September 13, 2012 Maryland Health Benefit Exchange Update for the Middle Atlantic Actuarial Club 2012 Annual Meeting

- 1 - The Patient Protection and Affordable Care Act (ACA) Signature legislation of the Obama Administration making health insurance coverage a central focus Relies on the private insurance market and public programs (Medicaid) to address the issue of access to care Key Components must work together: Guaranteed Issue Minimum Essential Health Benefits Individual Mandate Federal Subsidies Risk Adjustment State-based Health Insurance Exchanges are the focal point for implementing market changes

- 2 - Basic Exchange Functions Creates a new Health Insurance Marketplace for Individuals and Small Groups (SHOP) Establish policies and procedures for certifying Qualified Health Plan (QHPs) from commercial insurance carriers Makes eligibility determinations for government assistance for health insurance Provides Consumer Support through Navigators, Brokers and Agents, and Online Web Portal Enrolls Consumers into affordable health care options Consolidated Billing and Collections in the Small Group Market

- 3 - The Affordable Care Act and Maryland Code of Federal Regulations (CFR) 45 Part 155 – Exchange Establishment Standards and Other Related Standards Under the Affordable Care Act defines requirements for state-based Exchanges Maryland has embraced the ACA and committed itself to create a state- based Exchange Health Benefit Exchange Act of 2011 April 12, 2011: Governor O’Malley signed the Maryland Health Benefit Exchange Act to establish Maryland’s exchange as a public corporate and independent unit of state government June 3, 2011: Exchange Board held its first meeting Health Benefit Exchange Act of 2012 Senate Bill 238 and House Bill 443: Maryland General Assembly recently passed (April 5, 2012) legislation that outlines the implementation policies and procedures for operating the exchange

- 4 - Key Federal and Maryland State Agencies Implementing Health Care Reform and Exchanges Federal Center for Consumer Information and Insurance Oversight (CMS/CCIIO) Center for Medicaid and CHIP Services (CMS/CMCS) Internal Revenue Service (IRS) Maryland Governor’s Health Care Reform Coordinating Council Maryland Health Benefit Exchange Board of Trustees Staff Maryland Insurance Administration (MIA) Maryland Health Care Commission (MHCC) Department of Health and Mental Hygiene (DHMH) Department of Human Resources (DHR)

- 5 - Seven Guiding Principles the Maryland Exchange 1. Accessibility. The Exchange should reduce the number of Marylanders without health insurance and improve access for all Marylanders. 2. Affordability. The affordability of coverage, within the Exchange and within the state, is essential to improving Maryland’s health care system and economy. 3. Sustainability. The Exchange will need to be sustainable in order to succeed in the long run. 4. Stability. The Exchange should promote solutions that respect existing strengths of our state’s health care system and promote stability within the Exchange. 5. Health Equity. The Exchange should work to address longstanding, unjust disparities in health access and health outcomes in Maryland. 6. Flexibility. The Exchange should be nimble and flexible in responding to the quickly changing insurance market, health care delivery system, and general economic conditions in Maryland, while being sensitive and responsive to consumer demands. 7. Transparency. The Exchange is accountable to the public, and its activities should be transparent, its services easily available, and its information easily understandable by the populations it assists.

- 6 - Maryland’s High Level Implementation Approach Establish a consolidated strategy for Health Care Reform implementation Phase I – Modified Adjusted Gross Income (MAGI) Eligibility Determinations for Medicaid and Advance Premium Tax Credits and Cost Sharing Subsidies (by 2014) Phase II – All Medicaid programs (by 2015) Phase III – All Maryland Social Service programs (by 2015) Secure Federal Establishment Grants CCIIO: Planning, Early Innovator, Level One Establishment, Level Two Establishment CMCS: Matching Funds Establish Policies and Regulations Stakeholder Advisory Committees Legislative and Regulatory Processes Set-up Exchange IT and Operations First Exchange Open Enrollment Period – October 2013 Self-Sufficient by 2015

- 7 - Federal Funding - $157M Planning Grant ($1 million): Initial Planning and Research Early Innovator Grant ($6 million) IT Model Sharing resources with other states Level One Establishment Grant ($27 million) IT Development Operations Planning/ Administration Level Two Establishment Grant ($123 million) IT Implementation Operations/ Administration Consumer Assistance Outreach & Education

- 8 - Maryland Exchange IT Systems The system is designed as an integration of Commercially Off the Shelf (COTS) products, that are being integrated and configured to meet Federal and State requirements. This diagram indicates the key building blocks of the solution:  Cúram is a software product that has existing and planned features to support requirements for Eligibility and Enrollment.  Connecture is a software product that has existing and planned features that support requirements for Plan Presentment and Enrollment.  Noridian is leading the integration of the COTS solutions based on the EXACT Service Oriented Architecture (SOA) integration product.

- 9 - MD HIX Implementation Timeline The diagram below articulates the timeline and development approach Maryland is following in order to be prepared for CMS Certification and to deliver the HIX Solution in time for production operations in Q4, 2013 Implementation & Test Implementation & Test 1 st QTR ‘12 2 nd QTR ‘12 3 rd QTR ‘12 4 th QTR ‘12 1 st QTR ‘13 2 nd QTR ‘13 3 rd QTR ‘13 4 th QTR ‘13 Validate Planning & Rqmt Artifacts NFRD Architecture Plan Knowledge Transfer COTS Demo Receive CMS Certification (Conditional) Non-Functional / Technical Requirement Development Non-Functional / Technical Requirement Development Architecture Development Design Integrated Testing Deployment & Disposition IT Vendor Starts Completed Tested System Start 2-path Sprint Approach Complete all development Warranty / Maintenance Complete Gap Analysis Start Enrollment End-to-End Testing, including: Functional and Technical Testing Other Requirement Development Sprint Execution – for requirements required for CMS Certification 1/1/13 Sprint Order Prioritize Rqmts & activities required for Certificat ion on 1/1/13 Certification Process Deployment to Production Training Fix any Production bugs, etc. Fix any Production bugs, etc. DDR CMS ILC Gate Reviews FDDR PORRORR Core Requirements Federal Requirements State Requirements SP1 SP2SP3SP4SP5 SP6SP7SP8 Test Planning Review Design Review Implement Review CMS ELC Gate Reviews Key: DDR – Detail Design Review; FDDR – Final Detail Design Review; PORR – Preliminary Operational Readiness Review; ORR – Operation Readiness Review

What the Exchange Means to Maryland Expands access to health insurance for 740,000 Marylanders currently without health insurance Provides federal subsidies and tax credits for individuals up to 400% of FPL to pay for health insurance premiums Provides $500 million in federal subsidies into the State of Maryland  NEW funds in the Maryland health care system Provides individuals access to primary care physicians, preventive services Lowers uncompensated care costs in the healthcare system resulting in lower insurance premiums across the state

Health Care Coverage Projections in Maryland due to the Affordable Care Act * Hamid Fakhraei, Ph.D., Director of Economic Analysis, The Hilltop Institute, University of Maryland, Baltimore County (UMBC) *

Carrier Impact and Qualified Health Plans (QHPs) Market-wide Minimum Essential Health Benefits Minimum Medical Loss Ratios Guaranteed Issue Community Rating Rating Variation Limitations Risk Adjustment and Reinsurance Exchange Specific Actuarial Value Metal Bands (Bronze, Silver, Gold, Platinum) Network Adequacy and Essential Community Providers Quality and Transparency Data QHP User Fees Active Purchasing (potential)

Qualified Health Plans (QHPs) Contracting Step 1 Issuer Contracting with the Exchange (Issuer Level) Maryland Market RulesService Area RequirementsMarketing StandardsTransparency StandardsQuality Data RequirementsTracking of RELICC DataReporting Requirements Continuity of Care Requirements? 2014 or 2015? Broker Compensation Step 2 MIA Review & Approval (Issuer & Plan level) SERFFLicensureSolvencyBenefits, Rates & FormsEssential Health BenefitsLimitations on Cost SharingActuarial Value/Metal LevelsDiscriminatory Benefit Design Step 3 Exchange Final Certification (Issuer & Plan level) HIX AccreditationNetwork Adequacy Data Essential Community Provider Data Transparency Data Step 4 MHCC Quality & RELICC Data (Issuer Level – Year 1) Annual Custom File HMO/PPO HEDIS ScoresHMO/PPO CAHPS ScoresDental Plan CAHPS ScoresVision Plan CAHPS Scores RELICC Data (Internal use only)

Consumer Financial Assistance Eligibility Rules Based on Modified Adjusted Gross Income (MAGI) in relation to Federal Poverty Level (FPL) Calculating actual APTC depends on: MAGI in relation to FPL 2 nd Lowest Priced Silver Plan Potential Issues: “Churn” and Continuity of Care Price Stability under Guaranteed Issue (High Risk Pools)

Sample Monthly Premium Payments by Income Level

Employer Sponsored Insurance Employer Group Size Considerations Only small groups can purchase on the Exchange through 2017 Maryland defines small group up to 50 employees through 2016 Adopt federal definition of small group of up to 100 employees after 2016 Tax credits for small groups that purchase in the Exchange starting in 2014 Penalty for larger groups that don’t offer minimum essential coverage to their employees Defined Contribution / Employee Choice Model Opens up all plans on a metal level to employees Minimum participation rate Employers make defined contributions (minimum?) Rating by average age or individual employee? Special enrollment Timing of account set-up and contracting

Consumer Assistance Marketing and Consumer Education Web Portal Online Eligibility Determinations Plan Shopping, Comparison, and Enrollment Several Classes of “Assistors” Navigators Exchange Call Center DHMH / DHR Case Workers Brokers and Agents

Navigator Program

Third Party Benefit Administrators Current Market Role Broker Training and Tools Plan Shopping and Enrollment Back-Office Financial Administration (Billing, Collections, Reconciliation, etc) Other Value Add Benefit Management Services (Life, Disability, Payroll) Role in SHOP Exchange TPA Certification Program Use Exchange systems Use their own systems Online Marketplace Back-Office Financial Administration Performance Metrics and Service Levels

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