ILLINOIS COVERED CHOICE Reinsurance Institute Washington, D.C. July 19, 2007

ILLINOIS COVERED -- OVERVIEW -- EXPANSION OF PUBLIC PROGRAMS –Targets Working Parents, Workers w/ Disabilities, Adults Below 100% FPL ILLINOIS COVERED REBATE –Subsidize Purchase of Employer-Sponsored Insurance, Including Covered Choice –Up to 400% FPL, Premium Cap (Varies Based on Income) ILLINOIS COVERED CHOICE

COVERED CHOICE HEALTHY NY MODEL, ILLINOIS PLAN

ELIGIBLE SMALL EMPLOYER 25 or Fewer Employees Contributes 70%+ of Employee Premium 2/3 of Employees < 400% FPL 50% Eligible Employee Participation

ELIGIBLE INDIVIDUAL Unemployed Employed But No Employer-Sponsored Insurance for 18 Months Not a Covered Choice Eligible Employee (Works <25 Hrs. p/wk) Solely Self-Employed

FUNDING SOURCES Employer Assessment –3% Gross Payroll Assessment if Employers with 10+ Employees Spend Less than 4% Gross Payroll on IL Employee Health Care –Estimated $1.3 billion CHIP Baseline Assessment –If Enough High Risk Pool Enrollees Take Up Covered Choice, State Will Use Some High Risk Pool Assessments to Fund Covered Choice –Estimate Uncertain

REGULATORY DIFFERENCE -- INDIVIDUAL MARKET -- New York –Guarantee Issue –Community Rating –No High Risk Pool Illinois –No Guarantee Issue –No Rating Structure (NEW RULE PROPOSED JULY 2007) –High Risk Pool KEY MARKET DYNAMIC Healthy Lives in IL Can Purchase Cheaper Products

REGULATORY DIFFERENCE -- SMALL GROUP MARKET -- New York –Guarantee Issue –Community Rating Illinois –Guarantee Issue –Liberal Rate Bands (+/- 25%) KEY MARKET DYNAMIC Healthy Lives in IL Can Purchase Cheaper Products

INDIVIDUAL MARKET GUARANTEE ISSUE Source: Kaiser Family Foundation

AVAILABLE RATES Illinois –30/male/non- smoker/Chicago $ BCBS PPO ($1000 deduct – 80/20) ($1000 deduct – 80/20) $ BCBS PPO ($1000 deduct) $ BCBS PPO ($0 deduct) (Data Collected June 2007)

AVAILABLE RATES Illinois –59/male/non-smoker Chicago $ BCBS PPO ($1000 deduct – (80/20)) $ BCBS PPO ($1000 deduct) $ BCBS PPO ($0 deduct) (Data Collected June 2007)

RATES FOR “UNINSURABLES” -- Isolating High Risks -- CHIP High Risk Pool Strategy – Isolate High Risks Enrollment = 16,543 CHIP Rates 30/male/non-smoker/Chicago –$345 CHIP PPO ($1000 deduct) –$390 CHIP PPO ($0 deduct) 59/male/non-smoker/Chicago $1,037 CHIP PPO ($1000 deduct) $1,134 CHIP PPO ($0 deduct) (Data Collected June 2007)

CHALLENGE: REINSURED PRODUCT IN NON-CR MARKET Diverse Risks Must Take-Up Reinsured Product Significant Reinsurance (80% of Claims Above $40k) and Subsidies (Illinois Covered Rebate) –Covered Choice = Cheapest Comprehensive Coverage Limited Rate Variation –(e.g., Age =+/- 25%, Minimum 5-Yr. Age Brackets) Aggressive Marketing Flexibility to Adjust to Unanticipated Market Dynamics Retain Necessary Rulemaking Authority –Adjust Eligibility, Benefits and Reinsurance Corridor New Health Insurance Rules = Better Market Data Insurers Must Fairly Price Reinsured Product Base Rate Review Considers Loss Ratio and Surplus

MANAGED CARE NETWORK CHALLENGES Ensure Meaningful, Statewide Coverage –Illinois HMO Penetration Low, Particularly Downstate, So Product Delivered Through HMOs and PPOs Address PPO “Network” Challenges –Provide Access to All Networks –Providers Otherwise Contracted as Network Provider Must Be A Network Provider for Covered Choice “Adequate Network” Burden Remains with Insurer Manage Provider Costs –Regulate Provider Reimbursement Rates

BIG-PICTURE ISSUES ERISA and Employer Assessment –Retail Industry Leaders Assoc. v. Felder (4th Cir. 2007) HIPAA Group Availability Requirement –42 U.S.C. 300gg-11(a)(1)(A) Free Market Rhetoric Inter-Department Coordination