Alice Rosenblatt Executive Vice President & Chief Actuary, WellPoint

1. Private Sector Initiatives to Control Costs Presentation to Citizens’ Health Care Working Group May 13, 2005 Alice Rosenblatt Executive Vice President & Chief Actuary, WellPoint

2. Agenda • About WellPoint • Product Innovation • Network Design • Health Care Management • Pharmacy Management • Leveraging Technology

3. About WellPoint • Leading health benefits company in the nation • Approximately 28 million medical members • Blue plans in 13 states: California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio, Virginia and Wisconsin • UniCare across the country, including significant presence in Illinois, Texas, and Massachusetts • HealthLink in Missouri and six other states: Arkansas, Illinois, Indiana, Iowa, Kentucky and West Virginia • Major specialty businesses: pharmacy, dental, vision, life/disability, behavioral health, EAP, workers’ compensation, state-sponsored • Nation’s 2nd largest Medicare contractor • Cover 1.8 million State Sponsored members (Medicaid, SCHIP, etc.) • More than 38,000 associates

4. Product InnovationConsumer Driven Health Care Five key elements comprise the framework for the most common product offerings Product and Plan Design Cost-share Funding Mechanisms • Typically a high-deductible PPO ($1,500 - $4,000) • 100% covered preventive care • Health Reimbursement Account (HRA) • Health Savings Account (HSA) • Complemented by Flexible Spending Account (FSA) Consumer-Centric Product Consumer Decision Support Tools Flexible Provider Network • Deep and broad • Choice-driven • eHealth tools • eService tools • Provider directories • Quality guidance Technology Platform • Web based front end • Benefits integration framework

5. Product InnovationHealthcare Advisor • User-friendly with context-consistent data and information • Research more than 150 different medical conditions and procedures • Compare hospital quality

6. Clinical outcomes Patient safety Hospital reputation Market-specific studies Hospital comments Product InnovationHealthcare Advisor

7. Product InnovationTonik • Developed by and for the “Young Invincibles” • Educates audience • Offers low price points • Unique package of benefits

8. Product InnovationBeneFits Plans for Small Businesses • Makes it easier for small businesses to offer coverage to their employees • employee participation requirements reduced to 60% • employer contribution reduced to 25% or $50 • coverage options for part-time employees • 84% of groups buying BeneFits plans to date were previously uninsured

9. Network DesignProvider Contracting

10. Using information to recognize hospitals for quality of care, better outcomes and efficiency Network DesignInformation-Based Networks Centers of Excellence • Narrow network for high cost procedures • CABG • Transplant • Bariatric Surgery Hospitals Subspecialists Segmented Networks Specialists • Smaller, more efficient quality networks • Select HMO • Select PPO Primary Care Physicians

11. Network DesignP4P Programs at WellPoint Partnerships with physicians and hospitals on quality incentive programs that include PPO and HMO products, and Medicaid PCP Programs Specialist Programs Hospital Programs Focused on primary care physicians. Typical major components: Focused on specialty care physicians. Early initiatives in: Ob/Gyn, Cardiology, Orthopedics. Measures similar to PCP programs: Focused on acute care hospital, typically full service facilities. Hospital programs typically have the following components: • Clinical Outcomes • Evidence-based medical procedures • Generic Prescribing Rates • Technology & streamlined administrative processes • Patient Satisfaction • Clinical Outcomes • Evidence-based medical procedures • Generic Prescribing Rates • Technology & streamlined administrative processes • Patient Satisfaction • Patient Safety • Clinical Outcomes • Patient Satisfaction

12. Data Mining, Predictive Modeling Integrated Care Models/Care Counselors Disease Management Hospital and Physician Quality Programs/Pay For Performance New Technologies and Therapeutics Processes Specialty Pharmacy Programs Health Care Management Healthy, Wanting to Remain Healthy Wellness - Fitness At Risk with Unhealthy Lifestyles Single Factor - Multi-Factor Chronically Ill / Complex Conditions Early Stage - Late Stage Sustain Wellness Improve Health Manage Disease

13. Pre-Authorization of Advanced Imaging MRI, CT, PET and Nuclear Stress Redirects Imaging to most clinically appropriate modality Steerage from higher cost to lower cost site of service, e.g., benefit designs in consumer directed plans Criteria developed in collaboration with American College of Radiology Radiology Management CT and MRI Imaging Utilization Annual Procedures Per 1000 Members Health Care ManagementClinically Appropriate, Cost-Effective Imaging 13

14. Midwest Care Counselor Prospective controlled study of 12,000 members Control group: 4,134 Intervention group: 7,797 Multiple chronic diseases: Average cost per year $24,000 Savings of 14% – or $3,500 per year – for members enrolled in program ROI of 4:1 Health Management Corporation (HMC) ASO groups who purchased DM (study group of 76,000 members) and those who did not (control) Chronic diseases (diabetes, asthma, coronary artery disease) Savings of 11% for those enrolled in the program ROI of 2.8:1 Health Care ManagementDisease Management Programs Sources: Cousins, Liu, Disease Management, Vol. 6, 2003. Harvard Blue Works Award, Program Description.

15. Health Care ManagementBehavioral Health • Follow-up after psychiatric hospitalization • Health management program for depression and co-existing illness • Postpartum depression screening and education program • Anti-depressant medication compliance in cooperation with PBM

16. Clinical / Medical Management Clinical Business Plan Intervention Programs Therapy Management Disease Management Patients-At-Risk ReViewPoint Online Reporting Consultative Services Incentive Programs Benefit Designs Interventions Account Management Sales Support Business Strategies Formulary Management Treatment Guidelines P&T Committees Manufacturer Discounts Preferred Rx Programs Prior Auth Center Generic drug initiatives Pharmacy Care Management • Claims Processing • Claims Keying • Online DUR • Specialty Pharmacy • Management and distribution of high tech, injectable drugs • 2 Facilities Network Management National Network Customized Local Networks MAC Programs • Mail Service Pharmacy • Integrated Mail Service Pharmacy • 2 Facilities Pharmacy Management • 4th largest PBM • Over 336M scripts in 2004 • Full spectrum of PBM services • Innovative programs to manage drug trend • Clinical programs: outcomes-focused, patient-centric

17. Membership Service Associate Web EDI EET Leveraging Technology • Process around 600 million medical and pharmacy claims per year • Benefits, eligibility & claims status inquiries account for about 85% of customer service call volume MEMBERSHIP SERVICES MEMBER EMPLOYER BROKER / AGENT PROVIDER Constituents EDI WEB EMAIL IVR FAX POSTAL PHONE Contact Channels Contact Point • Member Self-service • Employer Access • AgentFinder / AgentConnect • Provider Finder • Provider connectivity (EDI) • Consistent claim edits • Provider education / training • Auto-adjudication rates • Standard plan designs • Enhanced workflow management • Associate training

18. Leveraging TechnologyPhysician Quality & Technology Initiative GOAL: Move from basic administrative services to transactions that support quality care Basic Connectivity Claims Processes Medical Management Clinical Support Eligibility Member Benefits Claim Status Referrals Claim Submission Re-Credentialing Provider Directory Provider Change Preprocessing Claims Remittance Allowance Inquiry Claims Correction Plan AR Aging ER Notifications Formulary Management Alerts and Reminders Auto-Adjudication Pre-Certification Disease Management E-prescribing Outcomes Research Electronic Med Record Virtual Visits

19. Leveraging TechnologyPhysician Quality & Technology Initiative Prescription Improvement Package AFTER BEFORE • High Handwriting Risk • No Drug Utilization Review • No Formulary Check • No Handwriting Risk • Full Drug Utilization Review • Formulary Check Completed

20. Leveraging TechnologyCalRHIO • WellPoint Foundation made $1M grant to support California Regional Health Information Organization • CalRHIO Goal: build a statewide data exchange • Support use of IT and creation of a secure health information data exchange system to improve safety, quality, and efficiency of health care • Enable healthcare providers to use IT to securely exchange vital patient information • Identify legislation and regulation necessary for statewide data sharing • Ensure California’s data exchange projects are consistent with national technology platforms and networks