Presented by ChapterHouse Tom Main, Managing Partner

Realizing the Promise of the Retail Market and Saving the Private Healthcare System
Presented by ChapterHouse Tom Main, Managing Partner September 27, 2007

Agenda Employer Sponsored Affordability and Coverage Crisis
Promises and Challenges of the Sponsored Retail Marketplace Current Solution Landscape and Breakthrough Innovations Retail Market Development Evolution and Disruptive Innovation Redefining the Sponsored Retail Game

Unrelenting Healthcare Costs and Shifts in Employer Sponsorship Are Creating a New Marketplace
6.5M employees or 13M members have fallen out of the market—and over $73B1 in healthcare costs have been shifted to employees over the last five years Notes 1. Includes both discontinued employer contributions for members who are no longer covered by a group benefit, as well as cost-shifting to continuing members 2. Average uninsured on any given day; equates to 42M on a full year equivalent basis Sources: Kaiser Family Foundation, AHRQ-Medical Expenditure Panel Survey, Hewitt Health Value Initiative, Bureau of Labor Statistics, U.S. Census Bureau (Current Population Survey), ChapterHouse Analysis

Healthcare Marketplace Scorecard
Health Economy Performance Levers New programs in place Strong momentum Still losing ground in these key markets Consumer Sponsorship Employer Sponsorship Government Sponsorship Sponsorship and the Economic Value Equation Beginning to get consumer and provider engagement in the new model Still deeply embedded old market behaviors and incentives Progress is slow Consumer Engagement Provider Engagement Health Service Exchange Defining the Competitive Model Robust investment climate Mixed focus MCOs heavily favored Unprecedented government reform More private/ public partnership required Government Programs and Regulation Investment and Innovation Marketplace and Business System Enablement ? Progress Summary Key Points The general progress required to shift the basis of competition in healthcare has been slow. Creating market-based incentives for providers to compete on cost, quality and outcomes—and to invest in improving their clinical business models is no easy task. Equally difficult is motivating employers and consumers to become educated buyers of health care. While the industry grapples with these difficult issues, employer sponsorship is eroding and the social concern about the uninsured and underinsured is on the rise.

Sponsored Retail Market Holds the Promise of Driving Durable Market Reform Finally Unlocking Competitive Market Forces to Dramatically Improve the Cost/Value Performance Profile of the U.S. Healthcare Delivery System Building a Sponsored Retail Marketplace Enabling Market Competitive Forces to Work Retail Market Medical school Board certified Patient satisfaction scores Quality and outcome scores Location Office hours Integrated wellness Credit card High quality Convenient Available Spanish speaking Financing plan Open to alternative medicine On-site pharmacy Healthcare Services Market Exchange Value-Based Reimbursement and More Patients High Quality and Cost-Effective Care Industry shifts are increasingly moving the market from wholesale to retail: 1) Consumers selecting physicians based on performance information, 2) Providers competing for consumers’ business, and 3) Providers learning about cash businesses. While still in its early stages, the sponsored retail market holds the promise of driving health market reform through free market competitive forces.

Retail Market Wholesale Enablement
Sponsored Retail Market Means Sponsored by Employers and Enabled by Health Plans, Providers, and the Government Retail Market Building a Sponsored Retail Marketplace Enabling Market Competitive Forces to Work Value-Based Reimbursement and More Patients High quality Convenient Available Spanish speaking Financing plan Open to alternative medicine On-site pharmacy High Quality and Cost-Effective Care Medical school Board certified Patient satisfaction scores Quality and outcome scores Location Office hours Integrated wellness Credit card Healthcare Services Market Exchange Aligned Benefit Plans and Integrated Rewards Health improvement incentives Health risk assessment bonus First dollar prevention coverage Treatment compliance Whole Person Consumer Engagement Personalized health and financial management plan Integrated multi-channel consumer engagement model Whole person benefits and healthcare management model Wholesale Enablement Integrated Personalized Health Management Personal health plan Engagement tied to personalized health goals Care coordination and provider information integration Health and wellness programs Value-Based Provider Networks and Integrated Medical Homes Integrated medical homes Evidence-based Transparency and outcomes Patient experience matters

The Sponsored Retail Market is a Work in Process
Building a Sponsored Retail Marketplace Enabling Market Competitive Forces to Work Retail Market Value-Based Reimbursement and More Patients Medical school Board certified Patient satisfaction scores Quality and outcome scores Location Office hours Integrated wellness Credit card Healthcare Services Market Exchange High quality Convenient Available Spanish speaking Financing plan Open to alternative medicine On-site pharmacy High Quality and Cost-Effective Care Improved Consumer Engagement Personalized health and financial management plan Integrated multi-channel consumer engagement model Whole person benefits and healthcare management model Aligned Benefit Plans and Integrated Rewards Health improvement incentives Health risk assessment bonus First dollar prevention coverage Treatment compliance Consumer engagement models are just beginning to be designed to increase consumer involvement in health and benefits management Wholesale Enablement Value-Based Provider Networks and Integrated Medical Homes Integrated medical homes Evidence-based Transparency and outcomes Patient experience matters Integrated Personalized Health Management Personal health plan Engagement tied to personalized health goals Care coordination and provider information integration Health and wellness programs Payer’s health management and provider network models are just starting to be architected to drive real improvements in the practice of medicine

Sponsored Retail Market Development Barriers
Challenges by Constituent Employer & Broker Sponsorship is eroding Engagement is weak Worksite education programs are not well supported Brokers still focus on traditional solutions Benefit buy-downs are working in the short-term Consumer Low trust of the health plan Limited engagement in managing health Unprepared for new responsibilities Big gaps in tools, support and reliable information Provider Focused on transactional medicine Misaligned economic incentives Limited care collaboration Significant practice variability Consumer driven healthcare models and health savings accounts alone are not sufficient to effectively address the root cause problems driving medical trend or to solve the growing employer affordability crisis. Health plans must partner with consumers in the change process while leveraging their collective market clout to drive essential market changes with providers and employers that are well beyond the reach of the consumer.

Current Solutions—Product Benefits Continuum
Focused Benefit Solutions Integrated Product Solutions Network Solutions Value-Based Benefit Designs Health and Wealth Solutions Affordability Solutions Benefits Focused Health Focused Value-Based Benefit Designs Integrated Medical/Disability Integrated Medical/ Behavioral Health Savings Account Based Defined Contribution Health, Wealth and Retirement Planning A la Carte Health/Wealth Solutions Catastrophic Plans Short-Term Coverage Voluntary Products Critical Illness Products Mini-Med Discount Cards High Deductible Plans Engagement-Based Products Outcome-Based Products Tiered Networks Specialty Network-Based Products Integrated Medical Homes Health plans mainly compete on point solutions without addressing trade-offs in health management, networks or value-based benefits.

Evolving Product Categories
Product Benefits Continuum Focused Benefit Solutions Integrated Product Solutions Network Solutions Value-Based Benefit Designs Health and Wealth Solutions Affordability Solutions Benefits Focused Health Focused Catastrophic Plans Mini-Med Discount Cards Short-Term Coverage Voluntary Products Critical Illness Products Integrated Medical and Disability Benefits Integrated Medical and Behavioral Health Benefits Savings Account Based Defined Contribution Health, Wealth, and Retirement Planning A la Carte Health/Wealth Solutions Tiered Networks Specialty Network-Based Products Integrated Medical Homes High Deductible Plans Engagement-Based Products Outcome-Based Products Value Based Benefit Designs based on assessment of the clinical benefits to specific patient populations such as diabetics or asthma patients to improve treatment regimen compliance Product Types Aetna SCR BeniCard UnitedHealthcare Belay Conseco Cancer Secure CIGNA Disability Solutions for Chronic Conditions Humana/Corphealth Integrated Health-and-Wellness Program Fidelity (“Health meets Wealth”) Wells Fargo Ameriprise Aetna Accelerated Death Benefits Aetna Aexcel UnitedHealthcare Premera Blue Cross Medica Focus Blue Shield Net Value HMO WellPoint TONIK Humana No Worry BCN Healthy Blue Living United Healthcare/ BeneComp Accretive Care RedBrick Health Marriot International Inc./Hewitt Associates/Active Health—Reduced co-payments for diabetes, asthma, heart disease, colonoscopies, mammograms and childhood immunizations Eastman Chemical/ Towers Perrin: Free drugs and supplies for diabetes, free mammograms and childhood immunizations Market Examples The current product landscape is marked by innovation in plan design and integration, but not the fundamental health management that underlies medical trend abatement and disease market reform.

Current Solutions—Level of Development
Product opportunities based on their level of maturity and their target market segments Level of Development More Mature Early Stage Solution focus shifting to consumer health management from benefit buy-downs (only) Tiered Networks Outcome-Based Products Health, Wealth and Retirement Planning High Deductible Health Plans All Segments Engagement-Based Products A la Carte Health/Wealth Solutions Savings Account Based Specialty Network-Based Products Integrated Medical Homes Integrated Medical/Disability Integrated Medical/ Behavioral Health Value-Based Benefit Designs Employer Sponsored Defined Contribution Catastrophic Plans Discount Cards Voluntary Products Individual Mini-Med Short-Term Coverage Critical Illness Products = Focused Benefit Solutions = Integrated Product Solutions = Network Solutions = Affordability Solutions = Value-Based Benefit Designs = Health and Wealth Solutions

Success of Early CDH Innovators
Aetna’s HealthFund has improved: Medication compliance among chronic patients Preventive care screenings Generic drug utilization Aetna spearheads provider transparency Pricing information for 100k providers Quality information for 22k specialists Aetna’s Aexcel performance network expands to 31 markets United’s Definity product has experienced: Lower utilization of non-preventive care services Decrease in emergency room utilization Fewer hospital admissions compared to industry Higher generic substitution rate Employer renewal rates below national trends United’s Simply Engaged program offers rate discounts in exchange for employer commitments CIGNA’s Choice Fund results included: Lower costs of health care for CDHP members Higher degrees of engagement More frequent use of preventive care Increased use of medications to treat chronic conditions like diabetes Greater awareness of health care cost and quality Integrates CareGain’s Defined-Care platform to further customize and enhance Choice Fund Humana’s SmartSuite improved: Members compliance with maintenance drugs Annual medical cost range (4 to 5%) Humana introduces “No Worry” rate cap product for 51 to 99 to ease employers into CDH Introduces “Smart Results” product for ASO 300+ groups that reduces fees if employer lowers claim expenses WellPoint’s Lumenos customer survey revealed: Increased knowledge of managing their health care Improved health-related behaviors, such as exercise and eating healthier More engaged and more likely to use Lumenos' online health site Offers first full-service, FDIC-insured HSA plan on the market One of the first payers to bring across-the-board support to the Small Group Market Aetna’s HealthFund has improved: Medication compliance among chronic patients Preventive screenings Generic drug utilization (Lumenos has a 94% generic substitution rate) Lumenos clinical results also include: 9% reduction in unnecessary elective surgery 94% generic substitution rate Increase in preventive spend (CDHP = 5% of total medical expenses vs. 2-3% for rest of market) 53% of members report increased knowledge in managing healthcare 36% of members report that they are more actively involved in health-related behaviors Due to Aetna’s high level of product innovation and network and consumer tool enhancements scheduled for 2008, they pose a high threat to Lumenos. Next we’ll discuss UnitedHealth Group CDH pioneers have driven meaningful breakthroughs—where innovative solutions have resulted in positive measurable outcomes.

Retail Consumer Market Evolution—Building Momentum or Stalled?
Stage IV: Transforming Collective consumer voice driving market reform Tomorrow’s Market Stage III: Maturing Increased health management engagement resulting in behavior changes and improved outcomes Stage II: Developing Informed and improved healthcare decision making Today’s Market Stage I: Emerging Financial engagement stimulated by buy downs and costs shifting

Expect Disruptive Innovation
Health Benefits Services Pharmacy & Biotech Financial Services Core Competencies Consumer Brand Consumer Trust Consumer Innovation Health Benefits Expertise Clinical Expertise Financial Expertise Personal Services, Coaching and Intimacy Local Market Knowledge IT, Integration, Decision Support and Procurement Disease Management Healthcare Delivery Medical Products & Services Insurance Products Provider & Payer Solutions Consumer Products Consumer Software & Services Retailers

Emerging Competitors and Niche Players
Non-traditional competitors are entering the broad health and wealth space to fulfill unmet needs and have the potential to disrupt the market. A health services company that utilizes financial tools, incentives, personalized wellness plans, and independent customer service advocacy to achieve greater accountability, behavior change and return on healthcare investments A new business focused on reducing total medical costs by providing a high touch patient guidance system Assumes total risk by guaranteeing trend/savings A leading provider of business and financial management solutions for consumers, accounting professionals and small to mid-size employers Declared healthcare as new business vertical introducing personal healthcare financial management programs Mission is to organize the world’s information and make it universally accessible and useful Recently declared and established focus on healthcare “What’s needed is an independent advocate on behalf of customers.” Kyle Rolfing, CEO “…Guiding each of your employees, their families and their physicians to personalized, high-quality healthcare allows us to grow employee satisfaction…” Tom Spann, CEO “The personal intimacy and drop-dead ease of the solutions is only possible if you’re a consumer-driven company.” Scott Cook, Chairman and Founder “Focus on the user and all else will follow.” Larry Page and Sergey Brin, Co-Founders Direct to employer Direct to consumer Goal is to help people be healthy Concierge services to be offered through the website and through a call center Elected new board member focused on “creating a consumer-centric system” Help patients navigate healthcare system Establish trust-based relationship with customers Backed by investors that “deliver meaningful and unique value to their customers” Only pursue opportunities that provide incremental value over other options for the consumer “Follow them home” approach Vision of the customer: aggregates all consumer touch points Web communities Responses to feedback buttons within the software Intuitive experience Most services are free Global access by supporting 90 languages Develop services that significantly improve the lives of as many people as possible Credible track record with innovative employers Entrepreneurial spirit No barrier mentality with expertise outside of healthcare Brand Consumer experience and expertise Description Philosophies Approach Customer-Centric Initiatives Key Assets

The New Competitive Landscape—Charting Your Course
Health Management Employer Healthcare Affordability Market Consumer Health/ Wealth Service Market High Quality and Cost-Effective Care Value-Based Reimbursement and More Patients Healthcare Services Market Exchange From Insurance to Health Management $2.0T Marketplace Driving Competition and Investment Employer Benefits and Product Market Today Market Consumer Benefits and Product Market Products/ Benefits Wholesale (Employer) From Wholesale to Retail Retail (Consumer)

Health Plans and Innovators are Defining New Markets
Consumer Service Companies Consumer Product Companies Health Management and Delivery Companies Current Landscape Health Management Employer Healthcare Affordability Market Consumer Health/ Wealth Service Market From Insurance to Health Management Employer Benefits and Product Market Today Market Consumer Benefits and Product Market Products/ Benefits Wholesale (Employer) From Wholesale to Retail Retail (Consumer)

Moving the Retail Market Forward
Design Guidelines Employer and consumer-centric model Positive, constructive work site environment Personal relationship with every member with aligned health and finance goals Balanced consumer accountability with real decision consequences Proactive integrated whole person consumer engagement model Evidence based medicine (clinical efficacy) and informed treatment options Aligned provider economic model with role clarity Provider information integration and advanced medical homes

Sponsored Retail Business Model—A New Value Chain
Market Development Consumer Relationship Initiation Consumer Engagement Management Care and Provider Integration Management Performance Management Relationship Extension Promising lower costs, improving trend performance, and increasing customer satisfaction through superior consumer engagement and provider integration Establishing the consumer as the customer and building an information and relationship foundation for personalized integrated health/wellness management Engaging the consumer through a personalized integrated experience leading to improved health, high levels of satisfaction and increased value Partnering with providers through the medical home model to improve the quality of care and facilitate care coordination and information flow between/among providers, consumers, and health plans Evaluating performance demonstrating total value for consumers and employers and determining program refinements Expanding customer relationships through deep understanding of needs and differentiated experience and outcomes

Building the Health Plan Business Model for the Consumer
New Market Development Model With Employer Partnership and Consumer Engagement Market Development Sponsored Retail Business Model Employer Segmentation Model Employer Segments Employer Profiles Frozen in Place Partners in Health Price Buyers Desperate Trailblazers Attitudes Demographics Workforce profile Labor market Beliefs about roles Segmentation Model Developing the Consumer as a Customer and Establishing the Foundation for Partnership and Advocacy Consumer Relationship Initiation Health Attitudinal Financial Behavioral Family Demographics and Culture Personalized integrated health/wellness and financial management plan (including assessment) with shared goals Consumer Engagement and Integrated Health, Wellness, Finance and Lifestyle Management Consumer Engagement Management Personal Planning Benefits Coaching and Financial Management Care Management Provider Selection Integrated Consumer Experience Fragmented Whole Person Refining Provider Partnerships and Integrated Care Delivery Care and Provider Integration Management Coordinated Care with Shared Health Benefits and Household Expense Information Health Plan Advanced Medical Home Patient Measuring Employer and Consumer Performance Against Goals and Refine Programs to Improve Total Value Performance Management Household budget for healthcare 100% 1x day Insulin management 33% 1x wk 3x wk Fitness program attendance 90% 135/90 120/75 Blood pressure 225 200 Cholesterol 208 Weight Result Actual Goal Personal Plan Consumer Performance Evaluation 80% $325/mo $300/mo 0% 20% 15% 10% 5% Payer as the Trusted Resource Using Deep Customer Understanding to Renew and Expand Relationships Relationship Extension Q1 Q2 Q3 Q4 60% 100% Performance Perspective 90% 80% 70% Satisfaction Trend Consumer Satisfaction Healthcare Trend

A Dozen Innovations Required to Shift the Model
Employer segmentation and consultative sales approach Broker segmentation and broker service model New Market Development Model With Employer Partnership and Consumer Engagement Market Development 1 2 Sponsored Retail Business Model Worksite education programs promoting a culture of health Consumer profile development replacing current enrollment process Developing the Consumer as a Customer and Establishing the Foundation for Partnership and Advocacy Consumer Relationship Initiation 3 4 Personalized integrated health and finance plan with goals Benefits models to align incentives and promote health Whole person consumer engagement model tied to personal plan Consumer Engagement and Integrated Health, Wellness, Finance and Lifestyle Management Consumer Engagement Management 5 6 7 Integrated or partnered provider relationships with aligned reimbursement model Advanced medical homes Shared evidence-based medicine guidelines and preference sensitive treatment options Refining Provider Partnerships and Integrated Care Delivery Care and Provider Integration Management 8 9 10 Consumer performance management capability tied to personal plan and integrated rewards Measuring Employer and Consumer Performance Against Goals and Refine Programs to Improve Total Value Performance Management 11 Integrated product, solution and service offerings based on deep employer and consumer knowledge Using Deep Customer Understanding to Renew and Expand Relationships Relationship Extension 12

Presented by ChapterHouse Tom Main, Managing Partner

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