Working Together to Help Keep Connecticut’s Economy Healthy

Eileen Auen, President Health Net of the Northeast

CBIA Economic ForumSeptember 4, 2003

CBIA – September 4, 2003 2

Connecticut Executives’ Top Concerns

81%

37%32%

25% 24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Health CareCosts

PropertyTax

Workers’Compensation

PersonalIncome

Tax

Labor Costs

BlumShapiro//CBIA 2003

CBIA – September 4, 2003 3

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

CBIA – September 4, 2003 4

Industry Premium Comparisons

150

170

190

210

230

250

270

290

2000 2001 2002

California

Connecticut

New York

New Jersey

IndustryCommercial Premium, per member per month

Source: 2003 Health Leaders, Inc.

CBIA – September 4, 2003 5

Health Net Hospital Cost Comparison

Q2 2003 (Per member, per month relative cost)

Connecticut 1.26

California 1.10

New Jersey 1.15

New York* 1.0

*Excludes HCRA Tax

CBIA – September 4, 2003 6

Factors Driving Premium Increases%

Source: PricewaterhouseCoopers

0

5

10

15

20

25

Drugs, Medical

Devices &Advances

Rising Provider

Expenses

Government

Mandates &Regulations

Increased

ConsumerDemands

Litigation &

RiskManagement

Other

22% 18% 15% 15% 7% 5%

$15B

$12B

$10B $10B

$5B$3B

*Plus 18% general inflation

CBIA – September 4, 2003 7

Utilization Increasing

8,186

9,49010,320 10,713

0

2,000

4,000

6,000

8,000

10,000

12,000

Q 4/99 Q 4/00 Q 4/01 Q 4/02

Rx per 1,000 MembersHealth Net of the Northeast

CBIA – September 4, 2003 8

Missing the Mark on Generics

3936 37

39

0

10

20

30

40

50

Q 4/99 Q 4/00 Q 4/01 Q 4/02

% of GenericsHealth Net of the Northeast

CBIA – September 4, 2003 9

Rising Provider Expenses

Industry factors Macro-economic issues Regulatory Government programs General lack of competitiveness

CBIA – September 4, 2003 10

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

CBIA – September 4, 2003 11

Mandates that make sense

Mammography screenings Cervical cancer screenings Some clinical trials

CBIA – September 4, 2003 12

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

CBIA – September 4, 2003 13

Litigation and Risk Management

Class-action lawsuits Defensive medicine Malpractice premiums

Solutions:How We Can Control Health Care Costs in Connecticut

CBIA – September 4, 2003 15

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

CBIA – September 4, 2003 16

Bringing Consumers into the Process

Transparency Cost and quality incentives Variable-option plans Access to information

CBIA – September 4, 2003 17

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.)

CBIA – September 4, 2003 18

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

CBIA – September 4, 2003 19

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

CBIA – September 4, 2003 20

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

CBIA – September 4, 2003 21

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

CBIA – September 4, 2003 22

What You Can Do

Wise health care policies More

consumer information

Flexible plan design

Be an advocate