1. The Benefit Management Company Consumer Driven Healthcare “Unleashing the Power of Free Market Economics on the Healthcare Industry”

2. The Benefit Management Company The Principles of CDHC #1: Patients have the freedom to choose their providers and to direct their care #2: Patients share in the economic consequences of their healthcare choices #3: Patients get tools to improve health and assess healthcare options: e.g. fitness programs, provider “report cards”

3. The Benefit Management Company The Claim Cost Curve 8% 24% 69% 60% 26% 13% 0% 10% 20% 30% 40% 50% 60% 70% 80% HealthyTransitionalChronically Ill/High Risk % Members% of Dollars ($1-$999)($1,000-$4,999)($5,000-$100,000) $30 pmpm $176 pmpm $1,259 pmpm

4. The Benefit Management Company Designing a CDHP: Level #1 A “Wrap” Plan Employer buys high deductible plan HMO, POS or PPO Employer “self-funds” deductible to desired ultimate benefit level Net savings vs. Traditional = 10% to 20%

5. The Benefit Management Company Advantages of Wrap Strategy Not Self-funded/Not Fully-insured Substantial Rate Relief/Limited Claim Risk Claim Risk per Patient from $1k to $5k Employer has stake in Employees’ Health Employer gets Credit for Good Experience –vs. Community Rate (Small Group Reform) Unlimited Plan Design Flexibility

6. The Benefit Management Company Designing a CDHP: Level #2 Add a Flexible Spending Account (FSA) Employees take on some claims liability Employees can pre-fund with pre-tax $$ Funds not used for medical can be spent on vision, dental or alternative therapies Unused funds are forfeited at year end Employer may “seed” employees’ FSAs

7. The Benefit Management Company Designing a CDHP: Level #3 A Health Reimbursement Account (HRA) Employer creates a virtual benefit bank for each employee (e.g. $500/ee, $1k/family) Employee’s out-of-pocket medical costs are paid from bank until exhausted Any unused “bank balance” can be rolled over into the next plan year

8. The Benefit Management Company Designing a CDHP: Level #4 One high deductible base plan Multiple employee benefit options –options include FSA & HRA tools Employees pay cost differentials with pre- tax $$; employer cost same for all options Employer cost is fixed, regardless of which option an employee selects