Insure New Mexico! Council Deborah Dorman-Rodriguez Vice President and General Counsel Dorane Wintermeyer Vice President

1. Insure New Mexico! CouncilDeborah Dorman-RodriguezVice President and General CounselDorane WintermeyerVice President, Marketing and Sales November 4, 2004 Blue Cross and Blue Shield of New Mexico, A Division of Health Care Service Corporation, A Mutual Legal Reserve Company, An Independent Licensee of the Blue Cross and Blue Shield Association

2. Introduction and Overview • Products • Utilization – Education – Wellness • Charitable Giving • Partnering with Government

3. Understanding New Mexico’s Uninsured – 396,000 11,000 of New Mexico’s uninsured are unaccounted for1 Approximately 112,000 New Mexicans may be considered short-term unisured2 Approximately 73,000 of New Mexico’s uninsured have incomes of $50,000 or more and may be able to afford coverage1 Approximately 200,000 New Mexicans may be considered long-term unisured2 Source: 1 HRSA White Paper on Unisurance in New Mexico; Synopsis, 2004 2 Extrapolated from NM Health Care Coverage and Access Study, 2002 U.S. Census Bureau, 2003; BCBSA analysis

4. Uninsured Segments Wellness Financial Support Product Innovation Health Education & Services Health Screening New Mexico’s Uninsured: BCBSNM’s Perspective There is no single solution for New Mexico — the diversity of the uninsured necessitates multiple public and private solutions

5. Health Care Costs – Understanding Cost Trends Private Insurance Healthcare Dollar 31¢ HospitalCare 30¢ Physician Services 14¢ PrescriptionDrugs 11¢ Admin 10¢ Other Medical Services 3¢ Nursing Home & Home Health 1¢ Durable Medical Products Source: CMS, BCBSA analysis March, 2003

6. FactorsDriving Healthcare Cost Increases Fraudand Abuse Increased Consumer Demand GeneralInflation (CPI) 5% 18% 15% Litigation and Risk Mgmt 7% Drugs,Medical Devices& other MedicalAdvances 22% 15% 18% Government Mandates & Regulation Rising Provider/ Hospital Expenses

7. Employer Cost Per Employee By Age

8. A Market in the Midst of Change Cost Value Rapidly Rising Healthcare Costs and Increasing Consumerism Reshapingthe Industry Employees andConsumers Consumer DirectedHealthcare Employers = + • Shouldering burden of rising medical costs • Covering 70% of premium increases • Looking for ways to manage short and long term costs • Struggling tobalance employee satisfaction and pressure on bottom line • Greater accountability • More cost transparency • Consumers need to understand the cost implications of their actions • More informed decision making • Empowered to make good healthcare and health plan decisions • Shielded from true cost of healthcare • Wanting more value from their benefits as out of pocket costs increase • Looking for more information and control over healthcare decisions

9. Product Innovation - Current BCBSNM has designed new products to improve access for the most vulnerable populations • Programs targeted towards: • Low-income adults • Children • Small employers • Provider partnerships are key to success Product Innovation

10. Product Innovation - Results Preliminary results show that HSA products are helping with the uninsured problem • AHIP survey June 2004 • Conducted by Hey Group • Preliminary results • 20% of individual HSA sales are for previously uninsured Product Innovation

11. Consumer Driven Health Plans:Wave of the Future? • Approximately 80 - 85% of those insured have claims from $0 - $2,500 • 60% of people who had Medical Savings Accounts (MSAs) had a balance at the end of the year • “One size fits all” group medical benefits no longer work • Baby boom generation in best position to participate in and benefit from Health Savings Accounts (HSAs) • Other options include Health Reimbursement Accounts coupled with Flexible Spending Accounts • With proper tools, Americans can become the center of their health care and can decide for themselves what’s best for their families.

12. Product Innovation - 2005 BCBSNM is developing programs to cover the short-term uninsured and the middle-class uninsured Short-term Products Value Products • Targeted at individuals between jobs • Low monthly payments • Limited eligibility – usually six to nine months • Targeted at working uninsured and small employers • HSA’s for Individuals • Products without mandated benefits

13. Consumers Can Play Significant Role • The Long Term: Consumers can play a significant role over their health and future health expenses Source: IFTF and Center for Disease Control and Prevention, Health and Healthcare 2010, January 2000 How Can We Encourage and Support BehaviorChange?

14. Healthcare Cost Campaign Started the campaign focusing on drivers of cost Cost of HIPAA Physician Cost Drivers SupplierInduced Demand Hospital Cost Drivers AdministrativeCost Drivers

15. Healthcare Cost Campaign Emphasizing what works to address affordability and quality in local Plan markets through BlueWorks Partnership with Harvard Medical School Partnerships ConsumerEngagement ProductInnovation

16. Health Education and Services - 2005 BCBSNM will sponsor the Care Van program to provide health screenings, immunizations and educate children Goals: • Partner with DOH, Providers, and non-profit health groups to provide a diverse range of health services in New Mexico. • Educate children and families throughout New Mexico about good health and choosing a healthy lifestyle. • Support state-wide DOH health initiatives and provide health awareness outreach to underserved communities.

17. Health Screening Health Education and Services BCBSNM provides education and services to other individuals in the uninsured community BCBSNM provides: • Multilingual materials to Hispanic communities • Outreach to underprivileged groups • Health screenings • Educational materials to all groups on maintaining healthy lifestyles Health Education& Services

18. Charitable Giving BCBSNM administers more than $250K in charitable giving to help the uninsured Blues issue grants to: • Non-profit organizations that address community health issues • Groups that provide education and health resources to families and children • Forums on the uninsured and improving access Health Grants