A Step-by Step Approach to Launching CDHPs & HSAs

1. A Step-by Step Approach to Launching CDHPs & HSAs

2. The Healthcare Cost Problem • Introducing a CDHP Design • Preparing for an HSA Launch • Launching the HSA Plan • HSA Enrollment Results Agenda

3. Sperian Protection: A Brief Introduction • World’s largest manufacturer of Personal Protective Equipment. Headquartered in Paris, France. • $1 billion global sales, $400m in the United States • 1600 Employees in 14 Business Units in U.S. • 10 Major locations in 9 States + National Sales Force • 2007 US health insurance expense: $8.8 million

4. Sperian’s Cost Containment Challenge • 1600 Employees in 14 Business Units in U.S. • 5 Health Plans in 2002 • Health Insurance Trend • 2002 $6,616,212 (12.3% increase) • 2003 $7,132,928 (7.8 % increase) • 2004 $9,764,864 (36.9% potential increase) Tried Contingent Premium Funding Gap: When will it occur and how much will it be? 2001 2002 2003 2004

5. Achieving Long-Term Cost Containment Required a Strategy Key Elements of our strategy: • Support our overall business plan • Be consistent with our corporate culture. Understand our benefits relationship with our employees. What is it now and what do we want it to be in the future? • Be implemented in phases so that employees will be introduced to consumerism gradually, over time.

6. Implement Tiered Choice ROI from Wellness Initiatives Implement HSA Program Implement Health Behavior Incentives Increase Self-funding Level Our Roadmap to Containing Healthcare Costs Over Time Reduced Trend

7. Our Solution: Phasing in a CDHP Working with Primarily Care, Inc. (“PCI”) Sperian adopted a hybrid funding arrangement in 2004 to reduce health insurance premiums by carving out certain parts of our insured plans to be self-insured. • 1 National PPO plan and 2 regional HMOs • BCBS-RI Covers 1,013 Employees (274 in HSAs) • A lower health cost trend • 2004 $7,965,538 (11.7% increase) • 2005 $8,320,981 (4.5 % increase) • 2006 $8,622,024 (3.6.% increase) • 2007 $8,846,197 (2.6.% increase) • 3-year plan savings of $7.69 million • Payroll deductions have remained stable for 4 years

8. Average Cost Per Employee - 2007 • Avg. Cost of PPO Plans Family Individual • Kaiser Survey (Sept. 2007) $12,443 $4,638 • Sperian PPO Option $ 9,616 $3,640 • Sperian HSA Option $ 8,685 $3,299 • Source: Kaiser/HRET 2007 Survey of Employer-Sponsored Health Benefits, Exhibit 6.3 • Average Cost Per Employee – All Plan Types • Towers Perrin (2007) $8,748 • Sperian $6,532 • Source: 2007 Towers Perrin Health Care Cost Survey

9. Claims Reduced 20% Compared with Traditional PPO Design (18.7%) (0%) (28.3%) (25.5%) (22.8%) $ $ $ Comparison of Sperian Per Member Utilization with BCBS-RI Plan-wide Data for 2006 Plan Year

10. The Healthcare Cost Problem • Introducing a CDHP Design • Preparing for an HSA Launch • Launching the HSA Plan • HSA Enrollment Results Agenda

11. Components of a CDHP Hybrid Funding Plan • The Primary Insurance Plan • The Supplemental Plan • Flex Account (or an HSA) with a Debit Card

12. Advantages of the Hybrid CDHP Design The Hybrid CDHP design permits employers to reduce cost while preserving benefits. By self-funding the deductible & coinsurance expense the employer accomplishes five things: • Significantly reduces overall health plan costs • Maintains present level of benefits for PPO participants • Raises employee awareness as to the value of the benefit they are receiving from the company because the company name is on the E.O.B. • Raises the level of employee awareness that health costs are increasing rapidly and that change is imminent • Prepares employees for taking more responsibility for their own health care purchasing and lifestyle

13. HSA Platform as an HSA Specific Stop Loss Example of the maximum self-funded exposure in a $6,000 family deductible HSA plan that is repackaged into a $2,250 employee deductible HSA Plan All Claims above $6,000 paid by health insurer Sperian pays claims from $2,251 to $6,000 Employee pays first $2,250 of claims

14. HSA Platform as a PPO Specific Stop Loss Example of the maximum self-funded exposure in a $6,000 family deductible HSA plan that is repackaged into a PPO with employee co-pays. All Claims above $6,000 paid by health insurer HSA Platform Sperian pays difference between PPO co-pays and the cost of service on first $6,000 of claims Employee pays PPO co-pays and deductibles for all services on first $6,000 of claims &

15. PPO Option Weekly Payroll Deduction: $23 Single $46 2-Person $59 Family Deductible $500/$1,000 Everything but OVs & Rx Co-pays $15/$25 OV 25% Rx Use with Flex Account HSA Option Weekly Payroll Deduction: $13 Single $26 2-Person $39 Family Deductible $1,100/$2,250 Up-front, cumulative OVs & Rx are FREE after deductible is met Use with HSA Account 2007 Plan Comparison Both Plans Use

16. The Healthcare Cost Problem • Introducing a CDHP Design • Preparing for an HSA Launch • Launching the HSA Plan • HSA Enrollment Results Agenda

17. Listen Before You Launch To help us understand the decision-making behavior of our employees when it come to health care decisions – and to help us plan our communication campaign, we held a series of focus groups around the company in June 2006: • 71 Employees from 5 key locations • 12 to 15 per session – mixture of salaried and hourly • Participants from all of our health plan options, plus non-participants Each group followed a structured agenda with four main components that allowed us to capture consistent information for comparison and analysis: • Reasons for selecting their current plan option • A ranking exercise for key health insurance attributes • Understanding of how they make consumer decisions • Recommendations for improving plan communications and education

18. 2006 Focus Groups: Ranking the 4 C’s • Coverage Comprehensive Network, Providers & Services • Cost Payroll & Out-of-Pocket Co-pays and Deductibles • Convenience Easy to follow forms and processes • Cash Flow Ability to pay as you go - with no surprises # Most Common Response in the Category Second Most Common Response #

19. Focus Groups: Effective Communication Buying Behavior • Willing to spend a lot of time researching a major consumer purchase (car, home appliance, computer purchase, etc.) • Will use a variety of information sources (print, friends, internet, legwork) • But - DO NOT want to spend a lot of time choosing a health plan Communication Preferences • Keep it simple – use basic side-by-side comparisons • Health insurance is too complex – give us more time to make a decision • Give us tools (like online calculators and worksheets) to help determine how much it will cost us. General Observations and Conclusions • Plan communications need to be broken down into a series of smaller, more targeted pieces leading up to enrollment meetings • Comparisons between key plan options must be described simply and clearly without a lot of unnecessary detail • Simple decision making calculators and tools are essential

20. The Healthcare Cost Problem • Introducing a CDHP Design • Preparing for an HSA Launch • Launching the HSA Plan • HSA Enrollment Results Agenda

21. Our Plan Design Strategy for 2007 Increase employee control, involvement and responsibility for their health care by: • Redesigning our PPO option to make more services subject to the deductible while maintaining our current 70/30 cost-sharing formula • Changing the Pharmacy co-pay to increase employee awareness of the true cost of their prescriptions • Introducing the next phase of Consumer Driven Health through an HSA compatible health plan with an up-front deductible • Making Health Savings Accounts available to employees to allow them to save for their current and future health care needs It’s YOUR money – to keep, spend or save!

22. Explaining the Plan to Employees • Use multiple communication vehicles to get your message across: • Employee Meetings • Webcasts • Print • Intranet • Clearly explain what is changing – and what isn’t • Health insurance is a family decision – plan your communication for ease of use at home • Communication needs to be adaptable for bilingual/bicultural audiences

23. Targeted Employee Communications Campaign

24. FSA Account It’s a Spending Account $3,000 max/yr. Available Jan. 1 to use Use it or lose it Tax Advantages Pretax payroll deduction Earns no interest Tax-free withdrawals Leave your unused $$ behind if you leave the company HSA Account It’s a Savings Account $2,850/ $5,650 max/yr. $250 Company contribution Use it or save it Tax Advantages Pretax payroll deduction Savings can be invested Tax-free withdrawals It’s YOUR money – take it with you if you leave the company HSA – FSA Comparison

25. The Healthcare Cost Problem • Introducing a CDHP Design • Preparing for an HSA Launch • Launching the HSA Plan • HSA Enrollment Results Agenda

26. 2007 Enrollment Results 23% HSA Enrollment in Year 1 Based on 1219 Employees enrolled in a health plan option for 2007

27. HSA Participants by Age 69% of HSA Participants Age 40+ Based on 274 Employees enrolled in the HSA option for 2007

28. HSA Participants by Income 52% of HSA Participants Earn < $50,000/yr. Based on 274 Employees enrolled in the HSA option for 2007

29. Focus Group Comparison: “The Maslow Effect” #1 #2

30. “Concierge Service” for Plan Participants “Call Sara”

31. For More Information Mike Vittoria Sperian Protection 900 Douglas Pike Smithfield, RI 02917 401-757-2111 mvittoria@sperianprotection.com Ed Belt Primarily Care, Inc. 75 Sokanosset CR Suite 300 Cranston, RI 02920 401-946-4441 800-395-1300 ebelt@ primarilycare.com