1. Innovations Driven By Employers Patrick Pine, Chief Administrative Officer, Robert F. Kennedy Medical Plan

2. What is the Robert F. Kennedy Medical Plan? A Taft Hartley (Union) Plan for Employers Contracted with United Farm Workers (UFW) Serves average of 3500 to 4000 employees and 10,000 to 15,000 total lives Works with average of 40 employers Most (85%) in California but some groups in Oregon, Washington, Arizona, New Mexico and Texas

3. How is the Robert F. Kennedy Medical Plan Structured? Self insured, self administered Medical benefits via a network with Anthem Blue Cross Dental benefits via insured arrangement with United Healthcare Vision benefits via insured arrangement with Vision Service Plan (VSP) Prescription drug benefits via insured arrangement with Express Scripts

4. Challenges Facing Employers Other Than Cost Compliance with multiple regulatory requirements Developing and maintaining and transmitting and receiving data securely Communicating required information and disclosures in multiple languages using multiple media Recruiting, retaining, training and developing employees

5. What Has Not Worked for Us? “Wellness” programs - Why not? Over last two years, the persons who incurred our most expensive claims: 77 year old spouse of an employee with chronic conditions; 65 year old spouse with chronic condition; 10 year old child; two 55 year old spouses with chronic conditions; infant child; employee injured in a fall; teenage son hurt in a fight None of our largest claims would have been mitigated by any “wellness” program

6. What Else Has Not Worked For Us? Printed material – especially if in English and formal Spanish – Why not? Too much “legalese”; general aversion to print material; medical terminology not understood in any language

7. Our “Success Stories” Our Program with our consultants at Gallagher Benefits to RFQ/RFP/Bid Prescription Benefit Managers (PBMs) Our Program Relying on a Network of Providers based in Mexico – mostly Mexicali and Tijuana

8. RFP RX BID Process- Project Background Robert F. Kennedy Medical Plan (RFK Plan) currently contracts with Express Scripts for its pharmacy benefit management (PBM) services through 12/31/2015. RFK Plan engaged Healthcare Analytics (HCA), a division of Gallagher Benefit Services (GBS), to assess the PBM marketplace to ensure that they attain the best financial arrangement for the 2016-2018 plan years  The key to the analysis, and what clearly differentiates GBS from other consulting firms, is its in-depth evaluation of the bidding PBM’s contract language  There is a direct link between variations in contract language and the overall financial impact for each PBM’s bid In order to select the best candidate for PBM services, HCA conducted an extensive Request for Proposal (RFP) process which included an analysis of all submitted proposals

9. 9 PBMs were solicited for proposals  Costco and Navitus declined to bid. HCA’s analysis included, but was not limited to, the following parameters:  Review of bidding PBM’s contract language  Review of the proposed financial terms to calculate the potential costs and/or savings projected over the contract term (using HCA’s proprietary PBM pricing model)  Evaluation of questionnaire responses  Comparison of the unit cost and cost per day amounts of highly utilized drugs in all networks; and  Review of the Maximum Allowable Cost (MAC) lists provided by each bidding PBM RFP RX BID Process

10. Summary of PBMs Invited/Responding

11. RFP RX BID Ranking Process Best and final offers (BAFO) were requested from the finalists identified in the original analysis – The results of these improved bids but did not change the results or recommendations As a result of the BAFO financial and scoring analysis, HCA concludes the following PBMs should be considered and participate in finalist presentations. Suggested ranking: – Benecard (Pass-Through) Switched administrative fee to PMPM (mistake) Increase in cost (54K). – Express Scripts (Narrow)(Traditional) Biggest increase in rebates ($143K) Increase in discounts ($51K) – Optum (Traditional) Second best improvement in rebates ($96K). Best increase in discounts (63K).

12. Best and Final offers did result in better financial savings for each of the three finalists Express Scripts had the biggest improvement in their offer RFP Rx Bid Results

13. RFP RX BID Results Best and Final Offers – adjustments made to original bid FinalistDiscountsRebates 3 Year Enhanced Savings Projections BenecardSwitch to PMPM ($54K increase) No Rebate increase$54,000 Cost increase Express Scripts (Narrow)Better Discounts ($51K over 3 years) Biggest increase in rebates ($143K over 3 years) $194,000 OptumBest Discount ($63K over 3 years) Increase in Rebates ($96K over 3 years) $160,000

14. RFP RX BID Financial Results Projected Total Cost Avoidance over the Contract Term (3 years): The 3-year savings figures below reflect the Best and Final bids from the PBMs. Express Scripts the incumbent, had the greatest improvement over 3 years. All but two of the vendors offered a financial improvement over the then current offer Express Scripts Provided a greater than $1 million savings over the then current contract Significant savings to the client for the next three years of their pharmacy contract

15. Our Mexico Provider Program Several plans with employees and families near the border have long had programs using doctors, dentists, optometrists and pharmacies in Mexico. There are some hospital facilities that some plans also include.

16. Our Mexico Provider Program Typically the providers are first “vetted” to assure quality. The providers are often included in medical tourism programs with American insurers. There are firms that specialize in creating networks for American employers such as SIMNSA.

17. Why Do Many of Our Members Prefer Mexico Providers? Cost Savings Typically Mexico providers charge substantially less for same services than US providers Overcoming Language Barrier Our Spanish speaking members prefer providers that are primarily Spanish speaking

18. Why Do Many of Our Members Prefer Mexico Providers? Familiarity Those Who May Have Grown Up in Mexico or Who Have Family in Mexico Prefer Providers That They Are Familiar With Excellent “Customer Service” Many of the providers provide transportation to and from the US with expedited border crossings, some provide hotel lodging and food for patients and family members and many reportedly are better than US providers at communicating with the patient

19. Example of Savings from Mexico Providers Female spouse of member told by US doctor she needs a full knee replacement at total cost of $35,000 with Plan paying about $28,000 and her cost about $7,000 Mexico doctor recommends partial knee surgery without full replacement Cost in Mexico about $3,500 with Plan paying about $2,800 and her cost about $700 plus her travel costs ($500) Plan reimburses her about $500 in travel costs under its medical tourism policy Plan Net Savings: $24,700 Her Net Savings: $6,800

20. What Else Are We Considering? Various applications of “reference based pricing” Further use of “medical tourism” – both domestic and international Increased use of data analytics