C LARK N UBER P . S .

1. Washington Health Benefit Exchange • Potential Service Need: • Enterprise Financial Risk Assessments Vincent Stevens, CPA vstevens@clarknuber.com 425.990.7608 Paul Manry, CPA pmanry@clarknuber.com 425.709.4871 Presented By: Bob Nakahara, CFO, Washington HBE June 4, 2013 CLARK NUBER P.S.

2. Threats of Growing Too Fast Multi-billion dollar companies are typically not created overnight. Within 2 – 3 years, HBE is forecasting $2B+ annually in premiums and operating expenses exceeding $50M. Key business/financial risk factors may include: • Inability to effectively manage all business processes. • Lack of a proper system control foundation or infrastructure. • Internal systems and procedures may not be appropriate. • Poor service leading to dissatisfied customers/stakeholders. • Over-reliance on one or few partners. • Overworked and dissatisfied employees. Loss in productivity.

3. Need for Financial Risk Assessments • Risks can impede an organization’s ability to meet its mission and objectives. Ultimately, the organization, its board members & management reputations are at stake. • Financial risks resulting from unintended or intended irregularities are present in all business processes of an organization impacting all stakeholders. • Significant inherent risk in designing a new business model and implementing the operating/financial infrastructure to manage $1+ billion of transactions, over 2 - 3 million member months, multiple QHP/health plans, vendors, partners, regulators, and other stakeholders.

4. Revenue Cycle – Example Processes Plan Selection & Setup Billing, Payment & Collections User Assistance Eligibility QHP • Billing Accuracy • Payment Processing • Premium Aggregation & Adjustments • Data Integrity Checks • In-person Assister • Call Center • Contracting, Management & Payments • Application Data Integrity Checks • Eligibility Determination • Appeals • Rate / Data Integrity Checks • Method of Payment • Rate • Bank Info • Payment / Plan Modifications • Data Integrity Checks Policy, Operations, IT, Accounting, Other Departments

5. Financial Risk Assessment 1 Review / Document Processes (Flowcharts/Narratives) 6 2 Risk Monitoring (How are risks monitored) Risk Identification (What could go wrong) Revenue Cycle Processes Hospital 5 3 Risk Response (What is an appropriate response) Risk Analysis (What are the key risks) 4 Risk Ratings (Impact / Likelihood of Occurrence)

6. Assist management with performing enterprise financial risk assessments, beginning with the entire revenue cycle. Proposed Scope and Timing June 2013 October 1, 2013  December 2013 Go Live Date • For each area selected, we will assist management with: (1) process mapping the cycle; (2) performing risk assessments; (3) developing a heat mapping of the risks; and (4) creating a risk control matrix of key controls and risks identified. • Assist management in researching and identifying best practices related to the processes that will be assessed. This could include best practices from other exchanges.

7. Engagement Team Paul Manry Senior Manager Rob Fleming Consulting Shareholder Vincent Stevens Engagement Shareholder Bob Nakahara HBE Project Sponsor Mike Nurse Engagement Senior Amanda Brault Associate Consultant Brad Parker Associate Consultant

8. Desired HBE Goal The process of designing and implementing a sound set of financial & operational controls is fluid, thereby it will evolve with the maturity of the Company. At a minimum, on October 1, 2013, the HBE board and its management will be able to state the following: • We have conducted ourselves in a manner that meets all reasonable expectations as fiduciaries and trusted stewards of the public’s funds & assets. • Working closely with our 3rd party financial experts, HBE designed and implemented its general & internal accounting controls using industry-accepted guidelines & best practices.