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Agenda

Welcome & Introductions

Garry Ramsey, Chief Marketing Officer, Bluegrass Family Health

Today’s Healthcare Environment & CDHPs as a Solution

Kismet Toksu, President, Candor Consulting

HRA, FSA, HSA & Debit Cards

Lynden Kendrick, Vice President, Wells Fargo Flex Benefits Services

Bluegrass Consumer Choice - Concept

Rita Woods, Product Specialist, Bluegrass Family Health

Sales Proposition to Employer Groups – Case Studies

Garry Ramsey, Chief Marketing Officer, Bluegrass Family Health

Broker Sales Support, Process & Commissions

Nancy Atkins, Director of Sales, Bluegrass Family Health

Q & A Insurix Quoting Tool Demonstration

Aaron Downend, Vice President, Insurix

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Kismet Toksu President 3

State of the Current Environment

       Premiums increased an average of 13.9% in 2003.

Average coverage cost is now $9,068 family/$3,576 single.

Plan sponsors continue to pay an average of 84% of premium for single and 73% for family coverage.

Rx cost increases are driving employers and consumers toward generics. 58% of patients surveyed use the internet to become better educated about their treatment options and costs.

A 4% pay increase is considered good in this economy is often negated by increasing health care costs.

Rising costs squeeze budgets leaving less money for salaries and wages, especially among small employers .

Rather than cutting health benefits, employers are screaming for innovative coverage ideas.

Data excerted from nationwide surveys conducted by the Kaiser Family Foundation, Fidelity Investment and Mercer Human Resource Consulting. 4

Enter…

Consumer Choice Health Care

  Holds Cost or Minimize Increases in 2004 Minimizes Premium Trend Going Forward – average 7% for CDHP rather than 15% PPO  Continues to Provide Comprehensive, High Quality Medical Benefits   Better Manages Utilization Supports Recruitment and Retention Goals  Provides Incentives for Employees to Become Partners in Managing Health Care Costs 5

Employer Value Proposition

      Mitigates health care cost trend.

 Employs a new cost control strategy combining supply-side

and

 demand-side management.

Provides financial incentives to employees for wise health care purchasing.

Motivates members to be healthy.

Enables and supports employees to take control of their healthcare. Provides a “safety umbrella” in the event of multiple or catastrophic health events.

Creates a partnership between Employer and Employee in managing health care quality and cost.

Leverages the power of technology.

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Current Adoption Rates

 When offered as an option:  Up to 65% of participants enroll – appx. 20% is average  20% - 30% of new hires select     Increasingly offered as full replacement More than 90% of employees re-enroll Employee surveys show high levels of satisfaction Employer and carrier analysis show positive financial results Employee and employer survey results from Towers Perrin, PriceWaterhouseCooper, Mercer Human Resources Consulting, Definity Health and Lumenos. 7

Current Employers Offering CDHPs

Large Group + Mid and Small Segments in All Industries

• • • Abbott Labs • Baylor Health Systems • Budget Group

Western Trailers Cardinal Health *

• Honeywell • JB Hunt • Novartis • Pharmacia •

City of Provo

• US Postal Service • •

Whole Foods

• Raytheon • CVS Pharmacy • Charter Communications

Old World Industries

• • Intel • Medtronic • Pitney Bowes • Ridgeview Medical Center

Trover Solutions

* Current Bluegrass Family Health client.

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Consumer Choice

“Best in Class” Product Features

   Employer-sponsored, consumer-directed health care alternatives -- in its best form -- combine: 

1.

2.

3.

4.

5.

Preventive Care Coverage HRA Patient Responsibility Traditional Coverage Consumer Support –

 

Web Tools Health & Medical Management

Are fully Internet-enabled.

Leverage and support consumer purchasing ability by providing access to tools.

Focus on the consumer as the most powerful form of health care cost containment. 9

How Consumer Choice Products Work

Example: Family Coverage Employer provides coverage above the deductible Employee is responsible for paying an out-of pocket amount. This is called the “bridge” or “gap.” Annual employer pre-tax allocation to an employee’s HRA

Traditional Coverage Patient Responsibility $1,000

Coverage takes effect when expenses exceed annual employer HRA allocation plus the “Bridge.”

Health Reimbursement Account $1,000

64% of participants roll over funds Average roll over amount of $342

Preventive Care 100% 1 st Dollar Coverage + Consumer Health & Medical Management + Web Enabled Tools

FSA & Debit Card Features Optional

HRA used for qualified expenses; Unused amounts roll over year to year 10

A Fast, Easy & Quality Solution!

Institutional Trust Services

Wells Fargo Health Benefit Services

Institutional Trust

Premier Provider of Retirement, HRA, FSA and HSA Administrative Services

Administering 120,000 HRA accounts; 95,000 FSA accounts. Total Trust Assets Under Administration: Total Trust Assets Under Management: Total Institutional Trust Staff: Total Investment Professionals: Total Wells Fargo Mutual Funds Assets: Total Retirement Plan Services Participants: Institutional Trust Plans: Over $500 Billion Over $200 Billion 1,600+ Team Members 200+ Team Members Over $72 Billion Over 1 Million Over 8,500

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HRA Trends

       

What we are seeing

Both HRA & Flex use Benny TM Card for all of 213(d) Using data file to match card swipes to lessen audits letters.

Most plans are NOT funded. Rx and Dental HRA’s are new…we are introducing both for 2004 Flex first vs. second or mutually exclusive Vesting periods and retirement strategy including interest Offering HRA as option or full replacement 13

Employer Advantages of HRA vs HSA

Potential HRA Advantages Potential HSA Disadvantages Cash flow advantage —HRA $’s are a promise to pay. Employer keeps control

Employer has much more flexibility in designing plan

Employer may fund on pay-as-you-go basis but doesn’t have real control.

High Deductible Health Plan (HDHP) more strict. Only $1K and 2K deductible or more will apply.

Employer can decide to vest $ or not.

HSAs are owned by EE’s

No trust required, company can set up VEBA. Most don’t.

No restriction on other plans ee may have.

Must set up trust

Maximum out-of-pocket not mandated, company has more freedom to design plan EE’s must use $ for qualified expenses

Employer has more control of expense substantiation process

HSA participant cannot be covered by other plan with lower deductible.

HSAs set limits on plans…$5k for single and $10k for family. Rx plans are problems EE can use $ for car payment and pay penalty

Employer cannot restrict reimbursement or claims process

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

Card Features

• Works with Wells Fargo as the “Intel Inside” • Interfaces with HRA and/or FSA; employees can still submit manual claims • Used for allowable services wherever MasterCard is accepted • “Multi-Purse” capabilities • With web (wffbs.com) access to:

– account transactions – account balances – account history 15

Rita Y. Woods Product Development Specialist Bluegrass Family Health 16

Bluegrass Consumer Choice Next Generation Alternative

Employers Understand health care costs will continue to rise Most cannot continue to absorb the rising costs Employees Want more choice and control Underestimate the value of their health insurance benefits 17

Bluegrass Consumer Choice Five Major Components

PPO Health Insurance Patient Responsibility Health Reimbursement Arrangement Preventive Care Deductible 18

Bluegrass Consumer Choice Plan Design – Phase I

PREVENTIVE CARE 100% first dollar coverage paid from PPO

Allocated on individual basis Covered expenses pre-determined

HRA

Standard Funding Level at 40, 45 or 50% of Deductible Benefits Mirror PPO

DEDUCTIBLE

Range of Deductibles offered Employee $1000/1500/2000/$2500 E+S, E+C, Family (2X) $2000/3000/4000 1 person must meet the deductible after which it is cumulative

OUT-OF-POCKET MAXIMUM

Range of Out of Pocket Max offered Employee $2000/$2500/$3000/$4000/$5000 E+S, E+C, Family (2X) $4000/$5000/$6000/$8000/$10000 1 person must meet the OOP Max, after which it is cumulative

CO-INSURANCE

Co-insurance for all services except preventive care 90% / 10% in network 70% / 30% out of network 80% / 20% in network 60% / 40% out of network 70% / 30% in network 50% / 50% out of network All services on a co-insurance basis -- No preset co-pay

Urgent care

pays at in network rates Utilizes current network 19

Bluegrass Consumer Choice Plan Design – Phase I

PHARMACY

Range of Deductibles offered ($100, $150, $200) Co-insurance with minimum (lower of $15 or price) and maximum ($150) by script 20

Bluegrass Consumer Choice

Web Support – MyBluegrassInfo.com

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Bluegrass Consumer Choice

Web Support – Wells Fargo Flex Benefits Services

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Bluegrass Consumer Choice Plan Design – Phase I

ADD-ONS/OTHER

FSA – Option Rx – Option Infertility - Option Benny Card - Option

TIERS MEDICAL – 2-4 Tiers

Employee Employee + Spouse Employee + Child(ren) Family Behavioral – Mandated Chiropractic – Mandated Home Health – Mandated

HRA – 2-3 Tiers

Employee Employee + 1 Family 23

Garry R. Ramsey Chief Marketing Officer Bluegrass Family Health 24

Bluegrass Consumer Choice Next Generation Alternative

Brokers and Agents To review a sample Bluegrass Consumer Choice recommendation package, contact your Bluegrass Family Health Account Executive, or call 1-800-787-2680, ext. 4317.

Employers For more information about Bluegrass Consumer Choice, please contact your Broker or Agent.

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Nancy G. Atkins Director of Sales & Marketing Bluegrass Family Health 26

Product Description 27

Employer Materials 28

Employee Materials 29

Deductible / $ 2,000 / $ 3,000 / $ 4,000 / $ 5,000 Deductible $ 50 / 100 $ 100 / 200 $ 150 / 300 $ 50 / 100 $ 100 / 200 $ 150 / 300 $ 200 / 400 Coinsurance 90% / 10% 80% / 20% 70% / 30% Rx Options Coinsurance 80% / 20% 80% / 20% 80% / 20% 70% / 30% 70% / 30% 70% / 30% 70% / 30%

Quoting Options

Out - of - Pocket Maximum / / / / Maximum per Prescription $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150

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     Quoting Process Phase 1 Step 1 -- You submit request to BFH Account Executive Step 2 -- BFH Account Executive submits request to Underwriting Step 3 -- BFH Underwriting calculates rates and returns to Account Executive Step 4 -- BFH Account Executive works with You to formulate recommendation Step 5 -- BFH Account Executive returns rates and recommendation to You 31

Proposal Package

$ 89.25 89.25 89.25

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Garry R. Ramsey Chief Marketing Officer Bluegrass Family Health 33

Bluegrass Consumer Choice Phase II

 HSA Integration – May 2004  Online Enrollment – July 2004  Enhanced Web Support Tools – 3 rd Qtr 2004  Automated Quoting Process – 3 rd Qtr 2004  Additional Rx Options – 4 th  Qtr 2004 Carve in or out of medical HRA  Stand-alone Rx-only HRA  Bluegrass Consumer Choice Co-branded Benny  Card – 4 th Qtr 2004 34

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