CBIA HEALTHCARE UPDATE Michelle Zettergren Sr. Vice President, Chief Sales & Marketing Officer ConnectiCare, Inc. & Affiliates September 21, 2011

The Environment Today U.S. Census - 49 million Americans uninsured in million Americans uninsured in 2010 Worst recession in the last 80 years Inflation-adjusted median household income in the U.S. fell 2.3% in 2010, to $49,445

Texas 24.6% New Mexico 21.6% Nevada 21.3% Mississippi21.1% Florida 20.8% South Carolina 20.6% Louisiana 20.0% California19.4% Georgia 19.4% Arizona 19.1% Uninsured Rates New Jersey 15.4% New York15.0% Rhode Island 11.4% Connecticut11.0% Pennsylvania11.0% New Hampshire10.3% Maine 9.4% Massachusetts5.0%

Massachusetts – A Success Story? First Public Exchange – the Commonwealth Health Insurance Connector Goal – provide universal health coverage for Massachusetts residents Coverage required or pay penalties Small Group and Individual Markets merged Government funded subsidiaries provided for low income individuals Uncompensated care fund

Impacts on Massachusetts Marketplace Many employers had to increase benefit coverage Providers struggle with increased demand State regulators artificially suppress premium increases Uncompensated care expense continues Health care cost continue to increase…

SustiNet Not implementing Create giant pool including public employees & Medicaid Public Exchange Benefit will be defined by Federal government 5 Specific levels of benefits Carriers must charge same rate in and out of exchange One pool (small employers & individuals) Reinsurance mechanisms in and out of exchange What is Happening in Connecticut? Passed several benefit mandates Expanded coverage – Impacts cost 2011 Legislative Session

Connecticut Has An Exchange Today “Best Practice Model” recognized nationally Sophisticated administrative system Uniform benefits Employee choice Encourages competition

Minimum Loss Ratio (Five Minute University Version) Requires insurers to pay out at least 80% of premium revenue, as claim payments or quality improvement expenses, for the small group and individual policies; 85% for large group policies If not  must issue rebates to insureds MLR = Claims + Quality Premiums – (Taxes + Fees)

What counts as “claims” or “quality”  improving the ratio? Minimum Loss Ratio Payments made for clinical services provided to enrollees Activities that improve health care quality: -Increase the likelihood of desired health outcomes -Direct interaction with enrollees -Improve patient safety -Promote wellness and health -Enhance quality through meaningful use of HIT All other expenses are administrative and have a negative effect on MLR

MLR Rebates First rebates are due on August 1, 2012, based on calendar year 2011 premium and claim/quality payments Calculations are per business segment, per issuing company, per state Rebates are intended to go to the entity that paid the premium – employer and employee Employers will have to be involved in paying any group rebates to their employees Rules are complex and new for everyone Results will also change over time as new Exchange-related risk adjustment rules come into effect in 2014

Uniform Summary of Benefits and Coverage Effective March 23, 2012 proposed rules issued August 17, 2011 Insurers must provide to employers and beneficiaries 1.Pre-application (and with application if any changes) 2.Post-application 3.Upon material modification to the plan 4.At renewal 5.Upon request Penalties of up to $1,000 per enrollee for violations

Impacts on Health Care Industry Rules are complex and much has not been developed or outlined Timing has been delayed causing impacts on internal development and preparation One size does not fit all – complexity adds cost PPACA does not acknowledge uniqueness of each state Reform does not address cost drivers