CBIA HEALTHCARE UPDATE

1. CBIA HEALTHCARE UPDATE Michelle Zettergren Sr. Vice President, Chief Sales & Marketing Officer ConnectiCare, Inc. & Affiliates September 21, 2011

2. The Environment Today • U.S. Census - 49 million Americans uninsured in 2009 - 49.9 million Americans uninsured in 2010 • Worst recession in the last 80 years • Inflation-adjusted median household income in the U.S. fell 2.3% in 2010, to $49,445

3. Uninsured Rates • New Jersey 15.4% • New York 15.0% • Rhode Island 11.4% • Connecticut 11.0% • Pennsylvania 11.0% • New Hampshire 10.3% • Maine 9.4% • Massachusetts 5.0% • Texas 24.6% • New Mexico 21.6% • Nevada 21.3% • Mississippi 21.1% • Florida 20.8% • South Carolina 20.6% • Louisiana 20.0% • California 19.4% • Georgia 19.4% • Arizona 19.1%

4. Massachusetts – A Success Story? • First Public Exchange – the Commonwealth Health Insurance Connector • Goal – provide universal health coverage for Massachusetts residents • Coverage required or pay penalties • Small Group and Individual Markets merged • Government funded subsidiaries provided for low income individuals • Uncompensated care fund

5. Impacts on Massachusetts Marketplace • Many employers had to increase benefit coverage • Providers struggle with increased demand • State regulators artificially suppress premium increases • Uncompensated care expense continues • Health care cost continue to increase…

7. What is Happening in Connecticut? Public Exchange • Benefit will be defined by Federal government • 5 Specific levels of benefits • Carriers must charge same rate in and out of exchange • One pool (small employers & individuals) • Reinsurance mechanisms in and out of exchange 2011 Legislative Session • Passed several benefit mandates • Expanded coverage – Impacts cost SustiNet • Not implementing • Create giant pool including public employees & Medicaid

8. Connecticut Has An Exchange Today • “Best Practice Model” recognized nationally • Sophisticated administrative system • Uniform benefits • Employee choice • Encourages competition

10. MLR = Claims + Quality Premiums – (Taxes + Fees) Minimum Loss Ratio(Five Minute University Version) Requires insurers to pay out at least 80% of premium revenue, as claim payments or quality improvement expenses, for the small group and individual policies; 85% for large group policies If not  must issue rebates to insureds

11. What counts as “claims” or “quality”  improving the ratio? Minimum Loss Ratio • Payments made for clinical services provided to enrollees • Activities that improve health care quality: • Increase the likelihood of desired health outcomes • Direct interaction with enrollees • Improve patient safety • Promote wellness and health • Enhance quality through meaningful use of HIT • All other expenses are administrative and have a negative effect on MLR

12. MLR Rebates • First rebates are due on August 1, 2012, based on calendar year 2011 premium and claim/quality payments • Calculations are per business segment, per issuing company, per state • Rebates are intended to go to the entity that paid the premium – employer and employee • Employers will have to be involved in paying any group rebates to their employees • Rules are complex and new for everyone • Results will also change over time as new Exchange-related risk adjustment rules come into effect in 2014

13. Uniform Summary of Benefits and Coverage • Effective March 23, 2012 proposed rules issued August 17, 2011 • Insurers must provide to employers and beneficiaries • Pre-application (and with application if any changes) • Post-application • Upon material modification to the plan • At renewal • Upon request • Penalties of up to $1,000 per enrollee for violations

16. Impacts on Health Care Industry • Rules are complex and much has not been developed or outlined • Timing has been delayed causing impacts on internal development and preparation • One size does not fit all – complexity adds cost • PPACA does not acknowledge uniqueness of each state • Reform does not address cost drivers