CBIA HEALTHCARE UPDATE

Michelle ZettergrenSr. Vice President, Chief Sales & Marketing Officer

ConnectiCare, Inc. & Affiliates

September 21, 2011

The Environment TodayThe Environment Today

• U.S. Census

- 49 million Americans uninsured in 2009

- 49.9 million Americans uninsured in 2010

• Worst recession in the last 80 years

• Inflation-adjusted median household income in the U.S. fell 2.3% in 2010, to $49,445

•Texas 24.6%•New Mexico 21.6%•Nevada 21.3%•Mississippi 21.1%•Florida 20.8%•South Carolina 20.6%•Louisiana 20.0%•California 19.4%•Georgia 19.4%•Arizona 19.1%

Uninsured RatesUninsured Rates

•New Jersey 15.4%

•New York15.0%

•Rhode Island 11.4%

•Connecticut11.0%

•Pennsylvania11.0%

•New Hampshire10.3%

•Maine 9.4%•Massachusetts

5.0%

Massachusetts – A Success Story?Massachusetts – A Success Story?• First Public Exchange – the

Commonwealth Health Insurance Connector

• Goal – provide universal health coverage for Massachusetts residents

• Coverage required or pay penalties

• Small Group and Individual Markets merged

• Government funded subsidiaries provided for low income individuals

• Uncompensated care fund

Impacts on Massachusetts MarketplaceImpacts on Massachusetts Marketplace

• Many employers had to increase benefit coverage

• Providers struggle with increased demand

• State regulators artificially suppress premium increases

• Uncompensated care expense continues

• Health care cost continue to increase…

SustiNetSustiNet• Not implementing• Create giant pool including public

employees & Medicaid

Public ExchangePublic Exchange• Benefit will be defined by Federal government• 5 Specific levels of benefits• Carriers must charge same rate in and out of

exchange• One pool (small employers & individuals)• Reinsurance mechanisms in and out of exchange

What is Happening in Connecticut?What is Happening in Connecticut?

• Passed several benefit mandates• Expanded coverage – Impacts cost

2011 Legislative Session

Connecticut Has An Exchange TodayConnecticut Has An Exchange Today

• “Best Practice Model” recognized nationally

• Sophisticated administrative system

• Uniform benefits

• Employee choice

• Encourages competition

Minimum Loss RatioMinimum Loss Ratio(Five Minute University Version)(Five Minute University Version)

Requires insurers to pay out at least 80% of premium revenue, as claim payments or quality improvement expenses, for the small group and individual policies; 85% for large group policies

If not must issue rebates to insureds

MLR = Claims + Quality

Premiums – (Taxes + Fees)

What counts as “claims” or “quality” What counts as “claims” or “quality” improving the ratio? improving the ratio?

Minimum Loss Ratio • Payments made for clinical services provided to enrollees• Activities that improve health care quality:

- Increase the likelihood of desired health outcomes

- Direct interaction with enrollees

- Improve patient safety

- Promote wellness and health- Enhance quality through meaningful use of HIT

• All other expenses are administrative and have a negative effect on MLR

MLR RebatesMLR Rebates• First rebates are due on August 1, 2012, based on calendar year 2011

premium and claim/quality payments

• Calculations are per business segment, per issuing company, per state

• Rebates are intended to go to the entity that paid the premium – employer and employee

• Employers will have to be involved in paying any group rebates to their employees

• Rules are complex and new for everyone

• Results will also change over time as new Exchange-related risk adjustment rules come into effect in 2014

Uniform Summary of Benefits and CoverageUniform Summary of Benefits and Coverage

• Effective March 23, 2012 proposed rules issued August 17, 2011

• Insurers must provide to employers and beneficiaries

1. Pre-application (and with application if any changes)

2. Post-application

3. Upon material modification to the plan

4. At renewal

5. Upon request

• Penalties of up to $1,000 per enrollee for violations

Impacts on Health Care IndustryImpacts on Health Care Industry

• Rules are complex and much has not been developed or outlined

• Timing has been delayed causing impacts on internal development and preparation

• One size does not fit all – complexity adds cost

• PPACA does not acknowledge uniqueness of each state

• Reform does not address cost drivers