Multiyear national Account Strategy

1
Innovations in Product and Network
Labor Healthcare Forum July 25, 2007
Jennifer VachonExecutive Director,Marketing and
Business Strategy
2
National Account Marketplace

• The number one decision factor for choosing a
  carrier remains minimizing total costs

Most Important Factors in Selecting Health Insurer
Percent of Accounts Ranking Factor 1 or2
Source 2006 NARG
3
National Account Marketplace

• Product and network cited as key factors in
  minimizing total costs

Most Important Factors for Minimizing Cost
Percent of Accounts Ranking Factor 1 or2 Most
Important
Source 2006 NARG
4
Blue Innovations
Product
Network

• Retiree Health

• Transparency
• Blue Distinction

5
Population Growth
Product

• Retiree Health

U.S. population is aging rapidly with largest
growth expected in older population segments
Population Distribution by Age (2000-2020)
Total Change (2000-2020)
CAGR(2000-2020)
335,805
85
2.6
308,936
70
65 to 84
2.1
282,125
54
45 to 64
1.4
34
Projected Population (In Thousands)
20 to 44
0.2
4
5 to 19
0.4
8
0 to 4
0.8
19
Source US Census Bureau, BCBSA Analysis
6
Early Retiree Coverage
Product

• Retiree Health

Erosion of employer-sponsored retiree coverage
Percent of Employers Expecting to Continue to
Offer Retiree Health to Current Future Early
Retirees
Employers with 500 Employees
CAGR (6)
CAGR (2)
Source EBRI Issue Brief 279 BCBSA Analysis
7
Solutions for Retiree Healthcare
Product

• Retiree Health

Current State
Solution Imperatives
Ensure access to retiree benefit products for
both groups and individuals

• 10 of firms plan to terminate coverage for
  future retirees(1)
• Over 14 of early retirees are uninsured(2)
• A couple retiring at age 55 will need 400,000
  to cover retiree health costs(3)
• 80 of Americans 65 and over live with at least
  one chronic condition, 50 with at least two(4)
• Medical errors account for 2.4 million extra
  hospital days and over 9 billion in excess
  cost(5)

Address impact of expected medical expenditures
on retirement planning
Recognize and address segment-specific health
management needs
Create a safe, effective health system based on
evidence-based care
Sources (1) 2006 Kaiser/Hewitt Retiree Health
Benefit Survey (2) BCBSA Analysis (3) Fidelity
Retiree Healthcare Costs Addressing the Growing
Gap BCBSA Analysis(4) CDC State of Aging and
Health in America 2007 Report (5) CMS
Eliminating Serious, Preventable and Costly
Medical Errors Never Events, 2006
8
National Demonstration
Product

• Retiree Health

Blues are launching a national demonstration
Blue Solutions for Retiree Health
Blue Solutions for Retiree Health

• National demonstration in at least 15 markets
• Leverages the diversity and learnings of local
  pilots to deliver national solutions
• Identifies the most effective ways to address
  retiree health imperatives
• Individual-based solutions
• Group-based solutions
• Partnerships with key parties including public
  and private employers

• Early retirees
• Medicare-eligibles

9
National Demonstration
Product

• Retiree Health

Blue Solutions for Retiree Health builds on
Blue Plan innovations and broad experience
Types of Solutions

• Individual retiree products across all 50 states
• Segment-specific product options
• Continued government support for MA

Ensure access to retiree benefit products for
both groups and individuals
Address impact of expected medical expenditures
on retirement planning

• Creative financing approaches (e.g., VEBA)
• Health knowledge embedded within financial
  planning

Recognize and address segment-specific health
management needs

• Retirees engaged in segment-specific health
  management programs

Create a safe, effective health system based
onevidence-based care

• Powerful tools to create measurable improvements
  in safety and quality

10
Demonstration Product
Product

• Retiree Health

Voluntary plans provide retirees with access to
products while limiting employer financial
liability
Considerations

• Quoted as group plan
• Direct-billed to retirees
• Utilize Third-Party Administrator (TPA)

• Risk selection
• Enrollment/underwriting guidelines
• Level of employer funding

11
Demonstration Product
Product

• Retiree Health

Segment-specific pilots address both groups and
individuals
Bridge Product
Low-Cost Product

• Bridge product for individuals ages 50 through 64
• Bundled medical, dental, vision and Rx benefits
• HMO product
• 17 office / 10 generic drug copay
• Guaranteed issue with no underwriting
• Enroll within 31 days of BCBS group coverage
• At least 2 consecutive years of BCBS group
  coverage
• Ineligible for group, COBRA or other government
  programs
• Marketed directly to individuals exiting group
  plans

• Targeted to 45-60 year olds
• Hospital/surgical product
• Hospital coverage and surgery in any setting
• No routine care/office visits
• Generic drug card
• High deductible product (1,000/3,000)
• Coinsurance, Inpatient Copay
• Optional benefits generic drug, mental health,
  substance abuse
• Increased underwriting flexibility
• Lower guidelines for approval

12
Demonstration Financing Options
Product

• Retiree Health

Test mechanisms for reducing uncertainty of
future health liabilities

• Utilize VEBAs (Voluntary Employees Beneficiary
  Association)
• Reduces future uncertainties
• Reduces / eliminates FASB/GASB liabilities
• Guarantees employee access

Accumulate funds over longer period
Money grows tax free

• Shape the development of Medicare Medical Savings
  Accounts (MSAs)
• Smooth transition from HSAs
• Create incentives for seniors to manage health

Known cap on employer liabilities
Increases personal responsibility
13
Blue Innovations
Product
Network

• Retiree Health

• Transparency
• Blue Distinction

14
Network Information
Network

• Transparency
• Blue Distinction

Increasing account emphasis on providing quality
information to consumers
Provider Information Criteria Ranked 1st or 2nd
by Accounts
Source 2007 Business Decision-Maker Panel
15
Consumer Engagement
Network

• Transparency
• Blue Distinction

Meet Meredith

• I weigh more than I should
• I have a family history of heart disease
• My doctor just told me I need a coronary bypass

16
Consumer Engagement
Network

• Transparency
• Blue Distinction

What were Merediths options five years ago?

• Get advice from friends
• Ask her doctor for recommendations

Her options were limited
17
Consumer Engagement
Network

• Transparency
• Blue Distinction

With Blue Transparency, Meredith will have more
information to make a better decision

• Compare bypass centers
• Identify hospitals success treating heart
  disease
• Manage costs while seeking best possible care
• Connect with and learn from other bypass patients

18
Consumer Engagement
Network

• Transparency
• Blue Distinction

Future transparency tools are being shaped by
people like Meredith

• Market testing with hundreds of employees of
  Fortune 100 companies nationwide
• Testing a broad range of cost and quality
  measures
• Identifying consumer preferences for display
  design
• Measuring impact on consumer decision-making

19
Market ValueAddressing Consumer Needs
Network

• Transparency
• Blue Distinction

Consumers validate interest in having information
to support decision making
InformationValue
Metrics
Design

• High degree of consumer interest in provider
  evaluation information
• Significant opportunity to shape consumer
  decision process

• Quality defined broadly variety of metrics
  required
• Patient satisfaction critical measure to most
• Needs vary based on consumers care needs
• Routine care patients more interested in
  logistical/experience metrics
• Critical care patients more interested in
  clinical quality measures

• Summary page with key metrics seen as highly
  valuable
• Drill-down functionality supports navigation and
  interpretation
• Aversion to black-box evaluations
• Visual cues (e.g., color coding) can greatly
  improve ease-of-use

Source Consumer Focus Groups, 2006-2007
20
Transparency Standards Summary Page
Network

• Transparency
• Blue Distinction

Summary page shows multiple types of quality data
Further refinements of metrics and design being
tested in partnership with national employers
including 3M, Michelin and FEP
21
Blue Innovations
Product
Network

• Retiree Health

• Transparency
• Blue Distinction

22
Employer Perspective
Network

• Transparency
• Blue Distinction

Value in insures monitoring adherence to clinical
standards and working to reduce errors
Network Improvement Most Important for Meeting
Employee Healthcare Needs
Improving Adherence to Clinical Standards17
Making Quality and Cost Information Available41
Establishing Narrower Networks Based on Quality
and Efficiency12
Holding Provider Accountable for Errors30
Source 2007 Business Decision-Maker Panel
23
Blue Distinction
Network

• Transparency
• Blue Distinction

Blue Distinction is our national program to raise
healthcare quality by recognizing providers that
consistently practice evidence-based medicine
and, as a result, demonstrate better overall
outcomes. The Blue Distinction designation will
become a widely recognized symbol of quality that
is sought out by providers and trusted by
consumers.
24
National Medical Collaborations
Network

• Transparency
• Blue Distinction

Blues actively partnering with medical
organizations to raise standards and improve
quality care
Primary Care
Specialty Care
Surgical Care
Other Organizations

• American College of Physicians
• American Board of Internal Medicine
• American Academyof Family Physicians
• American Academy of Pediatrics

• American College of Cardiology
• National Comprehensive Cancer Network
• Commission on Cancer
• American College of Radiology
• Other subspecialty medical professional
  organizations

• American College of Surgeons
• Society of Thoracic Surgeons
• American Society of Bariatric Surgeons
• American Academy of Orthopaedic Surgeons
• Other subspecialty organizations

• Institute for Healthcare Improvement
• National Quality Forum
• Ambulatory Care Quality Alliance
• Surgical Quality Alliance
• eHealth Initiative
• Governmental agencies
• Institute of Medicine
• National and regional business groups and
  coalitions
• Association of American Medical Colleges
• Industry stakeholders
• Federation of State Medical Boards

25
Network Performance
Network

• Transparency
• Blue Distinction

Blue Distinction Centers for Specialty Care

• Developed with leading medical specialty
  organizations
• Focus on the most challenging medical cases
• Bariatric surgery
• Cardiac care
• Transplants
• Cancer care

26
Network Performance
Network

• Transparency
• Blue Distinction

More clinically credible and more transparent

• Blue Distinction Centers designation criteria are
  transparent
• Industry-endorsed technical requirements
• General criteria publicly available
• Rigorous evaluation of structures, processes and
  outcomes of care
• Focus on clinical data as basis of criteria

27
IHI
Institute for Health Improvement (IHI) is a
strong ally in BCBS companies effort to address
patient safety issues

• BCBS companies contributed 5M to IHIs 5
  Million Lives in 2006 to strengthen national
  infrastructure
• Campaign aims to protect five million lives from
  harm over the next twenty-four months
• Enroll more than 4,000 hospitals
• Proven infection control practices
• Evidence-based practices for congestive heart
  failure
• Deployment of rapid response teams
• Reduction of adverse drug events

28
Blue Innovations
Next Steps
Product
Network

• Launch demonstration
• Identify segment-based needs

• Build on existing strengths
• Maximize value beyond discounts