Contributory Plan Summary of Market Research

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

5. Employer Plan + ChoiceSimilar 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

8. Employer Plan + ChoiceExample: 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 + ChoiceSome 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. Example – Some Employees Pick Options Employer’s monthly cost remains $748 Employees save or pay the difference. $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