Kelly McGivern Sr. Director, Government Affairs December 14, 2012

1. This presentation is only a high level summary of the Patient Protection and Affordable Care Act (ACA). Information contained in this presentation is subject to change as regulations are issued and interpretation evolves. This presentation should not be considered to be legal guidance regarding ACA or its potential impact.

2. 2014 Health Care Landscape Kelly McGivernSr. Director, Government AffairsDecember 14, 2012 This presentation is only a high level summary of the Patient Protection and Affordable Care Act (ACA). Information contained in this presentation is subject to change as regulations are issued and interpretation evolves. This presentation should not be considered to be legal guidance regarding ACA or its potential impact.

3. Benefit coverage changes • Preventive Care at 100% in network • Dependents < age 26 • No pre-ex < age 19 • Prohibits rescissions except fraud • No lifetime limits/ annual limits on essential benefits • Patient protections • Grievance and appeals updates • Temporary high-risk pool • Uniform MLR definition (NAIC) • HHS Web Portal • Guaranteed issue • Individual coverage mandate • Individual subsidy • State individual and small group exchanges operational • Rating rule changes • Insurer taxes • Employer “Pay or Play” Mandate • Essential health benefits • Medicaid expansion • 90-Day maximum waiting period • Auto-Enrollment • Annual reporting of employee coverage • Definition of full-time employees • Wellness incentives • Minimum MLR requirements • Medicare Advantage plans begin to have payments frozen • Medicare Advantage cost sharing limits effective • Pharmaceutical fee • Rate review implementation • Patient Centered Outcomes Research fee • MLR reporting goes “live” • Administrative Simplification begins to phase in • Uniform summary of coverage • Medical device fee • Exchange coverage notice • FSA Cap • Tax deduction for Medicare Part D subsidy eliminated • Increased penalties on individual mandate • Increased insurer taxes • States must allow groups with <100 employees into exchanges (2016) • “Cadillac tax” (2018) Healthcare Reform Timeline Source: Patient Protection and Affordable Care Act

4. ProminentACA Provisions in 2014 Key ACA provisions, which will become effective in 2014, will have a significant impact on the health insurance marketplace. Prohibits health plans from denying coverage or rating applicants based on their health status Levels the playing field between health plans and mitigates the impact of Guaranteed Issue and pricing uncertainty in the short term Creates government regulated Individual and Small Group health insurance marketplaces Guaranteed Issue (GI) and Rating Changes Insurance Exchanges Risk Management Mechanisms Key ACA provisions effective in 2014 Institutes penalties for employers who fail to offer affordable comprehensive coverage Institutes penalties for failing to purchase health insurance Employer Mandate Individual Mandate Taxes and Fees Tax Credits and Subsidies Levies against health insurers and other groups to fund subsidies and risk management mechanisms Lowers the cost of coverage for the low and middle income populations in the Individual market

5. Key 2014 Provision: Insurance Exchanges States have a considerable amount of flexibility in deciding how to structure their Public Individual and Small Group Exchanges. Small Business Health Options Program (SHOP Exchange) Private Exchange Individual Exchange • Exchange Eligibility: • US citizen or legal alien • Not incarcerated • Resident of the state in which Exchange is based • Access to Premium Tax Credits and Cost Sharing Subsidies: • Between 133% and 400% FPL • Not offered affordable coverage through an employer • Exchange Eligibility: • Full-time employees of small businesses from 1 to 100 employees • State option to limit to businesses of 50 or less until 2017 • States will decide on the degree of choice offered to employees through the small business Exchange and how employers can provide contributions toward employee coverage • Beginning in 2017, states will have the option to open the Exchanges to large employers • Description: • May allow health plans to target employers that are potentially interested in defined contribution for their employees • Potentially more health plan flexibility as plans may not need to meet QHP (Qualified Health Plan) standards • Regulatory issues to be considered include state insurance law, rating, anti-selection, risk management, and antitrust requirements • Access to Premium Tax Credits and Cost Sharing Subsidies: • No access to tax credits and subsidies

6. Exchange Implementation Timeline Health plans currently await additional Exchange guidance from Health and Human Services and States. Higher Low Degree of Clarity on Exchange Regulations from HHS and States Award Funding and Publish Legislation Build Exchange Certify Exchange IVL/SG Exchange Effective Exchange Coverage Effective LG Exchange Effective Health Plan Implementation Milestones • Summer • States notify HHS of intent to operate Exchange Q1 – Determine Exchange technology solutions Q2 – Finalize Exchange go-to-market strategy – Begin technology build Q4 – Networks configured – Products developed and filed

7. Exchange Implementation Timeline Health plans currently await additional Exchange guidance from Health and Human Services and States. Higher Low Degree of Clarity on Exchange Regulations from HHS and States Award Funding and Publish Legislation Build Exchange Certify Exchange IVL/SG Exchange Effective Exchange Coverage Effective LG Exchange Effective Health Plan Implementation Milestones • January • HHS decides on Fallback Exchanges Q1 – Rates filed for 2014 Q2 – Submit applications to States for qualified health plans Q3 – Ready to quote / enroll Q4 – Ready to service • Fall • Exchanges finalize available options • Initial enrollment

8. Exchange Implementation Timeline Health plans currently await additional Exchange guidance from Health and Human Services and States. Higher Low Degree of Clarity on Exchange Regulations from HHS and States Award Funding and Publish Legislation Build Exchange Certify Exchange IVL/SG Exchange Effective Exchange Coverage Effective LG Exchange Effective Health Plan Implementation Milestone • January • Exchange coverage becomes effective Q1 – Fully operational on the Exchange

9. Exchange Implementation Timeline Health plans currently await additional Exchange guidance from Health and Human Services and States. Higher Low Degree of Clarity on Exchange Regulations from HHS and States Award Funding and Publish Legislation Build Exchange Certify Exchange IVL/SG Exchange Effective Exchange Coverage Effective LG Exchange Effective • January • States may permit large employers in Exchange

10. Value-Based Contracting Michelle Mathieu Daniels Vice President Network Management December 14, 2012

11. Aetna Works with Providers to Create Incremental Value Value

12. What is Value? “Value” is the patient health outcome achieved per healthcare dollar spent. Our strategy is to provide improved value through population health management, which is built on the foundation of the Triple Aim: 1) Improve patient experience/engagement; 2) Improve population health; 3) Reduce aggregate cost of care. Definition of “value” from: Porter ME. What is value in health care? N Engl J Med 2010; 363:2477-81. (10.1056/NEJMp1011024). http://www.nejm.org/doi/suppl/10.1056/NEJMp1011024/suppl_file/nejmp1011024_appendix1.pdf. “Triple Aim” from: “Triple Aim Initiative.” IHI. http://www.ihi.org/offerings/Initiatives/TripleAim/Pages/default.aspx.

13. Charting the Payment Reform Path Continuum of Payment Models Episodic Cost Accountability Total Cost Accountability Minimal Savings Potential Substantial Source: The Advisory Board Company: Accountable Care Forum-Briefing for Health Plan Executives

14. Medicare Collaboration Our objective is to align resources and incentives to improve outcomes National and local focus

15. The Building Blocks of Collaboration Collaborative Care Management Nurse Case Manager in the Participating Provider’s Group Practice Care Managers work in collaboration with physicians to Develop care plans Monitor ongoing symptoms Coach patients to manage their conditions Continuity of care Performance Based Compensation Provide enhanced payment opportunities for achieving defined performance measured focus on quality, recognition and management of chronic conditions and reductions in avoidable hospital admissions and readmissions

16. The Building Blocks of Collaboration Medicare Data Analysis Sharing actionable information to improve recognition of chronic conditions for risk scores and achievement of quality measures Collaboration Results Overall Aetna MA inpatient utilization results are 31% - 34% better than FFS Medicare

17. Creating Alignment with Patient-Centered Medical Homes Aetna supports the development of Patient Centered Medical Homes through pilots in eight states --- the early returns are promising • Features: • Three levels of PCMH certification from the National Committee on Quality Assurance • Emphasis: Coordinated team-based primary care focused on the needs of members, populations • Standards: Access, continuity, self-care, population mgt, treatment goals, performance improvement Aligning Incentives: • Per member per month coordination-of-care fee to support practice infrastructure • Members are “attributed to the practice using standard attribution logic • Gain sharing modelso practices can benefit from incremental efficiency and clinical improvements • Sample Clinical Measures: • Diabetic: A lipid management: LDL-C control <100 • Diabetes: medical attention for nephropathy • Diabetic: hemoglobin A1c management  • Sample Efficiency Measures: • 30-day readmissions rate • Bed days per thousand (excluding trauma/maternity) • Inpatient cost savings PMPM • ER visits per thousand

18. Aetna’s PCMH Models Multi-Payor Collaboratives, CMS, and Comprehensive Primary Care Initiative (CPCI) Direct Contractual Relationship Region specific contracting pipeline Care Coordination Fee and Shared Savings Efficiency and Clinical Performance Monitoring PCMH Recognition Model Market based program Care Coordination Fee Efficiency and Clinical Performance Monitoring

19. More PCMH Proof Points Results compiled by the Patient-Centered Primary Care Collaborative at: “Benefits of Implementing the Primary Care Patient-Centered Medical Home.” PCPCC. 2012. http://www.pcpcc.net/files/benefits_of_implementing_the_primary_care_pcmh.pdf.

20. Definition of Bundled Payments Bundled Payments can be defined as payments that reimburse providers on the basis of expected costs for clinically-defined episodes of care. They are a mid-point on the road to payment reform.

21. Aetna and Bundled Payments With Bundled Payments, Aetna aims to support the “Triple Aim” of improved population health, improved patient experience and reduced cost of care.

22. Pay-for-Performance – Payment Reform’s Underpinnings • Pay-for-Performance (P4P) can mean a stand-alone program, but there are P4P components to any payment mechanism that ties payment to achievement of quality metrics, including most programs whose results are on these slides. • Aetna’s Hospital and Specialty P4P programs offer hospitals and providers scorecards that assess their proficiency at improving outcomes and following evidence-based processes of care. They also reward facilities and providers that publicly report on the quality of the care they offer. Aetna’s goals for the program include: • Ensure quality care for the money hospitals receive. • Ensure hospitals operate efficiently. • Closing the gap between low-and-high performers.

23. Pay-for-Performance – Payment Reform’s Underpinnings

24. Aetna’s Way Forward

25. Margaret Anson, SVP Strategy and Operations Accountable Care Solutions December 14, 2012 Accountable Care Quality health plans & benefits Healthier living Financial well-being Intelligent solutions

26. We see Accountable Care as a Broad, Transformational Commercial Model Aetna Perspective All patient model – Medicare, Medicaid, Commercial All payor model – not limited to Aetna members Committed to quality and total cost management Symmetrical risk sharing CMS Model Medicare only Defined network Shared savings Quality measures and reporting Aetna’s Accountable Care Solutions offering is a sustainable long-term model for change

27. Accountable Care Benefits All StakeholdersLower cost, higher quality, enhanced member experience Consultants/Brokers Employers • Innovative client cost savings solution • Increased growth through opportunity to differentiate • Quality indicator reports • Cost savings • Sustainable solution • Improved quality • Enhanced wellness and care management • Improved employee productivity Aetna and Health System Partner Members Care Providers • Infrastructure to manage populations and risk • Payment aligned with quality and outcomes • Improved compensation • Quality-based, coordinated care • Lower out-of-pocket costs • Enhanced member experience • Tools to support a healthy lifestyle

28. This Is How It Works ACOs allow providers to counter significant profitability reductions via a sustainable business model Growth Current Performance Performance Gap (e.g., Rate Pressure, Competitive Market Forces) Steerage (Commercial, Medicare, Medicaid) Operating Cost Improvement Clinical Integration Shared Savings Future Performance Without Defensible Strategy Invest in New ACO Capability Clinical Efficiency and Enhanced Care Management/HIT

29. Three models of collaboration Model Description Clinical Integration Support All Payers • Governance • Network Development • Business, Payment and Clinical Model Development • Workflow Redesign, Clinical, IT, Care Management Infrastructure Development • Change management • Role and Responsibility Definition Build Population Specific Models • Medicare: Pioneer, Medicare Shared Savings Program, Medicare Advantage • Medicaid • System Employees • Commercial Fully Insured • Large, self funded customers • Federal Employees Private Label Health Plan • Use of Aetna insurance license and expertise (e.g., actuarial) to enable private label or co-branded health plan offering and manage risk • Leverage Aetna scale/operations – claims processing, customer service, call center, & care management (e.g., staff, programs, technology)

30. CT Suite • HIE • CDS • PHR / Pt Portal • Analytics • Implementation Services • Any Payer, Any Insurance Segment Business Models A la Carte and Turn-Key Solutions Provider Provider Payment Payment Branded Branded & Incentive Models Reform Health Plan Health Plan Strategy Development and Change Management Consulting Care Care Health Health HIT/HIE HIT/HIE Management Management Plan Services Plan Services Infrastructure Embedded CM Telephonic / Embedded License License Care Team Suite • • • • • • Telephonic CM Claims Claims • • • • HIE HIE • • UM, DM, CM, BH, MM Training, Staff & Programs DM, UM, CM Member Services Member Services • • • CDS CDS • • Wellness Sales and Marketing Sales and Marketing • • • • PHR / Patient Portal Wellness and Lifestyle • • Senior Programs Actuarial / Underwriting Actuarial / Underwriting • • • • Analytics Analytics & Reporting Clinical / IT Platform • • Implementation Services Implementation Services Implementation Services • • • • Implementation Services Implementation Services Implementation Services • • Physicians Hospitals Physicians Hospitals Staff Staff Out Patient Facilities Out Patient Facilities Pharmacy Home Health Pharmacy Home Health

31. We are better prepared this time around ACOs are not HMOs by another name THEN … … NOW 1980s 2000s 2012 Limited transparency and access to information; Absence of public policy to drive systematic change Policy and cost pressures are forcing change; Technology is available to enable transparency and collaboration with providers through aligned incentives HMO Gatekeeper Model Consumer Directed Health Plans Advent of the PPO TODAY • Broad networks with out-of-network benefits increase cost • Disjointed care delivery • FFS reimbursement encourages volume over value • Cost-shifting to members moderates utilization • Insufficient data to change consumer behavior and coordinate care • FFS reimbursement encourages volume over value • Care coordination through HIT • Aligned incentives between payers and providers • Cost savings and sustainable solutions • UM functions as barrier to care • Insufficient data to support care coordination • Limited payer/provider collaboration 31

32. Hospital Employee Benefit Plan Administration Powered by Diverse Suite of Unique Tools and Services • Creation of meaningful Payment and incentives for triple aim improvement on a defined population(s) • Clinically Integrated Delivery Model that has the ability to drive improved performance • Business model that Rewards both partners • Dedicated service model • Custom network administration • Clinical coordination with on site programs • Reporting/Data analytics • Decision support tools • Leading consumer mobile app • Symptom-to-Provider pathway • Navigation, access, appointments, registration • Population-based clinical intelligence, decision support and alerts • Care Management, communication and workflow technology • Provider interface • Cloud-based applications • Rapid / viral distribution • Clinical Data Integration • Secure Data Exchange

33. Our Strategies Deliver Benefits to all Stakeholders Consumers Providers Employers • Improved access, quality, affordability, and convenience • Flexible and customizable • Payment aligned with quality and outcomes • Infrastructure to manage populations and risk • More affordable benefits • Increased and improved engagement • Workforce productivityand human capital

34. What is Your ACO Readiness? Do you have a population based care management program? How strong is your commitment to the triple aim of better care, better health, reduced costs? Have you embraced the PCMH philosophy? Can you embrace payer discipline? Are you ready to share risk with payers or the government? Do you have an organizational commitment to transformation? How are you perceived by your community (do employers see you as a partner in helping manage their benefit costs)? Does your existing “owned” or “clinically integrated” provider network provide adequate geographic coverage for your targeted population or do you need more partners? Does your technology plan support population health management?

35. Questions?

36. Thank you