C LARK N UBER P. S. Washington Health Benefit Exchange Potential Service Need: Enterprise Financial Risk Assessments June 4, 2013 Vincent Stevens, CPA Paul Manry, CPA Presented By: Bob Nakahara, CFO, Washington HBE

Page 1 C LARK N UBER P. S. Threats of Growing Too Fast Multi-billion dollar companies are typically not created overnight. Within 2 – 3 years, HBE is forecasting $2B+ annually in premiums and operating expenses exceeding $50M. Key business/financial risk factors may include: –Inability to effectively manage all business processes. –Lack of a proper system control foundation or infrastructure. –Internal systems and procedures may not be appropriate. –Poor service leading to dissatisfied customers/stakeholders. –Over-reliance on one or few partners. –Overworked and dissatisfied employees. Loss in productivity.

Page 2 C LARK N UBER P. S. Risks can impede an organization’s ability to meet its mission and objectives. Ultimately, the organization, its board members & management reputations are at stake. Financial risks resulting from unintended or intended irregularities are present in all business processes of an organization impacting all stakeholders. Significant inherent risk in designing a new business model and implementing the operating/financial infrastructure to manage $1+ billion of transactions, over million member months, multiple QHP/health plans, vendors, partners, regulators, and other stakeholders. Need for Financial Risk Assessments

Page 3 C LARK N UBER P. S. QHP User Assistance Eligibility Plan Selection & Setup Billing, Payment & Collections Revenue Cycle – Example Processes -Rate / Data Integrity Checks -In-person Assister -Call Center -Contracting, Management & Payments -Application Data Integrity Checks -Eligibility Determination -Appeals -Method of Payment -Rate -Bank Info -Payment / Plan Modifications -Data Integrity Checks -Billing Accuracy -Payment Processing -Premium Aggregation & Adjustments -Data Integrity Checks Policy, Operations, IT, Accounting, Other Departments

Page 4 C LARK N UBER P. S. Hospital Review / Document Processes (Flowcharts/Narratives) Risk Monitoring (How are risks monitored) Risk Identification (What could go wrong) Risk Analysis (What are the key risks) Risk Response (What is an appropriate response) Risk Ratings (Impact / Likelihood of Occurrence) Financial Risk Assessment Revenue Cycle Processes

Page 5 C LARK N UBER P. S. Proposed Scope and Timing June 2013  October 1, 2013  December 2013 Go Live Date Assist management with performing enterprise financial risk assessments, beginning with the entire revenue cycle. Assist management in researching and identifying best practices related to the processes that will be assessed. This could include best practices from other exchanges. For each area selected, we will assist management with: (1) process mapping the cycle; (2) performing risk assessments; (3) developing a heat mapping of the risks; and (4) creating a risk control matrix of key controls and risks identified.

Page 6 C LARK N UBER P. S. Vincent Stevens Engagement Shareholder Mike Nurse Engagement Senior Paul Manry Senior Manager Rob Fleming Consulting Shareholder Engagement Team Bob Nakahara HBE Project Sponsor Amanda Brault Associate Consultant Brad Parker Associate Consultant

Page 7 C LARK N UBER P. S. The process of designing and implementing a sound set of financial & operational controls is fluid, thereby it will evolve with the maturity of the Company. At a minimum, on October 1, 2013, the HBE board and its management will be able to state the following: –We have conducted ourselves in a manner that meets all reasonable expectations as fiduciaries and trusted stewards of the public’s funds & assets. –Working closely with our 3 rd party financial experts, HBE designed and implemented its general & internal accounting controls using industry-accepted guidelines & best practices. Desired HBE Goal