1. Contributory Plan Summary of Market Research
Kevin Counihan
Chief Marketing Officer
Friday, November 16, 2007

2. Contributory Plan Proposed Product Summary & Research Results
Presentation Objectives
Contrast Status Quo (“Employer’s Plan”) to Proposed Benchmark Plan (“Employer’s Plan + Choice”)
Summarize Research Findings

3. Status Quo – “Employer’s Plan”
Employer selects a plan of health benefits & a single carrier
Employer selects the % of the premium they contribute (e.g. 70%)
Employees may participate or not participate.
Example
The employer selects Harvard Pilgrim HMO.
The employee pays 30% of the monthly premium.
Joe, Sally, Bob, and Roberta accept the offer
Henry opts not to participate in plan.

4. Employer’s Plan - Example
Employee (Age)
Employer Pays
Employee Pays
Total Monthly Premium
HPHC
Joe (25)
$187
$80 =
$267
Sally (33)
Bob (40)
Roberta (61)
Total
$748
$320
$1,068

5. Employer Plan + Choice Similar Products
Modeled after CBIA “Health Connections” product presented to CCA Board in October 2006
Health Connections
Introduced in 1995
4 Health Plan Choices
Employee Choice (38 options)
Ability for employer to benchmark plan design and contribution level
6,000 client companies
88,000 members
Broker distributed

6. Employer Plan + Choice (“Benchmark Plan”)
Employer selects a plan design from the Connector’s coverage tiers (e.g. Bronze) and a health plan (e.g. HPHC)
Employer selects the percentage of premium they contribute (same as status quo)
Employee can stay with their Employer’s plan (status quo) OR choose another health plan within the same coverage tier (e.g. Bronze)

7. Example – All Employees Select Employer Plan
Employee (Age)
Employer Pays
Employee Pays
Total Monthly Premium
HPHC
Joe (25)
$111
$80 =
$191
Sally (33)
$123
$203
Bob (40)
$211
$291
Roberta (61)
$303
$383
Total
$748
$320
$1,068

8. Employer Plan + Choice Example: If Employee Chooses Alternative Plan
Employee may select any carrier available in coverage tier (“Bronze”).
Individual rating applies to employees who select an alternative to Employer’s Plan
Employer contribution is fixed for each individual employee
The employee may apply the employer’s contribution to another option he/she prefers

9. Employer Plan + Choice Some Employees Pick Alternative Plans
Example:
Joe elects Harvard Pilgrim Bronze
Sally elects Neighborhood Health Plan Bronze
Bob elects BCBS Bronze
Roberta elects Harvard Pilgrim Bronze

10. Employer’s monthly cost
Example – Some Employees Pick Options
Employer’s monthly cost
remains $748
Employees
save
or pay the
difference.
Employee pays…
Employee (Age)
NHP
HPHC
BCBSMA
Joe (25)
$56
$80
$137
Sally (33)
$153
Bob (40)
$40
Roberta (61)
$27
$192
TOTAL
$200
$564
$77
$82
$320
(30% of total cost of employer-selected plan)
[Composite Rating]

11. Employer Plan + Choice – Core Features
Connector qualifies and selects sets of health plans on behalf of small employers
Employer Plan + Choice combines composite and individual rating
Employers selects coverage tier (e.g. “Bronze”) and health plan (e.g. Harvard Pilgrim)
Employer determines premium contribution level (e.g. 70%)
Employee contribution to Employer’s Plan is the same, irrespective of age or demographics

12. Market Research Summary
Objectives:
Test the desirability and sales potential of the proposed Benchmark Plan (“Employer’s Plan + Choice”)
Uncover simple and clear ways to describe Employer’s Plan + Choice features
Understand the communication challenges and administrative support needs of employers and employees

13. Methods Focus groups and one-on-one interviews
Focus group research is qualitative and directional
→ not fool-proof indicator of product adoption
64 employers of firms with between 5 and 50 employees
22 employees of small business firms
12 brokers who assist small businesses in the purchase of group health insurance
Research conducted from September to November, 2007 by RKM Research and Communications

14. Research Results - Employer
89% indicated interest in new models of health insurance products
This product design is new to MA, but not unique (e.g. CBIA’s “Health Connections”)
76% chose Employer Plan + Choice over status quo
65% thought Employer Plan + Choice would enhance service and rate competition

15. Research Results - Employee
100% reacted “positively” to availability
82% “Very Positively”
100% would choose Employer Plan + Choice over status quo
100% found it “Acceptable” for employees of different ages to pay more/less based on their plan choices

16. Research Results - Brokers
92% believed small group market would “prefer” Employer Plan + Choice to existing products
83% believed Employer Plan + Choice would increase employees’ awareness/appreciation of health insurance plan

17. Summary and Discussion
Research suggests broad appeal for a new way to provide health insurance in small firms
Employers value offering choice to their employees, but want to budget their costs.
Employees value choice of health plans
Employer Plan + Choice proposed product shows traction among employers, employees, and brokers
Clear communication and administrative support are core requirements for employers, employees, and brokers