Agenda

1. Commonwealth Health Insurance Connector AuthorityMinimum Creditable Coverage Regulatory Revisions for ConsiderationBoard of Directors MeetingOctober 8, 2009

2. Agenda • Recap of current MCC Regulations • Review MCC Revisions Under Consideration • Out-of-Pocket (OOP) Maximum Calculation • Indexing OOP Maximum and Deductibles • Distribution of Medical Spending and OOP Expenses • Impact of Various Scenarios • Current Landscape and Carrier Feedback

3. Current MCC Regulations • Deductibles: • Any deductible for in-network covered services shall not exceed $2,000 (ind) / $4,000 (fam) • OOP Maximums: • If a health benefit plan includes deductibles or co-insurance for in-network covered core services, the plan must set OOP maximums for in-network covered services. • OOP Maximums shall not exceed $5,000 (ind) / $10,000 (fam)

4. Current MCC Regulations (cont) • Calculation of OOP Maximum: • The calculation of the OOP maximum must include the following payments for in-network covered services: • Deductibles, • Co-payments over $100, and • Co-insurance; however • Amounts paid for prescription drugs (Rx) need not be considered.

5. OOP Maximum Calculation – Possible Revisions • Require all costs (medical and prescription drugs) to count toward OOP maximum • Require prescription drug costs to count toward OOP maximum, or, impose separate OOP maximum for Rx

6. Indexing Options • OOP Maximum • Index to IRS Revenue Procedure re: Inflation Adjusted Items • Issued in spring/early summer for subsequent calendar year • OOP maximum would be same as allowed for a High Deductible Health Plan (HDHP) • For example, in 2010: $5,950 (ind) / $11,900 (fam)

7. Indexing Options (cont) • Maximum allowable deductible • OPTION 1: Index to same rate of increase as OOP maximum • OPTION 2: Set to 50% of OOP maximum

8. Distribution of Medical Expenditures • Over 98% of the population has OOP costs of $5,000 or less Notes: *Out-of-Pocket medical spending includes all consumer payments for medical services and prescription drugs.

9. Distribution of Medical Expenditures (cont) Notes: *Total medical spending is defined as the sum of direct payments for care provided during the year, including out-of-pocket payments and payments by private insurance, Medicaid, Medicare, and other sources. Payments for over-the-counter drugs, alternative care services, and phone contacts with medical providers are not included in MEPS total expenditure estimates.

10. Impact of Various Scenarios – Caveats • Several factors may impact accuracy of model and results: • Actual distribution in health benefit packages • Actual pricing and utilization patterns (relies on commercial model) • Actual carrier risk assumptions for pricing (vast differences across carriers)

11. Impact of Various Scenarios – All costs counting toward OOP

12. Impact of Various Scenarios – Separate Rx OOP Maximum

13. OOP Maximum Calculation –Current Landscape • Findings based on survey representing ~3 million MA lives • Overwhelming majority are in plans that are not required to have an OOP Maximum to meet MCC • Of those in plans required to have OOP Maximum, vast majority do not count Rx cost-sharing

14. OOP Maximum Calculation –Carrier Feedback • Carrier feedback re: integrated OOP Max • Vast majority of plans lack administrative/operational capacity to implement • Difficult and/or infeasible to integrate services covered by outside vendors into OOP • Minimum 18 month lead time to implement

15. Separate OOP Maximum –Carrier Feedback (cont) • Carrier feedback re: separate Rx OOP maximum • Several carriers have this capability and/or could easily implement • Two carriers indicated some of existing products have a separate Rx OOP Maximum • Several carriers indicated major administrative/operational challenges • Minimum 18 month lead time to implement • If adopted, require only co-insurance for prescription drugs to count toward a separate Rx OOP maximum