from or on behalf of Plan Sponsor, or that Business Associate create, receive, maintain, or transmit PHI on behalf of Plan Sponsor. To perform these administrative services, Business Associate may use or disclose PHI provided such use or disclosure would not violate the HIPAA Standards if done by Plan Sponsor. However, Business Associate may use PHI internally to carry out its legal responsibilities and for its proper management, internal auditing, and administration, and at the request of Plan Sponsor, to provide data aggregation services to Plan Sponsor as permitted by the HIPAA Standards. 2.3 Disclosure of PHI. Performance of administrative services by Business Associate may require that Business Associate disclose PHI to agents or subcontractors of Business Associate. Business Associate may disclose PHI to third parties with which it contracts to assist in providing administrative services, and to its agents to carry out Business Associate's legal responsibilities, for proper management, internal auditing, and administration, only if (a) Business Associate obtains reasonable assurances from such third parties or agents that the PHI will be held by them confidentially and used or further disclosed only as Required by Law or for the purpose for which it was disclosed to them, (b) such third parties or agents agree to implement reasonable and appropriate safeguards to protect the confidentiality, integrity, and availability of PHI, and (c) such third parties or agents agree to notify Business Associate of any instance of which they are aware that the confidentiality of the information has been breached or that a Security Incident has occurred. Notwithstanding the foregoing, Business Associate will be permitted to exchange PHI freely with any Business Associates of the Plan Sponsor with which the Plan Sponsor has executed a Business Associate Agreement/Addendum. 2.4 Satisfactory Assurances. Plan Sponsor may not transfer or transmit PHI to Business Associate or permit Business Associate to create, receive, or transmit PHI on behalf of Plan Sponsor without satisfactory assurances from Business Associate that it will appropriately safeguard the information. Article 3: Duties of Business Associate 3.1 Limitations on Use of PHI. Business Associate shall not use PHI except as permitted or required by this Agreement or as Required by Law. Business Associate shall only use PHI in a manner that is consistent with the HIPAA Standards. 3.2 Limitations on Disclosure of PHI. Business Associate shall not disclose PHI except as permitted or required by this Agreement or as Required by Law. Business Associate shall only disclose PHI in a manner that is consistent with the HIPAA Standards. 3.3 Minimum Necessary. Business Associate shall request, use and disclose the minimum amount of PHI necessary to accomplish the purpose of the request, use or disclosure, in accordance with 42 U.S.C. § 17935(b). 3.4 Safe warding PHI. Business Associate shall use appropriate safeguards, and comply with Subpart C of 45 CFR Part 164, to prevent the use or disclosure of PHI other than as provided for by this Agreement. Business Associate shall comply with the provisions of \BAA-Plan Sponsor[Rev.09-23-2013] 3 fr 45 C.F.R. §§ 164.308, 164.310, 164.312 and 164.316, and implement administrative, physical, and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of the PHI that it creates, receives, maintains, or transmits on behalf of Plan Sponsor as required by the HIPAA Standards. 3.5 Third Party Agreements. Business Associate may need to enter into agreements with third parties, including agents or subcontractors, in order to satisfy its obligations to Plan Sponsor. In accordance with 45 C.F.R. § 164.502(e)(1)(ii) and 164.308(b)(2), should third parties, agents, or subcontractors create, receive, maintain, or transmit PHI on behalf of Business Associate, Business Associate shall require such third parties or agents to agree, in writing,to (a)be bound by the same restrictions, conditions, and requirements that apply to Business Associate with respect to such information, and (b) implement reasonable and appropriate administrative, technical and physical safeguards to protect PHI and the confidentiality, integrity and availability of PHI. Notwithstanding the foregoing, Business Associate will be permitted to exchange PHI freely with any Business Associates of the Plan Sponsor with which the Plan Sponsor has executed a Business Associate Agreement/Addendum. 3.6 Reporting of Security Incidents. Business Associate shall identify and report to Plan Sponsor any suspected or known Security Incidents, mitigate, to the extent practicable, harmful effects of Security Incidents that are known to Business Associate, and document Security Incidents and their outcomes. 3.7 Reporting of Unauthorized Uses and Disclosures. If Business Associate becomes aware that Unsecured PHI has been, or is reasonably believed to have been accessed, acquired, used, or disclosed as a result of a Breach by Business Associate, its employees, officers, or other agents, except as provided in 45 C.F.R. § 164.412, Business Associate shall notify Plan Sponsor of the Breach, in writing, without unreasonable delay, and no later than thirty (30) calendar days after discovering the Breach. Business Associate is deemed to have discovered the Breach on the first day Business Associate knows about the Breach, or by exercising reasonable diligence, would have been known to any person, other than the person committing the Breach, who is an employee, officer, or other agent of Business Associate. 3.8 Content of Notification. To the extent possible, Business Associate's notice to Plan Sponsor shall include the identification of each Individual whose Unsecured PHI has been, or is reasonably believed to have been, accessed, acquired, used, or disclosed during the Breach. At the time of notification or soon thereafter as information becomes available, Business Associate shall provide the following information to Plan Sponsor: (a) A brief description of what occurred, including the date of the Breach and the date of discovery of the Breach, if known; (b) A description of the types of Unsecured PHI involved in the Breach; (c) Steps Individuals should take to protect themselves from potential harm resulting from the Breach; \BAA-Plan Sponsor[Rev.09-23-2013] 4 I Ir (d) A brief description of what Business Associate is doing to investigate the Breach, to mitigate harm to Individuals, and to protect against any further Breaches; and (e) Contact procedures for Individuals to ask questions or learn additional information, including a toll-free telephone number, an e-mail address, website or postal address. 3.9 Burden of Proof. Business Associate shall have the burden of demonstrating that it made all notifications to Plan Sponsor, including evidence showing the necessity of any delay, or that the use or disclosure did not constitute a Breach. 3.10 Mitigation of Disclosure of PHI. Business Associate agrees to mitigate, to the extent practicable, any harmful effect that is known to Business Associate of a use or disclosure of PHI by Business Associate in violation of the requirements of this Agreement. 3.11 Access to PHI. Within ten (10)business days of Plan Sponsor's written request, Business Associate shall provide Plan Sponsor or an Individual who is the subject of the PHI with access to PHI in Business Associate's possession, if Business Associate's information consists of a Designated Record Set in order for Plan Sponsor to comply with 45 C.F.R. § 164.524. 3.12 Availability of PHI for Amendment. The Parties acknowledge that the HIPAA Standards permit an Individual who is the subject of PHI to request certain amendments of his or her records. Within ten (10) business days of Plan Sponsor's written request, Business Associate shall make PHI contained in a Designated Record Set in Business Associate's possession available for amendment and shall incorporate any amendments in accordance with 45 C.F.R. § 164.526. 3.13 Accounting of Disclosures. Business Associate agrees to document disclosures of PHI, and to make available, within ten (10) business days of Plan Sponsor's written request, information to Plan Sponsor concerning Business Associate's disclosure of PHI for which Plan Sponsor needs to provide an Individual with an accounting of disclosures as required by 45 C.F.R. § 164.528. Should an accounting of the PHI of a particular Individual be requested more than once in any twelve (12) month period, Business Associate may charge Plan Sponsor a reasonable, cost-based fee. 3.14 Compliance with Subpart E of 45 C.F.R. Part 164. To the extent Business Associate carries out Plan Sponsor's obligations under Subpart E of 45 C.F.R. Part 164, Business Associate shall comply with the requirements of Subpart E that apply to Plan Sponsor in the performance of such obligations. 3.15 Availability of Books and Records. For purposes of determining compliance of Plan Sponsor with the HIPAA Standards, Business Associate agrees to make available to the Secretary its internal policies and procedures, books and records relating to the use and disclosure of PHI received from, or created or received by Business Associate on behalf of, Plan Sponsor. `\.BAA-Plan Sponsor[Rev.09-23-2013] 5 3.16 Treatment of PHI at Termination. With respect to PHI received from Plan Sponsor, or created, maintained, or received by Business Associate on behalf of Plan Sponsor, upon termination of this Agreement for any reason, Business Associate, shall: (a) Retain only that PHI which is necessary for Business Associate to continue its proper management and administration or to carry out its legal responsibilities; (b) Return to Plan Sponsor or, if agreed to by Plan Sponsor, destroy the PHI that is not retained by the Business Associate under(a) above; (c) Continue to use appropriate safeguards and comply with Subpart C of 45 CFR Part 164 to prevent use or disclosure of the PHI, other than as provided for in this Agreement, for as long as Business Associate retains the PHI; (d) Not use or disclose the PHI retained by Business Associate other than for the purposes for which such PHI was retained and subject to the same conditions set out in Section 2.2 and Section 2.3 which applied prior to termination; and (e) Return to Plan Sponsor or, if agreed to by Plan Sponsor, destroy the PHI retained by Business Associate when it is no longer needed by Business Associate for its proper management and administration or to carry out its legal responsibilities. Article 4: Duties of Plan Sponsor 4.1 Limitations in Notice of Privacy Practices. Plan Sponsor shall notify Business Associate of any limitations in the notice of privacy practices of Plan Sponsor under 45 C.F.R. § 164.520, to the extent that such limitation may affect Business Associate's use or disclosure of PHI. 4.2 Changes in Permission. Plan Sponsor shall notify Business Associate of any changes in, or revocation of, the permission by an Individual to use or disclose his or her PHI, to the extent that such changes may affect Business Associate's use or disclosure of PHI. 4.3 Restriction on Use or Disclosure of PHI. Plan Sponsor shall notify Business Associate of any restriction on the use or disclosure of PHI that Plan Sponsor has agreed to or is required to abide by under 45 C.F.R. § 164.522, to the extent that such restriction may affect Business Associate's use or disclosure of PHI. Article 5: Term and Termination 5.1 Term. The term of this Agreement shall be effective as of the Effective Date stated above, and shall terminate on the date Business Associate discontinues the provision of services to or on behalf of Plan Sponsor, or on the date Plan Sponsor terminates for cause as authorized in Section 5.2, whichever is sooner. '.BAA-Plan Sponsor[Rev.09-23-2013] 6 s•!t,� �1 h... 5.2 Termination for Cause. Business Associate authorizes termination of this Agreement by Plan Sponsor, if Plan Sponsor reasonably determines that Business Associate has violated a material term of the Agreement and Business Associate has not cured the breach or ended the violation within the time specified by Plan Sponsor or ten (10) business days, whichever is greater. Plan Sponsor shall provide Business Associate notice of such breach or violation, in writing, with sufficient specificity as to reasonably permit Business Associate to cure such breach or violation. Plan Sponsor understands that, upon termination of this Agreement, Business Associate will no longer be authorized to create, receive, or transmit PHI on behalf of Plan Sponsor, except as otherwise provided herein. 5.3 Survival of Certain Rights and Obligations._ The respective rights and obligations of Business Associate under Section 3.16 of this Agreement shall survive the termination of this Agreement. Article 6: Miscellaneous 6.1 Regulatory References. A reference in this Agreement to a section in the HIPAA Standards means the section as in effect or as amended. 6.2 Amendment. The Parties to this Agreement agree to take such action as is necessary to amend this Agreement from time to time as is necessary to comply with the requirements of the HIPAA Standards and any other applicable law. 6.3 Prior Business Associate Agreements or Addenda. This Agreement shall supersede any prior Business Associate Agreement or Business Associate Agreement Addenda. 6.4 Interpretation. Any ambiguity in this Agreement shall be interpreted to permit compliance with the HIPAA Standards. 6.5 HIPAA. Business Associate will comply with all requirements under HIPAA that apply to business associates. [SIGNATURE PAGE FOLLOWS] \BAA-Plan Sponsor[Rev.09-23-2013] 7 •I . V I IN WITNESS WHEREOF, the Parties have, by their duly authorized representatives, executed this Agreement to be effective as of the date first above written. PLAN SPONSOR: By: Print Name and Title BUSINESS ASSOCIATE: By: Print Name and Title \BAA-Plan Sponsor[Rev.09-23-2013] 8 CLAIMS ADMINISTRATION AGREEMENT This Agreement is made and entered into this first day of January 2015 between: City of Bremerton(Client) 345 6th Street,Suite 600 Bremerton,WA 98337 And CYPRESS BENEFIT ADMINISTRATORS, LLC 5560 West Grande Market Drive Appleton,WI 54913 This document Is an administrative agreement only and contents of this document should not be viewed as any official state or federal regulation(s)interpretation or any legal advice. WITNESSETH WHEREAS,Client has established a benefit plan(called the Plan in this Agreement)for certain of its employees(hereinafter the Plan);and, WHEREAS,Client has requested CYPRESS BENEFIT ADMINISTRATORS,LLC to act as its agent with regard to the payment of certain benefits of the Plan and to furnish certain services with respect to the Plan. NOW THEREFORE,in consideration of the mutual promises and covenants in this Agreement,Client and CYPRESS BENEFIT ADMINISTRATORS,LLC agree to the provisions as set forth in this Agreement. ARTICLE I DEFINITIONS 1.1 "Plan"means City of Bremerton Employee Healthcare Plan and shall be designated by CYPRESS BENEFIT ADMINISTRATORS,LLC for its identification as Group Number S24. 1.2"Plan Document"means the written rules and guidelines of Client governing the operation of the Plan. 1.3"Claim Account"means an account established by Client for use in satisfying its Plan payment obligations. 1.4"Employee"and"Dependent"means Employee and Dependent as described in eligibility provisions of the Group Health Care Plan Document. 1.5"Participant"means a person who is eligible to participate in and receive benefits under the Plan. 1.6"Funds"means all deposits made by Client Into a Claim Account to satisfy its obligations pursuant to the Plan Document and the terms of this Agreement,including the payment of Plan benefits insurance/reinsurance premiums and fees due CYPRESS BENEFIT ADMINISTRATORS,LLC. City of Bremerton Administrative Services Agreement 01.01.2015 t A. ARTICLE 2 EFFECTIVE DATE 2.1 The term of this Agreement(Term)shall be from the effective date of this Agreement January 1,2015 to its termination date of,December 31,2015 with any renewals thereafter as agreed in writing by the parties. 2.2 This Agreement may be renewed and its term extended by the mutual written agreement of the parties,at any time prior to the expiration of the then current Term for up to two(2)additional one(1)year periods on the same terms and conditions. Fees and charges will be established for each subsequent year by mutual agreement. ARTICLE 3 PLAN BENEFITS SUBJECT TO THIS AGREEMENT 3.1 The Plan benefits subject to this Agreement are: Medical Administration,Cost Containment and Subrogatlon. ARTICLE 4 CLIENT RESPONSIBILITIES 4.1 Client retains the final authority and responsibility for the Plan and its operation.Client gives CYPRESS BENEFIT ADMINISTRATORS,LLC the authority to act on behalf of Client in connection with the Plan, but only as expressly stated in writing by Client and CYPRESS BENEFIT ADMINISTRATORS,LLC. 4.2 Client will pay CYPRESS BENEFIT ADMINISTRATORS,LLC charges as set forth in this Agreement. 4.3 Client will provide Funds for the payment of Plan benefits as set forth in the Plan Document. 4.4 Client will furnish the information needed by CYPRESS BENEFIT ADMINISTRATORS,LLC to perform its functions under this Agreement if the information is readily available.Information regarding the Plan includes any information concerning the eligibility and entitlement of persons to receive Plan benefits. 4.5 Client will reimburse CYPRESS BENEFIT ADMINISTRATORS, LLC for expenses of any printing and/or mailing matter prepared especially for the Plan and pre-approved by Client,except for expenses specifically assumed by CYPRESS BENEFIT ADMINISTRATORS,LLC in this Agreement. 4.6 Client and CYPRESS BENEFIT ADMINISTRATORS will mutually indemnify and hold each other harmless from and against all losses,liabilities,damages,expenses(including reasonable attomeys'fees and expenses)and other obligations (collectively,"Losses")resulting from or arising out of any claim,demand or lawsuit against either party in connection with performance of its duties under this Agreement,except to the extent such Losses result from or arise out of any failure by either party to use reasonable care and due diligence in the performance of its duties under this Agreement. 4.7 Client will indemnify and hold CYPRESS BENEFIT ADMINISTRATORS,LLC harmless against any liability expenses, demand or other obligations resulting from or arising out of any tax or similar assessment(federal or state,but excluding any tax(es)levied on the income of CYPRESS BENEFIT ADMINISTRATORS,LLC)(a)which CYPRESS BENEFIT ADMINISTRATORS,LLC may incur with respect to Plan benefits which are the obligation and liability of Client;or(b)levied on any charges or fees payable by Client to CYPRESS BENEFIT ADMINISTRATORS,LLC under this Agreement. 4.8 Client gives CYPRESS BENEFIT ADMINISTRATORS,LLC the authority,on behalf of Client,to engage the services of a third party to provide recovery claim services on first party claims including workers compensation,automobile medical payments or`No-fault"medical expense savings or reimbursement claims;to advance subrogation claims on behalf of Client;and to provide excess and coordination of benefit claims services on behalf of Client,all in accordance with the terms provided In the Plan and contract forms administered by CYPRESS BENEFIT ADMINISTRATORS,LLC. The Client is bound by the compensation provisions as agreed to by CYPRESS BENEFIT ADMINISTRATORS,LLC unless contrary to the Plan or other written direction of Client Client agrees that such a third party has the authority to retain open cases after City dBremerton Administrative Services Agreement 01.01 2015 2 termination of this Agreement and to continue to receive reasonable and customary compensation for such services as provided for in the agreement between the third party and CYPRESS BENEFIT ADMINISTRATORS,LLC. ARTICLE S CYPRESS BENEFIT ADMINISTRATORS,LLC RESPONSIBILITIES 5.1 CYPRESS BENEFIT ADMINISTRATORS, LLC,as agent of Client,will pay Plan benefits in its usual and customary manner to and in accordance with this Agreement to or on behalf of Participants. 5.2 CYPRESS BENEFIT ADMINISTRATORS.LLC,as agent for Client,will notify any Participant whose request for Plan benefits is denied of the reasons for the denial and of the Participants right to have the denial reviewed.The notification and review will be in a manner agreed upon by Client and CYPRESS BENEFIT ADMINISTRATORS,LLC designed to satisfy the requirements of the Employee Retirement Income Security Act of 1974(ERISA). 5.3 CYPRESS BENEFIT ADMINISTRATORS,LLC will maintain,for the duration of this Agreement and for seven(7)years thereafter,adequate records of all transactions between Client,CYPRESS BENEFIT ADMINISTRATORS,LLC and Participants.The Client has the right of continuing access to its records,even after termination of this Agreement 5.4 Upon Client's request,CYPRESS BENEFIT ADMINISTRATORS,LLC will refer to Client for determination:any disputed claims;any claims involving any question of eligibility or entitlement of the claimant for coverage under the Plan;any question with respect to the amount of payment due;or any other claims or class of claims Client may specify. 5.5 CYPRESS BENEFIT ADMINISTRATORS,LLC will provide Client services and assistance in connection with the design and development of the Plan,Initially and in connection with any Plan revisions.Service and assistance include: underwriting services,estimates of initial Plan costs,cost projections and any proposed Plan revisions,and advice regarding the preparation of employee benefit booklets. 5.6 CYPRESS BENEFIT ADMINISTRATORS, LLC will also furnish Client the items described in the following subsections: 1. An annual report of information available to CYPRESS BENEFIT ADMINISTRATORS,LLC,which may be needed by Client to satisfy Plan requirements of applicable state and federal laws.CYPRESS BENEFIT ADMINISTRATORS, LLC does not prepare 5500 forms but, if requested,but will assist Client by providing appropriate data for the same. 2. Administrative forms excluding the Employee Benefit Booklets(printing costs to be paid by Client)needed to facilitate the performance of CYPRESS BENEFIT ADMINISTRATORS,LLC's duties pursuant to this Agreement. CYPRESS BENEFIT ADMINISTRATORS,LLC will supply a Plan Document with the necessary language to adopt the Plan design specified by Client. 5.7 CYPRESS BENEFIT ADMINISTRATORS,LLC will indemnify Client and hold it and its directors,officers,employees, and agents, harmless from and against all claims,lawsuits,settlements,judgments,costs,penalties and expenses, including legal fees,with respect to this Agreement resulting from or arising out of the negligence or the dishonest, fraudulent or criminal acts of CYPRESS BENEFIT ADMINISTRATORS,LLC or its employees,whether acting alone or In collusion with others. 5.8 CYPRESS BENEFIT ADMINISTRATORS,LLC will not in any event assume responsibility for soliciting bill(s),whether known to CYPRESS BENEFIT ADMINISTRATORS,LLC or which CYPRESS BENEFIT ADMINISTRATORS,LLC has no knowledge of,directly from providers of services.CYPRESS BENEFIT ADMINISTRATORS,LLC cannot be held responsible for processing of claims received during the final week of a policy year due to normal operating cycles. 5.9 CYPRESS BENEFIT ADMINISTRATORS,LLC will not in any event print claim checks against an unfunded client's claim account This provision will not apply to clients who maintain claim accounts on their own check stock or those clients who wire transfer same day funds.Stop loss reimbursement(s)will be dependent on Clients adequate and prompt claims funding. 5.10 Upon commencement of this Agreement,and at such other times as requested by Client,CYPRESS BENEFIT ADMINISTRATORS,LLC will conduct meetings as reasonably requested by Client to educate Client's employees regarding the claims process and/or changes in the Plan. City ofDmmertonAdministmtivcSavicesAgeemcnt0i.0(.2015 3 Na 5.11 CYPRESS BENEFIT ADMINISTRATORS, LLC will comply,with all applicable local,state,and federal laws rand. =s regulations governing its performance of this Agreement,including,without limitation, laws governing the protection of non- public,medical or other personal information of Participants. 5.12 CYPRESS BENEFIT ADMINSTRATORS, LLC grants Client the right,at Client's expense and following reasonable notice,to examine CBA's records relating to the services provided by CBA under this Agreement. This examination may be at CYPRESS BENEFIT ADMINSTRATORS,LLC place of business,or the parties may agree that one or more supplemental reports requested by Client pursuant to Section 5.6 above is sufficient to address Client's audit needs under this Section 5.12. ARTICLE 6 PLAN BENEFIT PAYMENTS 6.1 Client authorizes CYPRESS BENEFIT ADMINISTRATORS,LLC to pay Plan benefits by checks drawn on a Claim Account maintained by or for Client.Client will maintain in such account amounts of sufficient Funds for checks written against the account,within 2 business days from notice of required funding,by CYPRESS BENEFIT ADMINISTRATORS, LLC.Client will enter into agreement(s)and issue instructions to its bank as are necessary to implement the terms of this Agreement. ARTICLE 7 CLIENT LIABILITY 7.1 CYPRESS BENEFIT ADMINISTRATORS,LLC does not insure or underwrite the liability of Client under the Plan.Client retains the ultimate responsibility for claims made pursuant to the Pian.Client is responsible for all expenses incident to the Plan except those specifically assumed by CYPRESS BENEFIT ADMINISTRATORS, LLC in this Agreement. ARTICLE 8 CYPRESS BENEFIT ADMINISTRATORS,LLC LIABILITY 8.1 CYPRESS BENEFIT ADMINISTRATORS,LLC will use reasonable care and due diligence in performance of its duties under this Agreement. 8.2 In the event CYPRESS BENEFIT ADMINISTRATORS,LLC incorrectly makes or fails to make any payment pursuant to this Agreement as a result of the failure of CYPRESS BENEFIT ADMINISTRATORS,LLC to use reasonable care and due diligence in the performance of its duties under this agreement,CYPRESS BENEFIT ADMINISTRATORS,LLC will be liable for the error unless the error is the result of incorrect information provided by Client.CYPRESS BENEFIT ADMINISTRATORS,LLC reserves the right to attempt to recover any excess payments incorrectly made by CYPRESS BENEFIT ADMINISTRATORS,LLC pursuant to the Agreement 8.3 CYPRESS BENEFIT ADMINISTRATORS,LLC will indemnify Client and its directors,officers,employees,and agents and hold them harmless against all losses(including legal fees)resulting from or arising out of any failure by CYPRESS BENEFIT ADMINISTRATORS,LLC to use reasonable care and due diligence In the performance of its duties under this Agreement,including losses resulting from or arising out of the dishonest,fraudulent or criminal acts of CYPRESS BENEFIT ADMINISTRATORS,LLC or its employees,acting alone or in collusion with others. This Section 8.3 is an addition to,and not a substitution for,CYPRESS BENEFIT ADMINISTRATORS,LLC.'s obligations under Section 5.7 above. ARTICLE 9 COMPENSATION OF CYPRESS BENEFIT ADMINISTRATORS,LLC 9.1 For CYPRESS BENEFIT ADMINISTRATORS,LLC services provided pursuant to this Agreement Client will pay the charges described in Exhibit 1,with payments during any renewal of this Agreement to be determined by the written agreement of the parties. Monthly charges are due and payable on or before the first day of each month during the continuance of this Agreement. City of Bremerton Administmtive Services Agreement 0101.2015 4 9.2 A grace period of fifteen(15)days without interest will be allowed for the payment of every charge invoiced due and payable after the effective date of this Agreement. Failure of Client to pay any undisputed charge within the grace period may result in the termination of this Agreement at the end of the grace period.Nevertheless,Client will be liable to CYPRESS BENEFIT ADMINISTRATORS,LLC for charges due and unpaid as of the date of termination. 9.3 Any interest accruing to the Claim account,which is not offset by bank reconciliation fees,etc.,will belong to Client. 9.4 CYPRESS BENEFIT ADMINISTRATORS,LLC compensation may include commissions,fees,overrides and/or rebates from contracted Vendors. 9.5 Upon Clients request,Cypress Benefit Administrators,LLC will administer claims processing for claims incurred prior to the effective date of this Agreement. ARTICLE 10 SEVERABILITY 10.1 If any provision of this Agreement is held invalid by law or court of law,the invalidity will not affect any other provision of this Agreement.The provisions of the Agreement are severable.It is agreed,however,that the basic purposes of this Agreement must be achieved through the remaining valid provisions,or this Agreement will terminate. ARTICLE 11 CAPTIONS AND HEADINGS 11.1 The captions and headings throughout this Agreement are for the convenience and reference only of the parties.The words of the captions and headings will in no way be held or deemed to define,describe,explain,modify or limit the meaning of any provision or the scope or the intent of the Agreement. ARTICLE 12 AGREEMENT COMPLIANCE:NONWAIVER 12.1 Failure by Client,CYPRESS BENEFIT ADMINISTRATORS,LLC or both to insist upon compliance with any term or provision of this Agreement at any time or under any set of circumstances will not operate to waive or nullify that provision or render it unenforceable at any other time whether the circumstances are or are not the same.No waiver of any of the terms or provisions of this Agreement will be valid or of any force or effect unless in each instance the waiver or modification is contained in a written memorandum expressing such alternative or modification and executed by Client and CYPRESS BENEFIT ADMINISTRATORS,LLC. ARTICLE 13 ASSIGNMENT 13.1 Any assignment of this Agreement in whole or part,or of any rights contained in the Agreement will make this Agreement be void or of no force or effect. ARTICLE 14 AMENDMENT 14.1 This Agreement may be amended only by a written Agreement signed by Client and CYPRESS BENEFIT ADMINISTRATORS,LLC,which shall be attached to and become a part of this Agreement. City of Bremerton Administrative 5etviccs Agre®mcnt 01.01.015 5 ? 4 � ARTICLE 15 7 TERMINATION 15.1 This Agreement may be terminated by Client or by CYPRESS BENEFIT ADMINISTRATORS,LLC at any time other than the end of its current Term following not less than sixty(60)days written notice.The written notice will state the effective date of the termination. 15.2 If this Agreement or the Plan benefits subject to this Agreement are terminated,CYPRESS BENEFIT ADMINISTRATORS,LLC, upon Clients request,will continue to administer claims incurred but not paid as of the date of termination and the provisions of this Agreement will continue in effect solely for this purpose with the following exceptions: CYPRESS BENEFIT ADMINISTRATORS,LLC will receive$10 per claim for a run-out period to be determined by the Client prior to the termination date. 15.3 Termination of this Agreement will not terminate the rights or obligations of either party with respect to any matter arising while this Agreement was(1)in effect or(ii)in operation after termination,such as pursuant to Section 15.2. 15.4 CYPRESS BENEFIT ADMINISTRATORS,LLC will release all claim files to Client after all fees due and payable to CYPRESS BENEFIT ADMINISTRATORS are paid. 15.5 CYPRESS BENEFIT ADMINISTRATORS,LLC may,at its option,terminate this Agreement upon the occurrence of any one or more of the following events on thirty(30)days advance written notice to the Client: 1) Client fails to pay any undisputed charge invoiced within thirty(30)days after such charges are due and payable as provided in this Agreement; 2) Client fails to perform its obligations regarding Plan benefits in accordance with this Agreement within thirty(30) days after written notice from CYPRESS BENEFIT ADMINISTRATORS,LLC of the failure to perform.Termination will not relieve Client of its obligation for payments of Plan benefits; 3) Client amends Plan benefits subject to this Agreement without prior written acknowledgement of CYPRESS BENEFIT ADMINISTRATORS,LLC; 4) The Plan or the Plan benefits subject to this Agreement are terminated; 5) A temporary or permanent receiver is appointed by any court for all or substantially all of the Clients assets,the Client makes a general assignment for the benefit of its creditors,the Client becomes insolvent or subject to liquidation,receivership or conservatorship,or the Client has a voluntary or involuntary petition under any bankruptcy law filed against it and is not dismissed within 60 days of such filing;or 6) CYPRESS BENEFIT ADMINISTRATORS,LLC.fails to remedy any material breach of this Agreement within thirty (30)days following written notice from Client of the breach. 15.6 Upon termination by Client,if reports other than standard census and monthly Aggregate reporting are requested,a fee of$250 per report will be charged to Client.This fee must be paid to CYPRESS BENEFIT ADMINISTRATORS,LLC prior to release of any and all final reports. In the circumstance whereby requested reports and/or files require specialized programming,an additional fee of$125 per hour of programming time will be charged to Client ARTICLE 16 MISCELLANEOUS 16.1 Client hires CYPRESS BENEFIT ADMINISTRATORS,LLC as an independent contractor and neither CYPRESS BENEFIT ADMINISTRATORS,LLC nor any of its employees are employees of Client. 16.2 All notices required or desired in connection with this Agreement shall be sufficient if given by mail addressed to the Party receiving the notice at the address designated herein or at such address as may be agreed to in writing by the parties. IN WITNESS WHEREOF,Client and CYPRESS BENEFIT ADMINISTRATORS,LLC have caused this agreement to be executed in their names by their undersigned officers,the same being duly authorized to do so. City of Bremerton Administrative Services Agreement 01.01.2015 6 City of Bremerton CYPRESS BENEFIT ADMINISTRATORS,LLC Name Name Title Title Date Date City offireme ton Administrative Services Agreement 01,01.2015 7 EXHIBIT I Pursuant to the CLAIMS ADMINISTRATIVE AGREEMENT,Client will pay the following charges/fees to CYPRESS BENEFIT ADMINISTRATORS,LLC for services provided: Service Charge/Fee (11112016-12131/215) Except where the context indicates otherwise,the following are based on a per employee,per month basis: Medical Administration $17.75 PPO Access Fee As contracted with PPO Utilization Management Fee $4.50 Cypress Online Included COBRA/HIPAA Administration $1.50 Specialized IS Programming/Reporting $1251 Hour ID Card Re-printing Fee $1 per card A$100 minimum monthly invoice charge applies for groups with less than 50 enrolled employee lives. The following are expressed as a percentage of total savings,discounts and recoveries: Passive PPO Access Fee 33%of Savings/Discount Provider Discount Negotiations 339/6 of Savings/Discount Subrogation Administration 33%of Recovery plus the cost of any council and/or litigation fees Over Payment Recoveries 33%of Recovery—From Hospital AP/AR Audits ARGUS Audits/Cost Containment 33%of Savings/Discount The following fees are associated with plan change requests and are used to offset legal review,implementation,plan build programming and costs associated as a result of any required changes to reporting.Note:Amendment Fees do not apply to plan changes that are a result of legislative or mandated initiatives. Restated Medical Plan Document(SPD) pass through cost from Vendor Amendments $160 Medical Plan Programming $600 Auditing(Retro Adjustments/plan changes) $250 plus$10 per re-processed claim SBC's(Summary of Benefit Coverage) $200 per benefit plan Cypress Benefit Administrators may receive administration commissions,fees and/or rebates from various contracted vendors Including but not limited to stop loss,the Pharmacy Benefits Manager(PBM),Participating Provider Organizations (PPO), Utilization Management Companies,recovery,auditing,fraud abuse and detection and negotiating organizations,to offset costs of integration and the administration program with the Health Plan.Commissions,fees and/or rebates are used by Cypress Benefit Administrators in providing a variety of services including but not limited to integration of data and information into reporting and stop loss claims,providing billing and remittance services,coordinating enrollment and termination information,and producingidentification cards. Any commissions,fees and/or rebates received by other entities are to be disclosed by the receiving party. Cary of Bremerton Adwunist tive Services Agrutntmt 01.01.2015 8 FORM BUSINESS ASSOCIATE ADDENDUM A..i 1. PREAMBLE J City of Bremerton ("Covered .Entity") and Cypress Benefit Administrators, LLC (`Business Associate") {jointly "the Parties")wish to modify the Administrative Services Agreement("Agreement")to incorporate the terms of this Addendum to comply with the requirements of: (i) the implementing regulations at 45 C.F.R Parts 160, 162, and 164 for the Administrative Simplification provisions of Title II,Subtitle F of the Health Insurance Portability and Accountability Act of 1996 ("14.1P.AA") (i.e., the HIPAA Privacy, Security, Electronic Transaction, Breach Notification, and Enforcement Rules ("the Implementing Regul.ations'�), (ii) the requirements of the Health Information Technology for Economic and Clinical Health Act,as incorporated in the American Recovery and Reinvestment Act of 2009(the"HITECH Act")that are applicable to business associates, nod (iii) the requirements of the final modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules as issued on January 25, 2013 and effective March 26, 2013 (75 Fed. Reg. 5566 (Jan. 25, 2013)) C"the Final Regulations"). The Implementing Regulations, the HITECH Act, and the Final Regulations are collectively referred to in this Addendum as"the HIPAA Requirements." Covered Entity and Business Associate agree to incorporate into this Addendum any regulations issued by the U.S. Department of Health and Human Services("DI IHS")with respect to the HIPAA Requirements that relate to the obligations of business associates and that are required to be (or should be) reflected in a business associate agreement. Business Associate recognizes and agrees that it is obligated by law to meet the applicable provisions of the HIPAA Requirements and that it has direct liability for any violations of the HIPAA Requirements, 2. DEFINITIONS (a) "Breach" shall mean, as defined in 45 C.F.R. § 164.402, the acquisition, access, use or disclosure of Unsecured Protected health Information in a manner not permitted by the HIPAA Requirements that compromises the security or privacy of that Protected Health Information. (b) ".Business Associate Subcontractor"shall mean, as defined in 45 C.F.R. § 160.103, any entity(including an agent)that creates,receives, maintains or transmits Protected Health Information on behalf of Business Associate. (c) "Electronic .PHP' shall mean, as defined in 45 C.F.R. § 160.103, Protected Health Information that is transmitted or maintained in any Electronic Media. (d) `Limited Data Set' shall mean, as defined in 45 C.F.R. § 164.514(e), Protected Health Information that excludes the following direct identifiers of the individual or of relatives,employers,or household members of the individual: (i) Names; (ii) Postal address information,other than town or city,State,and zip code; (iii) 'Telephone numbers; (iv) Fax numbers; (v) Electronic mail addresses; (vi) Social security numbers; (vii) Medical record numbers; (viii) Health plan beneficiary numbers; (ix) Account numbers; (x) Certificate/license numbers (xi) Vehicle identifiers and serial numbers,including license plate numbers; (xii) Device identifiers and serial numbers; (xiii) Web Universal Resource Locators(URIs); (xiv) Internet Protocol(IP)address numbers; (xv) Biometric identifiers,including finger and voice prints;and (xvi) Full face photographic images and any comparable images. (e) "Protected Health Information" or "PHP shall mean, as defined in 45 C.F.R. § 150.103, information created or received by a Health Care Provider,Health Plan,employer,or Health Care Clearinghouse,that: (i)relates to the past,present,or future physical or mental health or condition of an individual,provision of health care to the individual, or the past, present, or future payment for provision of health care to the individual; (ii) identifies the individual,or with respect to which there is a reasonable basis to believe the information can be used to identify the individual; and (iii)is transmitted or maintained in an electronic medium,or in any other form or medium. The use of the term"Protected Health Information"or"PHP'in this Addendum shall mean both Electronic PHI and non-Electronic PHI,unless another meaning is clearly specified. (f) "Securitylncident"shall mean,as defined in 45 C.F.R.§ 154.304,the attempted or successful unauthorized access,use,disclosure,modification, or destruction of information or interference with system operations in an information system. (g) "Unsecured Protected Health Information"shall mean,as defined in 45 C.F.R.§ 164.402,Protected Health Information that is not rendered unusable, unreadable,or indecipherable to unauthorized persons through the use of a technology or methodology specified by DHHS. (h) All other capitalized terms used in this Addendum shall have the meanings set forth in the applicable definitions under the HIPAA Requirements. 3. GENERAL.TERMIS (a) In the event of an inconsistency between the provisions of this Addendum and a mandatory term of the HIPAA Requirements(as these terms may be expressly amended from time to time by the DHHS or as a result of interpretations by DHHS, a court, or another regulatory agency with authority over the Parties), the interpretation of DHHS,such court or regulatory agency shall prevail. In the event of a conflict among the interpretations of these entities,the conflict shall be resolved in accordance with rules of precedence. (b) Where provisions of this Addendum are different from those mandated by the HIPAA Requirements,but are nonetheless permitted by the HIPAA Requirements,the provisions of this Addendum shall control. (c) Except as expressly provided in the HIPAA Requirements or this Addendum, this Addendum does not create any rights in third parties. 4. SP F.CIF'IC'REQUIREMENTS (a) Flow-Down of Obligations to Business Associate Subcontractors. Business Associate agrees that as required by the HIPAA Requirements, Business Associate will enter into a written agreement with all Business Associate Subcontractors that: (i)requires them to comply with the Privacy and Security Rule provisions of this Addendum in the same manner as required of Business Associate, and(ii)notifies such Business Associate Subcontractors that they will incur liability under the HIPAA Requirements for non- compliance with such provisions. Accordingly,Business Associate shall ensure that all Business Associate Subcontractors agree in writing to the same privacy and security restrictions,conditions and requirements that apply to Business Associate with respect to PHI. (b) Privacy of Protected Health Infonnation (i) Permitted Uses and Disclosures ofPHl. Business Associate agrees to create,receive,use,disclose, maintain or. transmit PHI only in a manner that is consistent with this Addendum or the HIPAA Requirements and only in connection with providing the services to Covered Entity identified in the Agreement. Accordingly, in providing services to or for the Covered Entity, Business Associate, for example,will be permitted to use and disclose PHI for"Treatment, Payment, and Health Care Operations," as those terms are defined in the HTPAA. .Requirements. Business Associate further agrees that to the extent it is carrying out one or more of the Covered Entity's obligations under the Privacy Rule (Subpart E of 45 C.E.R. Part 154), it shall comply with the requirements of the Privacy Rule that apply to the Covered Entity in the performance of such obligations. (1) Business Associate shall report to Covered Entity any use or disclosure of PHI that is not provided for in this Addendum, including reporting Breaches of Unsecured Protected Health Information as required by 45 C.F.R. § 164.410 and required by Section 4(e)(ii) below. (2) Business Associate shall establish, implement and maintain appropriate safeguards, and comply with the Security Standards (Subpart C of 45 C.F.R. Part 154) with respect to Electronic PHI,as necessary to prevent any use or disclosure of PHI other than as provided for by this Addendum. (ii) Business Associate Obligations. As permitted by the HIPAA Requirements, Business Associate also may use or disclose PHI received by the Business Associate in its capacity as a Business Associate to the Covered Entity for Business Associate's own operations if- (1) f(1) the use relates to: (1)the proper management and administration of the Business Associate or to carry out legal responsibilities of the Business Associate, or (2) data aggregation services relating to the health care operations of the Covered Entity;or (2) the disclosure of information received in such capacity will be made in connection with a function, responsibility, or services to be performed by the Business Associate, and such disclosure is required by law or the Business Associate obtains reasonable assurances from the person to whom the information is disclosed that it will be held confidential and the person agrees to notify the Business Associate of any breaches of confidentiality. (iii) Minimum Necessary .Standard and Creation of Limited Data Set. Business Associate's use, disclosure, or request of PHI shall• utilize a Limited Data Set if practicable. Otherwise, in performing the functions and activities as specified in the Agreement and this Addendum,Business Associate agrees to use,disclose,or request only the minimum necessary PHI to accomplish the intended purpose of the use,disclosure,or request. (iv) Access. In accordance with 45 C.F.R.§ 164.524 of the HIPAA Requirements,Business Associate will make available to the Covered Entity(or as directed by the Covered Entity,to those individuals who are the subject of the PHI (or their designees)), their PHI in the Designated Record Set. Business Associate shall make such information available in an electronic format where directed by the Covered Entity. (v) Disclosure Accounting. Business Associate shall make available the information necessary to provide an accounting of disclosures of PHI as provided.for in 45 C.F.R. § 164.528 of the HIPAA Requirements by making such information.available to the Covered Entity or(at the direction of the Covered Entity)making such information available directly to the individual. (vi) Amendment. Business Associate shall make PHI in a Designated Record Set available for amendment and, as directed by the Covered Entity, incorporate any amendment to PHI in accordance with 45 C.F.R. § 164.526 of the HIPAA Requirements. (vii) Right to Request Restrictions on the Disclosure of PHI and Confidential Communications. if an individual submits a Request for Restriction or Request for Confidential Communications to the Business Associate, Business Associate and Covered Entity agree that Business Associate, on behalf of Covered Entity, will evaluate and respond to these requests according to Business Associate's own procedures for such requests. (viii) Return or Destruction of PHI. Upon the termination or expiration of the Agreement or this Addendum,Business Associate agrees to return the PHI to Covered Entity, destroy the PHI (and retain no copies), or if Business Associate determines that return or destruction of the PHI is not feasible,(a)continue to extend the protections of this Addendum and of the HIPAA Requirements to the PHI,and(b) limit any further uses and disclosures of the PHI to the purpose making return or destruction infeasible. (ix) Availability of Books and Records. Business Associate shall make available to DHHS or its agents the Business Associate's internal practices,books,and records relating to the use and disclosure of PHI in connection with this Addendum. (x) Termination for Breach. (1) Business Associate agrees that Covered Entity shall have the right to terminate this Addendum or seek other remedies if Business Associate violates a material term of this Addendum (2) Covered Entity agrees that Business Associate shall have the right to terminate this Addendum or seek other remedies if Covered Entity violates a material term of this Addendum. (c) Information and Security Standards (i) Business Associate will develop, document, implement, maintain, and use appropriate Administrative,Technical,and Physical Safeguards to preserve the Integrity,Confidentiality,and Availability of, and to prevent non-permitted use or disclosure of, Electronic PHI created or received for or from the Covered Entity. (ii) Business Associate agrees that with respect to Electronic PHI, these Safeguards, at a minimum, shall meet the requirements of the HIPAA Security Standards applicable to Business Associate. (iii) More specifically, to comply with the HIPAA Security Standards for Electronic PHI, Business Associate agrees that it shall: (1) Implement Administrative, Physical, and Technical Safeguards consistent with (and as required by) the HIPAA Security Standards that reasonably protect the Confidentiality, Integrity, and Availability of Electronic PHI that Business Associate creates, receives, maintains,or transmits on behalf of Covered Entity. Business Associate shall develop and implement policies and procedures that meet the documentation requirements as required by the HIPAA Requirements; (2) As also provided for in Section 4(a) above, ensure that any Business Associate Subcontractor agrees to implement reasonable and appropriate safeguards to protect the Electronic PHI; (3) Report to Covered Entity any unauthorized access, use, disclosure, modification, or destruction of PHI(including Electronic PHI)not permitted by this Addendum,applicable law, or permitted by Covered Entity in writing ("Successful Security Incidents" or Breaches)of which Business Associate becomes aware. Business Associate shall report such Successful Security Incidents or Breaches to Covered Entity as specified in Section 4(e)(iii)(1); (4) For Security Incidents that do not result in unauthorized access, use, disclosure, modification, or destruction of PHI (including, for purposes of example and not for purposes of limitation, pings on Business Associate's firewall,port scans,attempts to log onto a system or enter a database with an invalid password or username,denial-of-service attacks that do not result in the system being taken aff--line,or malware such as worms or viruses)(hereinafter"Unsuccessful Security Incidents"),aggregate the data and,upon the Covered Entity's written request, report to the Covered Entity in accordance with the reporting requirements identified in Section 4(e)(iii)(2); (5) Take all commercially reasonable steps to mitigate,to the extent practicable,any harmful effect that is known to Business Associate resulting from any unauthorized access, use, disclosure,modification,or destruction of PHI; (6) Permit termination of this Addendum if the Covered Entity determines that Business Associate has violated a material term of this Addendum with respect to Business Associate's security obligations and Business Associate is unable to cure the violation;and (7) Upon Covered Entity's request, provide Covered Entity with access to and copies of documentation regarding Business Associate's safeguards for PHI and Electronic PHI. (d) Compliance with HIPAA Transaction Standards (i) Application of NPAA Transaction .Standards. Business Associate will conduct Standard Transactions consistent with 45 C.F.R_Part 162 for or on behalf of the Covered Entity to the extent such Standard Transactions are required in the course of Business Associate's performing services under the Agreement and this Addendum for the Covered Entity. As provided for in Section 4(a) above, Business Associate will require any Business Associate Subcontractor involved with the conduct of such Standard Transactions to comply with each applicable requirement of 45 C.F.R. Part 162. Further,Business Associate will not enter into,or permit its Subcontractors to enter into, any trading partner agreement in connection with the conduct of Standard Transactions for or on behalf of the Covered.Entity that: (1) Changes the definition, data condition,or use of a data element or segment in a Standard Transaction; (2) Adds any data element or segment to the maximum defined data set; (3) Uses any code or data element that is marked "not used" in the Standard Transaction's implementation specification or is not in the Standard Transaction's implementation specification;or (4) Changes the meaning or intent of the Standard Transaction's implementation specification. (ii) Specific Communications. Business Associate, Plan Sponsor and Covered Entity recognize and agree that communications between the parties that are required to meet the Standards for Electronic Transactions will meet the Standards set by that regulation. Communications between Plan Sponsor and Business Associate, or between flan Sponsor and the Covered Entity, do not need to comply with the HIPAA Standards for Electronic Transactions. Accordingly,unless agreed otherwise by the Parties in writing, all communications(if any) for purposes of"Enrollment"as that term is defined in 45 C.F.R. Part 162, Subpart U or for "Health Covered Entity Premium Payment Data,"as that term is defined in 45 C.F.R.Part 162,Subpart Q,shall be conducted between the Plan Sponsor and either Business Associate or the Covered Entity. For all such communications (and any other communications between Plan Sponsor and the Business Associate),Plan Sponsor shall use such forms,tape formats,or electronic formats as Business Associate may approve. Plan Sponsor will include all information reasonably required by Business Associate to affect such data exchanges or notifications. (iii) 'Communications Between the Business Associate and the Covered Entity. All communications between the Business Associate and the Covered Entity that are required to meet the HIPAA Standards for Electronic Transactions shall do so. For any other communications between the Business Associate and the Covered Entity,the Covered Entity shall use such forms,tape formats, or electronic formats as Business Associate .may approve. The Covered .Entity will include all information reasonably required by Business Associate to affect such data exchanges or notifications. (e) Notice and Re ortine Obligations of Business Associate (i) Notice of'Non-Compliance with the Addendum. Business Associate will notify Covered Entity within 60 calendar days after discovery,any unauthorized access,use,disclosure,modification,or destruction of PHI (including any successful Security Incident) that is not permitted by this Addendum, by applicable law, or permitted in writing by Covered Entity, whether such .non- compliance is by(or at)Business Associate or by(or at)a Business Associate Subcontractor. (ii) Notice of Breach. Business Associate will notify Covered Entity following discovery and without unreasonable delay but in no event later than 60 calendar days following discovery,any Breach of Unsecured Protected Health information, whether such Breach is by Business Associate or by Business Associate Subcontractor. (1) As provided for in 45 C.F.R.§ 164.402,.Business Associate recognizes and agrees that any acquisition,access,use or disclosure of PHI in a manner not permitted under the HIPAA Privacy Rule (Subpart E of 45 C.F.R. Part 164) is presumed to be a Breach. As such, Business Associate shall(i)notify Covered Entity of any non-permitted acquisition,access, use or disclosure of PHI, and (ii) assist Covered Entity in performing (or at Covered Entity's direction,perform)a risk assessment to determine if there is a low probability that the PHI has been compromised. (2) Business Associate shall cooperate with Covered Entity in meeting the Covered Entity's obligations under the HIPAA Requirements and any other security breach notification laws. Business Associate shall follow its notification to the Covered Entity with a report that meets the requirements outlined immediately below. (iii) Reporting Obligations. (1) For Successful Security incidents and Breaches, Business Associate — without unreasonable delay and in no event later than 60 calendar days after Business Associate learns of such non-permitted use or disclosure (whether at Business Associate or at Business Associate Subcontractor)—shall provide Covered Entity a report that will: a. identify (if known) each individual whose' Unsecured Protected Health Information has been,or is reasonably believed by Business Associate to have been accessed,acquired,or disclosed; b. Identify the nature of the non-permitted access, use, or disclosure including the date of the incident and the date of discovery; C. Identify the PHI accessed,used,or disclosed(e.g., name;social security number; date of birth); d. Identify what corrective action Business Associate (or Business Associate Subcontractor)took or will take to prevent further non-permitted accesses, uses, or disclosures; e. Identify what Business Associate(or Business Associate Subcontractor)did or will do to mitigate any deleterious effect of the non-permitted access,use,or disclosure; and f. Provide such other information, including a written report,as the Covered Entity may reasonably request. (2) For Unsuccessful Security Incidents, Business Associate shall provide Covered Entity, upon its written request,a report that: (i)identifies the categories of Unsuccessful Security Incidents as described in Section 4(c)(iii)(4); (ii) indicates whether Business Associate believes its(or its Business Associate Subcontractor's)current defensive security measures are adequate to address all Unsuccessful Security Incidents,given the scope and nature of such attempts; and(iii) if the security measures are not adequate,the measures Business Associate (or Business Associate Subcontractor) will implement to address the security inadequacies. (iv) Termination. (1) Covered Entity and Business Associate each will have the right to terminate this Addendum if the other party has engaged in a pattern of activity or practice that constitutes a material breach or violation of Business Associate's or the Covered Entity's respective obligations regarding PHI under this Addendum and, on notice of such material breach or violation from the Covered Entity or Business Associate, fails to take reasonable steps to cure the material breach or end the violation. (2) If Business Associate or the Covered Entity fail to cure the material breach or end the violation after the other party's notice, the Covered Entity or Business Associate (as applicable)may terminate this Addendum by providing Business Associate or the Covered Entity written notice of termination,stating the uncured material breach or violation that provides the basis for the termination and specifying the effective date of the termination. Such termination shall be effective 60 days from this termination notice. (v) Continuing Privacy and Security Obligations. Business Associate's and the Covered Entity's obligation to protect the privacy and security of the PHI it created, received, maintained, or transmitted in connection with services to be provided under the Agreement and this Addendum will be continuous and survive termination, cancellation, expiration, or other conclusion of this Addendum or the Agreement. Business Associate's other obligations and rights,and the Covered Entity's obligations and rights upon termination, cancellation, expiration, or other conclusion of this Addendum,are those set forth in this Addendum and/or the Agreement. FOR City of Bremerton FOR Cypress Benefit Administrators Signature Signature T--7 - Title Title President=Spress Benefat Administrators Late Date 11/1.8/2014 ORA. MONTGOMERY 137 S Akin SAW Abfth witiin PA 19111 Telephone:(2e71223-2391 Fe draft(215)793.01595 Issuing Carrier Companion Life Insurance Company Proposal No 4 Producer LBG Advisors,LLC Proposal 11/2612014 Valid Thru 01111/2015 Underwriter Kim Schmidt Effective 01/01/2015 Expiration 12/31/2015 Group City of Bremerton INDIVIDUAL EXCESS LOSS COVERAGE Option 1 Option 2 Option 3 Option 4 Coverages Medical,Rx Card Medical,Rx Card Medical,Rx Card Medical,Rx Card Contract Type 12MS 12115 12115 12!15 Annual Spealic Deductible per Individual i 125,000 S 150,000 t 175,000 S 200,000 Maximum Annual Reimbursement Unlimited Unlimited Unlimited Unlimited Maximum Lifetime Reimbursement Unlimited Unlimited Unlimited Unlimited Quoted Rate Per Month Enrollment Single 65 S 42.86 $ 35.69 S 30.93 S 28.96 Family 188 S 93.71 S 78.42 S 68.34 $ 59.88 Estimated Annual Prernium $ 244,841 S 204,754 $ 178,300 $ 156,118 Quoted Rate(s)includes Commissions of 0.00% 0.00% 0.00% 0.00% AGGREGATE EXCESS LOSS COVERAGE Option 1 Option 2 Option 3 Option 4 Coverages Medical,Rx Card Medical,Rx Card Medical,Rx Card Medical,Rx Card Contract Type 12112 12112 12112 12112 Loss Limit per Individual 125,000 150,000 175,000 200,000 Maximum Annual Reimbursement $ 1,000,900 $ 1,000,000 $ 110001000$ 1,000,000 Rate Per Month Enrollment Composite 253 $ 12.38 $ 12.48 $ 12.59 $ 12.65 Estimated Annual Premium(If Paid Monthly) $ 37,586 $ 37,889 $ 38,223 $ 38,405 Rafe(s)includes Commissions of 0.00% 0.00% 0.00% 0.00% Annual Aggregate Deductible S 3,818,382 $ 3,853,935 S 3,894,294 S 3,915,425 Minimum Aggregate Deductible $ 3,627,463 $ 3,681,238 $ 3,699,579 $ 3,719,654 Run-in Limited To $ 0 $ 0 i 0 $ 0 Monthly Aggregate Claim Factors Enrolment Medical.Rx Card Single 65 5 668.34 $ 671.81 $ 675.64 S 676.05 Family 188 i 1,481.47 S 1,476.03 6 1,492.83 $ 1,501.82 1 U2512014 U:15 am Page 11 Rates and Factors subject to attached Qualifications and Contingencies and Plan Document Assumptions. b� x.��„f .nuc ��•x,.+"7 Group City of Bremerton Proposal No 4 INDIVIDUAL EXCESS LOSS COVERAGE Option 5 Option 6 Option 7 Option 8 Coverages Medical,Rx Card Medical,Rx Card Medical,Rx Card Medical,Rx Card Contract Type 12118 12118 12118 12118 Annual Specific Deductible per Individual $ 125,000 $ 160,000 S 175,000 $ 200,000 Maximum Annual Reimbursement Unlimited Unlimited Unlimited Unlimited Maximum Lifetime Reimbursement Unlimited Unlimited Unlimited Unlimited Quoted Rate Per Month Enrollment Single 65 $ 44.11 $ 36.73 $ 31.82 $ 27.72 Family 188 $ 96.62 $ 80.88 $ 70.49 $ 61.78 Estimated Annual Premium $ 252,381 $ 211,115 $ 183,845 $ 1601997 Quoted Rate(s)includes Commissions of 0.00% 0.00% 0.00% 0.00% AGGREGATE EXCESS LOSS COVERAGE Option 5 Option 6 Option 7 Option 8 Coverages Medical,Rx Card Medical,Rx Card Medical,Rx Card Medical,Rx Card Contract Type 12112 12112 12112 12112 Loss Limit per Individual 125,000 150,000 175,000 200,000 Maximum Annual Reimbursement $ 110801000 $ 1,000,000 $ 1.000.000$ 1,000,000 Rate Per Math Enrollment Composite 253 $ 12.38 $ 12.48 $ 12.59 $ 12.65 Estimated Annual Premium(If Paid Monthly) $ 37,586 $ 37,889 $ 38,223 S 38,405 Rate(s)includes Commissions of 0.00% 0.00% 0.00% 0.00% Annual Aggregate Deductible $ 3,81$,368 $ 3,853,928 S 3,894,283 $ 3,915,426 Minimum Aggregate Deductible $ 3,827,460 $ 3,661,232 $ 3,699,569 $ 3,719,854 Run-in Limited To S 0 $ 0 $ 0 $ 0 Monthly Aggregate Claim Factors Enrollment Medical.Rx Card Single 65 $ 667.31 $ 670.47 $ 674.05 $ 674.17 Family 188 $ 1,461.82 $ 1,478.49 $ 1,493.14 $ 1,502.47 1172512014 9:10 am Page 2 Rates and Factors subject to attached Qualifications and Contingencies and Plan Document Assumptions. H4 q, Group City of Bremerton Proposal No 4 MEDICAL BENEFITS Plan A(20.61%) Plan B(79.59%) In-Network Outof-Network In-Natwark Out.of-I�g Deductible $250 $250 $100 $100 Coinsurance Percent 100% 100% 80% 80% Out-of-Pocket $250 $250 $350 $350 PURSUANT TO YOUR REQUEST FOR QUOTATION FOR STOPLOSS COVERAGE: QUALIFICATIONS(IF APPLICABLE) This proposal Is conditioned upon the following: • Large case management and mandatary precertification. • Mental nervous and substance abuse are limited to the lessor of the provision as specified in the plan document or the MHPA Law efect!"9/28!1996. • The required minimum participation level of 70%in an employer sponsored plan. • Retirees age 65 and over are Medicare Primary. If the group has participants who reside in New York,New Jersey,Massachusetts,Vermont,Pennsylvania,or Connecticut,we will expect the group to register with the State of New York The 8.8%surcharge will be allowed on those daims. This proposal assumes that the Group is paying a PPO Access Fee and this fee will not be covered under the stoploss. Anyone disclosed as terminated from coverage or retired,is not covered by the stoploss and no rurnin will be accepted on these claimants.This will apply to retirees who are not a covered entity under the stop loss policy. This proposal is pending complete diagnosis,prognosis,amount paid and future expected treatment plan on any individuals at 50%of the specific deductible.These claimants may be subject to a higher individual specific deductible level. Please provide all available LCM notes and/or an APS for each claimant listed below.. All individuals who have reached 50%of the Specific Deductible. This proposal Includes Specific Advancement. This proposal is subject to Montgomery Managements approval of the proposed TPA. Actively at work waived for all employees currently covered. This proposal does not bind Insurance coverage:additional conditions will appy.All rates and factors are subject to final underwriting. Please see accompanying cover letter for further Information. If the group were to terminate mid-contract,minimum premium requirements are 80%of the estimated annual specific premium and 100% of the estimated annual aggregate premium. Any claimant who is disclosed as terminated as of the effective date is excluded from coverage and will be subject to medical underwriting if they rejoin the plan. This proposal assumes the utilization of First Choice Network If this network changes,we reserve the right to recalculate the rates and factors. This proposal is pending receipt and review of paid claims for 1/112014 through 4/3012014.Aggregate factors may be subject to change. right a le iv forth Policy Period if there is more than ten We reserve the ght lo recalculate the renewal aggregate deductible factors retroactively e o Icya percent(10%)variance between: 1)the average monthly Paid Claims under the Pian for the last two months or the prior Policy Period;and 2)the average monthly Paid Claims under the Plan for the first ten months of the prior Policy Period. 111202U14 Ule aro Page 3 Rates and Factors subject to attached Qualifications and Contingencies and Pian Document Assumptions. Group City of Bremerton Proposal No 4 his applies ro takeover of your In-fbrce renewal business as well. Aggregate TertMnal Liability can be included for$1.00 per employee per month net of commission.Include Aggregate Terminal Liability Monthly Aggregate Accommodation can be included for$1.00 per employee per month net of commissions.Include Marbly Accommodation_ Please provide additionayupdated disclosure for the folbwing claimants: -All claimants with an ongoing trigger Dx -ATI claimants at or above 5D%of the quoted specific deductible If the prior year plan document Includes extension of benefits wording,claims eligible under this extension will not be covered under the stopaoas policy. In the event of a laser,any claims between the group specific deductible and the lasered specific deductible are not applicable under the aggregate coverage. Any claimant who has previously met or exceeded the group's lifetime maximum must be disclosed to Montgomery Management during the underwriting process in order to be considered eligible for coverage under the stop-loss In the event that the group's SPD contains the wording'The Plan Administrator has the final decision to determine benefits"(or similar language),the stop-loss contract will supersede the SPD and treat the decision as an extracontractual decision. Coverage Is not bound until binder premium is received and all final underwriting materials are received and approved by the underwriter. Premium is due on the first day of coverage month. Montgomery Management reserves the right to revise rates,deductibles,terns or conditions of the Contract on any of the following dates: 1.When the Contraolholder adds or deletes a subsidiary or affiliate; 2.When there is a change In the geographical area in which the Contractholder is located; 3.When there is a change in the nature of business in which the Contraclhoider is engaged; 4.When there is an Increase or decrease In the number o1 Covered Units which exceeds(10%)in any one month or(20%]over arry period of three consecutive months. PLEASE INITIAL SELECTED PROPOSAL OPTION AND RETURN TO THE UNDERWRITER. Traditional Stop Loss Requirements to finalize underwriting: -signed proposal option -signed disclosure statement -binder premium on or before the effective date -aggregate claims and large claims data through the effective date -final census QUOTE SUBJECT TO REVIEW OF PLAN DISCLOSURE STATEMENT. YOU MUST NOTIFY IN WRITING THE UNDERWRITER OF THE QUOTE IF YOU DO NOT MEET THE ABOVE ASSUMPTIONS/CONDITIONS 1112 am Page 4 Rates and Factors subject to attached Qualliicatione and Contingencies and Plan Document Assumptlona Group City of Bremerton Proposal No 4 Initial the selected proposal option: Option 1 Option 2 Option 3 Option 4 Specific Aggregate Option 5 Option 6 Option 7 Option 8 SPecMc Aggregate Data: By: Agent of Record or Administrator 1172M2014 9:18 em Page 5 Rates and Factors subject to attached QuallReatlona and Contingencies and Plan Document Assumptlom MONTGOMERY DISCLOSURE STATEMENT Participant(s) shall include all Active employees, COBRA beneficiaries and their dependents, Retirees (if applicable) and Disabled persons. Disclosed individuals, who are required to be disclosed are (a) All employees and dependents who are medically confined; (b)All high dollar claimants;and(c)All claimants with potentially catastrophic medical conditions, including,but not limited to,those individuals currently eligible under the plan that were formerly ineligible due to meeting their lifetime maximum in the past, Full Legal Name of Applicant(Plan Sponsor) PARTICIPANTS Please list any Participants)who have paid or pending claims in excess of 5011/0 of the specific deductible during the past 12 months or could reasonably be expected to have claims in excess of this amount This should include any Participant(s)known to have cancer (specific type: ex. leukemia), HIV/AIDS, severe cardiovascular disease, any severe disorder of a major organ system,severe burns or trauma,neonatal disorders,brain or spinal injuries,or potential organ(specific type)transplant If the diagnosis or course of treatment of a disclosed individual changes prior to the effective date,we reserve the right to re-evaluate the risk and place a separate individual specific deductible on that individual,if necessary. Birth Date of Diagnosis/ Amounts Paid/ Currently Name Date Disability Prognosis Current Treatment Pending Confined DISABLED PERSONS AND RETIREES:(Please note"None"if there are not any.) Disabled Persons are those employees not actively at work(or,in the case of a dependent or Continuation Beneficiary,is by disability unable to perform his or her normal functions of a person of like sex and age)on the Effective Date of this Contract or the date such person becomes eligible for coverage under the Employee Benefit Plan. Birth Date of Diagnosis/ Amounts Paid/ Currently Name Date Disability Prognosis Current Treatment Pending Confined COBRA PARTICIPANTS:(Please note"None"if there are not any.) Name COBRA Effective Date Reason 137 S.Main Street North Wales.PA 19454 Phone:(215)793-0313 Toll-free:(800)883-1500 Pax:(215)793-0535 info@montmgmt.com www roontmgntt.cotn MONTGOMERY 9: Please attach a separate sheet for shock loss claims, disabled persons, retirees or COBRA participants if additional space is needed. Montgomery Management's quote is based upon the request for proposal submitted, including, but not limited to the claims experience. Any inaccuracies in the date and experience submitted may necessitate either revision or rescission of the quote(s). Coverage will not be bound until Montgomery Management's underwriting department can review all requested information and all disclosure information. Coverage will be bound upon review and acceptance of this information by Montgomery Management. The Plan Sponsor,through its authorized representatives,warrants and represents that the above list and additional pages attached, is true, complete and accurate to the best of his/her knowledge and belief,and that nothing has been knowingly or intentionally omitted. I have reviewed this completed form and the information given is complete and accurate,to the best of my knowledge. I understand that if the information given is not complete and accurate, the excess loss coverage proposed may be re-evaluated and Participants not disclosed may be individually underwritten retroactively to the effective date. The Insurers) reserves the right to terminate or limit the Participant's participation in the Policy, change or modify the Premium Rates or Specific Deductible Amount(s), or adjust the terms of the Specific and Aggregate Stop Loss coverage quoted. The Plan Sponsor further acknowledges, understands and agrees that the information provided herein may be used by the Insurer(s)in evaluating and determining the acceptability of the Plan Sponsor's risk and that no coverage shall be provided for such person(s)unless specifically agreed in writing by the Insurer(s). This information shall be treated confidentially. Plan Sponsor: Third Party Administrator: Officer's Signature: Signature: Name/Title: Name/Title: Date: Date: Disclosure statement should be completed no more than 30 days prior to the Effective Date. 137 S.Main Street North Wales,PA 19454 Phone:(215)793-0313 Toll-free(800)883-1500 rax:(115)793-0535 info@montmgmt.com www.monungmt.com Companion Life Insurance Company, Columbia, South Carolina agrees to pay Excess Loss Insurance benefits under the provisions of this Contract to the Contractholder listed in the Schedule of Excess Loss Insurance. READ YOUR CONTRACT CAREFULLY This Contract is legally binding between the Contractholder and Companion Life Insurance Company ("Company"). The consideration for this Contract includes, but is not limited to, the Application and the payment of premiums as provided hereinafter. AGREEMENT The Company will pay the[Aggregate and Specific Benefits] provided in this Contract Payment is subject to the conditions, limitations and exceptions of this Contract. The Contractholder agrees to pay premiums when due and to comply with the Contract provisions. This Contract takes effect on the Effective Date shown in the Schedule, which will be the date of issue, and terminates on the end of the Contract Period shown in the Schedule unless it is renewed. All periods indicated in the Contract begin and end at 12:01 A.M. standard time at the Contractholders office. This Contract Form is governed by the laws of the state of South Carolina. The sections set forth on the following pages are a part of this Contract and take effect on the Effective Date. IN WITNESS WHEREOF Companion Life Insurance Company has caused this Contract to be executed by its President at Columbia, South Carolina. Trescott N.Hinton President Policy Providing Excess Loss Insurance Nonparticipating COMPANION LIFE INSURANCE 7909 PARKLANE ROAD, SUITE 200 COLUMBIA, SC 29223 CLXLPOL -11- COMPANION LIFE INSURANCE COMPANY SCHEDULE OF EXCESS LOSS INSURANCE 1. Contract Number: CL170XXX 2. Contractholder. SAMPLE GROUP 3. Address: City: Anytown State: USA ZipCode: 55555 4. Subsidiary or affiliated companies (companies under common control through stock ownership, contract, or otherwise)to be included (list legal name and addresses): 5. Name and address of Designated Third Party Administrator: TPA 6. Effective Date: 01101120XX 7. GENERAL SCHEDULE OPTIONS: (a) Contract Period 01/01/20XX to 12/31/20XX (b) Disabled Persons [X]are a are not covered. Retired Employees a are [x] are not covered. (c) Aggregate Benefit [X]Yes a No Aggregate Contract Basis: Employee Benefit Plan Expenses must be Incurred from 01101120XX through 12131/20XX. and Paid from 01/01120XX through 03/31/20XX. Claims Incurred prior to the Contract Effective Date are limited to$Not Applicable. Aggregate eligible expenses include: [x] Medical [x] Prescription Card Service Dental Care Weekly(Disability) Income p Vision Care Other CLXLPOL -2- 7. GENERAL OPTIONS: (Continued) Aggregate Monthly Factor per single Employee: $ 300.00 Family: $ 750.00 Composite: $ 0.00 Aggregate Payable Percentage(excess of Deductible): 100 % Maximum Eligible Claim Expense Per Covered Person: $ 50 000.00 Minimum Aggregate Deductible: $ 450,000.0 Maximum Aggregate Benefit(excess of Deductible): $ 1,000,000.00 (d) Monthly Aggregate Accommodation Q Yes [x] No (e) Terminal Liability Yes [X] No (f) Specific Benefit [X]Yes No Specific Contract Basis: Employee Benefit Plan expenses must be Incurred from 01101120XX through 12/31/XX. Paid from 01/01/20XX through 03/31/20XX. Claims Incurred prior to the Contract Effective Date are Limited to: $ 0.00 Specific Eligible Expense: Medical and Rx Specific Deductible(per person): $ 50,000.00 Specific Payable Percentage(excess of Deductible). 100 % Maximum Specific Benefit(per person in excess of Specific Deductible): $ 4,950,000.00 8. PREMIUMS: (a) Aggregate Premium Premium Per Month Per Unit: $ 5.00 Minimum Annual Aggregate Premium : $ 9,000.0 Monthly Aggregate Accommodation Premium Per Month Per Unit: $ 0.00 Annual Premium in Advance: $ Not Applicable Terminal Liability Premium Per Month Per Unit: $ 0.00 Annual Premium In Advance: $ of Applicable (b) Specific Premium (c) Premium Per Month Per Single Employee: $ 100.00 Family: $ 250.00 Composite: $ 0.00 Minimum Annual Specific Premium: $ 120,000.00 9. SPECIAL RISK LIMITATIONS: Contract will be based upon the current employee benefits as defined in the Employee Benefit Plan by reference or by attachment, except as noted below. Specific: If the group were to terminate mid-contract, minimum premium requirements are 80% of the estimated annual specific premium and 100% of the estimated annual aggregate premium. Any claimant who is disclosed as terminated as of the effective date is excluded from coverage and will be subject to medical underwriting if they reioin the plan. This contract assumes the utilization of XXX PPO Network. If this network changes, we reserve the right to recalculate the rates and factors. This renewal is based upon the current plan document. In the event of a laser. any claims between the group specific deductible and the lasered specific deductible are not applicable under the aggregate coverage.Any claimant who has previously met or exceeded the group's lifetime maximum must be disclosed to Montgomery Management durina the underwriting process in order to be considered eligible for coverage under the stop-loss. In the event that the groups' SPD contains the wording "The Plan Administrator has the final decision to determine benefits" (or similar language), the stop-loss contract will supersede the decision as an extra-contractual decision. Aggregate: CLXLPOL -3- I. DEFINITIONS As used in this Contract,the following definitions shall be applicable: Agent, when referring to the Contractholder, means the Contractholder's representative, including but not limited to its Designated Agent, Broker, or Third Party Administrator. Aggregate Benefit means the amount that the Company agrees to pay the Contractholder after the end of the Contract Period for eligible claims Paid by the Contractholder as set forth in the Schedule and pursuant to the terms, conditions and limitations of the Contract. Aggregate Contract Basis identifies the dates during which Employee Benefit Plan expenses must be Incurred and must be Paid to be considered eligible for reimbursement as Aggregate Benefits. Aggregate Deductible Per Month means the Aggregate Monthly Factor shown in the Schedule multiplied by the Number of Covered Units. Aggregate Deductible means the sum of each Aggregate Deductible Per Month for each month during the Contract Period or fraction thereof. Minimum Aggregate Deductible means the lowest possible Aggregate Deductible applicable to the Contract Period or fraction thereof. This amount is set forth in the Schedule. Continuation Beneficiary is a Covered Unit which elects to extend its group health coverage under the Employee Benefit Plan entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985(COBRA). Contract means the entire agreement between the Contractholder and the Company, specifically including the Contract Application, the Contract Form, the Contract Addenda (if any), and a copy of the Contractholder's Employee Benefit Plan. . Contract Month means a period measured from the Effective Date of this Contract, while this Contract is in force. Each new Contract Month will begin on a day which corresponds to the Effective Date. If there is no such day in any applicable month, then the last day of the month will be used. Contract Period is stated in the Schedule. Contractholder is named in the Schedule. Covered Person refers to each person, individually, who is a Covered Unit, or, in the case of a dependent, a member of a Covered Unit. In no event will coverage for a dependent become effective before the Effective Date of Coverage of the plan participant under the Employee Benefit Plan. Covered Unit, for purposes of calculation of the premiums and the Aggregate Deductible Per Month, means a plan participant, a plan participant with dependents, or such other defined unit as agreed upon between the Company and the Contractholder, provided such plan participant, dependents or such other defined unit is covered under the Employee Benefit Plan. Dependent means a person who is defined as a dependent under the Employee Benefit Plan. CLXLPOL -4- I. DEFINITIONS(Continued) Disabled Person is a plan participant not actively at work or, in the case of a dependent or Continuation Beneficiary, is by disability unable to perform his or her nominal functions of a person of like sex and age on the Effective Date of this Contract or the date such person becomes eligible for coverage under the Employee Benefit Plan. Eligible Claims Payments means expenses of the Employee Benefit Plan qualifying for coverage under the terms and conditions of this Contract. Employee means a person who is defined as an employee under the Employee Benefit Plan. Employee Benefit Plan means the master plan document of the Contractholder to provide medical expense benefits to the Contractholder's covered plan participants and dependents of such plan participants in effect on the Effective Date of this Contract, a copy of which is attached to and made a part of this Contract. Incurred refers to the date on which a covered medical service was rendered, the date disability benefit payments become due, or a covered medical purchase was made for a Covered Person under the Employee Benefit Plan. Maximum Aggregate Benefit means the amount set forth in the Schedule as the maximum total Aggregate Benefit payable under the terms, conditions and limitations of this Contract during the Contract Period. Maximum Eligible Claim Expense Per Person, as it relates to aggregate coverage, means the maximum dollar value of claims Paid on any one Covered Person that can apply toward satisfaction of an Aggregate Deductible, or that can apply toward the calculation of the Aggregate Benefit for a Contract Period. Maximum Specific Benefit means the amount set forth in the Schedule that is the maximum total Speck Benefit payable under the terms, conditions and limitations of this Contract during the period an individual is a Covered Person under the Employee Benefit Plan, regardless of the number of years the Covered Person is eligible under the Employee Benefit Plan and regardless of whether expenses for this Covered Person were Incurred and/or Paid during this Contract Period. In the context of the definition of Maximum Specific Benefit, references to "Employee Benefit Plan" include all predecessors and successors of the particular plan in effect on the Contract's Effective Date. Number of Covered Units means the total number of Covered Units existing in any Contract Month. Paid means that funds are actually disbursed by the Contractholder or his Agent. Payment of a claim is the unconditional and direct payment of a claim to a Covered Person or their health care providers. Payment will be deemed made on the date that both (1)the payor directly tenders payment by mailing (or otherwise delivering) a draft or check, and (2) the account upon which the payment is drawn contains, and continues to contain, sufficient funds to permit the check or draft to be honored. Should the account upon which payment is drawn not contain sufficient funds to cover all outstanding checks and drafts on the account, then the Company may consider, in its sole discretion, any particular checks or drafts as not having been paid, but only to the total amount representing the difference between the funds in the account and the total of outstanding checks CLXLPOL -5- and drafts. I. DEFINITIONS(Continued) Payable Percentage means the percentage payable as shown in the Schedule. The calculation of Specific Benefits may be subject to a different Payable Percentage than the calculation of Aggregate Benefits. Plan Participant means an employee, a dependent or any other person who is eligible and who is covered under the Employee Benefit Plan. No plan participant may be covered by this contract prior to the date his or her coverage is effective under the Employee Benefit Plan or after the date his or her coverage under the Employee Benefit Plan Ends. Proof of Loss is the form authorized by the Company to be used for the submission of claims as well as the supporting documentation reasonably necessary for the Company's independent evaluation of the legitimacy and extent of the claim. Claims for expenses not specifically identified in previously submitted Proofs of Loss must be accompanied by separate Proofs of Loss. Schedule means the Schedule of Excess Loss insurance. Specific Benefit means the amount the Company will pay to the Contractholder for eligible claims Paid by the Contractholder over and above the Contractholders Specific Deductible Per Person, and pursuant to the terms, conditions and limitations of the Contract. Specific Contract Basis identifies the dates during which Employee Benefit Plan expenses must be Incurred and must be Paid to be considered eligible for reimbursement as Specific Benefits. Specific Deductible means the per Covered Person deductible as shown in the Schedule. CLXLPOL -6- II. BENEFITS The Company will pay, subject to the terms, conditions and limitations of the Contract, the following benefits, if shown in the Schedule, to the Contractholder within a reasonable time upon receipt of a fully executed Proof of Loss: 1. Aggregate The Aggregate Benefit for the Contract Period, or fraction thereof, is the total of the Eligible Claim Payments, on an Incurred and/or Paid basis as shown in the Aggregate Contract Basis of the Schedule: a. less the Aggregate Deductible or Minimum Aggregate Deductible,whichever is greater; and b. less the amount of the claims Paid by the Contractholder in excess of the Maximum Eligible Claim Expense Per Person as shown in the Schedule; and c. less amounts recovered from other sources; d. multiplied by the Aggregate Payable Percentage. Aggregate Benefits are not payable until after the end of the Paid basis shown in the Aggregate Contract Basis of the Schedule. If this Contract should terminate prior to the end of the Contract Period, the Company shall not be liable for Aggregate Benefits for expenses Incurred or Paid by the Contractholder after the termination date. In no event will the Aggregate Benefit exceed the Maximum Aggregate Benefit shown in the Schedule. 2. Specific The Specific Benefit with regard to each Covered Person, is the total of the Eligible Claim Payments, on a Incurred and/or Paid basis as shown in the Speck Contract Basis of the Schedule; a. less the Speck Deductible; and b. less amounts recovered from other sources; c. multiplied by the Specific Payable Percentage. The Contractholder shall not be entitled to any Specific Benefit unless and until the Contractholder has actually Paid the full amount of the Specific Deductible as set forth in the Schedule for the Covered Person(s) for which the Specific Benefit is sought. The Contractholder shall only be entitled to a Specific Benefit up to the amount actually Paid by Contractholder over and above the Specific Deductible. If this Contract should terminate prior to the end of the Contract Period, the Company shall not be liable for Specific Benefits for expenses Incurred or Paid by the Contractholder after the termination date. In no event will the Speck Benefit with regard to any Covered Person exceed the Maximum Specific Benefit shown in the Schedule. CLXLPOL -7- III. LIMITATIONS 1. This Contract will not pay the Contractholder for any loss or expense caused by or resulting from any of the following: a. Expenses incurred while the Employee Benefit Plan is not in force with respect to the Covered Person. b. Expenses resulting from weekly (disability) income, dental, vision or any prescription card service, unless shown in the Schedule. c. Liability assumed by the Contractholder under any contract or service agreement other than the Employee Benefit Plan. d. Expenses as the result of extra-contractual damages; compensatory damages; or punitive damages. e. Expenses resulting from services which are billed in excess of the general level of charges being made by other providers of services in the locality where the service is rendered. f. Expenses for benefits for accidental bodily injury or sickness arising out of or in the course of any occupation for wage or profit, or for which the Covered Person would be entitled to benefits under any Worker's Compensation, U. S. Longshoremen and Harbor Workers or other occupational disease legislation or policy, whether or not such policy is actually in force. g. Expenses which (1) are not accepted as standard medical treatment for the illness, disease or injury being treated by physicians practicing the suitable medical specialty; (2) are the subject of scientific or medical research or study to determine the item's effectiveness and safety; (3) have not been granted, at the time services were rendered, any required approval by a federal or state governmental agency, including without limitation, the Federal Department of Health and Human Services, Food and Drug Administration, or any comparable state governmental agency, and the Federal Health Care Finance Administration as approved for reimbursement under Medicare Title XVIII; or (4) are performed subject to the Covered Person's informed consent under a treatment protocol that explains the treatment or procedure as being conducted under a human subject study or experiment. h. Cost of the administration of claim payments or expense of litigation with individual claimants. I. Expenses for benefits to any Covered Person with coverage under any other plan, including Medicare, which, when combined with the benefits payable by such other plan, would cause the total to exceed 100% of the Covered Person's actual expenses. j. Payments under the Employee Benefit Plan arising out of or caused by or contributed to or in consequence of war,hostilities(whether war be declared or not), invasion or civil war. CLXLPOL -8- III. LIMITATIONS(Continued) 2. If the Schedule shows disabled persons are not covered, no benefits will be paid under the Contract for expenses Incurred or Paid under the Employee Benefit Plan for a Disabled Person until: a. if a plan participant, he or she returns to active, full-time employment for at least one (1)full working day; or b. if a dependent or Continuation Beneficiary, he or she is able to perform the normal functions of a person of like sex and age. 3. Newborn children of plan participants who have previously enrolled and continue to cover their eligible dependents under the Employee Benefit Plan will be eligible under the Contract on the date of the child's birth. Employees who have not previously enrolled for dependent coverage will be eligible for newborn child coverage as defined within the Employee Benefit Plan. 4. Retired plan participants and their dependents, who are eligible under the Employee Benefit Plan, will be eligible for coverage under the Contract only if so indicated in the Schedule. CLXLPOL -9- IV. CLAIMS PROVISIONS 1. Payment of Claim: All benefits as they become payable under this Contract will be paid to the Contractholder. All expenses as they become payable under the Employee Benefit Plan shall be Paid by the Contractholder. The Company shall pay claim within a reasonable time after receiving fully executed Proofs of Loss and the documentation reasonably necessary to evaluate the eligibility and extent of the claim. 2. Warranty: Upon presentation of Proof of Loss to the Company for Aggregate or Specific Benefits, the Contractholder warrants that all monies necessary to pay for services and supplies have been paid to the respective providers of medical services or supplies to which the claim for reimbursement relates. 3. Notice of Claim: The Contractholder shall give written notice of claims to the Company on the Company's customary notice(Proof of Loss form), within thirty(30)days of the date the Contractholder becomes aware of the existence of facts which would reasonably suggest the possibility that benefits will be incurred which are covered by this Contract and which are equal to or exceed fifty percent(50%) of the Specific Deductible. In addition, the Contractholder shall notify the Company immediately of the expenses of any Covered Person which meet any of the following criteria: a. continuous hospitalization for more than [one] month, or b. a claim for any one of the following disabilities: [mental disorder requiring hospitalization, brain injury, spinal injury resulting in real or suspected paralysis of the limbs, serious bums involving ten percent(10%)or more of the body with third degree bums or thirty percent (30%) or more of the body with second degree burns, multiple or serious fractures, crushing or massive internal injuries, premature births, Acquired Immune Deficiency Syndrome(AIDS). The Contractholder shall submit on a timely basis proofs, reports, and supporting documents including, but not limited to, a monthly summary of all Eligible Claims Payments processed by the Contractholder. CLXLPOL -10- V. CONTRACT TERMINATION The Contract and all benefits hereunder will terminate upon the earliest of the following dates: 1. The termination date specified In writing by the Contractholder provided that the Company is notified not less than 31 days in advance of the termination date. 2. The end of any period for which premiums were paid and subsequent premiums are not paid. 3. The end of the Contract Period. 4. The date of termination of the Employee Benefit Plan. 5. The date of cancellation of the administrative agreement between the Contractholder and the Designated Third Party Administrator, unless the Company has, prior to such cancellation, consented in writing to the Contractholder's designation of a successor Third Party Administrator. 6. This Contract will automatically terminate if the Contractholder does not pay claims or make available funds to pay claims as required by the Contract. CLXLPOL -11- VI. MISCELLANEOUS PROVISIONS 1. Liability: The Company will have neither the right nor the obligation under this Contract to directly pay any Covered Person [or provider of professional or medical services] for any benefit which the Contractholder has agreed to provide under the terms of the Employee Benefit Plan. The Company's sole liability hereunder is to the Contractholder, subject to the terms, conditions and limitations of this Contract. Nothing in this Contract shall be construed to permit a Covered Person to have a direct right of action against the Company. 2. Payment of Premiums: Each Premium for this Contract is payable on or before its due date as set forth in the Schedule to the Company or to this authorized representative. Payment of a premium will not maintain this Contract in force beyond the period for which such premium is paid, except as otherwise stated in the Grace Period. If the Effective Date of this Contract is other than the first day of a calendar month, premiums payable under this Contract are due and payable on.the first of each calendar month. 3. Grace Period: A Grace Period of thirty (30) days will be allowed for the payment of each premium after the first premium. Should a premium otherwise due not be paid during the Grace Period, this Contract will terminate without further notice retroactive to the date for which premiums were last paid. The liability of the Company will be limited to claims Paid by the Contractholder prior to the date of termination. There will be no refund of any premium shown in the Schedule. 4. Entire Contract: This Contract Form as issued to the Contractholder, together with the Contractholder's Application, Contract Addenda(if any), and a copy of the Contractholder's Employee Benefit Plan, constitute the entire contract. The Company has relied upon the underwriting information provided by the Contractholder or the Contractholder's Agent, in the issuance of this Contract. Should subsequent information become known which, if known prior to issuance of this Contract, would affect the rates, deductibles, terms or conditions for coverage hereunder, the Company will have the right to revise the rates, deductibles, terms or conditions as of the Effective Date of issuance, by providing written notice to the Contractholder. 5. Concealment, Fraud: This entire Contract will be void if,whether before or after a claim or loss, the Contractholder or its Agent has concealed or misrepresented any material fact or circumstance concerning this Contract or the subject thereof, including any claim thereunder or in any case of fraud by the Contractholder or its Agent relating thereto. 6. Clerical Error: Clerical error, whether by the Contractholder or by the Company, in keeping any records pertaining to the coverage, will not invalidate coverage otherwise validly in force nor continue coverage otherwise validly terminated. CLXLPOL -12- VI. MISCELLANEOUS PROVISIONS (Continued) 7. Audits: The Company will have the right: (1) to inspect and audit all records and procedures of the Contractholder and Designated Third Party Administrator; and (2) to require, upon request, proof of records satisfactory to the Company that payment has been made to the Covered Person or the provider of such services or benefits which are the basis for any claim by the Contractholder hereunder. S. Notice of Appeal: Any objection, notice of legal action, or complaint received on a claim process by the Contractholder or the Third Party Administrator, and on which it reasonably appears a benefit will be payable to the Contractholder under this Contract shall be brought to the immediate attention of the claims department of the Company. 9. Changes: Only the President or Executive Officer of the Company have the authority to alter this Contract, or to waive any of the Companys rights and then only in writing. No such alteration of this Contract shall be valid unless endorsed on or attached to this Contract. No Agent, Broker, or Third Party Administrator has the authority to alter this Contract or to waive any of its provisions. 10. Notice: For the purpose of any notice required from the Company under the provisions of this Contract, notice to the Contractholder's Designated Third Party Administrator shall be considered notice to the Contractholder. 11. Amendments to the Employee Benefit Plan: The Employee Benefit Plan shall not be changed while this Contract is in force without the prior written consent of the Company. Notice of any amendment to the Employee Benefit Plan must be given to the Company or its authorized representative at least (thirty (30)] days prior to the Effective Date of the amendment. The Company will have the sole option to accept the amendment to the Employee Benefit Plan,and if accepted, the Company reserves the right to revise the rates, deductibles,terms or conditions of the Contract as of the Effective Date of the amendment. If such amendment is not agreed to in writing,the Company will be liable to pay benefits as if the Employee Benefit Plan was not changed. 12. Responsibilities of the Contractholdees Designated Third Party Administrator: Without waiving any of its rights under this Contract, and without making the Designated Third Party Administrator a party to this Contract, the Company agrees to recognize the Designated Third Party Administrator as respects the normal administration of the Contractholder's Plan subject to: a. The Third Party Administrator being responsible on behalf of the Contractholder for auditing, calculating and processing all claims eligible under the Employee Benefit Plan within a reasonable period of time, preparing periodic reports as required by the Company and maintaining and making available to the Company at all times such information as the Company may reasonably require for proof of payment of the claims(s) by the Contractholder; CLXLPOL -13- VI. MISCELLANEOUS PROVISIONS (Continued) b. The Third Party Administrator performing such other duties as may be reasonably required by the Company, including but not limited to, maintaining an accurate record of eligible Covered Persons of the Contractholder; c. The Company will not be responsible for any compensation due the Designated Third Party Administrator for functions performed in relation to this Contract; and d. This Contract will not be deemed to make the Company a party to any agreement between the Contractholder and the Designated Third Party Administrator. 13. Hold Harmless: a. The Contractholder agrees to indemnify and hold the Company harmless for any legal expenses incurred, reasonable settlements made, or judgment(s) awarded, arising out of any dispute involving a plan participant or former plan participant of the Contractholder's Employee Benefit Plan provided such legal expenses, settlements, or judgments were not incurred as a result of the sole negligence or intentional wrongful acts of the Company. The Company, following any notification of its being, or likely to be, named as a defendant on any action concerning the aforementioned dispute will, within a reasonable time, in writing, notify the Contractholder of the dispute. The Company will cooperate with the Contractholder in matters pertaining to the dispute, however, such cooperation with the Contractholder will not waive the right of the Company to solely defend or settle any action in a manner it deems prudent. b. The Contractholder shall be responsible for any State premium taxes incurred with respect to funds paid to or by the Contractholder under the Employee Benefit Plan. Taxes incurred with respect to premiums paid for the Contract will be the responsibility of the Company. 14. Offset: The Company will be entitled to offset claim reimbursements to the Contractholder against premiums due and unpaid by the Contractholder. 15. Assignments: The Contractholder shall not assign any of its rights under this Contract without the prior written consent of the Company, and any assignment without prior written consent shall be void. 16. Subrogation: The Contractholder shall prosecute any and all valid claims that the Contractholder may have against third parties arising out of any occurrence resulting in a loss payment by the Contractholder and to account for any amounts recovered. Should the Contractholder fail to prosecute any valid claims against third parties and the Company thereupon becomes liable to make payments to the Contractholder under the terms and conditions of this Contract, then the Company shall assume all the Contractholder's rights to prosecute any valid claims against third parties, and the Contractholder will be responsible for any reasonable legal expenses incurred in the course of the prosecution. CLXLPOL -14- VI. MISCELLANEOUS PROVISIONS(Continued) 17. Recoveries: The Company shall be entitled to recover first up to its full share of reimbursed claims before the Contractholder shares in any amount so recovered whether by way of subrogation or otherwise. 18. Arbitration: Any controversy or claim arising out of or relating to this Contract, or the breach thereof, shall be settled by Arbitration in accordance with the rules of the American Arbitration Association, with the express stipulation that the arbitrator(s) shall strictly abide by the terms of this Contract and shall strictly apply rules of law applicable thereto. All matters shall be decided by a panel of three (3) arbitrators. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. This provision shall survive the termination or expiration of this Contract. The parties hereto may alter any of the terms of this provision only by express written agreement, although such alteration may be before or after any rights or obligations arise under this provision. 19. Insolvency: The insolvency, bankruptcy,financial impairment, receivership, voluntary plan of arrangement with creditors, or dissolution of the Contractholder or the Contractholder's Designated Third Party Administrator shall not impose upon the Company any liability other than the liability defined in this Contract. In particular, the insolvency of the Contractholder shall not make the Company liable to the creditors of the Contractholder, including Covered Persons. 20. Severability Clause: Any clause deemed void, voidable, invalid, or otherwise unenforceable, whether or not such a provision is contrary to public policy, shall not render any of the remaining provisions of the Contract invalid. 21. Renewal: Renewal is not automatic but is available if permitted by the Company. Renewal may be subject to new premium rates, new underwriting terms, and new Contract terms. 22. Group Specifications - Changes: The Company reserves the right to revise rates, deductibles,terms or conditions of the Contract on any of the following dates: 1. When the Contractholder adds or deletes a subsidiary or affiliate; 2. When there is a change in the geographical area in which the Contractholder is located; 3. When there is a change in the nature of business in which the Contractholder is engaged; 4. When there is an increase or decrease in the number of Covered Units which exceeds [10%] in any one month or [20%] over any period of three consecutive months. CLXLPOL -15- f. ,IIII HCC HCC Life Insurance Company Medical Stop Loss Proposal For City of Bremerton Presented by Liberty Benefits Group Underwritten by Matthew Heiberger HCC Life Insurance Company 11100 Wayzata Blvd., Suite 350 Minnetonka, MN 55305 (763) 486-1000 Visit us O;nfine at • r"a ®/ HCC Life Insurance Company HCC 11 100 Wayzata Blvd.,Suite 350,Minnetonka,hW 55305 7etephone:(763)486-1000 FacslmIle:(763)486-1001 Proposal No 4 Underwriter Helberger,Matthew Proposal 10/09/2014 Valid Thru Date 01110/2015 Group City of Bremerton Effective Date 01/0112015 Expiration Date 12/31/2015 INDIVIDUAL STOP LOSS COVERAGE Option 1 Option 2 Option 3 Option 4 Coverages Medical,Rx Card Medical,Rx Card Medical,Rx Card Medical,Rx Card Contract Type 12118 12118 12118 12118 Annual Specific Deductible per Individual 125,000 160,000 176,000 200,000 Lifetime Reimbursement Unlimited Maximum Lifetime Period Reimbursement Unlimited Unlimited Unlimited Unlimited Inpatient Mental&Nervous 356 Days Quoted Rate Per Month Enrollment Employee 59 41.14 33.06 27.58 23.54 Employee Plus Spouse 59 81.94 65.86 54.94 46.89 Employee Plus Child 40 72.52 58.28 48.53 41.50 Family 127 123.08 98.90 82.62 70A2 Composite 285 90.50 72.73 60.68 51.79 Estimated Annual Premium 309,524 248,726 207,527 177,105 Quoted Rate(s)includes Commissions of 0.00% 0.00% 0.00% 0.00% 10/91201412:12 PM Page 1 Rates and Factors subject to attached Qualifications and Contingencies and Plan Document Assumptions. - Z HCC Life Insurance Company r HCC 11100 Waynta Blvd.,Suite 350,Minnetonka,MH 55305 Telephone:(763)496.1000 Facsimile:(763)486.1001 Proposal No 4 Underwriter Herberger,Matthew Proposal 10/0912014 Valid Thru Date 01110/2016 Group City of Bremerton Effective Date 01101/2015 Expiration Date 1213112016 AGGREGATE STOP LOSS COVERAGE Option 1 Option 2 Option 3 Option 4 Coverages Medical,Rx Card Medical,Rx Card Medical,Rx Card Medical,Rx Card Contract Type 12112 12112 12112 12112 Loss Limit per Individual 125,000 150,000 175,000 200,000 Maximum Contract Period Reimbursement 1,000,000 1,000,000 1,000,000 11000,000 Rate Per Month Enrollment Composite 285 9.29 9.56 9.75 10.01 Estimated Annual Premium 31,772 32,661 33,346 34,234 Rate(s)includes Commissions of 0.00% 0.00% 0.00% 0.00% Annual Aggregate Deductible 4,193,981 4,290,559 4,355,925 4,428,688 Minimum Aggregate Deductible 4,193,981 4,290,559 4,355,925 4,426,686 Run-in Limited To 0 0 0 0 Monthly Aggregate Claim Factors Enrollment Medical,Rx Card Employee 59 557.38 670.22 578.91 688.30 Employee Plus Spouse 59 1,110.31 1,135.88 1,153.19 1,171.89 Employee Plus Child 40 982.87 1,005.30 1,020.61 1,037.17 Family 127 1,667.70 1,706.10 1,732.09 1,760.19 Composite 285 1,226.31 1,254.65 1,273.88 1,294.32 OVERALL COST SUMMARY Option 1 Option 2 Option 3 Option 4 Total Annual Fixed Costs 341,296 281,387 240,872 211,339 Aggregate Variable 4,193,981 4,290,659 4,355,925 4,428,586 Maximum Annual Liability 4,535,277 4,671,946 4,596,797 4,637,926 10/9/201412:12 PM Page 2 Rates and Factors subject to attached Qualifications and Contingencies and Plan Document Assumptions. Group City of Bremerton Proposal No 4 PROPOSAL (QUALIFICATIONS AND CONTINGENCIES Quoted terms and conditions are subject to possible revision based upon receipt and review of the following items: ■ Paid claims experience to the effective date including monthly enrollment figures. ■ Updated shock loss information to the date HCC Life Insurance Company has been notified that the proposal has been accepted by the group.Shock loss information should include injuries,illnesses,diseases,diagnoses,or other losses of the type,which are reasonably likely to result in a significant medical expense claim or disability,regardless of current claim dollar amount.In addition, shock loss information should include any claimant that has incurred claim dollars in excess of$62,500,regardless of diagnosis. Information is also needed on any claims processed and unpaid,pended or denied for any reason.Please refer to our Trigger Diagnosis Disclosure List,which provides examples of some,but not all,types of shock losses. ■ We will accept final shock loss disclosure no earlier than 30 days prior to the effective date. ■ Please see the attached exhibit for plan document assumptions and requirements. ■ Should a large claim(s),(non-reoccurring and/or ongoing)become known and the initial date of service is prior to the date of written acceptance by HCC Life Insurance Company,we reserve the right to re-underwrite the case. ■ In the event there is a greater than 10%change in enrollment between the submitted initial enrollment data and the final enrollment data,rates and factors may be recalculated. ■ Minimum participation level of 75%of all eligible employees is required. ■ Rates and Factors are based on no individuals being considered a covered participant under the stop loss policy who have previously satisfied their lifetime maximum until we have provided written approval of their acceptance under the stop loss policy. ■ Rates and Factors are calculated with the plan anniversary date and the Policy effective date as the same date,should the plan anniversary date and the stop loss policy effective date be different we reserve the right to modify our rates,factors and terms of coverage to accommodate for additional liabilities incurred by the plan due to state and/or federal mandates during the stop loss contract period. ■ Quote rated with retirees covered.Quote rated with no COBRAs being covered based on the census Information provided. ■ Quote Rated with the following UR Vendore:CARE LINK,. ■ Quote Rated with the following Cost Containment Progmrns(s): Firet Choice Health Network. 10/9/201412:12 PM Page 3 Rates and Factors subject to attached Qualifications and Contingencies and Plan Document Assumptions. Group City of Bremerton Proposal No 4 PROPOSAL QUALIFICATIONS AND CONTINGENCIES Initial the selected proposal option: Option 1 Option 2 Option 3 Option 4 Specific Aggregate The Premium and Aggregate Deductibles are based on the data submitted.Any inaccurate or incomplete data submitted may require changes at final underwriting.We will not be bound by any typographical errors or omissions contained herein. Date: By: Agent of Record or Administrator This proposal expires if applications are not requested before the valid through date. 10/9/201412:12 PM Page 4 Rates and Factors subject to attached Qualifications and Contingencies and Plan Document Assumptions. Plan Document Assumptions This proposal for stop loss coverage assumes the Plan Sponsor's plan document includes certain standard clauses,exclusions and limitations. These exclusions and limitations include,but are not limited to the following: 1. Eligibility,Effective Date,and HIPAA Enrollment Date provisions,which include definitions of employee(including definitions of full-time and part-time),dependent, and retiree,if applicable. 2. Termination Provisions which clearly define when eligibility and benefits cease. The Termination Provisions should include specific wording regarding extension of coverage (also known as"extension of active service")during a period of inactive service due to disability,layoff or leave of absence. The plan should include COBRA wording consistent with federal requirements. 3. Transplant benefit wording that identifies any benefits applicable to the donor (particularly the non-participating donor),the recipient,organ procurement,and any covered transportation,lodging and companion charges. 4. Industry standard right of recovery,subrogation and coordination of benefits clauses. 5. Exclude expenses resulting from losses which are due to any act of war,whether declared or not. 6. Exclude expenses for any injury or illness arising out of or in the course of any occupation or employment for wage or profit. 7. Exclude expenses related to Alternative Treatment,except when deemed both medically necessary and cost effective when compared to a normal course of treatment. 8. All HCC Life policies contain an Experimental and Investigative definition and exclusion. All our policies also include,by endorsement,coverage for phase II,III and IV clinical trials for Cancer care. The Definition of Experimental and Investigative along with the Clinical Trials Endorsement are available for review at www.hcclife.com. 022813 STOP LOSS INSURANCE HCC LIFE INSURANCE COMPANY Three Town Park Commons,225 TownPark Drive,Suite 145 Kennesaw,Georgia 30144 (800 447-0460) APPLICATION 1. Full Legal Name of Applicant and Address 2. Applicant is a(check one): El Corporation ❑Labor Union ❑Partnership ❑Association Telephone No.: ❑ MEWA ❑ PEO ❑Other: 3. Contract Period: Effective Date: Expiration Date: 4. Full Legal Name of Affiliates,Subsidiaries and other major locations to be included in coverage: Address of Affiliates or Subsidiaries: ❑ None ❑See attached listing 5. Nature of Business of the Applicant to be 6. Key Contact Person at Applicant: Insured: 7. Enter full name of the Employee Benefit Plan(s): A signed copy of such Employee Benefit Plan(s) must be attached and will form part of this contract. 8. Name and Address of Plan Supervisor: 9. Agent of Record: 10. Estimated Initial Enrollment. Single: Family: Total Covered Units: 11. Retirees Covered: Yes EJ No 12.The Utilization Review vendor will be: 13. Deposit Premium (Minimum of first month's estimated premium): $ Please review the deposit premium on the Monthly Premium Accounting Worksheet. 14.SPECIFIC STOP LOSS INSURANCE: 1. ❑Yes ❑No A. Covered Expenses Paid under the Employee Benefit Plan for the following Plan Benefits are covered for Specific Stop Loss Insurance(not included unless checked): ❑Medical ❑Prescription Drug Card ❑Prescription Drugs Under Medical ❑Other. B. Specific Deductible in each Contract Period per Covered Person or per Covered Family: $ C. Contract Basis: Covered Expenses Incurred from[Date]through[Date]and Paid from[Date]through[Date] D. Unlimited Specific Lifetime Reimbursement Maximum per Covered Person or Covered Family] Specific Contract Period Reimbursement Maximum per Covered Person or Covered Family: $ E. Separate Individual Specific Deductible: [Name]for[Amount] F. Monthly Specific Premium Rates: Single: $ Family:$ G. Specific Percentage Reimbursable % H. Specific Terminal Liability Option: ❑Yes ❑ No Specific Terminal Liability Option premium per Covered Person per month: $ HCCLMSL-2010 APP Applicant's Initials: Page 1 of 15.AGGREGATE STOP LOSS INSURANCE: ❑Yes ❑No A. Covered Expenses Paid under the Employee Benefit Plan for the following Plan Benefits are covered for Aggregate Stop Loss Insurance(not included unless checked): [J Medical ❑ Dental ❑Weekly Income ❑Vision ❑Prescription Drug Card ❑Prescription Drugs Under Medical ❑Other. B. Minimum Annual Aggregate Deductible: $ (Subject to the Definition of Minimum Annual Aggregate Deductible in the Policy) C. Contract Basis: Covered Expenses Incurred from[Date]through[Date],and Paid from[Date]through[Date]. Run-In claims limited to: $ D. Aggregate Contract Period Reimbursement Maximum: $ E. Monthly Aggregate Factors: Monthly Combined Medical Dental Weekly Vision Prescription Drugs Factors Income Composite Single Family F. Aggregate Percentage Reimbursable % G. Loss Limit: $ For the purposes of Aggregate Slop Loss Insurance,the Loss Limit is the maximum amount of Covered Expenses Incurred by each Covered Person(or Covered Family),which can be used to satisfy the Annual Aggregate Deductible. H. Monthly Deductible Advance Reimbursement Option: ❑Yes ❑No I. Aggregate Terminal Liability Option: ❑Yes ❑No J. Aggregate Premium: 1. ❑Annual Premium payable In advance for Contract Period: $ 2. ❑Monthly Premium rate per Covered Unit: $ 3. ❑ Monthly Deductible Advance Reimbursement premium per Covered Unit per month: $ 4. ❑Aggregate Terminal Liability Option premium per Covered Unit per month: $ HCCL MSL-2010 APP Applicant's Initials: Page 2 of 3 SPECIAL LIMITATIONS: Specific: Aggregate: It is understood and agreed by the Applicant that: 1. The Applicant is financially sound,with sufficient capital and cash flow to accept the risks inherent in a"self-funded' health care plan,and 2. The Plan Supervisor retained by the Applicant will be considered the Applicant's Agent, and not the Company's Agent,and 3. All documentation requested by the Company must be received within 90 days of the Policy effective date, and is subject to approval by the Company and may require adjustment of rates, factors, and /or Special Limitations to accommodate for abnormal risks,and 4. The Stop Loss Insurance applied for herein will not become effective until accepted by the Company,and 5. Premiums are not considered paid until the premium check is received by the Company,is paid according to the rates set forth in the Application,and all items required to issue the Policy have been.returned to the Company. Premiums are subject to refund should any outstanding policy requirement not be met within 90 days of the Policy's effective date,and 6. This Application will be attached to and made a part of the Policy issued by the Company,and 7. The Employee Benefit Plan(s)attached shall be the basis of any Stop Loss Insurance provided by the Company and such Employee Benefit Plan(s)conforms with all applicable State and Federal statutes,and S. Any reimbursement under the Stop Loss Insurance provided by the Company shall be based on Covered Expenses Paid by the Applicant in accordance with the Employee Benefit Plans)attached hereto,and 9. After diligent and complete review, the representations made in this Application, the disclosures made,and all of the information provided for underwriters to evaluate the risk,are true and complete. Any person who knowingly and with the intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information or conceals for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act,which is a crime and subjects such person to criminal and civil penalties. Full Legal Name of Applicant: Applicant's Federal Tax I.D. Number: Dated at this day of 20 Officer/Partner Signature (print name) Licensed Agent Signature (print name) For HCC Life Insurance Company Use Only: ACCEPTANCE Accepted on behalf of the Company,this day of 20 By: Title: Policy No.: HCCL MSL-2010 APP Applicant's Initials: Page 3 of 3 HCC LIFE INSURANCE COMPANY 225 Town Park Drive,Suite 145 Kennesaw,Georgia 30144 1-800 447-0460 STOP LOSS POLICY THIS IS A CLAIMS REIMBURSEMENT POLICY-PLEASE READ IT CAREFULLY Policy Number. Policyholder. Principal Address: Designated Plan Supervisor(or TPA): This Policy is issued in consideration of Your Application, Your Plan Document and the payment of premiums. The aforementioned documents combine to form this Policy. The effective date of this Policy is 12:01 a.m., at Your address and the expiration date of this Policy is 11:59 p.m.,as shown below at Your principal address. Effective Date: Expiration Date: This Policy is issued by Us as of the Effective Date, but is not valid unless countersigned by Our duly authorized representative. Jurisdiction of Issue:Texas This policy is governed by the laws of the jurisdiction of issue. President Vice President and General Counsel NON-PARTICIPATING INSURANCE This is a reimbursement policy. You,or Your Plan Supervisor,are responsible for making benefit determinations under Your Employee Benefit Plan. We have no duty or authority to administer, settle,adjust,or provide advice regarding claims filed under Your Employee Benefit Plan. HCCL MSL-2007 TABLE OF CONTENTS ARTICLE I. DEFINITIONS.......................................................................................................PAGE 3 ARTICLE IL SPECIFIC STOP LOSS INSURANCE..................................................................PAGE 8 ARTICLE III. AGGREGATE STOP LOSS INSURANCE............................................................PAGE 8 ARTICLE IV. CLAIMS UNDER THE POLICY.............................................................................PAGE 9 ARTICLE V. LIMITATIONS OF COVERAGE..........................................................................PAGE 12 ARTICLE VI. EXCLUSIONS.....................................................................................................PAGE 12 ARTICLE VII. GENERAL PROVISIONS......................................................................PAGE 12 HCCL MSL-2010 t V ARTICLE I.DEFINITIONS When used in this Policy,the following terms will have the meanings as indicated below: ANNUAL AGGREGATE DEDUCTIBLE. For any one Contract Period, (or any fraction thereof, if the Contract terminates during the Contract Period)the total of the number of Covered Single or Family units multiplied by its corresponding Monthly Aggregate Factor,applied each month that the.Contract is in-force. In no instance shall the Annual Aggregate Deductible be less than the Minimum. Annual Aggregate Deductible. AGGREGATE CONTRACT PERIOD REIMBURSEMENT MAXIMUM. The maximum amount We will reimburse the Policyholder for Covered Expenses during each Contract Period under the terms of the Aggregate Stop Loss Insurance as shown on the Application. AGGREGATE PERCENTAGE REIMBURSABLE. The percentage of Covered Expenses to be reimbursed that were Paid under the Employee Benefit Plan in excess of the Annual Aggregate Deductible. COBRA BENEFICIARY. Any former Covered Person of the Employee Benefit Plan continuing participation under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)and its amendments. COMPANY. Company,We,Our,and Us refers to HCC Life Insurance Company. COMPLETE CLAIMS HISTORY. All of the following for a minimum of 12 consecutive months immediately preceding the Policy Year: 1. Participant census,and 2. Eligibility information,and 3. Claims Experience,and 4. Large Claim Disclosures,and 5. Details of any condition shown on the Trigger Diagnosis List in the Disclosure Statement. CONTRACT. All of the following: 1. The Application,and 2. This Policy and any endorsements to it,and 3. The Policyholder's Plan Document. CONTRACT BASIS. The form of coverage shown on the Application that was selected by the Policyholder. The Contract Basis shall be considered in determining what Covered Expenses will be reimbursed by Us. CONTRACT MONTH. A period of one-month that begins on: 1. The effective date of the Policy,or 2. The same day of each following month during the Contract Period. CONTRACT PERIOD. The period of time shown on the Application during which the Policyholder is covered for Aggregate and/or Specific Stop Loss Insurance. COST CONTAINMENT PROGRAM. A program designed to reduce or control the cost of providing Plan Benefits to participants of the Employee Benefit Plan. HCCL MSL-2010 2 44) COVERED EXPENSES. Plan Benefits incurred by a Covered Person(or Covered Family)- 1. amily):1. For which benefits are Paid by the Policyholder under the Employee Benefit Plan,and 2. Which are not in excess of the Reasonable and Customary Charge for those services, and 3. Which are Medically Necessary for the treatment of an illness or injury or for any preventative care covered by the Employee Benefit Plan, and 4. Which are reimbursable under this policy subject to its terms, deductible(s), limitations' ' and exclusions. Plan Benefits provided by the Employee Benefit Plan that are specifically excludedby this Policy are not considered Covered Expenses. Covered Expenses shall not include any expenses which are not reimbursable under this Policy,such as: 1. The expenses related to processing claim payment,or 2. PPO discounts, network or negotiated discounts,and other reductions from billed charges,whether or not they were actually deducted from Plan Benefits,or 3. Salaries paid to any individual,or 4. Plan Supervisor's fees,or 5. Litigation expenses,or 6. Premiums paid for coverage under this Policy. COVERED FAMILY. The Covered Person and his or her dependents covered under the Employee Benefit Plan. COVERED PERSON. If so indicated on the Application, an individual covered-under the Employee Benefit Plan. This includes: 1. Legally employed covered employees,and 2. Covered dependents,and 3. Participating COBRA Beneficiaries,and 4. Retirees. COVERED UNITS. A Covered Person, a Covered Family, or such other defined unit as-agreed upon between You and Us in writing. DEDUCTIBLE. The amount of Covered Expenses You must pay before Aggregate Stop Loss Insurance and/or Specific Stop Loss Insurance benefits become reimbursable. The Deductible(s)is/are shown on the Application issued to You. See also: 1. Annual Aggregate Deductible,and 2. Specific Deductible,and 3. Specific Family Deductible. ELIGIBLE. Eligible under the Employee Benefit Plan. EMPLOYEE BENEFIT PLAN. The medical benefits You have agreed to provide under a plan of benefits for Your Eligible employees and their Eligible dependents, whether or not it is subject to the Employee Retirement Income Security Act of 1974, as is or as may be amended. HCCL MSL-2010 3 EXPERIMENTAL AND INVESTIGATIVE. A drug,device or medical treatment or procedure is Experimental or Investigative: 1. If the drug or device cannot be lawfully marketed without approval of the U.S. Food and Drug Administration and approval for marketing has not been given at the time the drug or . device is furnished,or 2. If reliable evidence shows that the drug,device or medical treatment or procedure is the . subject of ongoing Phase I, II or III clinical trials or under study to determine Its: a. Maximum tolerated dose,or b. Toxicity,or C. Safety,or d. Efficacy,or e. Efficacy as compared with the standard means of treatment or diagnosis,or 3. If reliable evidence shows that the consensus among experts regarding the drug,device or medical treatment or procedure is that further studies or clinical trials are necessary to determine its: a. Maximum tolerated dose,or b. Toxicity,or C. Safety,or d. Efficacy,or e. Efficacy as compared with the standard means of treatment or diagnosis. Reliable evidence shall mean: 1. Only published reports and articles in the authoritative peer reviewed medical and scientific literature,or 2. The written protocol or protocols used by the treating facility or the protocol(s)of another facility studying substantially the same drug,device or medical treatment or procedure,or 3. The written informed consent used by the treating facility or by another facility studying substantially the same drug,device or medical treatment or procedure. INCURRED. The date on which medical care or a service or supply is provided to.a Covered Person for Plan Benefits under the Employee Benefit Plan for which a charge results. LARGE CLAIM DISCLOSURE.You,with the assistance of Your Plan Supervisor,agree-to disclose to us any known or potential shock losses. Shock Losses are: 1. Injuries,and 2. Illnesses,and 3. Diseases,and 4. Diagnoses,and 5. Any condition listed on the Trigger Diagnosis list,and 6. Other losses of the type,which are reasonably expected or are likely to result in significant medical expense or liability. LOSS LIMIT. The maximum amount of Covered Expenses Incurred by each Covered Person(or Covered Family), which can be used to satisfy the Annual Aggregate Deductible. This amount is shown in the Application. The maximum allowable amount of Covered Expenses by a Covered Person who has been assigned a Separate Individual Specific Deductible will be the specified amount as shown under the Loss Limit on the Application,regardless of that Covered Person's Separate Individual Specific Deductible. HCCL MSL-2010 4 MEDICALLY NECESSARY. A procedure,treatment,service,supply,equipment, drug or medicine that is: 1. Deemed appropriate,essential and is recommended for the diagnosis or treatment of the Covered Person's symptoms by a licensed physician,dentist or other medical practitioner who is practicing within the scope of his or her license and specialty or primary area of practice,and 2. Within the scope,duration and intensity of that level of care which is required to provide safe,adequate and appropriate diagnosis or treatment,and 3. Prescribed in accordance with the generally accepted,current professional medical practice and is not considered Experimental or Investigative. MINIMUM ANNUAL AGGREGATE DEDUCTIBLE. For each Contract Period, the-number of Contract Months times the Monthly Aggregate Factor times the number of Covered Units. Covered Units shall be based on the first month's enrollment or the quoted enrollment whichever is greater. The Minimum Annual Aggregate Deductible as shown on the Application is based on the quoted enrollment and it is subject to change if the first month's enrollment is greater. MONTHLY AGGREGATE DEDUCTIBLE. The Monthly Aggregate Deductible is determined for each Contract Month by multiplying the number of Covered Units for that month by the applicable Monthly Aggregate Factor(s)shown on the Application. MONTHLY AGGREGATE FACTOR. The amount specified in the Application. MONTHLY SPECIFIC PREMIUM RATES. The amounts specified in the Application. NET PAID CLAIMS. The sum of Covered Expenses Paid during the Policy Year by You less the sum of all amounts paid by You that exceeds the Loss Limit of any Covered Person(s). ORIGINAL EFFECTIVE DATE. The first day of the Contract Period of Your initial Stop Loss Policy with Us subject to any Run-in Period as shown on the Application. If coverage has not been continuous with Us,then the Original Effective Date shall be the first day of the most recent continuous coverage. PAY,PAID, PAYMENT. Charges that,as of the dates shown in the Contract Basis,are: 1. Covered and payable under your Employee Benefit Plan,and 2. Have been adjudicated and approved,and 3. A check or draft for remuneration is issued and deposited In the U.S. Mail,or other similar conveyance or is otherwise delivered to the payee,and 4. Sufficient funds are on deposit the date the check or draft is issued. Our reimbursements will not be made until all of these conditions are satisfied. Checks or drafts that are returned to the payor unpaid for any reason will not be considered Paid. PLAN BENEFITS. The medical expense benefits to which Covered Persons become entitled under the Employee Benefit Plan during the Policy Year which are: 1. Incurred after the effective date of this Policy or the first date of the Run-In Period,and 2. Incurred while this Policy is in-force,and 3. Paid during the Policy Year or before the end of the Run-Out Period. Plan Benefits do not include: i. Deductibles,or 2. Co-insurance amounts,or 3. Interest,or 4. Expenses,or 5. The amounts of any PPO discounts, network or negotiated discounts, or any other reductions to billed charges,whether or not they were actually deducted,and HCCL MSL-2010 5 6. Claims paid under an Employee Benefit Plan's discretionary clause or similar provision that would not otherwise be payable.under the terms and conditions of the Employee Benefit Plan,and 7. Claims that are not covered under the terms and conditions of the Employee Benefit Plan or that are reimbursable from any other source. An Employee Benefit Plan expense Is Incurred at the time the serviced is rendered or the supply is provided. PLAN DOCUMENT. The written document evidencing Your Employee Benefit Plan including any amendments. You will provide Us with a copy of Your Plan Document that is in effect as of the Policy effective date. Amendments are subject to Article VI, Item D and Article VII, Item A.3.a of this Policy. We will provide written confirmation of receipt of this Plan Document. The Plan Document does not waive of any provisions of this Policy. PLAN SUPERVISOR (TPA). The person or entity selected by the Plan Sponsor and approved by Us to perform administrative services for the Employee Benefit Plan,including payment of claims. POLICY YEAR. The period beginning on the effective date and ending on the expiration date as shown on the face page of this Policy,or the actual period of time during which the Policy is in force ff the Policy terminates prior to the expiration date. POLICYHOLDER. Employer, Insured,You,Your or Plan Sponsor. REASONABLE AND CUSTOMARY CHARGE. Charges for medical expenses, including but not limited to, physician services, hospital supplies, hospital bed rates, drugs, ancillary services and durable medical equipment usually made by such providers in the same geographical area using nationally and regionally adjusted data. RUN-IN PERIOD. The period of time as defined under the Contract Basis on the Application during which claims for Plan Benefits may be Incurred provided they are Paid during the Contract Period. RUN-OUT PERIOD. The period of time as defined under the Contract Basis on the Application during . which claims for Plan Benefits may be Paid provided they were Incurred during the Contract Period. SPECIFIC CONTRACT PERIOD REIMBURSEMENT MAXIMUM. The maximum amount of Covered Expenses We will reimburse You in each Contract Period for any one Covered Person (or Covered Family). This amount shall not exceed the amount shown as the Specific Contract Period Reimbursement Maximum on Your Application, or any maximum benefit amount or limit defined in Your Employee Benefit Plan,whichever is less. SPECIFIC DEDUCTIBLE. If a Specific Deductible is shown on the Application, this is the amount of Covered Expenses that must be Paid by the Employee Benefit Plan for any Covered Person before Specific Stop Loss Insurance benefits are reimbursable under the Policy. It applies separately for each Policy Year and will be determined annually by Us. SPECIFIC FAMILY DEDUCTIBLE. if a Specific Deductible is shown on the Application per a Covered Family,this is the amount of Covered Expenses which must be Paid by the Employee Benefit Plan for any Covered Family member or combination of Covered Family members before Specific Stop,Loss Insurance benefits are reimbursable under the Policy. It applies separately for each Policy Year and will be . determined annually by Us. SPECIFIC PERCENTAGE REIMBURSABLE. The percentage of Covered Expenses to be reimbursed that were Paid under the Employee Benefit Plan in excess of the Specific Deductible. ARTICLE II. SPECIFIC STOPLOSS INSURANCE A. Subject to the terms, conditions and limitations of this Policy, We will reimburse You for Covered Expenses Paid in excess of the Specific Deductible(or Specific Family Deductible). HCCL MSL-2010 8 dX y V , c . B. We will not reimburse you for any amounts after the Specific Contract Period Reimbursement Maximum has been reached. C. We will not reimburse You for Plan Benefits Incurred after the Policy's expiration date. D. If the Policy terminates before the expiration date, Plan Benefits paid after the date of termination will not be eligible for reimbursement. E. Plan Benefits Paid by You which have been reimbursed by Us under Your Aggregate Stop Loss Insurance or by another insurance company or reinsurance company will not be used to: 1. Satisfy the=Specific Deductible(or the Specific Family Deductible),or 2. Compute Specific Stop Loss Insurance benefits payable to You. F. The Monthly Specific Premium Rates shown on the Application apply only to the Policy Year shown therein. New Monthly Specific Premium Rates will be furnished for each new Policy Year and will be shown on a new Application provided for each Policy Year. ARTICLE III. AGGREGATE STOP LOSS INSURANCE A. Subject to the terms, conditions and limitations of this Policy, We will reimburse You for Eligible Covered Expenses Paid,less: 1. The Annual Aggregate Deductible or the Minimum Annual Aggregate Deduotible, whichever is greater,and 2. Specific Stop Loss reimbursements due or paid to You,and 3. Any amounts paid by you that exceeds the Loss Limit for any Covered Person (or Covered Family). B. We will not reimburse you for any amounts after the Aggregate Contract Period Reimbursement Maximum has been reached. C. We will not reimburse You for Plan Benefits Incurred after the Policy's expiration date. D. If the Policy terminates before the expiration date, any Plan Benefits paid after the date of termination will not be eligible for reimbursement. E. Plan Benefits Paid by You which have been reimbursed by Us under Your Specific Stop Loss Insurance,by another insurance company or reinsurance company will not be used to: 1. Satisfy the Annual Aggregate Deductible or the Minimum Annual Aggregate Deductible,or 2. Compute the Aggregate Stop Loss Insurance benefits payable to You. F. Plan Benefits Paid by You which exceed the Specific Contract Period Reimbursement Maximum for Specific Stop Loss Insurance as shown on the Application will not be used to: 1. Satisfy the Annual Aggregate Deductible or Minimum Annual Aggregate Deductible,or 2. Compute the Aggregate Stop Loss Insurance benefits payable to You. G. Reimbursement for Aggregate Stop Loss Insurance for any Covered Person(or Covered Family) will be limited to an amount not to exceed the Specific Deductible(or Specific Family Deductible) or the Loss Limit,whichever is less,as set forth in the Application. H. The Monthly Aggregate Factors) shown on the Application apply only to the Policy Year shown therein. New Monthly Aggregate Factors will be furnished for each new Policy Year and will be shown orra new Application provided for each Policy Year. I. The Monthly Aggregate Deductible cannot be reduced by more than 10% per month if the number of Covered Persons decreases for any reason. If any Covered Persons are absent from work due HCCL MSL-2010 7 to a strike,lockout,or work stoppage during any Contract Month,the number of Covered Persons will remain at the same level as for the Contract Month preceding the disruption. ARTICLE IV. CLAIMS UNDER THE POLICY A. Specific Claims 1. We will reimburse You for Specific Stop Loss Insurance, subject to the terms, conditions and limitations of this Policy, only after We receive a request for reimbursement•with complete claim information. 2. The following documentation is required to file a Specific Stop Loss claim: a. Specific Claim Notification/Initial Filing form,and b. A copy of the employee's enrollment card, including the employee's hire date and the original effective date,and C. A copy of the Plan Supervisor's claim form if the claim Is for a dependent,and d. Complete details regarding eligibility,and if applicable,information regarding work status, pre-existing I HIPAA documentation, subrogation, Coordination of Benefits, provider discounts and COBRA,including a copy of the COBRA election form and COBRA payment verification for all months,and e. Copies of Explanations of Benefits attached to the corresponding itemized bills, and f. Check copies, if not part of an Explanation of Benefits,and g. Completion of the Specific Supplemental Claim Request portion of the claim form if applicable,and h. Miscellaneous information as applicable,including but not limited to: i. Complete accident details; including how, when and where an accident may have occurred,and ii. Police reports for motor vehicle accidents or for services for which a law enforcement agency is involved, and iii. A Subrogation and Right. of Recovery Reimbursement Agreement if charges were Incurred as a result of a third party liability,and iv. Coordination of benefits documentation,and V. PPO discount /repricing sheets,and vi. Large Case Management Reports,and i. Other documentation We may request. 3. [LATE CLAIMS: Any claim that is either submitted,or that remains incomplete,more than 90 days after the last date for which Plan Benefits can be reimbursed under the terms of the Policy will be denied,whether or not the delay has prejudiced Us. Your or Your Plan Supervisor's failure to file a complete claim in a timely manner may result in an adjustment,of Our reimbursement to You to reflect any savings We could have obtained had a timely claim filing taken place pursuant to this provision.] OR [LATE CLAIMS: Satisfactory proof of loss must be provided to the Company within a 0 reasonable amount of time after the 50% Notification or Large Claim Disclosure is received.] 4. [50% NOTIFICATION:You or Your Plan Supervisor must give notice to Us when the total amount of Plan Benefits Paid by You on a Covered Person equals or exceeds 50%of the Specific Deductible, or has the potential to exceed 50% of the Specific Deductible. Your failure to give prompt notice may result in an adjustment of Our reimbursement to You, if any, to reflect any savings We could have obtained had a prompt 50% Notification been given.] OR [50% NOTIFICATION: You or Your Plan Supervisor must give notice to Us when the total amount of Plan Benefits Paid by You on a Covered Person equals or exceeds 50%of the Specific Deductible, or has the potential to exceed 50%of the Specific Deductible. There HCCL MSL-2010 8 is no specific coverage of a claim if written notice of the pending claim is not received by HCC Life within 12 months after the end of the Policy Year.] B. Aggregate Claims 1. We will reimburse You for Aggregate Stop Loss Insurance, subject to the terms, conditions and limitations of this Policy, only after We receive a request for reimbursement with Complete Claim History. 2. The following documentation is required to file an Aggregate Stop Loss claim: a. Completed Year End Aggregate Claim Form,and b. Paid Claims Analysis report indicating claimant's name, Incurred date, charged amount, Paid amount and Paid date,and C. Eligibility listing which identifies birth date, effective date, termination date and coverage type,and d. Proof of funding to include bank statements and/or deposit slips,and e. Void&Refund report,and f. Benerit/Service Code report,and g. Aggregate Report(Monthly Loss Summary Reports),and h. Specific Report showing which claimants have exceeded the Specific Deductible or Loss Limit,and L Listing of payments made outside the Aggregate Stop Loss Insurance (i.e. Dental, Weekly Income, Vision, PPO fees capitated and, PCS Administrative Fees),and J. Check Register,and k. Outstanding overpayment and subrogation log,and I. Prescription invoices if Prescriptions are covered under the Aggregate Stop Loss Insurance,and M. Other documentation We may request. We may also request this information the month following the expiration date of the Policy to review for retroactive adjustments. 3. Any reimbursement payable by Us to You, under this article,will be paid after the end of the Contract Period,unless otherwise endorsed. 4. CLAIM FILING: You must file a request for reimbursement with Us on Our customary Notice/Proof of Loss form within 90 days after the end of the time specified for payment of claims under this Policy. Your failure to file a claim within 90 days will result In claim denial,whether or not the delay has prejudiced Us. 5. DETERMINATION OF THE ULTIMATE AGGREGATE CLAIM: You must submit a Proof of Loss within 90 days of the end of the Policy Year or Run-Out Period,whichever is later, showing the amount of all Plan Benefits Eligible under the Employee Benefit Plan and this Policy which You have Paid. These shall be compared to the greater of the Annual Aggregate Deductible or the Minimum Annual Aggregate Deductible. If the amount of Net- Paid Claims eligible under this policy is greater than the appropriate Annual Aggregate Deductible,We will reimburse You for the amount of the excess. C. All Claims 1. REIMBURSEMENT OF CLAIMS: Prior to making any reimbursement,We have the right to review each claim submitted to Us to determine if You are entitled to any reimbursement under this Policy. This review may include, but is not limited to;an on-site: audit or requests for additional documentation. You warrant that You have Paid the providers of Plan Benefits for which reimbursement is sought. 2. SETTLEMENT OF PLAN CLAIMS: We have no duty or obligation to settle or adjust any claims for Plan Benefits filed under Your Employee Benefit Plan. HCCL MSL-2010 9 `N 3. RIGHT OF.RECOVERY. If You are-entitled to recover from any party Plan Benefits Paid under the Employee Benefit Plan, such amounts cannot be used to satisfy either the Specific and / or Aggregate Deductibles. We also will not reimburse You for any Plan Benefit recovered from any party. If We have reimbursed You for all or part.of a Plan:- Benefit laneBenefit and You recover any part of the Plan Benefit from any party, You must repay Us. to the extent of Our reimbursement regardless of whether the policy is still in-force on the date of the recovery. You must reimburse Us first, and in full, before You receive any _. benefit of the recovery. We retaln the right to employ our own independent counsel and You assign to us Your rights and the Employee Benefit Plan's rights to the extent of Our reimbursement(s)to You. In the event that You reimburse Us in the matter where Our designated counsel is not involved, Your repayment may be reduced by the reasonable and necessary expenses incurred in recovering from the third party. If You fail to reimburse Us for a valid claim for a Covered Expense against a third party, and We are required to reimburse You for such a Covered Expense, We shall be subrogated to Your rights to pursue the claim. Any amount We recover shall first be used to pay Our expenses of collection and then apply towards any amount that We reimbursed You under the policy. Any remaining amount will be paid to You. You are required to provide Us with such information as We request in order to protect• Our right to reimbursement. 4. CLAIMS ELIGIBLE UNDER TWO CONTRACTS. If a claim for reimbursement can be filed under two different policy years,it must be filed under the earlier policy year. HCCL MSL-2010 10 ARTICLE V. LIMITATIONS OF COVERAGE A. This Policy is between You and Us. No other party has any rights under this.Pollcy. B. . Coverage for Plan Benefits Incurred for an employee who is not actively'at work as a result of sickness, accidental bodily Injury, maternity, military service, personal reasons; lay-off, strike,,or any other leave of absence (either before or after the effective date of the:Policy), or the employee's covered dependent(s), unless the employee or dependent(s) :are recelViing continuation benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as amended,shall be limited to the length of time specified in the Plan Document. C. All Plan Benefits Incurred outside the United States of America will be excluded from coverage unless: 1. The service(s)would have been a Covered Expense if the service(s)had been provided in the United States,and 2. The Covered Person is not covered by any other country's national health care'program or any employers foreign voluntary compensation coverage. ARTICLE VI. EXCLUSIONS WE will not reimburse YOU for: A. Plan Benefits covered by amendments to the Employee Benefit Plan that were incurred prior to Our written approval of such amendments. B. Plan Benefits that are covered under any Coordination of Benefits provision. We may elect to reduce or deny any reimbursement which may be payable to You, to the extent that a payment may be made by another insurer, another Employee Benefit Plan or any other party,to either the-- Employee Benefit Plan or Covered Person. This provision is applicable irrespective of•how such payment is characterized and whether or not payment has actually been made for any or all of the Covered Person's losses. C. Plan Benefits paid for any surgery, prescription drugs, device, or procedure, which is defined as Experimental or Investigative and any complications or other expenses arising thereto. D. Plan Benefits Incurred by or on behalf of an employee or dependent of-an employee of any affiliated or subsidiary company not included in the Application, unless added by Policy endorsement. ARTICLE VII. GENERAL PROVISIONS A. CHANGES AND TERMINATIONS OF THE POLICY 1. Your Policy may be changed at any time with Our written consent. 2. Only an officer of The Company has the authority to alter this Policy,or to waive any of Our rights or requirements,and then only by written endorsement. 3. We reserve the right to change any Specific or Aggregate Premium Rates and Monthly Aggregate Factors with written notice to You as to the extent and effective date of the change at any time during Your Policy Year if: a. Your Employee Benefit Plan is changed,or b. The number of Covered Units Eligible under Your Policy: i. Drops below 15,or HCCL MSL-2010 11 w Nr � ii. Increases or decreases by 15%from the number of Covered Units on the first day of the Contract Period,or ill. Increases or decreases by 10% in any Contract Month from the prior Contract Month. C. If we have agreed to reduce the Monthly Aggregate Factors,the Minimum Annual Aggregate Deductible and / or the Monthly Specific Premium Rates in consideration of Your agreement to implement a Cost Containment Program,we may recalculate in accordance with Our normal practice, the Monthly Aggregate Factors,the Minimum Annual Aggregate Deductible and/or the Monthly Spdcific Premium Rates if you have not followed the procedures relating to the Cost Containment Program as defined In Our agreement. d. Upon the enactment of any law,regulation or amendment thereto, by any state or jurisdiction, which affects our liability under this Policy, and in Our judgment; requires such a change. 4. You may terminate the Policy by giving Us not less than 31 days written notice. 5. We may terminate this Policy prior to the end of a Contract Period by giving you 31 days written notice if You fail to comply with any provision of the Policy. 6. We may terminate this Policy at the end of the Contract Period by giving You 31 days written notice of such termination. 7. All insurance provided hereunder to You will automatically terminate: a. At the beginning of any Contract Month for which any premium for either Specific or Aggregate Stop Loss Insurance has not been paid in full by the end of the . grace period,or b. On the date You fail to Pay claims promptly or make funds available to Pay claims promptly as required by this Policy,or C. On the date Your agreement with Your Plan Supervisor is terminated,or d. On the date You change Your Plan Supervisor before obtaining Our written consent for a successor Plan Supervisor,or e. On the date Your Employee Benefit Plan terminates or ceases to accept newly Incurred claims,whichever is earlier,or on the date You obtain other coverage for. Your Employee Benefit Plan participants,or f. On the date You terminate the Policy for any reason prior to the end of the Contract Period. In this event, We will not be liable for any Plan Benefits Paid after the termination date,or g. At the end of the Contract Period unless You accept in writing Our terms for renewal of the Stop Loss Insurance before the and of the Contract Period,or h. On the expiration date of this Policy. B. AMENDMENTS TO THE PLAN: You must give Us at least 31 days written notice of any proposed amendments to Your Employee Benefit Plan. No amendment to Your Employee Benefit Plan will be binding on Us until We have approved the amendment in writing. C. ARBITRATION: Any controversy or dispute, involving Us that arises out of or relates to this Policy, shall be settled by arbitration in accordance with the rules of the American Arbitration. Association. Judgment upon the award rendered by the arbitrators may be entered In any court having jurisdiction. This provision shall survive the termination of this Policy. D. ASSIGNMENT: You may not assign any of Your rights under this Policy without Our prior written consent. E. CLERICAL ERROR: Our obligations under this Policy will not be expanded by any clerical error whether by You or Us in creating or maintaining records or calculating rates, factors, premiums, deductibles or claims pertaining to this Policy. A clerical error is a mistake in performing a clerical function, such as typing, but does not include intentional acts or the failure to comply with the provisions of the Employee Benefit Plan or Policy. HCCL MSL-2010 12 '�`•.ter F. CONCEALMENT OR MISREPRESENTATION: This Policy Is issued based upon Our understanding that You, Your Plan Supervisor and your agent or broker have provided to Us a Complete Claims History. The Policy will be void if We find that You, your Plan Supervisor-and your agent or broker have concealed or misrepresented any material fact or circumstance concerning this coverage or the Employee Benefit Plan's Complete Claims History, whether-, intentional or not. Our liability will be limited to return of the premium paid by You after deducting the amount of the reimbursements made by Us to You prior to the date of termination. If they amount of reimbursements paid to You exceeds the premium paid to Us, You will pay Us the difference. If We find that You, Your Plan Supervisor, your agent or broker have not provided to Us a Complete Claims History, We may;'at Our option, either rescind the policy or re-underwrite coverages under this Policy,using all claims data available to Us. G. CONFORMITY WITH STATE AND FEDERAL LAW: Any provision of this Policy, which, on its effective date, is in conflict with the laws of the state of jurisdiction or which is mandated by Federal law,is hereby amended to conform to the minimum requirements of said laws. H. COST CONTAINMENT PROGRAM:We have the right to participate, at Our option and expense, in any savings or Cost Containment Program that You have in place. If no such program exists, We have the right to retain the services of a third party to implement a,Cost Containment Program. I. DISCLAIMER: We act only as an insurer to You. We are not a fiduciary or a party-fn interest to the Employee Benefit Plan or any participant. We do not assume any duty to perform any of the functions of,or to provide any of the reports required by,You by the Employee Retirement Income Security Act of 1974, as amended or any other applicable state or federal law. We assume no responsibility or obligation for the administration of Your Employee Benefit Plan or Your acts. We reserve the right to determine amounts payable under this Policy without regards to such acts. J. ENDORSEMENTS: Any endorsements attached or subsequently issued by us shall become a part of this Policy. K. ENTIRE AGREEMENT: This Policy and any attached endorsements, Your-attached,Application. and your Plan Document are the entire agreement between You and Us. .We have relied upon the underwriting information(including Complete Claims History and the Plan Document)provided by You in issuing this Policy and You represent such information is complete and accurate. Should We later learn such information was incomplete or incorrect, We have the right to modify the Policy as of the effective date to reflect the complete or correct information or to terminate the Policy. HCCL MSL-2010 13 I =..�T14 L. INDEMNIFICATION, DEFENSE AND HOLD HARMLESS: You agree to indemnify, defend and hold Us harmless from any liability, including but not limited to, interest, penalties, attorney fees, extra contractual,exemplary or punitive damages('expenses")arising from or relating to: 1. Any negligence,error,omission,defalcation or intentional acts by your Plan Supervisor,or 2. Any dispute Involving Covered Person(s), former Covered Person(s), or any person(s) claiming entitlement to benefits under the Employee Benefit Plan,or 3. Any taxes We are assessed with respect to funds paid to or by You under Your Employee Benefit Plan,except any taxes or amounts paid to Us as premiums for this Policy. We will promptly notify You upon discovery of matters to which Your obligations under this provision apply. We have the right to participate in the defense at Our expense. Without limiting the foregoing, if You fail to defend timely, We have the right, but not the duty, to defend and to compromise or settle the claim or other matters on Your behalf,for Your account and at Your risk. M. INSOLVENCY: In the event of Your insolvency or bankruptcy, subject to the terms; conditions and limitations of this policy, We may pay to Your receiver, trustee, liquidator or legal successor amounts otherwise payable under this Policy. We will make such paymeAts only if You have Paid all required premiums and have complied with Your obligatlons under this Policy Nothing in this section shall increase Our liability beyond that which would have existed had You not become insolvent or bankrupt. N. LEGAL ACTION: No legal action can be brought to recover under this Policy: 1. Until 60 days after the date a reimbursement claim Is submitted,or . 2. Two years after the date a reimbursement claim is required to be furnished. You shall notify Us in writing within 10 days after receipt of any objection, notice of legal action or complaint regarding Your handling of a claim. O. NOTICE: Notice under this Policy will be given to You through Your Plan Supervisor and will be deemed to have been received by You. P. OFFSET: We may offset payments due to You under this Policy against clalms overpayments, cost containment charges and premiums due and unpaid. Q. PAYMENT OF PREMIUMS: 1. Each premium is payable to HCC Life Insurance Company,P.O.Box 402032,Atlanta,GA 30384-2032 or such other place as We designate in writing. 2. Specific Stop Loss Insurance premiums are due on the first day of each calendar month, regardless of the effective date of the Policy. If the effective date is other than the first day of a calendar month,the first month's premium will be pro-rated. 3. Aggregate Stop Loss Premlum(s) are due monthly or are payable in advance for the Policy Year,as stated in Your Application. 4. A grace period of 31 days is allowed for the payment of each premium after the first premium. If the premium is not paid during the grace period, the Policy will terminate without further notice as of the premium due date. 5. If we terminate this Policy for non-payment of premium, application may be made for reinstatement. All outstanding premiums, including the current month's premium, must be remitted within 10 days of the end of the grace period. HCCL MSL-2010 14 a Payment of premiums shall not guarantee reinstatement of the Policy. We-reserve the" right to conduct a diligent review of the Complete Claims History and re-underwrite the Policy as We deem necessary as part of the terms for reinstatement. If the Policy is terminated more than one time during a Policy Year for non-payment, no requests for reinstatement will be granted. 6. In no event, will more than three (3) months of retroactive credit be granted for any clerical errors)in the remittance of any premium. R. POLICY NON-PARTICIPATING:This Policy is non-participating and does not entitle You to share in Our earnings. S. RECORDS: You and/or Your Plan Supervisor will maintain such records as may be required by Us for this Policy and will make them available to us upon Our request. These records may include, but are not limited to, the Complete Claims History. We may audit Your records relating to this Policy and the claims filed under the Employee Benefit Plan at any time during the Policy. Year and for two years after the expiration date of such Policy. Your records will include records held by You or by Your Plan Supervisor. As a result of any audit,We may readjtjst your Monthly Specific Premium Rates, Monthly Aggregate Factors, premiums, deductibles or expenses as may- be necessary to reflect Our original intent in underwriting this Policy. T. RENEWAL: Unless terminated for any of the reason(s) described in this Policy, Your insurance will be renewed for another Policy Year if You accept Our renewal terms. We will not change rates more than once in any Policy Year, except as allowed under the Changes and.Termination Provisions in Article VII. We reserve the right to change the renewal premium rates and Monthly Aggregate Factors for the new Contract Period if the average monthly payments made by You for Plan Benefits during the last two months of the current Policy Year vary by more than 30%from the average of the monthly, payments made for Plan Benefits during the previous ten(10)Contract Months. We will not offer a renewal if We are no longer doing business with Your Plan Supervisor. U. SUBSIDIARIES AND AFFILIATED COMPANIES: You must notify Us in the event You acquire a subsidiary or affiliated company that will be included under Your Employee Benefit Plan. If You do acquire a subsidiary or affiliated company that will be included under Your Employee Benefit Plan, You must disclose certain claims information on the acquired subsidiary as awhole and /or on persons whose coverage You will be assuming under Your Employee Benefit Plan. Failure to do so will subject benefits under this Policy to certain limitations, as described under the ENTIRE AGREEMENT provision of this Article. Acquisition of a subsidiary or affiliated company that will be included under Your Employee Benefit Plan may affect Your Monthly Specific Premium Rates and/or Monthly Aggregate Factors, as described In the CHANGES AND TERMINATIONS provision of this Article. You must notify Us in the event You cede or dissolve a subsidiary or affiliated company that was included under your Employee Benefit Plan. Failure to do so may subject this Policy to termination or may affect Your Monthly Specific Premium Rates and/or Monthly Aggregate Factors as described in the CHANGES AND TERMINATIONS provision of this Article. V. TAXES: You shall hold Us harmless from any taxes, which may be assessed against Us with respect to Your Employee Benefit Plan or with respect to claims for Covered Expenses paid under the Policy,and You shall reimburse Us for such taxes, if any,as determined by Us. W. YOUR DESIGNATED PLAN SUPERVISOR (YOUR TPA). We agree to recognize Your Plan Supervisor as Your agent and attorney-in-fact for the administration of Your Employee Benefit Plan. You agree that: HCCL MSL-2010 is z A r„ 1. Your Plan Supervisor is Your agent and attorney-in-fact, and is not Our agent. You authorize Your Plan-Supervisor to act in Your name, place and stead for purposes of this Policy, to include submission of proofs of loss, certifying the Payment of Plan Benefits, transmitting reports and payments of premiums to Us and receiving reimbursements from Us. Payments sent by Us to Your Plan Supervisor are payments to You. Premium payments by You through Your Plan Supervisor will be payments to Us only to the extent We actually receive them. 2. You or Your Plan Supervisor is responsible for administering Your Employee Benefit Plan, preparing reports as required by Us and keeping and making available to Us such data as We may require. 3. You or Your Plan Supervisor will perform such duties and keep such records as are required for You to comply with this Policy. 4. You will pay Your Plan Supervisor for all administrative functions performed in relation to this Policy. 5. We reserve the right to cease doing business with Your Plan Supervisor. HCCL MSL-2010 16