©2005 SilverScript, Inc. All rights reserved. This presentation contains confidential and proprietary information of SilverScript, Inc. and may not be reproduced, distributed or printed without written permission from SilverScript, Inc. Medicare Prescription Drug Coverage: An Overview of Opportunities and Challenges for PBMs and Industry Partners Todd R. Rooker President, SilverScript Insurance Co. Wisconsin Association of Health Underwriters Fall Sales Conference Sept. 14, 2005

Confidential and proprietary information. Not for distribution. What is SilverScript?  SilverScript Insurance Company  Indirectly wholly owned subsidiary of Caremark  Will participate as a PDP in 34 regions –Pending insurance licensure in all states –Granted waiver by CMS to operate PDP until licensure secured  Two products offered for 2006 –A fully-insured offering, featuring two basic alternative benefit plan designs

Confidential and proprietary information. Not for distribution. Agenda  Evolution of Part D  Providing employer support  Providing health plan support  The role of agents and brokers in Medicare Part D  The future of the program for duals and low- income subsidy individuals  Conclusions

Confidential and proprietary information. Not for distribution. Medicare Modernization Act The Evolution of Part D  Encourages growth of managed care in Medicare  Adds a drug-only benefit to the existing Medicare fee-for- service (FFS) program  Relies on private plans (which must bear insurance risk) to deliver drug benefits  Included interim drug discount card, which “sunsets” at end of 2005  Other significant components  Health savings accounts (HSAs)  Reimportation  Revise Part B drug reimbursements (AWP reform)  E-prescribing  Hatch-Waxman changes  Demonstration projects

Confidential and proprietary information. Not for distribution. Key Dates  Employer subsidy applications due to CMS  MAPD/PDPs begin marketing  Medicare.gov plan comparison site goes live  Dual eligibles auto-assigned  Open enrollment begins. Final day to send notices of creditable coverage  Part D benefit begins  End of initial enrollment period  Facilitated enrollment of low-income subsidy eligibles —Sept. 30, 2005 —Oct. 1, 2005 —Oct. 15, 2005 —Oct. 20, 2005 —Nov. 15, 2005 —Jan. 1, 2006 —May 15, 2006 —May 16, 2006

Confidential and proprietary information. Not for distribution. Employer Options  Subsidy  Employer provides prescription coverage to retirees under regular prescription benefit plan  Direct waiver PDP  Employer becomes a PDP for its own retirees  Indirect waiver PDP  Employer contracts with a PDP to offer a closed Part D plan to their retirees  Wrap  A nonMedicare plan that coordinates with Part D. Employer encourages its retirees to join a Part D plan, but provides additional benefits  Premium subsidy  Employer subsidizes premiums for retirees who enroll in a PDP or MA-PD plan  Drop coverage  Employer drops retiree coverage. Retirees may enroll in a PDP or MA-PD plan of their choice

Confidential and proprietary information. Not for distribution. What are Employers Doing for 2005? Source: Caremark survey of employer clients, June 2005

Confidential and proprietary information. Not for distribution. Employer Subsidy How to Ensure Your Groups Qualify Five-step process for 2006 : 1.Submit application by Sept. 30 –Extension recently granted to Oct Include actuary’s attestation that plan meets actuarial equivalence standard, which is a CMS requirement 3.Certify that the plan will notify enrollees of the creditable coverage status of the plan 4.Submit and periodically update enrollment information 5.Submit aggregate data about incurred drug costs and reconcile costs at the end of the year

Confidential and proprietary information. Not for distribution. Employer Subsidy How Your PBM Can Help Subsidy RequirementPBM Support Application filing with CMS by September 30 Can provide executive summary template for application Include actuary’s attestation that plan meets actuarial equivalence standard Can provide access to tools and data to assist with actuary’s attestation Segregate subsidy populationCan assist in setting plan and beneficiary hierarchy Certify that plan will notify enrollees of the creditable coverage status of the plan Can provide letters of creditable coverage Submit and periodically update eligibility information Can assist clients in meeting CMS eligibility format requirements and ongoing enrollment files Submit aggregate data about incurred drug costs and reconcile costs at year-end Can provide client with claims files and backend-reporting requirements for CMS

Confidential and proprietary information. Not for distribution. Employer Subsidy Advantages  CMS highlights the administrative advantages of the retiree drug subsidy option including:  Employer control over plan design  Ability to use vendors of choice  Reduced administrative requirements  No service area restriction  Later deadlines  Retiree communication requirements streamlined  Easier to manage requirements for noncalendar year plans

Confidential and proprietary information. Not for distribution. Health Plan Options  Medicare Advantage Prescription Drug Plan (MAPD)  Prescription Drug Plan (PDP) options:  Open PDP  Waiver PDP (indirect or direct)  Support employer-based coverage  28% subsidy  Wrap plans  Fallback plans  None anticipated for 2006

Confidential and proprietary information. Not for distribution. MAPD/PDP Support How Your PBM Can Help  Client application support  Customer care enrollment and eligibility support  Benefit set up and coordination of benefits  Network contracting and development including long-term care, home infusion, Indian/tribal/ urban pharmacies  Claims processing  Mail service/specialty  Formulary development, P&T review  Reporting  Rebate processing and billing  Electronic prescribing  Compliance/audit

Confidential and proprietary information. Not for distribution. MAPD/PDP Outsource Challenges Areas to be Cautious Assigning to a PBM  Customer care  Customer calls can only support prescription inquiry which may impact beneficiary satisfaction  Information and outreach  Duplicate production of information to accommodate Medical and prescription coverage  Limited control of branding  Enrollment  Owning the beneficiary experience  Missed cross-selling opportunities

Confidential and proprietary information. Not for distribution. Role of Agents and Brokers  Generally, a licensed agent must review and approve a Medicare beneficiary’s Part D application  Significant growth opportunities  Current policyholders  Medicare beneficiaries without prescription coverage  Group business and employers dropping coverage  Impact on Medicare supplement business  H, I, & J plans: not “creditable” coverage

Confidential and proprietary information. Not for distribution. Looking Forward Employers  Employers looking to subsidy for 2006  Re-evaluate for 2007  Dropping coverage, wraps, waiver PDPs  Part D plans will partner with employers who elect to drop prescription coverage  Direct marketing and education to beneficiaries through a trusted source (employers)  Perceived continuity  Ties-in with normal open enrollment season  Additional services may be offered by Part D plans to ease transition to insured benefit  Premium subsidy  Implement secondary or wrap coverage

Confidential and proprietary information. Not for distribution. Looking Forward Dual Eligibles and Low-Income Subsidy Note: 100% of poverty is equal to $9,310/single: $12,490/couple in Source Congressional Budget Office, November % eligible for full subsidy 20% eligible for reduced subsidy 19% not eligible because of assets Nondual eligibles <150% of poverty: 9.4 million beneficiaries All Medicare beneficiaries: 39.4 million Nondual eligibles >150% of poverty (23.6 million beneficiaries) 60% Dual eligibles (6.3 million beneficiaries) 16% Nondual eligibles <150% of poverty (9.4 million beneficiaries) 24%

Confidential and proprietary information. Not for distribution. Looking Forward Part D Market  Beneficiary experience  Plan design, adoption, adverse selection  Premiums versus drug pricing  Shift from employer coverage to insured market  CMS  Reinsurance corridors, risk adjusters  COB process  Budgetary factors  Deficit, Iraq, Katrina, political environment  2007 PDP and MAPD bids  Year-to-year uncertainty on premiums  Re-enrollment process  PDPs versus MAPDs

Confidential and proprietary information. Not for distribution. Questions?