University of Alaska Analysis Period: January 2009 through December 2010 Paid Basis Although this report is not intended to contain any individually identifiable.

University of Alaska Analysis Period: January 2009 through December 2010 Paid Basis Although this report is not intended to contain any individually identifiable health information, it is possible that some of the information might be considered protected health information under federal or state privacy laws. As such, you are strictly limited in your ability to use this information for anything other than plan administrative functions as described in your health plan document and HIPAA privacy and security policies, as applicable.

Demographics

© 2011 Lockton, Inc. All rights reserved. Demographics - Overview 3  The University of Alaska has fewer men than the norm with greater male and female proportions from ages 50 to 64  Higher employee age/gender factor of 1.13 which translates to above norm per member per year (pmpy) cost profile of approximately 13%  Employees are driving the costs of the plan accounting for 46.6% of the costs whereas the norm has the spouses driving the plan costs.  0.3% of the University population is driving 16.1% of the costs  20.0% of the University population is driving 84.4% of the costs  The University of Alaska has a lower than norm proportion of women in child- bearing age with lower pregnancy and neonatal related cost than the norm but neonate UA inpatient cost per neonate per year increased from $2,590 to $5,053  Approximately 83.6% of the current members have been enrolled for 2 or more years

Health Cost Analysis

© 2011 Lockton, Inc. All rights reserved. Medical Financial Analysis Overview 7  Medical and Pharmacy Costs  Medical and Pharmacy costs are increasing below Premera Alaska trend of 14.5% for calendar year 2010  Inpatient  Average allowed per Admission increased 11.4% and the average allowed per day increased 32.8% from $3,910 to $5,194 from calendar year 2009 to 2010; whereas the average length of stay decreased from 5.6 days to 4.7 days  Increase in severity of inpatient claims  Emergency Room  ER visits per 1,000 decreased from 178 to 169 and the cost per visit increased indicating that members are utilizing the ER for appropriate services  Low percentage of (7.86%) of non-emergent like condition ER visits  Moderate rate of members with 2 ER visits (16.2%) and 3 plus ER visits (8.2%)  Recommendation: Care manage those with 3 or greater visits to develop solutions to determine cause and appropriate management thru Alere

© 2011 Lockton, Inc. All rights reserved. Medical Financial Analysis Overview 8  Outpatient  All office visits per 1,000 increased from calendar year 2009 to 2010  Mental health visits per 1,000 increased 5.7%  Preventive visits per 1,000 increased 2.8%  Large claims were a major driver of University costs  Large claims made up 33.7% of the total University medical/Rx costs compared to the norm of 29.4%  The average paid per high cost claimant increased from $111,444 to $126,649  The cost increase resulted predominately from a $2M increase in costs of claims greater than $150,000  52% of the large claimants had 3 or more conditions, e.g. high blood pressure, high cholesterol and diabetes  Four categories accounted for the higher costs: Cancer/Cancer therapy, cardiovascular disease, diabetes & renal failure and back/osteoarthritis

© 2011 Lockton, Inc. All rights reserved. Pharmacy Financial Analysis Overview 16  Generic usage increased from 2009 and 2010 from 53.6% to 57.9%  For each 1% increase in generic usage the pharmacy plan costs should decrease 1%  Estimated savings of $300,000 from 2009 to 2010  Nexium per script usage decreased from 2009 to 2010 from 1,318 to 1,197 & Simvastatin per script usage increased from 2009 to 2010 from 1,137 to 1,258  Step Therapy implemented in July 2010  Four specialty drugs made up 6.8% of the total University pharmacy spend in the calendar year 2010  Therapeutic class (condition): Anti-Inflammatory and Multiple Sclerosis  % paid per member per month increased 33.5% for MS and 66.0% for Anti- Inflammatory drugs between 2009 and 2010  Potential savings of $166,351, if 50% of cholesterol scripts moved to Simvastatin  Potential savings of $129,587, if 50% of PPI scripts moved to Omeprazole

© 2011 Lockton, Inc. All rights reserved. Anti-Hyperlipidemics Generic Analysis 20 Potential Savings If 50% of scripts for: Lipitor, Crestor, and Lescol XL moved to Simvastatin last year costs would have been reduced by approximately:

© 2011 Lockton, Inc. All rights reserved. Peptic Ulcer Generic Analysis 21 Potential Savings If 50% of scripts for: Prevacid, Nexium, Aciphex, Protonix, Kapidex, Prilosec, Axid, and Zantac moved to Omeprazole last year costs would have been reduced by approximately:

Clinical Risk and Conditions Members included in this section were active plan participants as of the last month of the reporting cycle. Each individual member is assigned a risk score indicating disease burden and a care gap score quantifying appropriate medical care. Depending upon the prevalence of disease and the extent of gaps in medical care, the population is stratified into low, moderate, and high risk for disease burden, and compliant or non-compliant for disease management.

© 2011 Lockton, Inc. All rights reserved. Employee Population Low Risk High Risk Moderate Risk High Risk Non- Compliant 25 Compliant Moderate Risk High Cost PRIORITY GoalIntervention Manage high costs Help members navigate system Case Management Close gaps in care Steerage Disease Management and Health Promotion Manage risk factors Reinforce and monitor compliance rates Health Promotion Manage risk factorsHealth Promotion Population Stratification

© 2011 Lockton, Inc. All rights reserved. Cost of Non-Compliance 28 This exhibit excludes high cost claimants. PMPY costs include comorbidities. *Norm from the Lockton InfoLock Book of Business. Moderate Risk - Non-Compliant members on average cost $627* more per year than Compliant members. High Risk - Non-Compliant members on average cost $1,035* more per year than Compliant members.

© 2011 Lockton, Inc. All rights reserved. Cost Adjustment 31  1 In the ACCRA Cost of Living Index, health care costs in Alaska’s cities ranged from 30.4% to 44.6% spendier than the average U.S. city in 2010  The Norm has not been adjusted for the higher costs in Alaska  Analysis Summary will compare UA costs to adjusted norm of norm plus 37.5% 1 http://labor.alaska.gov/research/col/col.pdf

© 2011 Lockton, Inc. All rights reserved. Asthma Summary & Observations 32  Asthma  Prevalence is comparable to the norm but has higher costs of $7,636 per member per year (pmpy) compared to the adjusted norm of $6,407 pmpy  81% of the members with asthma are compliant in medication and doctor visits  Patients with more than one asthma-related emergency room visit is higher than norm  18.3% of members with Asthma are without inhaled corticosteroids or leukotriene inhibitors compared to the norm of 27.2% without inhalers  Recommendation:  Alere send communications and out-reach to members with emergency room visits for Asthma  Provide information on new free generic program if actively engaged in Alere DM Asthma program

© 2011 Lockton, Inc. All rights reserved. COPD Summary & Observations 35  COPD  Prevalence is below the norm with higher UA costs of $12,692 pmpy compared to the adjusted norm of $11,390 pmpy  47% of the members with COPD are non-compliant due to doctor visits  40% have 3 or more co-morbidities  Low percentage of hospitalizations to due to COPD compared to the norm  The number of members with COPD with an ER visit is comparable to the norm  Typically COPD is related to smoking  Communicate smoking cessation programs

© 2011 Lockton, Inc. All rights reserved. COPD Quality and Risk Measures 37 This exhibit excludes high cost claimants. PMPY costs include comorbidities. Norm from the Lockton InfoLock Book of Business. Risk Measures Quality Care Measures

© 2011 Lockton, Inc. All rights reserved. CAD Summary & Observations 38  CAD (Coronary Artery Disease)  Prevalence is below the norm with lower UA costs of $8,787 pmpy compared to the adjusted norm of $11,647 pmpy  Greater percentage of spouses than employees with CAD  High Risk members make up 50% of the group  Higher than the norm CAD-related hospitals, cardiac catheterizations and cardiac stentings  This relates to higher intensity of CAD related services  There is significant non-compliance with only 54% of members being complaint  8.6% of the CAD population did not have hypertensive drugs and the norm is 5.6%  July 1, 2011 implementation of new disease management program for actively engaged members and free generic drugs

© 2011 Lockton, Inc. All rights reserved. Depression Summary & Observations 41  Depression  Prevalence is significantly above the norm and UA costs are lower at $7,258 pmpy compared to the adjusted norm of $7,661 pmpy  Employees make up 60% of the depressed population  Back and Neck pain are the top 2 co-morbidities  There is a high compliance rate of 92%  Anti-depressants are number two out the top 20 therapeutic drug classes by paid amount and number one by script count

© 2011 Lockton, Inc. All rights reserved. Diabetes Summary & Observations 44  Diabetes  Prevalence is slightly below the norm with UA costs of $9,459 pmpy higher than the adjusted norm of $8,984 pmpy  71% of the population is non-compliant  There is significant non-compliance in this population with 56% falling in the high risk category  Patients with diabetes-related ER visit is above the norm at 4.6% compared to 4.1%  Patients without a retinal exam is higher than the norm as InfoLock does not collect third party vision information  Currently VSP and Alere and working on a data exchange to better identify these individuals  Obesity is an issue within this group and percent of the diabetes population that is obese is greater than the norm

© 2011 Lockton, Inc. All rights reserved. Hyperlipidemia Summary & Observations 47  Hyperlipidemia (High Cholesterol)  Lower prevalence to the norm with higher UA costs of $7,493 pmpy compared to the adjusted norm of $6,792  66% of the population are employees  45% of the population is high risk but has significant compliance of 88%  Hyperlipidemics are the number one therapeutic drug class by paid amount and number two by script count

© 2011 Lockton, Inc. All rights reserved. Hypertension Summary & Observations 49  Hypertension  Prevalence is significantly lower the norm and UA costs of $7,335 pmpy are higher than the adjusted norm of $7,034 pmpy  46% of the population is high risk but with a high compliance rate of 84%

© 2011 Lockton, Inc. All rights reserved. Cancer & Screenings Summary & Observations 52  Malignant Neoplasms & Cancer Screenings  Cancer screenings (e.g. mammogram) are better than the norm  45% of the cancers are early-identifiable cancers such as breast and colon  Recommendation:  Communication to all members that there is no cost for preventive care and screenings

© 2011 Lockton, Inc. All rights reserved. Back & Neck Pain Summary & Observations 54  Back & Neck Pain  Significantly higher prevalence to the norm with UA costs of $7,092 pmpy comparable to the adjusted norm cost of $7,156 pmpy  58% of the members with back pain were employees  Approximately 50% of back pain members had associated neck pain  Significantly higher utilization of chiropractic and physical therapy care compare to the norm  Chiropractic units/1,000 for UA at 1,261.5 compared to the norm of 439.4  Physical Therapy units/1,000 for UA at 3,720.3 compared to the norm of 786.2  MRI Scan is slightly above the norm for utilization and CT Scan is significantly below the norm

© 2011 Lockton, Inc. All rights reserved. Pregnancy & Neonates Summary & Observations 61  Pregnancy  Pregnancy and neonatal cost as a % of total paid claims is lower than the norm  Pregnant women delivering with fewer than 6 prenatal visits is significantly worse than the norm  90.5% of the pregnant women in the UA population had less than 6 prenatal visits  16.8% of the women within the child-bearing age had babies  Neonates  Inpatient cost per neonate from 2009 to 2010 increased 95% from $2,590 to $5,053

© 2011 Lockton, Inc. All rights reserved. Recommendations 64  Medical  ER - Specific communication on using alternative care setting for non-emergent care  ER - Care manage those members thru Premera with three or greater ER visits to determine cause and appropriate resources and tools for the employee  Is primary care physician located close and are they seeing their primary care doctor  Neonates – provide communication on importance of prenatal vitamins and visits  Chiropractic – Reduce the number of visits from 26 a year to 12 visits a year  Pharmacy  Covering generic only PPIs – was not supported by JHCC for FY 2012

© 2011 Lockton, Inc. All rights reserved. Recommendations 65  Wellness  Provide Alere with list of individuals in the compliant and non-compliant high and moderate risk to see how many have been contacted by Alere and if any are actively engaged in the Alere programs  Gather metabolic syndrome cluster data through IHPs and Mass Screening events to identify those that are progressing to moderate and high risk – Keep the health employees healthy  Establish incentives for employees to provide biometric information  Communicate to employees no cost preventive care and screenings  Continue to provide and promote nutrition management and improved physical activity/ergonomics at work thru WIN and targeted communications  Obesity is a significant risk at the University  Continue programs that address obesity and nutrition  Currently have WIN weight management and IHPs

Appendix

© 2011 Lockton, Inc. All rights reserved. Chronic Condition Reference 67 Asthma Asthma is quite common. It can be triggered by environmental triggers such as allergies to pets or pollens, infections, cold temperatures, stress, and sometimes exercise. It is a common reason for emergency room visits and sometimes hospital admissions. It is best managed by avoidance of triggers when possible and regular use of medication. The number one reason for poor asthma control is lack of adherence to a medication regimen that includes an inhaled steroid in addition to a bronchodilator. Educating patients about the triggers and the importance of medication compliance are key to controlling this condition. Back Pain and Neck Pain Back injury prevention programs and core strengthening programs are effective in preventing injury and getting individuals back to work. In the workplace, attention to ergonomics of workstations is important in reducing back and neck pain. Monitoring the trend in high cost radiology for back pain, and surgery for herniated discs is important to establish the need for low back pain condition management programs and pre-certification programs in high cost radiology. Evaluation along with proper treatment of back pain and neck pain should limit the early use of high cost radiology including MRI and CT scans and early back surgery for herniated discs and other back ailments. Preventive practices in postural alignment, availability of therapeutic alternative treatments such as PT, acupuncture, pain treatment, and steroid injections help promote lower cost, higher efficacy solutions. COPD The most common cause of COPD is smoking. Unfortunately about 23% of American adults still smoke. COPD commonly includes chronic emphysema and bronchitis. The condition is associated with significant lost work time and high health costs. It is progressive and remains the fourth leading cause of death in the U.S. There is no cure. Treatment is aimed at managing exacerbations of the disease. The most important step in treatment is to encourage those who are still smoking to stop. This can be aided by implementing a smoking cessation program that combines behavioral modification with medication. CAD This the most common type of chronic heart disease. It is caused by the build up of plaque in the arteries supplying oxygen and nutrients to the heart muscle. Plaque consists of a number of substances, including cholesterol, other fats, and calcium. CAD can result in chest pain (angina), heart attacks, abnormal heart rhythms, and congestive heart failure. It can be minimized or ameliorated by implementing healthy lifestyle habits that include regular exercise, a healthy diet, and successful work-life balance. Medications also play a significant role, so compliance with a medication regimen is important. Depression Depression is common, whether it is mild, moderate, or severe. It is often associated with other chronic conditions such as heart disease, diabetes, and chronic pain. It is most commonly managed with medication. These drugs are expensive so employees should be aware of several good generic antidepressants that are now available. Several studies indicate that regular sleep and exercise, combined with a strong social network can reduce the incidence and severity of depression and also reduce the need for medication.

© 2011 Lockton, Inc. All rights reserved. Chronic Condition Reference (continued) 68 Diabetes Type 2 diabetes continues to increase in the U.S. The prevalence is a direct result of poor lifestyle choices including inactivity and poor dietary choices that result in obesity and diabetes. This a particularly serious chronic disease because it affects so many different body systems including the heart, the eyes, the kidneys, and the blood vessels. Poorly controlled diabetes results in accelerated decline in these body systems, a decline in quality of life, and high health costs. Like many of the other chronic conditions, it is best managed by implementing healthy lifestyle habits that include regular exercise, a healthy diet, and successful work-life balance. For those with established type 2 diabetes, it is very important that regular monitoring of the condition is done in order to avoid some of the serious complications. Hyperlipidemia An abnormally elevated lipid profile is a risk factor for heart disease. The lipid profile includes measurement of cholesterol, triglycerides, and LDL and HLD cholesterol. There is a genetic component to lipid levels that can make it more challenging for some individuals to control their lipid levels. But for most people lipid levels can be managed by implementing healthy lifestyle habits that include regular exercise, a healthy diet, and successful work-life balance. But many people now are prescribed medication to help control lipids. These medications are called “statins” and a variety of medication options are now available. Hypertension High blood pressure is very common. Sometimes there is an increased risk for an individual due to genetic makeup. For most people blood pressure gradually rises with age. Hypertension is a significant risk factor for heart attack, stroke, impaired vision, kidney damage, and congestive heart failure. Hypertension can be ameliorated by implementing healthy lifestyle habits that include regular exercise, a healthy diet, and successful work-life balance. Also for many a diet low in sodium is helpful. There are many medications that can help control blood pressure. As with any treatment for chronic disease, compliance is essential for effective management. Osteoarthritis About 21 million Americans have osteoarthritis. The incidence increases with age. It is associated with a breakdown of cartilage in joints and can occur in almost any joint in the body. It most commonly occurs in the weight bearing joints of the hips, knees, and spine. Factors associated with its onset include obesity, injury, joint overuse, and heredity. Osteoarthritis generates a lot of medical expense due to the cost of pain medications, diagnostic imaging, and surgical procedures (especially of the hip and lower back). Exercise and physical therapy are important restorative and preventive measures. Weight management and good nutrition are often helpful as well.

© 2011 Lockton, Inc. All rights reserved. Glossary 69 Adjusted Risk Index (ARI) Measurement of an individual's disease burden and compliance with D2Hawkeye's Quality and Risk Measures. The Quality and Risk Measures are designed to identify potential gaps in care and care management opportunities. Allowed Amount Total paid amount, this includes both the employee and employer paid amount. Co-morbidities A medical condition that exists simultaneously with and usually independently of another medical condition. Compliant Members Members with a Care Gap Index of 5 or less. Current Members Individuals who are eligible with the plan as of the end of the reporting period. Employee Paid Employee paid consists of co-pays, coinsurances, and deductibles paid by an enrollee, the spouses, and their dependents. Employer Paid Employer paid includes total paid by the plan for enrollee, the spouses, and their dependents. Emergency Room Visit Distinct service dates for members with claims that have HCFA (Health Care Financing Administration) Place of Service code of 23. Emergency Room Visits, Potential Non Emergent – Potential non emergent ER visits are visits which based on the diagnoses potentially should have been treated in a physician’s office. These include visits for general symptoms, sinusitis, influenza, general medical examinations, etc. Full Cycle Time period that corresponds to date range of data included in the data warehouse (typically 36 months). High Cost Claimants (HCC) Claimants with plan payment of $50,000 or more during either the current or previous 12 months.

© 2011 Lockton, Inc. All rights reserved. Glossary (continued) 70 High Risk Claimants Claimants with plan payment of less than $50,000 during the most recent 12 months and a Risk Index greater than or equal to 15. High Cost Script Script with a plan paid amount of $1,000 or more. Homegrown Codes Non-standard codes found in the dataset being reported. Incurred Basis Claim expenses reported based on the service date. Inpatient All claims paid for hospital inpatient services base on HCFA Place of Service code 21, 51, and 61. Low Risk Claimants Claimants with plan payment of less than $50,000 during the most recent 12 months and a Risk Index of 4 or less. MDC Major Diagnostic Category Member Months Total number of members eligible for the time period. Moderate Risk Claimants Claimants with plan payment of less than $50,000 during the most recent 12 months and a Risk Index between 5-14. Non-Compliant Members Members with a Care Gap Index of 6 or more. Norm Norms from the Lockton InfoLock Book of Business are derived from claims paid for the 12 months ending 12/31/2010 from Lockton’s Normative Database comprised of 2 million member lives from self-insured, commercial plans.

© 2011 Lockton, Inc. All rights reserved. Glossary (continued) 71 Office Visit Distinct service dates for members with claims that have HCFA Place of Service code of 11. Outpatient Services which take place outside of an inpatient place of service are defined as outpatient. Paid Basis Claim expenses reported based on the date the claim was paid. PEPM Per Employee per Month. PMPM Per Member per Month. Plan Payment Plan payment includes total paid by the plan for enrollee, the spouses, and their dependents. Also referred to as Employer Paid. Quality and Risk Measures The Quality and Risk measures are designed to identify potential gaps in care and care management opportunities. Risk Index (RI) Measurement of an individual's disease burden. The higher the RI the more likely that member is to experience a negative health event in the next 24 months. Therapeutic Class Grouping of drugs into categories defined by First Data Banks. Total Members Number of unique members in the time period. Units per 1,000 The average number of units (days, members, emergency room visits, etc.) per 1,000 members per year.

© 2011 Lockton, Inc. All rights reserved. Our Mission To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management Our Goal To be the best place to do business and to work www.lockton.com © 2010 Lockton, Inc. All rights reserved. Images © 2010 Thinkstock. All rights reserved. This document contains the proprietary work product of Lockton Companies, LLC, and is provided on a confidential basis. Any reproduction, disclosure or distribution to any third party without first securing written permission from Lockton Companies, LLC is expressly prohibited.

University of Alaska Analysis Period: January 2009 through December 2010 Paid Basis Although this report is not intended to contain any individually identifiable.

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University of Alaska Analysis Period: January 2009 through December 2010 Paid Basis Although this report is not intended to contain any individually identifiable.

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