Retiree Benefits

I move to maintain the Health Retirement Account as established by resolutions of

October and November 2016, pending the outcome of the litigation brought by
retirees and for dependents including exhaustion of all appeals. In addition, the
President/CEO of the district may negotiate and execute an amendment to the HRA
to allow rollover of any funds not used by the participants, including calendar year
2017.

On July 6th, a notice to appeal the courts decision on reinstatement of benefits was
filed. This filing officially initiates an appeal by the plaintiffs. The jurisdiction of the
case has now moved from the district trial court to the Eastland Court of
Appeals. Procedurally, the next step will be to get a briefing schedule from the court
of appeals. The record from the trial court will have to be assembled and
transmitted to the court of appeals. Once the record has been prepared and
transferred, the parties will prepare their respective briefs. The court will send out
a briefing schedule.

Suit claims:
1. No guarantee of benefits beyond 2017
2. No provisions for dependents
3. Cannot obtain equivalent coverage at current funding
4. Market Risks
5. Cannot retain doctors
6. Absence of COBRA

Prayer: (+ 3 injunctions)
1. Actual Damages
2. Pre-Post Judgment interest
3. Court Costs
4. Attorney Fees
5. All other relief, to which the plaintiffs may be entitled

Ive studied the HRA situation carefully and have considered multiple issues that
impact decisions today and for many years to come. Im providing a brief
explanation of these overlapping factors in order for all to realize the complexities
with which we are contending. The truth is, there is no simple solution or quick fix
resulting in fairness or equity to taxpayers, current retirees and future retirees and
secure financial stability for Ector County Hospital District.

The pending litigation, if an appeal is won, could cost the hospital and tax payers of
the Ector County Hospital District a substantial award. In researching the benefit
plan, I have evaluated past meetings where then CEO, J. Michael Stephans, made the
following statements.

Minutes - April 11,1989

 Mr. Stephans reported that he met with the retirees in a group two weeks
ago and discussed the possibility of the hospital maybe having to consider
making some changes to this policy sometime in the future.

Mr. Stephans commented that it is important to look beyond today in terms

of the hospitals financial situation to the hospitals ability to continue to
provide this same level of coverage for hospital retirees in the future It will
literally, sometime in the future break the hospital to provide this same
coverage.

Mr. Stephans stressed that no recommendations will be made that would

leave anyone without coverage from some source

I feel the Health Retirement Account (HRA) adheres to that promise and qualifies as
some source. The HRA is an alternate for healthcare funding in the amount of
$2,101,600.00 annually.

As of exactly of the calendar year (6/30/2017) 25.5% of the funded HRAs have
been utilized. Deductibles are front-end heavy, meaning that more of the money
generally is utilized at the beginning of the calendar year by paying deductibles.
Once deductibles are met, co-pays and percentage pays for benefits activate. Listed
below is the current percent of utilized funds to date.

25.4% of pre 65 aged retirees (163)

30.2% of post 65 with Medicare part A&B (199)
9.8% of post 65 with Medicare part A only (13)

A total of $1,5166,153.16 remains in the fund or 74.5% for the second half of the
2017 calendar year. The HRA is funded on a calendar year basis not a fiscal year
calendar. $535,446.84 of the annual funding has been utilized year to date.

One current insurance example of a retiree pre-65 consisted of a co-pay of $20.00 a

visit once the $6,250.00 deductible was met with a premium of $674.00/month.
Which equals an out-of-pocket expense of $194.83/month for a pre 65 aged retiree.
In comparison, the current Medical Center Hospital (MCH) benefits require current
full-time employees to be responsible for premiums, deductibles and co-pays.
Current retirement benefits are listed on the Medical Center health systems website.

The motion to add the rollover option will allow for unused funds not to expire.
This will give time to counsel and properly educate and inform the beneficiaries on
how to utilize the funds efficiently.

A proposed change to the national healthcare system is currently being debated.

There is uncertainty on what the new market will consist of and how it will impact
our community and healthcare system. The anticipated date to learn of these
changes is October 1, 2017. There can be major consequence for both parties if
changes are made at this time. It would not be wise to make changes without
knowing the details of a new system. The wrong decisions could further financially
strain the district and lead to increased tax rates for the citizens of Ector County. A
tax hike of 39% was proposed in September 2016 and was highly contested. We
must budget properly to address the increase in financial burden to the
communities healthcare system. Medical Center Hospital is scrutinizing
expenditures and evaluating production with the goal of operating more efficiently.
Time is needed to properly budget, develop and advance our system in the ever-
changing landscape of healthcare. The HRA allows for freedom to choose any plan.
There have been failed attempts to mediate the amount funded. This has led to the
current lawsuit. Legal consequence, actions and judgments can lead to further
financial burden and decreased bond ratings. The HRA impacts Ector County voters
with a much broader brush than just the retirees. At first glance, it may seem that
we could simply approve the retirees requests, however, peripheral perspective
requires for ECHD to consider a multitude of factors and the long-term impact our
decisions will have for the community at large.

Fitch Bond Rating

As of April of 2017 the current bond rating is BBB (negative) from A- (positive). In
April 2014 MCH was upgraded from stable to positive because of a robust economy
and light maximum annual debt (9.4% of operating margin). We have seen a decline
in oil and gas prices over the year, which has negatively affected Earnings Before
Income Taxes Depreciation and Amortization (EBITDA) and our bond rating. The
stagnant oil and gas market also affects the finances of the healthcare system. WTI
crude currently sits at $49.07 a barrel compared to nearly $100.00 a barrel 3 years
ago. This leads to decreased tax revenue and strain on the system. We must
prepare for the financial future of the institution and reinstating benefits at the level
they were once offered is not financially feasible at this time. These issues are not
resolved in one or two months and require strategy which considers various
possible financial scenarios.

GASB

The Governmental Accounting Standards Board (GASB) allowed for the long-term
liability of the retiree benefits to not be included in our balance sheets only as a
footnote. New regulations require this liability to be included in our operational
expenses beginning October 2017. This was the reason for the modification in the
healthcare plan. Currently, the actual operational cost currently is 2.1 million;
annually, the long-term liability must be noted closer to 80 million in operational
cost when included in the current financial statements. The HRA alleviates the line
item burden substantially while continuing to afford coverage. It is the intention of
the ECHD to fund the plan indefinitely and every effort to do so will be made.
Consequently, modifications must also be made to operate the regions healthcare
system efficiently.

Local Provider Participation

MCH will lose $9.6 million in local provider participation funds due to state
requirements beginning October 2017. Inter Governmental Transfers (IGTs) are not
going to be recognized as an afforded service. MCH has benefited from this ability
with area private hospitals but now will lose that funding. This too will have an
impact on the 2018 budget.

Cerner

The recent implementation of Cerner, the Electronic Health Records system, is a

substantial investment and will provide a solid foundation for the management of
healthcare in the region for many years to come. The system does come with a
significant cost of approximately 55 million dollars between 2016-2017. This cost is
necessary for access of healthcare throughout the region.

The plaintiffs need the opportunity to exhaust their appeals options. The hospital
system needs to financially prepare for outcomes of such litigation and changes to
the market in 2018. It would be unfair to the retiree group and to the citizens of
Ector County to make changes to the current structure at this time. Allowing a
rollover option to the plan, funds will not expire and more education and
information can be offered to properly utilize the fund. I feel this is a fair and
responsible decision for everyone concerned for the 2018 budget and calendar year.
The decision to maintain current funding and add the rollover amendment allows
for due process for the parties involved and time to utilize the full benefit currently
financed.

The Medical Center Health System serves approximately 500,000 people in 17

counties. The future of our society is birthed at MCH and it is also where many
spend their final days. We must maintain the quality of life saving services and
advancement of our healthcare system with consideration for all of our constituents.
2018 will face substantial obstacles and solutions need to be evaluated in every
aspect of the health system. I sincerely look forward to due process for the retiree
group and an amicable resolution.

Benjamin Quiroz D.C.