Alabama Rural Electric Cooperative Self-Insured Plan (ARECSIP) Overview

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The Alabama Rural Electric Cooperative Self-Insured Plan (ARECSIP) was established in July 1993 and is one of 17 Group Self-Insured Funds in Alabama with 22 participants. With assets totaling $16,878,820 and liabilities of $4,810,734, ARECSIP has recognized contributions of $49,827,190 since inception. The plan has incurred claims costs of $23,330,257 through December 2014, resulting in a loss ratio of 46.82%. Administrative costs, reinsurance, and contributions to loss control and regulatory compliance programs have been key aspects of ARECSIP's operations.

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2015 AREA 2015 AREA Annual Meeting Annual Meeting Montgomery, Alabama Montgomery, Alabama April 14, 2015 April 14, 2015

2015 AREA ANNUAL MEETING 2015 AREA ANNUAL MEETING ** Alabama Rural Electric Cooperatives Self-Insured Pool ** Electric Cooperative Health Benefits Plan

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Inception July 1993 Today we are 1 of 17 Group Self Insured Funds in Alabama 22 participants -- AREA -- 20 distribution cooperatives -- 1 co-op subsidiary {Wheeler Basin Natural Gas}

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Assets = $16,878,820 Liabilities = $4,810,734 Equity = $12,068,085

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Since inception through December 2014 Recognized contributions of $49,827,190 Paid claims expense of $22,041,188 Set reserves for open claims of $1,289,069 Resulting in total incurred claims cost of $23,330,257

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Since inception through December 2014 3,313 claims Incurred claims cost of $23,330,257 Loss Ratio = 46.82%

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Since inception through December 2014 Administrative Costs $13,558,142 (27.21% of collected contributions) -- 55.6% Reinsurance ($7,542,313) -- 16.5% Contribution to the AREA Loss Control & Regulatory Compliance Programs ($2,235,796) -- 9.8% Administrative Fees & Royalties paid to AREA ($1,332,793)

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Retrospective Retrospective Refund Refund Since inception ARECSIP has returned $6,315,279

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Items to Note * The Pool has achieved low loss ratios for the past four years -- Ranging 15.45% (2013) 36.69% (2011) -- 2010 ( 3rdworst loss ratio since inception) -- loss ratio of 80.76% -- Two claims costs over $1,500,000 - contact w/ amputation - head injury

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Items to Note In the 21 years of operating * One Permanent Total Claim -- Fall from Pole in 2008 -- Cost of $1,052,520 * Four Deaths have occurred -- One due to electrical contact -- Two due to traffic issues -- One due to a fall & blood clot

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Items to Note -- The Pool currently has a $1 million attachment on all claims -- The contribution rates for 2015 showed a 8% reduction from the 2014 rates

ALABAMA RURAL ELECTRIC COOPERATIVE SELF ALABAMA RURAL ELECTRIC COOPERATIVE SELF INSURED PLAN (ARECSIP) INSURED PLAN (ARECSIP) Credit for Success of Program Credit for Success of Program 1) Focus on safety at cooperatives (the Board to entry-level co-op employee) 2) Hard work of the AREA safety program (Michael Kelley, Brandon Betterton, Keith Twitty and Jeff Whatley) 3) Luck

ELECTRIC COOPERATIVE HEALTH BENEFITS PLAN

ELECTRIC COOPERATIVE HEALTH BENEFITS PLAN Inception May 2008 May 2008 1,127 contracts 2,615 covered lives 12 participating entities Today 1,962 contracts 4,948 covered lives 18 participating entities

ELECTRIC COOPERATIVE HEALTH BENEFITS PLAN ECHIP Participants Alabama Rural Electric Association * Joe Wheeler EMC Alabama Rural Electric Credit Union * Pea River EC Black Warrior EMC Central Alabama EC * CHELCO Coosa Valley EC* Covington EC * Cullman EC * Gulf Coast EC Pioneer EC * PowerSouth Energy * Southern Pine EC * Tallapoosa River EC * Tombigbee EC * West Florida EC Wiregrass EC *

ELECTRIC COOPERATIVE HEALTH BENEFITS PLAN Snapshot of Our Plan Employees (1,962) 39.65% 353 Males w/ Individual Coverage 1,068 Males w/ Family Coverage 234 Females w/ Individual Coverage 307 Females w/ Family Coverage Dependents (2,986) 60.35% 258 Male Spouses 1,003 Female Spouses 880 Male Dependents 845 Female Dependents

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN LOSS RATIO 2014 Loss Ratio = 74.77% (Best since inception) Claims cost = $16,670,958 Contributions collected = $22,295,245

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN LOSS RATIO Since Inception (May 1, 2008) Loss Ratio = 85.88% Claims cost = $91,426,773 Contributions collected = $106,457,445

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN Breakdown of Claims Costs Medical/Surgery - $24,928,227 (27.32%) Prescription Drugs (net) - $24,138,361 (26.45%) Outpatient Facilities - $18,573,546 (20.36%) Inpatient Facilities - $15,785,614 (17.30%) Major Medical - $7,348,203 (8.06%) Mental Health - $379,335 (0.42%) Out of Network Fees - $94,363 (0.10%)

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN Administrative Expenses 2014 2014 -- -- $1,937,128 (8.69%) $1,937,128 (8.69%) Since Inception Since Inception - - $9,828,978 (9.23%) $9,828,978 (9.23%) -- Reinsurance (attachment of $200,000) $4,031,021 (41.01%) -- Claims Administration (BCBS) $4,166,866 (42.39%) -- Administrative Payments to AREA $401,950 (4.09%)

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN FOR 2015 Projected Funding for the year = $23,999,615 $1,999,968 per month Rates were reduced between $8 - $163 monthly depending on the Plan chosen

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN Affordable Healthcare Act Affordable Healthcare Act Direct costs as of December 2014 = $177,250 Direct costs as of December 2014 = $177,250 * July Patient Centered Outcomes Research Fee ($2/covered life) * November Transitional Reinsurance Program Fees ($63/covered life) $25 BILLION in three years Pounds of paperwork (Required Notices) Pounds of paperwork (Required Notices)

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN DATA BREACHS Anthem (California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, Wisconsin) December 10, 2014 Data included personal info including SSN Info back to 2002 94 ECHIP members were thought to be effected only 1 with SSN breached Letters from BCBS & Anthem were mailed to those thought to be effected; offering them 2 year identity theft monitoring, identity theft resolution as well as a $1 million identity theft insurance policy. -

ELECTRIC COOPERATIVE HEALTH BENEFIT PLAN DATA BREACHS Premera (Washington & Alaska) Jan. 29, 2015 Data included personal info including SSN Info back to 2002 10 ECHIP members were thought to be effected Letters from BCBS & Premera were mailed to those thought to be effected; offering them 2 year identity theft monitoring, identity theft resolution as well as a $1 million identity theft insurance policy. -