© 2011 Blue Cross and Blue Shield of Minnesota. All rights reserved. South Central Service Cooperative School Renewal 7/1/2014

Service Cooperative Minimum Premium Model Minimum premium/self insured hybrid No MCHA or Premium Taxes Reduced Stop Loss and Administrative Fees negotiated at the Statewide level by multiple cooperatives Service Cooperative assumes risk between expected and maximum claims of 110% of expected claim level Specific Stop Loss Levels vary by Region Groups’ experience pooled to smooth peaks and valleys Drug Rebates, Performance Guarantees, all paid to Rate Stabilization Reserve (held by Cooperative) to fund risk Access Fees paid to Rate Stabilization Reserve to fund Corridor IBNR (Incurred but not reported) Reserve held by Service Cooperative Groups retain plan design control Groups have a fixed premium with no potential downside risk, with some refund potential 2

3 Fixed Costs (Administrative Cost):

Fixed Costs (Stop Loss Coverage): Stop Loss is 110% Aggregate, Specific by group size: 4

5 Fixed Costs (Network Access, Provider Settlement Fees): Five percent of savings negotiated with providers is set aside to build reserves; 0.75% is used for network development by Blue Cross and 4.25% is passed through to the Service Cooperative. A charge of 1.2% of paid claims will be accrued for the Year End Provider Settlement Fee. This fee is an adjustment or payment made to certain providers following the end of the year to cover deferred expenses in aligned incentive contracts or pay for performance incentives. Service Cooperative Administrative Fee$11.85 Fitness Discount:$3.05 Single $6.09 Family

SOUTH CENTRAL SERVICE COOPERATIVE SCHOOLS ADVISORY COMMITTEE Report on Recommendations from Larry IntVeld and Advisory Committee Jerry Kolander Harold Remme Dean Peterson Patrick Goggin Joel Whitehurst Regina Wernimont Barbie Doyle Ed Waltman Les Martisko 6

Overall 2014 Renewal Formula 52 Groups 6100 Contracts $75,0037,323 Annual Equivalent Premium Individual Calculated Increases from -38.3% to +67.8% All Groups Discounted 2.5% Min of -3% to 9.5% soft max for groups 100 contracts plus 20% of difference to hard max of 16.0% Min of -3% to 16.0% max for groups up to 99 contracts Overall Increase 11.3% Achieved income of 6.6% Pledged income (as needed) to 11.3% 7

Overall Renewal Released +6.6% All Groups Discounted 2.5% Groups 100 lives and over: Minimum -3% Maximum 16% Groups under 100 lives (No MN Reform Applies – SI) Minimum -3% Maximum 16% 8