Solution-Oriented Approaches to Control Health Care Costs Alpha Benefits March 31 & April 1, 2004

1. Solution-Oriented Approaches to Control Health Care Costs Alpha Benefits March 31 & April 1, 2004

2. HealthAmerica & HealthAssurance Overview • HealthAmerica & HealthAssurance • Subsidiary of Coventry Health Care, Inc. • Statewide health plan founded in 1975 • Licensed in 59 of 67 counties • Over 715,000 members • 474 inpatient facilities & 19,000 providers • Revenue run rate of $1.6 billion in 2004 • Full product spectrum • Progressive medical management philosophy

3. “The Perfect Storm” Health Delivery System Consolidations Unhealthy Lifestyles Rising Premium Rates Aging Baby Boomers Medical Malpractice Increased Uninsured & Unemployment Recovering Economy Clinical Labor Shortage Cost Shifting - Public Sector To Private Sector End-of-Life Issues Emerging Expensive Technology Federal & State Budget Deficit Insatiable Appetite for Health Care Services Lack of Checks and Balances Increased Federal & State Regulation

4. Solutions That Work Controls currently in place • Network management • Effective utilization management • Disease management programs • Quality improvement • Evidence-based medicine • Administrative efficiencies • Benefit plans featuring cost-sharing

5. Solutions That Work • Network management • Controlling unit cost demands

6. Solutions That Work • Network management • Effective utilization management • Appropriate service, appropriate place, fair & reasonable price

7. Solutions That Work • Network management • Effective utilization management • Appropriate service, appropriate place, fair & reasonable price • Containing Rx costs

8. Containing Rx Cost:A Case Study Comparison of Rx Trends Industry trend information is from Buck Surveys.

9. Solutions That Work • Network management • Effective utilization management • Appropriate service, appropriate place, fair & reasonable price • Containing Rx costs • Disease management programs

10. Effective Disease Management:A Case Study Cardiac Case Management HealthAmerica and HealthAssurance 2003 Report

11. Solutions That Work • Network management • Effective utilization management • Appropriate service, appropriate place, fair & reasonable price • Containing Rx costs • Disease management programs • Quality improvement

12. Solutions That Work • Network management • Effective utilization management • Appropriate service, appropriate place, fair & reasonable price • Containing Rx costs • Disease management programs • Quality improvement • Evidence-based medicine

13. Solutions That Work • Network management • Effective utilization management • Appropriate service, appropriate place, fair & reasonable price • Containing Rx costs • Disease management programs • Quality improvement • Evidence-based medicine • Administrative efficiencies

14. Solutions That Work • Network management • Effective utilization management • Appropriate service, appropriate place, fair & reasonable price • Containing Rx costs • Disease management programs • Quality improvement • Evidence-based medicine • Administrative efficiencies • Benefit plans featuring cost-sharing

15. Solutions Long Overdue Opportunity still exists • Lifestyle choices • Emphasis on prevention and wellness

16. Solutions Long Overdue • Lifestyle choices

17. Big Spending: The Price We Pay % of Total Medical Spending Obesity Related Expenditures State $7.68 billion CA 5.5% 6.08 NY 5.5 5.34 TX 6.1 4.14 PA 6.2 3.99 FL 5.1 3.44 IL 6.1 3.30 OH 6.1 2.93 MI 6.5 2.34 NJ 5.5 2.14 NC 6.0 Source: CDC States with the highest burden of the country’s $75.1 billion in estimated medical expenditures attributable to adult obesity.

18. Solutions Long Overdue • Lifestyle choices • 7 in 10 Americans do not exercise regularly • 4 in 10 Americans are not physically active • 64% of all Americans are overweight • 440,000 people die each year from smoking • It’s time to “walk the talk”

19. Solutions Long Overdue • Lifestyle choices • Emphasis on prevention and wellness • One way to control the demand for health care services

20. Opportunity for Improvement • Changing health care system’s economic orientation from treatment to prevention • Inefficiencies in the health care system • Eliminating medical errors • Fixing reimbursement • Regional planning approach to new technology expansion and health care services • Medical malpractice reform • Modify physician and consumer behavior • End-of-Life issues

21. Final Take-Aways Health benefit costs are only one component; employers need to be heard • Embrace evidence-based medicine • Insist on regional planning for new technology and expansion • Speak out against new benefit mandates • Support tort reform

22. Final Take-Aways • Base employee cost sharing on lifestyle • Accept that you cannot have access to every provider, unlimited coverage, and control costs at the same time • Accept a little noise from your employees (Rx formulary) • Engage employees in true cost of health care

23. The Solution …. • Pursue cost controls privately • Fix what we have today before putting in a new system • Terrific opportunity still exists • Make a goal for all constituents to work for single-digit medical trends • Allow businesses to retain health care choices for their employees

24. Future • Real cost containment requires real sacrifice • If we are to cover everyone, we cannot cover everything • We ration care now • Challenge is to ration in a way that is more efficient and equitable.