1 © 2011 Blue Cross and Blue Shield of Illinois. All rights reserved© 2011 Blue Cross and Blue Shield of Illinois. All rights reserved. An Independent Licensee of the Blue Cross and Blue Shield Association.

2 Welcome J. Todd PhillipsVice President, Middle Market and Sales Strategy

3 things I've learned

4 1 in 3 13.1 million members in our 4 statesIf they ALL held hands with arms outstretched, they would circle the earth FOUR times 1 in 3 Americans has a BCBS card more than 896,000 providers 13.1 million members in our 4 states more than 5,300 hospitals

5 Members Are +6.7% More LoyalWE RETAIN 98.5% CUSTOMERS < 10% turnover Customer Service Reps Members Are +6.7% More Loyal Average tenure of sales team 14 years

6 340% 10,000 channel views 27,000 fans followers than all competitorsActive producers online 18,245 Facebook fan increase in 2010 27,000 fans 340% Is there an APP for that ? 10,000 channel views More Twitter followers than all competitors Revised 6/2011 EM Team - MSM

7 Moving Toward the FutureKaren Atwood President

8 It’s a Brave New World… ACA: One Year and CountingNear Term Longer Term Grandfathering Temporary national high risk pools MLR reporting and rebates Benefit changes No lifetime or annual limits No pre-ex exclusions < age 19 Dependent coverage to 26 Preventive care at 100% Health Insurance Exchanges Individuals/Small Employers Underwriting reforms Guaranteed issue Community rating Minimum essential coverage Subsidies begin Medicaid expansion August 8, 2011 Wynstone: Seizing Opportunities 8 8

9 We Are Proceeding (Enthusiastically) – Despite UncertaintiesPolitical Judiciary Economic August 8, 2011 Wynstone: Seizing Opportunities

10 Leading the Charge for ChangeAugust 8, 2011 Wynstone: Seizing Opportunities 10

11 New Opportunities: New ChoicesInsurance Coverage in the U.S. (millions of lives) Individual Small Group Large Group (ASO) Large Group (Insured) Medicaid Medicare Uninsured Source: Oliver Wyman, April 2010 August 8, 2011 Wynstone : Seizing Opportunities

12 Different Groups – Different Strategies – More Choices78K Customers Small Group Mid-Market National Accounts Members 13M August 8, 2011 Wynstone: Seizing Opportunities 12

13 Customers Need Relief – and Innovative Solutions8% Trend $6000 Fee for Service Payment Systems New Medical and Therapeutic Solutions Declining Population Health Status and Current Attitudes $5000 Average Annual Individual Health Care Cost Demo-graphic Age Wave 3% CPI $4000 $3000 2010 2011 2012 2013 2014 2015 2016 August 8, 2011 Wynstone: Seizing Opportunities 13

14 Real Reform: Transforming Care DeliveryContinuum of Payment Models Episodic Cost Total Cost Deployment depends on a number of factors: Pay-for-Performance provider infrastructure and appetite for risk patient condition benefit design Episodic Bundling Global Payment Full Risk / Percent of Premium Fee-for-Service Provider Accountability Patient Centered Medical Home Accountable Care Organization August 8, 2011 Wynstone: Seizing Opportunities

15 Intensive Outpatient Care ProgramCommon patient characteristics: Care Management Nurse Role: Physician-employed Case Manager for Highest-Risk Patients Multiple chronic diseases (DM, Htn, Arthritis) Poor lifestyle choices (weight, smoking, activity) Incompletely treated depression, anxiety, substance abuse Life stresses greater than support system can handle Drives practice re-design RN employed in practice; dedicated to high-risk patients 1 RN : high-risk, high-cost patients Offers medical & psychosocial support Coordinates and ensures care is connected to their physician 20% net savings August 8, 2011 Wynstone: Seizing Opportunities 15

16 New Models – ACO Shared Savings AgreementPPO Total BCBSIL Members seeking care at the ACO Personal Physician Acute Episodic Care (ex. Surgery) Shared savings model for beating aggregate network medical trend Guaranteed threshold Then shared savings Physician “Attributed” members Total cost of care, including: Rx, if applicable Ancillary Hospital August 8, 2011 Wynstone: Seizing Opportunities

17 BCBSIL: Our PrioritiesGROWTH Deliver membership Understand and respond to emerging customer needs in light of reform Capitalize on new opportunities to grow membership—segment by segment Strengthen distribution partner relationships Deliver stronger “total cost” value proposition COST AND QUALITY Lead in total cost of care Collaborate with providers on system redesign Develop accountable care models and medical management programs to support them Develop narrower networks in preparation for Exchange Develop managed network and utilization programs for high cost clinical areas SPHERES OF INFLUENCE Influence and respond to legislation risks and opportunities Enhance BCBSIL reputation and presence in Springfield and communities throughout state Proactively assess and respond to state regulatory and legislative initiatives Build spheres of influence through public and community affairs August 8, 2011 Wynstone: Seizing Opportunities 17

18 We’re Not Like All the Rest!Committed to our communities for the long-term Responsibility to lead positive, meaningful health care change Largest non-investor owned health plan We maximize access to care, not profits We reinvest surpluses back into the health care system; not return it to shareholders We maintain a longer-term planning and investment horizon that enables better decision-making Unwavering commitment to provide as much affordable coverage to as many people as possible August 8, 2011 Wynstone: Seizing Opportunities 18 18

19 Creating the New World – TogetherWe want to continue be your business partner The world is changing – and we both face the challenge of redefining roles and contributions in this new world This includes the opportunity to define new ways of working together We share a mutual client and our job is to create the new scenario: Client WIN • Producer WIN • BCBSIL WIN August 8, 2011 Wynstone: Seizing Opportunities

20 Wynstone: Seizing OpportunitiesQuestions ? August 8, 2011 Wynstone: Seizing Opportunities

21 Legislative Update Harmony Harrington, BCBSIL Government Relations

22 View from Washington While health care remains an important issue in Washington, lawmakers remain focused on the economy, jobs, FY2012 appropriations and the federal budget / deficit ceiling. Members continue to have a strong interest in health reform implementation. Congressional hearings on key aspects of ACA Several bills introduced to repeal, “defund” or otherwise change key ACA provisions Regulatory Process is “overwhelming” While health care remains an important issue, the current primary focus in Congress is on the economy and jobs, FY 2012 appropriations and the federal budget. Central to these discussions are calls by both parties for major deficit reduction and the need to pass legislation to raise the debt ceiling by August. Lawmakers understand that voters are closely following these issues leading up to the 2012 elections, and deep partisan divides remain on how to move forward. There were several attempts to pass language in Texas that would authorize the creation of a state-wide insurance exchange. The effort lost steam after Gov. Rick Perry indicated he would likely veto any language that would set up an exchange. In Oklahoma, exchange legislation did not pass this year. Legislators are expected to work on a proposal for next year's session. BCBSOK continues to discuss the importance of a state-based exchange as the preferred alternative to a federal exchange. Legislation concerning exchanges was vetoed in the regular session this spring in New Mexico. On July 11, Health and Human Services released a notice of proposed rulemaking on state exchanges. It was the first of at least two anticipated exchange regulations. The proposed rule provides states with flexibility in determining how they will certify health plans for participating in their exchanges. It also provides some wiggle room around the Jan. 1, 2013 ACA deadline for HHS to determine whether a state’s exchange is sufficient to avoid a federal exchange. HHS indicated it will grant “conditional approval” to a state if it appears to be progressing toward complete readiness by the Jan. 1, 2013 deadline. This will give states more time to work toward compliance. In addition, states not ready for the 2014 launch can apply to operate the exchange in 2015 or any subsequent year -- but again, only if they can show that they’ve made a good faith effort to implement their own exchange. It isn’t a “try it before you buy it” period for states to see how the success of the exchange goes before deciding if they want to start their own. Along with the exchanges proposed rule, HHS also released a proposed rule laying out what has become known as the 3 Rs -- Reinsurance, Risk Adjustment and Risk Corridors -- programs to help health plans adapt to the health insurance market changes coming in We are still looking at how this will impact HCSC and our customers. In a nutshell, the risk adjustment program is meant to redistribute money from insurers that cover fewer high-risk people to those that cover more. The reinsurance program will require states to provide temporary assistance to individual market insurers to cover expenses associated with higher-risk enrollees. The risk corridor program provides protection for qualified health plan issuers in the Exchange, by sharing risk between issuers and the federal government. On July 18, the Centers for Medicare & Medicaid Services proposed standards for creating private, nonprofit, consumer-governed health insurance plans that also will be offered in the exchanges. The coverage, known as a Consumer Oriented and Operated Plan (CO-OP), will be eligible for $3.8 billion in startup loans through the health reform law. If successful, the CO-OP program could create an entire new competitor in the market. Vice President Biden is leading ongoing negotiations with congressional leaders to reach an agreement on raising the debt ceiling while also identifying areas and setting targets for spending reductions. Although entitlement reforms – including cuts to Medicare and Medicaid – are a major part of those discussions, health care reform is not currently front and center in Congress as it was in 2009 and 2010 – however, we are seeing implementation activity at the state level. The federal deficit is at the forefront; however Members continue to have a strong interest in health reform implementation. Congressional hearings continue on key aspects of the ACA, and several bills have been introduced to repeal, “defund” or otherwise change key ACA provisions. Against this political backdrop, we have been working with national business associations like the Chamber on several priority issues including (1) the need to repeal the health insurance excise tax; (2) the major business changes needed to implement health reform and our Plan’s innovations to transform the delivery system. 1) Regulatory Burdens of ACA; 2) IPAB; 3) Costs of ACA; 4) Medical Liability Reform; 5) Waste, Fraud and Abuse; 6) Defunding legislation 7) Shopping Across State Lines

23 View from Springfield While health care remains an important issue in Springfield, during the Spring Session, state lawmakers focused on the state budget, worker’s compensation reform and re-districting. Over 400 bills introduced during Spring Session impacting health insurance. Legislature Returns to Springfield for Fall Veto Session in late October. Governor Quinn appointed Jack Messmore as Acting Director of Insurance to fill McRaith vacancy. While health care remains an important issue, the current primary focus in Congress is on the economy and jobs, FY 2012 appropriations and the federal budget. Central to these discussions are calls by both parties for major deficit reduction and the need to pass legislation to raise the debt ceiling by August. Lawmakers understand that voters are closely following these issues leading up to the 2012 elections, and deep partisan divides remain on how to move forward. Vice President Biden is leading ongoing negotiations with congressional leaders to reach an agreement on raising the debt ceiling while also identifying areas and setting targets for spending reductions. Although entitlement reforms – including cuts to Medicare and Medicaid – are a major part of those discussions, health care reform is not currently front and center in Congress as it was in 2009 and 2010 – however, we are seeing implementation activity at the state level. The federal deficit is at the forefront; however Members continue to have a strong interest in health reform implementation. Congressional hearings continue on key aspects of the ACA, and several bills have been introduced to repeal, “defund” or otherwise change key ACA provisions. Against this political backdrop, we have been working with national business associations like the Chamber on several priority issues including (1) the need to repeal the health insurance excise tax; (2) the major business changes needed to implement health reform and our Plan’s innovations to transform the delivery system. 1) Regulatory Burdens of ACA; 2) IPAB; 3) Costs of ACA; 4) Medical Liability Reform; 5) Waste, Fraud and Abuse; 6) Defunding legislation 7) Shopping Across State Lines

24 97th General Assembly – Bills that Passed Both ChambersHB 224: External Review (Flowers/Steans) Amends Health Carrier External Review Act Broadens definition of “adverse determination” to include non- clinical appeals Broadens the definition of “Authorized representative” to include provider when plan requires that a request for a benefit be initiated by health care provider or for urgent request, provider with knowledge of the covered person's medical condition Effective: July 1, 2011 (with proposed Bulletin – September 1, 2011) Status: Sent to the Governor on 6/27/11 HB 1128: Producer Listed on Application (Osmond/Kotowski) Amends the Illinois Insurance Code Requires the name of producer or firm which sold that life or accident and health policy Name must appear on the individual health application or the master policy application for group coverage Makes other changes to public adjuster licensure Effective: Immediate Status: Signed by Governor as PA on 7/28/11

25 97th General Assembly – Bills that Passed Both ChambersHB 1191: Routine Care in Clinical Trials (Harris/Steans) Amends the Illinois Insurance Code Requires coverage for any routine patient care administered to an insured who is a qualified individual participating in a qualified clinical cancer trial, if the policy covers that same routine patient care of insureds not enrolled in a qualified clinical cancer trial. May apply any authorization requirement, UM, or other medical management practices. Insured shall not incur any greater out- of-pocket liability than an insured not enrolled in a qualified clinical cancer trial. Effective: January 1, 2012 Status: Signed on 7/11/11 as PA HB 1193: Recoupment (Harris/Steans) Amends Illinois Insurance Code Prohibits a recoupment or offset from being requested or withheld from future payments more than 18 months after the original payment is made. Exemptions: Fraud, ICHIP, and provider paid by another payer. Not a recoupment when a provider is paid an amount prospectively or concurrently under a contract with an insurer, HMO, IPA, or physician hospital organization that requires a retrospective reconciliation Effective: January 1, 2012 Status: Sent to the Governor 6/29/11

26 97th General Assembly – Bills that Passed Both ChambersHB 1287: Producer Webinars as CE Credit (Osmond/Sullivan) Amends the Illinois Insurance Code Sets forth a definition for "webinar" Includes webinars within the acceptable methods of instruction to satisfy the course study requirements for insurance producer licensure. Effective: Immediate Status: Signed on 7/14/11 as PA HB1530: State Mental Health Parity (Lang/Delgado) Amends the Illinois Insurance Code/ HMO Act Mandated “Offer” for Small Group Mental, emotional, nervous or substance abuse disorders subject to parity requirements of Sec 370c.1 of this Code: Requires Coverage of inpatient care for substance abuse (RTCs) Defines Substance Abuse Disorder as SMI Effective: Immediate Status: Sent to the Governor 6/27/11 Benefits no more restrictive than predominant financial requirements applies to all hospital/medical benefits and no separate cost sharing requirements/treatment limitations. Lifetime aggregate limits consistent with hospital/medical benefits

27 97th General Assembly – Bills that Passed Both ChambersHB 1698: Worker’s Compensation Reform (Bradley/Raoul) Amends the Worker’s Compensation Act and other Acts Beginning September 1, 2011, medical fee schedule reimbursement rates are reduced across-the-board by 30%. Reimbursement on implants will be set at 25% above net manufacturers invoice price less rebates and shipping charges Authorizes employers to establish PPOs for treatment of workplace injuries Effective: Immediate Status: Signed by the Governor on 6/28/11 as PA HB 1825: Oral Cancer Drug Parity ( Williams/Steans) Amends the Illinois Insurance Code Requires plans that provide coverage for prescribed orally-administered cancer medications and intravenously administered or injected cancer medications to ensure that the applicable financial requirements and treatment limitations are no more restrictive than those applied to intravenously administered/injected cancer medications that are covered by the policy Effective: January 1, 2012 Status: Signed by the Governor as PA Requires the AMA Guides to be applied in determining the level of impairment for permanent partial disability claimsProhibits an insurer from achieving compliance by increasing financial requirements or imposing more restrictive treatment limitations on prescribed orally-administered cancer medications or intravenously administered or injected cancer medications Requires that providers of medical treatment to injured workers submit to utilization review if requested by the employer or insurer

28 97th General Assembly – Bills that Passed Both ChambersHB 2249: A1C Education Programs (Osmond/Haine) Amends the Illinois Insurance Code - Diabetes self-management and training mandate. Requires coverage for education programs that allow the patient to maintain and A1C level within the range identified by national standards of care, as defined by the contract of insurance. Effective: January 1, 2012 Status: Sent to the Governor on 6/27/11 HB 3025: Data Collector Responsibilities in a Breach (Burke/Maloney) Amends the Personal Information Protection Act. Makes changes to the disclosure information needed to be provided to an individual whose information has been breached. Requires Data collector to cooperate with the individual whose information has been breached. Effective: Immediate Status: Sent to the Governor on 6/24/11

29 97th General Assembly – Bills that Passed Both ChambersHB 3039: Heart Disease Prevention (Lilly/Lightford) Amends the State Employees Group Insurance Act of 1971, the Counties Code, the Illinois Municipal Code, the School Code, the Illinois Insurance Code, the Health Maintenance Organization Act, the Voluntary Health Services Plans Act, and the Public Aid Code Requires an insurer providing group or individual health insurance or a managed care plan to develop and implement a process to communicate with their adult enrollees on an annual basis regarding the importance and value of early detection and proactive management of cardiovascular disease. Effective: Immediate Status: Sent to the Governor on 6/29/11 HR 332: Mandate Review by COGFA (Mautino) Requests that the Commission on Government Forecasting and Accountability study the cost of each mandate in the Illinois Insurance Code on the date of the resolution and all mandates cumulative effect on the cost of health insurance for business and individuals in Illinois Requires Report by February 6, 2012 Effective: Immediate Status: Adopted by the House 5/19/11

30 97th General Assembly – Bills that Passed Both ChambersHR 406: Mandate Review by COGFA (Flowers) Urges CGFA to include, in the study that it conducts under House Resolution 332, additional findings/ recommendations regarding the cost impact of health insurance mandates in terms of the intended purpose and health outcomes of each mandate so that the financial impact on business is not its sole consideration. Requires Report by February 6, 2012 Effective: Immediate Status: Adopted by the House 5/31/11 SB 178 – Health Alliance New Award Nullification (Frerichs/Jakobsson) Amends CGFA Act and Illinois Procurement Code. Authorizes CGFA to make a formal written determination to disapprove proposed contracts for the provision of group health insurance benefits. If contracts are not finalized for the coming fiscal year, the CPO may (i) not to finalize any proposed group health insurance contracts and (ii) to extend existing contracts for 2 additional years. Effective: Immediate Status: Vetoed by the Governor

31 97th General Assembly – Bills that Passed Both ChambersSB 673 – Tobacco Cessation Mandate Sponsor: Steans / Feigenholtz Amends the Illinois Insurance Code and HMO Act Requires an insurer to offer, for an additional premium and subject to the insurer's standard of insurability, optional coverage/reimbursement of up to $500 annually for a tobacco use cessation program for an enrollee 18 and older Coverage is subject to general exclusions and limitations of the policy, including coordination of benefits, participating provider requirements, and UM An insurer may not deny eligibility or continued eligibility to enroll or renew coverage solely for the purpose of avoiding the requirements under the Act Effective: January 1, 2012 Status: Sent to the Governor 6/29/11

32 97th General Assembly – Bills that Passed Both ChambersSB 1553: Financial Reporting (Haine/Osmond) Amends the Illinois Insurance Code as changed by PA Provides that the semi-annual statement of the aggregate administrative expenses shall be filed on or before October 1 (instead of July 31) for the preceding 6-month period ending June 30 and on or before April 1 (instead of February 1) for the preceding 6-month period ending December 31 Effective: January 1, 2012 Status: Sent to the Governor on 6/24/11 SB 1557 – State Employees Physical Therapy (Haine/Madigan) Amends the State Employees Group Insurance Act of 1971 Provides that there is coverage under the Act for medically necessary physical therapy and occupational therapy when that therapy is ordered for the treatment of autoimmune diseases or referred for the same purpose (rather than at any time medically necessary physical therapy and occupational therapy is ordered or referred) Effective: Immediate Status: Sent to the Governor 6/28/11

33 Illinois Exchange Enabling Legislation SB 1555 (Haine/Mautino) Signed by the Governor as PA 97-142Creates IL Health Benefits Exchange in accordance with ACA Declares Legislative Intent to have Exchange operational in Illinois by October 1, 2013 and to foster a robust and competitive market both inside and outside of the exchange Establishes bi-partisan legislative study committee to issue findings regarding implementation and establishment of state Exchange by September 30, 2011 Two separate pools for individuals and small employers Defines SG as no more than 50 Grants the DOI the authority to “apply for, accept, receive and use as appropriate for and on behalf of the state any grant money provided by the federal government…” Declares provision null and void if ACA repealed or replaced or both Repeals the Health Care Justice Act Exchange supplements current private market for Individual and Small Group Creates State Employee Health Savings Account Law

34 Exchange Bi-Partisan Legislative Study CommitteeHouse Republicans: Representative Joann Osmond (R-Antioch) Representative Jim Sacia (R-Freeport) Representative Darlene Senger (R-Naperville) House Democrats: TBD Senate Republicans: Senator Bill Brady (R-Bloomington) Senator John Jones (R-Mt. Vernon) Senator Dave Syverson (R-Rockford) Senate Democrats: Senator Bill Haine (D-Alton) Senator Michael Noland (D-Elgin) Senator Heather Steans (D-Chicago)

35 Exchange Activity 35

36 Wynstone: Seizing OpportunitiesQuestions ? August 8, 2011 Wynstone: Seizing Opportunities

37 Health Care Reform: The New Skill Set You NeedJoe Flower CEO, The Change Project

38 Lunch with Bill Rancic Entrepreneur and Donald Trump’s First Apprentice Bill Rancic, Entrepreneur and Donald Trump's First Apprentice