1. Working Together to Help Keep Connecticut’s Economy Healthy Eileen Auen, President Health Net of the Northeast CBIA Economic Forum September 4, 2003

2. 2 CBIA – September 4, 2003 Connecticut Executives’ Top Concerns Health Care Costs Property Tax Workers’ Compensation Personal Income Tax Labor Costs BlumShapiro//CBIA 2003

3. 3 CBIA – September 4, 2003 Our Regional Health Care Picture  Health care utilization and costs are continuing to rise  Premiums increasing in 2004 between 11% – 14% on average  Employers passing cost increases on to their employees  Employees looking to employers and legislators for leadership  State budget shortfalls will create more pressure on hospitals and insurers

4. 4 CBIA – September 4, 2003 Industry Premium Comparisons Industry Commercial Premium, per member per month Source: 2003 Health Leaders, Inc.

5. 5 CBIA – September 4, 2003 Health Net Hospital Cost Comparison Q2 2003 (Per member, per month relative cost) Connecticut1.26 California1.10 New Jersey1.15 New York*1.0 *Excludes HCRA Tax

6. 6 CBIA – September 4, 2003 Factors Driving Premium Increases % Source: PricewaterhouseCoopers 0 5 10 15 20 25 Drugs, Medical Devices & Advances Rising Provider Expenses Government Mandates & Regulations Increased Consumer Demands Litigation & Risk Management Other 22%18%15% 7%5% $15B $12B $10B $5B $3B *Plus 18% general inflation

7. 7 CBIA – September 4, 2003 Utilization Increasing Rx per 1,000 Members Health Net of the Northeast

8. 8 CBIA – September 4, 2003 Missing the Mark on Generics % of Generics Health Net of the Northeast

9. 9 CBIA – September 4, 2003 Rising Provider Expenses  Industry factors  Macro-economic issues  Regulatory  Government programs  General lack of competitiveness

10. 10 CBIA – September 4, 2003 Government Mandates and Regulations  More than 1,500 existing Federal and state mandates, and more to come  Unintended financial consequences  Elimination of cost-control tools  Shift away from medical necessity

11. 11 CBIA – September 4, 2003 Mandates that make sense  Mammography screenings  Cervical cancer screenings  Some clinical trials

12. 12 CBIA – September 4, 2003 Our Aging Population  12.5% of the U.S. population is 65 or older  14% of CT’s population is now 65 or older  By 2030 more than 20% will be 65 or older

13. 13 CBIA – September 4, 2003 Litigation and Risk Management  Class-action lawsuits  Defensive medicine  Malpractice premiums

14. Solutions: How We Can Control Health Care Costs in Connecticut

15. 15 CBIA – September 4, 2003 Solutions for Reducing Health Care Costs  Bring consumers back into the process  Focus on pharmacy issues  Use information to target appropriate interventions  Reduce administrative costs

16. 16 CBIA – September 4, 2003 Bringing Consumers into the Process  Transparency  Cost and quality incentives  Variable-option plans  Access to information

17. 17 CBIA – September 4, 2003 Focus on Pharmacy Issues  Triple-tier Rx  Lower co-payments for generics, and increased co-pays & coinsurance for brand-name drugs  Patient/member education (i.e., antibiotic-resistance, compliance, interactions, etc.)

18. 18 CBIA – September 4, 2003 Target Appropriate Interventions  Focus on high-cost providers  Evidence-based medicine  Disease management programs for chronic illnesses  Case management of high-risk populations  Promote preventative health

19. 19 CBIA – September 4, 2003 How Health Net is Reducing Administrative Costs  Increasing auto-adjudication  Online enrollment  Physician and hospital Internet connectivity  Less documentation required from most in-network physicians

20. 20 CBIA – September 4, 2003 Reducing Costly Mandates and Regulations  Write or call your legislator and regulators  Lobby for more flexible benefits  Request cost-benefit analysis prior to any new health-care mandates being imposed  Educate your employees about issues driving health cost increases

21. 21 CBIA – September 4, 2003 Importance of Partnership with CBIA  Health Net serves close to 20,000 members through CBIA  Increases “buying power” for small businesses  Influential voice for meeting small- business needs in Connecticut

22. 22 CBIA – September 4, 2003 What You Can Do  Wise health care policies  More consumer information  Flexible plan design  Be an advocate