Contributory Plan Summary of Market Research Kevin Counihan Chief Marketing Officer Friday, November 16, 2007

Contributory Plan Proposed Product Summary & Research Results Presentation Objectives Contrast Status Quo (“Employer’s Plan”) to Proposed Benchmark Plan (“Employer’s Plan + Choice”) Summarize Research Findings

Status Quo – “Employer’s Plan” Employer selects a plan of health benefits & a single carrier Employer selects the % of the premium they contribute (e.g. 70%) Employees may participate or not participate. Example The employer selects Harvard Pilgrim HMO. The employee pays 30% of the monthly premium. Joe, Sally, Bob, and Roberta accept the offer Henry opts not to participate in plan.

Employer’s Plan - Example Employee (Age) Employer Pays Employee Pays Total Monthly Premium HPHC Joe (25) $187 $80 = $267 Sally (33) Bob (40) Roberta (61) Total $748 $320 $1,068

Employer Plan + Choice Similar Products Modeled after CBIA “Health Connections” product presented to CCA Board in October 2006 Health Connections Introduced in 1995 4 Health Plan Choices Employee Choice (38 options) Ability for employer to benchmark plan design and contribution level 6,000 client companies 88,000 members Broker distributed

Employer Plan + Choice (“Benchmark Plan”) Employer selects a plan design from the Connector’s coverage tiers (e.g. Bronze) and a health plan (e.g. HPHC) Employer selects the percentage of premium they contribute (same as status quo) Employee can stay with their Employer’s plan (status quo) OR choose another health plan within the same coverage tier (e.g. Bronze)

Example – All Employees Select Employer Plan Employee (Age) Employer Pays Employee Pays Total Monthly Premium HPHC Joe (25) $111 $80 = $191 Sally (33) $123 $203 Bob (40) $211 $291 Roberta (61) $303 $383 Total $748 $320 $1,068

Employer Plan + Choice Example: If Employee Chooses Alternative Plan Employee may select any carrier available in coverage tier (“Bronze”). Individual rating applies to employees who select an alternative to Employer’s Plan Employer contribution is fixed for each individual employee The employee may apply the employer’s contribution to another option he/she prefers

Employer Plan + Choice Some Employees Pick Alternative Plans Example: Joe elects Harvard Pilgrim Bronze Sally elects Neighborhood Health Plan Bronze Bob elects BCBS Bronze Roberta elects Harvard Pilgrim Bronze

Employer’s monthly cost Example – Some Employees Pick Options Employer’s monthly cost remains $748 Employees save or pay the difference. Employee pays… Employee (Age) NHP HPHC BCBSMA Joe (25) $56 $80 $137 Sally (33) $153 Bob (40) $40 Roberta (61) $27 $192 TOTAL $200 $564 $77 $82 $320 (30% of total cost of employer-selected plan) [Composite Rating]

Employer Plan + Choice – Core Features Connector qualifies and selects sets of health plans on behalf of small employers Employer Plan + Choice combines composite and individual rating Employers selects coverage tier (e.g. “Bronze”) and health plan (e.g. Harvard Pilgrim) Employer determines premium contribution level (e.g. 70%) Employee contribution to Employer’s Plan is the same, irrespective of age or demographics

Market Research Summary Objectives: Test the desirability and sales potential of the proposed Benchmark Plan (“Employer’s Plan + Choice”) Uncover simple and clear ways to describe Employer’s Plan + Choice features Understand the communication challenges and administrative support needs of employers and employees

Methods Focus groups and one-on-one interviews Focus group research is qualitative and directional → not fool-proof indicator of product adoption 64 employers of firms with between 5 and 50 employees 22 employees of small business firms 12 brokers who assist small businesses in the purchase of group health insurance Research conducted from September to November, 2007 by RKM Research and Communications

Research Results - Employer 89% indicated interest in new models of health insurance products This product design is new to MA, but not unique (e.g. CBIA’s “Health Connections”) 76% chose Employer Plan + Choice over status quo 65% thought Employer Plan + Choice would enhance service and rate competition

Research Results - Employee 100% reacted “positively” to availability 82% “Very Positively” 100% would choose Employer Plan + Choice over status quo 100% found it “Acceptable” for employees of different ages to pay more/less based on their plan choices

Research Results - Brokers 92% believed small group market would “prefer” Employer Plan + Choice to existing products 83% believed Employer Plan + Choice would increase employees’ awareness/appreciation of health insurance plan

Summary and Discussion Research suggests broad appeal for a new way to provide health insurance in small firms Employers value offering choice to their employees, but want to budget their costs. Employees value choice of health plans Employer Plan + Choice proposed product shows traction among employers, employees, and brokers Clear communication and administrative support are core requirements for employers, employees, and brokers